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. 18 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 18 [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
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
_____
X on June 3, 1996 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, 1996 was filed on March 28,
1996.
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, 27
5 Management of the Fund 10
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 27
7 Purchase of Securities Being Offered 11
8 Redemption or Repurchase 19
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-30
13 Investment Objectives and Policies B-2
14 Management of the Fund B-12
15 Control Persons and Principal B-15
Holders of Securities
16 Investment Advisory and Other B-15
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-27
18 Capital Stock and Other Securities B-30
19 Purchase, Redemption and Pricing B-17, B-21,
of Securities Being Offered B-25
20 Tax Status B-25
21 Underwriters Cover, B-17
22 Calculations of Performance Data B-28
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
PROSPECTUS JUNE 3, 1996
(LION LOGO)
Registration Mark
- --------------------------------------------------------------------------
Premier California Municipal Bond Fund (the "Fund") is an
open-end, diversified, management investment company,
known as a mutual fund. The Fund's investment objective 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, the Fund is offering three Classes of
shares--Class A, Class B and Class C--which are described herein. See
"Alternative Purchase Methods."
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 all Classes of 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 3, 1996,
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............................. 10
How to Buy Shares.................................. 11
Shareholder Services............................... 15
How to Redeem Shares............................... 19
Distribution Plan and Shareholder Services Plan.... 23
Dividends, Distributions and Taxes................. 24
Performance Information............................ 26
General Information................................ 27
Appendix........................................... 29
Page 2
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEE TABLE
CLASS A CLASS B CLASS 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 ........................... .38% .40% .38%
Total Fund Operating Expenses............. .93% 1.45% 1.68%
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: CLASSA CLASSB CLASS C
1 YEAR..................................... $ 54 $ 45/$15** $27/$17**
3 YEARS..................................... $ 73 $ 66/$46** $53
5 YEARS..................................... $ 94 $ 89/$79** $91
10 YEARS.................................... $154 $ 147*** $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 figure assumes 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 RETURN GREATER OR LESS THAN 5%.
- --------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the costs and expenses borne by the Fund and investors, the
payment of which will reduce investors' annual return. Other Expenses for
Class C are based on estimated amounts for the current 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.
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 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 are included in the Statement of Additional
Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a
share 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 JANUART 31,
---------------------------------------------------------------------------------------------
1987(1) 1988 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------- ------ ------ ------ ------- ------ ------ ------
<S> <C> <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 $12.24
------ ------- ------- ------ ------- ------- ------- ------- ------- ------
INVESTMENT OPERATIONS:
Investment income-net... .20 .84 .89 .89 .89 .82 .80 .77 .72 .67
Net realized and
unrealized gain (loss)
on investments... .42 (1.10) .18 .02 .21 .36 .39 .94 (.80) 1.02
------ ------- ------- ------ ------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT
OPERATIONS..... .62 (.26) 1.07 .91 1.10 1.18 1.19 1.71 (.08) 1.69
------ ------- ------- ------ ------- ------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from investment
income-net.... (.20) (.84) (.89) (.89) (.89) (.82) (.80) (.77) (.72) (.67)
Dividends from net realized
gain on investments... _ _ _ _ _ (.01) (.17) (.10) (.60) (.29)
------ ------- ------- ------ ------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS.... (.20) (.84) (.89) (.89) (.89) (.83) (.97) (.87) (1.32) (.96)
------ ------- ------- ------ ------- ------- ------- ------- ------- ------
Net asset value,
end of year..... $12.92 $11.82 $12.00 $12.02 $12.23 $12.58 $12.80 $13.64 $12.24 $12.97
====== ====== ====== ====== ====== ======= ====== ====== ====== ======
TOTAL INVESTMENT
RETURN(2)... 21.90%(3) (1.61%) 9.52% 7.82% 9.45% 10.02% 9.78% 13.62% (4.34%) 14.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets.... _ _ _ _ .11% .47% .65% .78% .90% .93%
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% 5.22%
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% 92.42%
Net Assets, end of year
(000's omitted)... $1,010 $2,713 $12,063 $58,714 $166,095 $218,703 $224,555 $245,435 $191,939 $185,187
- ---------------
(1)From November 10, 1986 (commencement of operations) to January 31, 1987.
(2)Exclusive of sales load.
(3)Annualized.
</TABLE>
Page 4
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
-------------------------------------------- -------------------------------
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31,
-------------------------------------------- --------------------------------
1993(1) 1994 1995 1996 1996(2)
------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year... $12.69 $12.81 $13.64 $12.25 $12.98
------- ------ -------- ------- --------
INVESTMENT OPERATIONS:
Investment income-net... .03 .69 .65 .60 .37
Net realized and unrealized gain
(loss) on investments.. .12 .93 (.79) 1.02 .29
------- ------ -------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS... .15 1.62 (.14) 1.62 .66
------- ------ -------- ------- --------
DISTRIBUTIONS:
Dividends from investment income-net... (.03) (.69) (.65) (.60) (.37)
Dividends from net realized
gain on investments.... -_ (.10) (.60) (.29) (.29)
------- ------ -------- ------- --------
TOTAL DISTRIBUTIONS.... (.03) (.79) (1.25) (.89) (.66)
------- ------ -------- ------- --------
Net asset value, end of year... $12.81 $13.64 $12.25 $12.98 $12.98
======= ======= ====== ======= =======
TOTAL INVESTMENT RETURN(3)...... 25.98%(4) 12.91% (4.77%) 13.55% 7.90%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets... 1.07%(4) 1.31% 1.42% 1.45% 4.42%(4)
Ratio of net investment income
to average net assets.... 4.92%(4) 4.90% 5.17% 4.69% 4.31%(4)
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation.... .13%(4) .13% .02% -- --
Portfolio Turnover Rate... 36.54% 26.69% 37.39% 92.42% 92.42%
Net Assets, end of year
(000's omitted).......... $325 $16,906 $18,981 $21,530 $1
- -------------
(1) From January 15, 1993 (commencement of initial offering of Class B shares) to January 31, 1993.
(2) From June 2, 1995 (commencement of initial offering of Class C shares) to January 31, 1996.
(3) Exclusive of sales load.
(4) 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 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 Shares - Class B Shares" and "How to
Redeem 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
Page 5
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 values for
shares of each such 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 Shares - Class C Shares" and
"How to Redeem 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 investment objective 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 its
investment objective, 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 temporarily
in other debt securities the interest from which is, in the opinion of
bond counsel to the
Page 6
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,
as amended (the "1940 Act")) of the Fund's outstanding voting shares.
There can be no assurance that the Fund's investment objective will be
achieved.
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 "Investment
Considerations and Risks - 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 Ratings Group, a division of The McGraw-Hill
Companies, Inc. ("S&P"), or Fitch Investors Service, L.P. ("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 Baa by Moody's or BBB by S&P or
Fitch are considered investment grade obligations; those rated Baa by
Moody's are
Page 7
considered medium grade obligations which lack outstanding investment
characteristics and have speculative characteristics, while those rated
BBB by S&P and Fitch are regarded as having an adequate capacity to pay
principal and interest. 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 the lowest rating assigned by such rating organizations and
indicates that the Municipal Obligation is in default and interest and/or
repayment of principal is in arrears. See "Investment Considerations and
Risks - 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 under "Appendix--Certain
Portfolio Securities--Taxable Investments." Under normal market
conditions, the weighted average maturity of the Fund's portfolio is
expected to exceed ten years.
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
"Investment Considerations and Risks" below.
The Fund's annual portfolio turnover rate is not expected to
exceed 100%. The Fund may engage in various investment techniques, such
as options and futures transactions, lending portfolio securities and
short-selling. Use of certain of these techniques may give rise to
taxable income. For a discussion of the investment techniques and their
related risks see "Investment Considerations and Risks," "Appendix --
Investment Techniques" and "Dividends, Distributions and Taxes" below and
"Investment Objective and Management Policies -- Management Policies" in
the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- 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 upon 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. Once the rating of a portfolio security has been
changed, the Fund will consider all circumstances deemed relevant in
determining whether to hold the security. 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.
Page 8
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 experienced recurring budget deficits for four of its five fiscal
years ended June 30, 1992. The State had operating surpluses of
approximately $109 million in fiscal 1992-93 and $917 million in fiscal
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. The 1994-95 Budget Act contained a plan to
retire a projected $1.025 billion deficit in the 1995-96 fiscal year. The
Department of Finance projects that, after repaying the last of the
carryover budget deficit, there will be a positive balance of $28 million
in the Special Fund for Economic Uncertainties at June 30, 1996. 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.
INVESTING IN MUNICIPAL OBLIGATIONS -- The Fund may invest more than
25% of the value of its total assets in Municipal Obligations which are
related in such a way that an economic, business or political development
or change affecting one such security also would affect the other
securities; for example, securities the interest upon which is paid from
revenues of similar types of projects. As a result, the Fund may be
subject to greater risk as compared to a fund that does not follow this
practice.
Certain municipal lease/purchase obligations in which the
Fund may invest may contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease payments in future
years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease/purchase obligations are secured by
the leased property, disposition of the leased property in the event of
foreclosure might prove difficult. In evaluating the credit quality of a
municipal lease/purchase obligation that is unrated, The 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 invest-
Page 9
ment 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.
ZERO COUPON SECURITIES -- 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.
LOWER RATED BONDS -- The Fund may invest up to 30% of its net assets
in higher yielding (and, therefore, higher risk) debt securities, 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 (commonly known as junk bonds).
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. The retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse 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. See "Appendix -- Certain Portfolio Securities --
Ratings."
USE OF DERIVATIVES - The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an
underlying asset, index or interest rate. The Derivatives the Fund may
use include options and futures. While Derivatives can be used
effectively in furtherance of the Fund's investment objective, under
certain market conditions, they can increase the volatility of the Fund's
net asset value, can decrease the liquidity of the Fund's portfolio and
make more difficult the accurate pricing of the Fund's portfolio. See
"Appendix-Investment Techniques-Use of Derivatives" below and "Investment
Objective and Management Policies-Management Policies-Derivatives" in the
Statement of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are
made independently from those of other investment companies advised by
The Dreyfus Corporation. If, however, such other investment companies
desire to invest in, or dispose of, the same securities as the Fund,
available investments or opportunities for sales will be allocated
equitably to each investment company. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by
the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- 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 March 29, 1996,
The Dreyfus Corporation managed or administered approximately $82 billion
in assets for more than 1.7 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 authority of the Fund's Board in accordance with
Massachusetts law. The Fund's primary portfolio manager is Stephen C.
Kris. He has held that position since January 1996 and has been employed
by The Dreyfus Corporation since February 1988. The Fund's other
Page 10
portfolio managers are identified in the Statement of Additional
Information. The Dreyfus Corporation also provides research services for
the Fund and 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 more than $237 billion
in assets as of March 31, 1996, including approximately $83 billion in
proprietary mutual fund assets. As of March 31, 1996, Mellon, through
various subsidiaries, provided non-investment services, such as custodial
or administration services, for more than $886 billion in assets,
including approximately $61 billion in mutual fund assets.
For the fiscal year ended January 31, 1996, the Fund paid The
Dreyfus Corporation a monthly management 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. 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.
In allocating brokerage transactions for the Fund, TheDreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus
Corporation may consider, among other things, the receipt of research
services and/or the sale of shares of the Fund or other funds managed,
advised or administered by The Dreyfus Corporation as factors in the
selection of broker-dealers to execute portfolio transactions for the
Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
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.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund
Services, Inc. (the "Distributor"), located at One Exchange Place,
Boston, Massachusetts 02109. The Distributor's ultimate parent is Boston
Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus
Transfer, Inc., a wholly-owned subsidiary of The Dreyfus 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 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
Page 11
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.
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.
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 Distribution Plan or Shareholder Services Plan. You
should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment must be
accompanied by the Account Application. The Fund reserves the right to
vary the initial and subsequent investment minimum requirements at any
time.
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,
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 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.
Fund shares also may be purchased through Dreyfus-AUTOMATIC
Asset BuilderRegistration Mark and the Government Direct Deposit
Privilege described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be
aware, however, that periodic investment plans do not guarantee a profit
and will not protect an investor against loss in a declining market.
Page 12
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 Fund's Board and
are valued at fair value as determined by the pricing service. The
pricing service's procedures are reviewed under the general supervision
of the Fund's Board. For further information regarding the methods
employed in valuing Fund investments, see "Determination of Net Asset
Value" in the Statement of Additional Information.
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 a
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.
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Distributions and
Taxes" and the 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").
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>
Page 13
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 of
purchase. The terms contained in the section of the Prospectus entitled
"How to Redeem shares--Contingent Deferred Sales Charge" (other than the
amount of the CDSC and time periods) 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 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.
Class A shares may be purchased at net asset value through
certain brokers-dealers and other financial institutions which have
entered into an agreement with the Distributor, which includes a
requirement that such shares be sold for the benefit of clients
participating in a "wrap account" or a similar program under which such
clients pay a fee to such broker-dealer or other financial institution.
Class A shares also may be purchased at net asset value,
subject to appropriate documentation, through a broker-dealer or other
financial institution with the proceeds from the redemption of shares of
a registered open-end management investment company not managed by The
Dreyfus Corporation or its affiliates. The purchase of Class A shares of
the Fund must be made within 60 days of such redemption and the
shareholder must have either (i) paid an initial sales charge or a
contingent deferred sales charge or (ii) been obligated to pay at any
time during the holding period, but did not actually pay on redemption, a
deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value,
subject to appropriate documentation, by (i)qualified separate accounts
maintained by an insurance company pursuant to the laws of any State or
territory of the United States, (ii) a State, county or city or
instrumentality thereof, (iii) a charitable organization (as defined in
Section 501(c)(3) of the Code investing $50,000 or more in Fund shares,
and (iv) a charitable remainder trust (as defined in Section 501(c)(3) of
the Code).
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 asClass A shares. In some instances, these
incentives may be offered only to certain dealers who have sold or may
sell significant amounts of such 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 Shares."
The Distributor compensates certain Service Agents for sell-
Page 14
ing Class B and 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.
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 is imposed, however, on
redemptions of Class C shares made within the first year of purchase. See
"Class B Shares" above and "How to Redeem 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 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 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 Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an
Automated Clearing House member may be so designated. 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 purchase of Fund shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
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 cer-
Page 15
tain 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
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. 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 1-800-645-6561 or, if
you are calling from overseas, call 516-794-5452. See "How to Redeem
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 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 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 the 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
Page 16
Fund Exchanges may be modified or terminated at any time upon notice to
shareholders. See "Dividends, Distributions and Taxes."
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 a shareholder. 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 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. 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 mailing written
notification 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. For
more information concerning this Privilege and the funds in the Premier
Family of Funds or the 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. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-Automatic Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. 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 a
Dreyfus-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
Page 17
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 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. 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, which can be obtained by
calling 1-800-645-6561, 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.
Page 18
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 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 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 their clients 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 upon 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 DREYFUS-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
DREYFUS-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 DREYFUS-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.
Page 19
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 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.
The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
<S> <C>
YEAR SINCE CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE PROCEEDS
----------------- ------------------------
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% 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
Page 20
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 Board determines to discontinue the waiver of the
CDSC, the disclosure in the Prospectus will be revised appropriately. 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
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.
PROCEDURES
You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the Check Redemption Privilege with respect to Class A
shares only, or the TELETRANSFER Privilege. If you are a client of a
Selected Dealer, you may redeem shares 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. 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
any redemption Privilege at any time or charge a service fee upon notice
to shareholders. No such fee currently is contemplated. Shares for which
certificates have been issued are not eligible for the Check Redemption
or TELETRANSFER Privilege.
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.
Page 21
You may redeem Fund shares by telephone if you have checked
the appropriate box on the 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 6587, Providence, Rhode Island 02940-6587. 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 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 -- You may write
Redemption Checks drawn on your Fund 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. This Privilege will be terminated immediately, without notice,
with respect to any account which is, or becomes, subject to backup
withholding on redemptions (See "Dividends, Distributions and Taxes").
Any Redemption Check written on an account
Page 22
which has become subject to backup withholding on redemptions will not be
honored by the Transfer Agent.
TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your
Fund account and your bank account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House
member may be designated. 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.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of shares by telephoning 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
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 timely manner. The proceeds of the redemption are credited
to your account with the Selected Dealer. See "How to Buy 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 B and Class C shares are subject to a Distribution Plan
and Class A, Class B and Class C shares are subject to a Shareholder
Services Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1
under the 1940 Act, 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.
Page 23
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. The Distributor may make payments to
Service Agents in respect of these services. The Distributor determines
the amounts to be paid to Service Agents.
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 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. If you are an omnibus accountholder
and indicate in a partial redemption request that a portion of any
accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her
account, such portion of the accrued dividends will be paid to you along
with the proceeds of the redemption. Distributions from net realized
securities gains, if any, generally are declared and paid once a year, but
the Fund may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. 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 dividends and 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 such 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.
Dividends and distributions derived from Taxable
Page 24
Investments, from income or gain derived from securities transactions and
from the use of certain of the investment techniques described under
"Appendix - Investment Techniques," will be subject to Federal income tax.
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 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 disposition of certain market discount bonds, paid by the Fund
are subject to Federal income tax as ordinary income whether received in
cash or reinvested in additional shares. 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.
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.
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 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.
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.
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
Page 25
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, 1996 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. 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.
You should consult your tax adviser regarding specific
questions as to Federal, state or local taxes.
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
net asset value (or maximum offering price in the case of Class A) per
share 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
Page 26
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 one, five and ten year periods, or
for shorter periods depending upon the length of time during which the
Fund has operated.
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
net asset value (or maximum offering price in the case of Class A) per
share 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 also
may 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 on Class A shares
which, if reflected, would reduce the performance quoted.
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. Prior to July 2,
1990, the Fund's name was Premier California Tax Exempt 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. 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 Fund intends to
conduct its operations in such a way so as to avoid, as far as possible,
Page 27
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.
Page 28
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund is permitted to borrow to the extent
permitted under the 1940 Act, which permits an investment company to
borrow in an amount up to 331/3% of the value of its total assets. The
Fund currently intends to borrow money only for temporary or emergency
(not leveraging) purposes in an amount up to 15% of the value of 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
value of the Fund's total assets, the Fund will not make any additional
investments.
SHORT-SELLING -- In these transactions, the Fund sells a security it
does not own in anticipation of a decline in the market value of that
security. To complete the transaction, the Fund must borrow the security
to make delivery to the buyer. The Fund is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund, which would result in a loss or
gain, respectively.
Securities will not 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 make a short sale which
results in the Fund having sold short in the aggregate more than 5% of
the outstanding securities of any class of an issuer.
The Fund also may make short sales "against the box," in
which the Fund enters into a short sale of a security it owns in order to
hedge an unrealized gain on the security. 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.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations
and Risks -- Use of Derivatives." These instruments and certain related
risks are described more specifically under "Investment Objective and
Management Policies -- Management Policies -- Derivatives" in the
Statement of Additional Information.
Derivatives can be volatile and involve various types and
degrees of risk, depending upon the characteristics of the particular
Derivative and the portfolio as a whole. Derivatives permit the Fund to
increase or decrease the level of risk, or change the character of the
risk, to which its portfolio is exposed in much the same way as the Fund
can increase or decrease the level of risk, or change the character of
the risk, of its portfolio by making investments in specific securities.
Derivatives may entail investment exposures that are greater
than their cost would suggest, meaning that a small investment in
Derivatives could have a large potential impact on the Fund's
performance.
If the Fund invests in Derivatives at inappropriate times or
judges the market conditions incorrectly, such investments may lower the
Fund's return or result in a loss. The Fund also could experience losses
if it were unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or suddenly can
become, illiquid. Changes in liquidity may result in significant, rapid
and unpredictable changes in the prices for Derivatives.
Although the Fund is not a commodity pool, Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission
which limit the extent to which the Fund can invest in certain
Derivatives. TheFund may invest in futures contracts and options with
respect thereto for hedging purposes without limit. However, the Fund may
invest in such contracts and options for other purposes if the sum of the
amount of
Page 29
initial margin deposits and premiums paid for unexpired options
with respect to such contracts, other than bona fide hedging purposes,
exceed 5% of the liquidation value of the Fund's assets, after taking
into account unrealized profits and unrealized losses on such contracts
and options; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be
excluded in calculating the 5% limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20%
of the value of its net assets at the time of such option contracts are
written. When required by the Securities and Exchange Commission, the Fund
will set aside permissable liquid assets in a segregated account to cover
its obligations relating to its transactions in Derivatives. To maintain
this required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate
a Derivative position at a reasonable price.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest or other
distributions payable on the loaned securities which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed
331/3 % of the value of the Fund's total assets, and the Fund will receive
collateral consisting of cash, U. S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities.
Such loans are terminable 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.
FORWARD COMMITMENTS -- The Fund may purchase Municipal Obligations
and other securities on a forward commitment or when-issued basis, which
means delivery and payment take place a number of days after the date of
the commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed when
the Fund enters into the commitment, but the Fund does not make payment
until it receives delivery from the counterparty. The Fund will commit to
purchase such securities only with the intention of actually acquiring
the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. 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 at all times
to the amount of the commitments will be established and maintained at
the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- The Fund may purchase floating and
variable rate demand notes and bonds, which are tax exempt obligations
ordinarily having stated maturities in excess of one year, but which
permit the holder to demand payment of principal at any time or at
specified intervals. Variable rate demand notes include master demand
notes which are obligations that permit the Fund to invest fluctuating
amounts at varying rates of interest, pursuant to direct arrangements
between the Fund, as lender, and the borrower. These obligations permit
daily changes in the amount borrowed. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations,
although they are redeemable at face value, plus accrued interest.
Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, the Fund's right to
Page 30
redeem is dependent on the ability of the borrower to pay principal and
interest on demand. Each obligation purchased by the Fund will meet the
quality criteria established for the purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS -- The Fund may purchase from
financial institutions participation interests in Municipal Obligations
(such as industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Fund an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the
Municipal Obligation. These instruments may have fixed, floating or
variable rates of interest. If the participation interest is unrated, it
will be backed by an irrevocable letter of credit or guarantee of a bank
that the Fund's Board has determined meets 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.
TENDER OPTION BONDS -- The Fund may purchase tender option bonds. A
tender option bond is a Municipal Obligation (generally held pursuant to
a custodial arrangement) having a relatively long maturity and bearing
interest at a fixed rate substantially higher than prevailing short-term
tax exempt rates, that has been coupled with the agreement of a third
party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the
option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees
equal to the difference between the Municipal Obligation's fixed coupon
rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities,
coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the
prevailing short-term tax exempt rate. The Dreyfus Corporation, on behalf
of the Fund, will consider on an ongoing basis the creditworthiness of
the issuer of the underlying Municipal Obligations, of any custodian and
of the third party provider of the tender option. In certain instances
and for certain tender option bonds, the option may be terminable in the
event of a default in payment of principal or interest on the underlying
Municipal Obligations and for other reasons.
CUSTODIAL RECEIPTS -- The Fund may purchase custodial receipts
representing the right to receive certain future principal and interest
payments on Municipal Obligations which underlie the custodial receipts.
A number of different arrangements are possible. In a typical custodial
receipt arrangement, an issuer or a third party owner of Municipal
Obligations deposits such obligations with a custodian in exchange for
two classes of custodial receipts. The two classes have different
characteristics, but, in each case, payments on the two classes are based
on payments received on the underlying Municipal Obligations. One class
has the characteristics of a typical auction rate security, where at
specified intervals its interest rate is adjusted, and ownership changes,
based on an auction mechanism. This class's interest rate generally is
expected to be below the coupon rate of the underlying Municipal
Obligations and generally is at a level comparable to that of a Municipal
Obligation of similar quality and having a maturity equal to the period
between interest rate adjustments. The second class bears interest at a
rate that
Page 31
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.
STAND-BY COMMITMENTS -- The Fund may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. Under a
stand-by commitment, the Fund obligates a broker, dealer or bank to
repurchase, at the Fund's option, specified securities at a specified
price and, in this respect, stand-by commitments are comparable to put
options. The exercise of a stand-by commitment, therefore, is subject to
the ability of the seller to make payment on demand. The Fund will
acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
The Fund may pay for stand-by commitments if such action is deemed
necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with stand-by commitments will be
taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund generally would purchase these call options to
protect the Fund from the issuer of the related Municipal Obligation
redeeming, or other holder of the call option from calling away, the
Municipal Obligation before maturity. The sale by the Fund of a call
option that it owns on a specific Municipal Obligation could result in
the receipt of taxable income by the Fund.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon
securities which are debt securities issued or sold at a discount from
their face value which do not entitle the holder to any periodic payment
of interest prior to maturity or a specified redemption date (or cash
payment date). 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
securities that pay interest periodically and are likely to respond to a
greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of
its net assets in securities as to which a liquid trading market does not
exist, provided such investments are consistent with the Fund's
investment objective. 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.
Page 32
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other
than for temporary defensive purposes (but not to exceed 20% of the value
of the Fund's net assets) or for temporary defensive purposes, the Fund
may invest in taxable short-term investments ("Taxable Investments")
consisting of: notes of issuers having, at the time of purchase, a
quality rating within the two highest grades of Moody's, S&P or Fitch;
obligations of the U.S. Government, its agencies or instrumentalities;
commercial paper rated not lower than P-1 by Moody's, A-1 by S&P or F-1
by Fitch; certificates of deposit of U.S. domestic banks, including
foreign branches of domestic banks, with assets of one billion dollars or
more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the
foregoing. Dividends paid by the Fund that are attributable to income
earned by the Fund from Taxable Investments will be taxable to investors.
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 tax. 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.
RATINGS -- 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
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. Although these ratings may be an
initial criterion for selection of portfolio investments, The Dreyfus
Corporation also will evaluate these
Page 34
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.
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.
PCCp060396
Page 34
__________________________________________________________________________
PREMIER CALIFORNIA MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
JUNE 3, 1996
__________________________________________________________________________
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 3,
1996, 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-12
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . B-15
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . B-17
Distribution Plan and Shareholder Services Plan . . . . . . . . . B-19
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . B-21
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value. . . . . . . . . . . . . . . . . B-25
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . B-25
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . B-27
Performance Information . . . . . . . . . . . . . . . . . . . . . B-28
Information About the Fund. . . . . . . . . . . . . . . . . . . . B-30
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors. . . . . . . . . . . . . . . B-30
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-44
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 sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended January 31, 1996,
computed on a monthly basis, was as follows:
Fitch Moody's Standard
Investors Investors & Poor's
Service, L.P. Service, Inc. Ratings Group Percentage
("Fitch") or ("Moody's") or ("S&P") of Value
AAA Aaa AAA 32.3%
AA Aa AA 11.1
A A A 33.3
BBB Baa BBB 9.1
D D D .2
F-1+\F-1 VMIG1\MIG1, SP-1+, SP-1, 2.4
P-1 A1+\A1
Not Rated Not Rated Not Rated 11.6*
------
100.0%
======
____________________________________________________
* Included under the Not Rated category are securities comprising 11.6%
of the Fund's market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities
in the following rating categories: AAA/Aaa (3.2%), A/A (1.4%) and
Baa/BBB (7.0%).
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 obligations 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.
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
and, with respect to Class B and Class C shares, the Distribution Plan,
will have the effect of reducing the yield to investors.
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.
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.
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.
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities purchased
by the Fund pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. 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 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.
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 are supported by the full faith and credit
of the U.S. Treasury; others by the right of the issuer to borrow from the
U.S. Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others
only by the credit of the agency or instrumentality. These securities
bear fixed, floating or variable interest 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.
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 (in no event longer than seven
days) 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 interest rates.
In a repurchase agreement, the Fund buys a security, and at the time
of sale, the seller agrees to repurchase the obligation at a mutually
agreed upon time and price (usually within seven days). The repurchase
agreement thereby determines the yield during the purchaser's holding
period, while the seller's obligation to repurchase is secured by the
value of the underlying security. 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 $1
billion, 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. Repurchase agreements could involve risks in the
event of a default or insolvency of the other party to the agreement,
including possible delays or restrictions upon the Fund's ability to
dispose of the underlying securities.
Management Policies
Short-Selling. Until the Fund closes its short position or replaces
the borrowed security, it will: (a) maintain a segregated account,
containing cash or U.S. Government securities, at such a level that the
amount deposited in the account plus the amount deposited with the broker
as collateral always equals the current value of the security sold short;
or (b) otherwise cover its short position.
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third
party which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received 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.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide
a cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated
with Derivatives purchased on an exchange. By contrast, no clearing
agency guarantees over-the-counter Derivatives. Therefore, each party to
an over-the-counter Derivative bears the risk that the counterparty will
default. Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested
in bidding for it.
Futures Transactions--In General. The Fund may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the
Fund intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once
the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended
for specified periods during the trading day. Futures contract prices
could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions
and potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the
Manager's ability to predict correctly movements in the direction of the
relevant market, and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract.
For example, if the Fund uses futures to hedge against the possibility of
a decline in the market value of securities held in its portfolio and the
prices of such securities instead increase, the Fund will lose part or all
of the benefit of the increased value of securities which it has hedged
because it will have offsetting losses in its futures positions.
Furthermore, if in such circumstances the Fund has insufficient cash, it
may have to sell securities to meet daily variation margin requirements.
The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to 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. The segregation of such assets will have the effect of
limiting the Fund's ability otherwise to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest
rate futures contracts. An interest rate future obligates the Fund to
purchase or sell an amount of a specific debt security at a future date at
a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to interest rate futures contracts. A call
option gives the purchaser of the option the right to buy, and obligates
the writer to sell, the underlying security or securities at the exercise
price at any time during the option period, or at a specific date.
Conversely, a put option gives the purchaser of the option the right to
sell, and obligates the writer to buy, the underlying security or
securities at the exercise price at any time during the option period.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen
events, at times have rendered certain of the clearing facilities
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading
halts or suspensions in one or more options. There can be no assurance
that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it
might not be possible to effect closing transactions in particular
options.
Successful use by the Fund of options will be subject to the
Manager's ability to predict correctly movements in interest rates. To
the extent the Manager's predictions are incorrect, the Fund may incur
losses.
Futures Developments. The Fund may take advantage of opportunities
in the area of options and futures contracts and options on futures
contracts and any other Derivatives which are not presently contemplated
for use by the Fund or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Fund's investment objective and legally permissible for the Fund. Before
entering into such transactions or making any such investment, the Fund
will provide appropriate disclosure in its Prospectus or Statement of
Additional Information.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to
changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise)
based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may
expose the Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued
basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Investment Consideration and Risks
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 statues 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 experienced recurring budget deficits for four of its five fiscal
years ended June 30, 1992. The State had operating surpluses of
approximately $109 million in fiscal 1992-93 and $917 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 over the last three
fiscal years 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. The 1994-95 Budget Act
contained a plan to retire a projected $1.025 billion deficit in the 1995-
96 fiscal year. The Department of Finance projects that, after repaying
the last of the carryover budget deficit, there will be a positive balance
of $28 million in the Special Fund for Economic Uncertainties at June 30,
1996. As a result of the deterioration of 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 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 sets
forth additional information relating to investing in California Municipal
Obligations.
Lower Rated Bonds. The Fund is permitted to invest in securities
rated Ba by Moody's or BB by S&P or Fitch and as low as the lowest rating
assigned by Moody's, S&P or Fitch. Such bonds, though higher yielding,
are characterized by risk. See "Description of the Fund--Investment
Consideration and Risks--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.
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, on balance, predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms
of the obligation and generally will involve more credit risk than
securities in the higher rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market
price and yield and the Fund's ability to dispose of particular issues
when necessary to meet the Fund's liquidity needs or in response to a
specific economic event such as a deterioration in the creditworthiness of
the issuer. The lack of a liquid secondary market for certain securities
also may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio and calculating
its net asset value. Adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease the values and
liquidity of these securities. In such cases, judgment may play a greater
role in valuation because less reliable objective data may be available.
These bonds may be particularly susceptible to economic downturns.
It is likely that any economic recession could disrupt severely the market
for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The
Fund has no arrangement with any persons concerning the acquisition of
such securities, and the Manager will review carefully the credit and
other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon bonds and pay-in-kind bonds, in which the
Fund may invest up to 5% of its net assets. Zero coupon securities and
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, which cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act of 1940,
as amended (the "1940 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 Fund's Board members 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 1940 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
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five
years, are shown below. Each Board member who is deemed to be an
"interested person" of the Fund (as defined in the 1940 Act) is indicated
by an asterisk.
Board Members of the Fund
CLIFFORD L. ALEXANDER, JR., Board Member. 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 and Mutual of America Life Insurance
Company. He is 62 years old and his address is 400 C Street, N.E.,
Washington, D.C. 20002.
PEGGY C. DAVIS, Board Member. 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. She is 53 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 venture capital
company; a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway, Inc., a manufacturer of industrial threads,
specialty yarns, home furnishings and fabrics, Curtis Industries,
Inc., a national distributor of securities products, chemicals, and
automotive and other hardware and Staffing Resources, Inc. He is 52
years old and his address is 200 Park Avenue, New York, New York
10166.
ERNEST KAFKA, Board Member. 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. He is
Associate Clinical Professor of Psychiatry at Cornell Medical School.
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. He is 63 years old and his address
is 23 East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, Board Member. 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. He is 76 years old and his address is 431-B
Dedham Street, The Gables, Newton Center, Massachusetts 02159.
NATHAN LEVENTHAL, Board Member. 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 also serves as Chairman of Citizens
Union, an organization which strives to reform and modernize city and
state governments. He is 53 years old and his address is 70 Lincoln
Center Plaza, New York, New York 10023-6583.
Ordinarily, no meetings of shareholders will be held for the purpose
of electing Board members unless and until such time as less than a
majority of the Board members holding office have been elected by
shareholders at which time the Board members then in office will call a
shareholders' meeting for the election of Board members. Under the 1940
Act, shareholders of record of not less than two-thirds of the outstanding
shares of the Fund may remove a Board member through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. The Board members are required to call a meeting of shareholders
for the purpose of voting upon the question of removal of any such Board
member when requested in writing to do so by the shareholders of record of
not less than 10% of the Fund's outstanding shares.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Board members of the Fund who are not "interested persons" of the Fund, as
defined in the 1940 Act, will be selected and nominated by the Board
members who are not "interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of
the Board receives an additional 25% of such compensation. Emeritus
Board members are entitled to receive an annual retainer and a per meeting
fee of one-half the amount paid to them as Board members. The aggregate
amount of compensation paid to each Board member by the Fund for the
fiscal year ended January 31, 1996, and by all other funds in the Dreyfus
Family of Funds for which such person is a Board member (the number of
which is set forth in parenthesis next to each Board member's total
compensation) for the year ended December 31, 1995, were as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
Clifford L. Alexander, Jr. $5,000 $94,386 (17)
Peggy C. Davis $5,000 $81,636 (15)
Joseph S. DiMartino $6,250 $448,618 (94)
Ernest Kafka $5,000 $81,136 (15)
Saul B. Klaman $5,000 $81,886 (15)
Nathan Leventhal $5,000 $81,636 (15)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $774 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director 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., the ultimate parent of which is
Boston Institutional Group, 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 38 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. He is 31 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 31 years old.
ELIZABETH A. BACHMAN, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 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 34 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 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer 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 60 years old.
MARGARET M. PARDO, Assistant Secretary. Legal Assistant with the
Distributor and an officer of other investment companies advised or
administered by the Manager. From June 1992 to April 1995, she was a
Medical Coordination Officer at ORBIS International. Prior to June
1992, she worked as Program Coordinator at Physicians World
Communications Group. She is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on May 7, 1996.
As of May 7, 1996, the following persons owned 5% or more of the
outstanding shares of beneficial interest of the Fund: Class B shares -
Merrill Lynch Pierce Fenner & Smith Inc. House A/C, 4800 Deer Lake Drive
E, Jacksonville, Florida 32246-6484 - 7.7%: Class C shares - Merrill Lynch
Pierce Fenner & Smith Inc. House A/C, 4800 Deer Lake Drive E,
Jacksonville, Florida 32246-6484 - 71.3%; Premier Mutual Fund Services,
Inc., 1 Exchange Pl., Boston, MA 02109-2809 - 28.7%. A shareholder who
beneficially owns, directly or indirectly, 25% or more of the Fund's
voting securities may be deemed to be a "control person" (as defined in
the 1940 Act) of the Fund.
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 or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is
approved by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund or the Manager, by vote
cast in person at a meeting called for the purpose of voting on such
approval. The Agreement was approved by shareholders on August 3, 1994
and was last approved by the Fund's Board, including a majority of the
Board members who are not "interested persons" of any party to the
Agreement, at a meeting held on July 19, 1995. The Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board or by
vote of the holders of a majority of the Fund's 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 1940 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; Christopher M. Condron, President,
Chief Operating Officer and a director; Stephen E. Canter, Vice Chairman,
Chief Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; William T. Sandalls, Jr., Senior Vice
President and Chief Financial Officer; Barbara E. Casey, Vice President-
Dreyfus Retirement Services; Elie M. Genadry, Vice President-Institutional
Sales; William F. Glavin, Jr., Vice President-Corporate Development; Mark
N. Jacobs, Vice President, General Counsel and Secretary; Patrice M.
Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig, Vice
President-Human Resources; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Andrew S. Wasser, Vice President-Information Services; Maurice
Bendrihem, Controller; Elvira Oslapas, Assistant Secretary; and Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian
M. Smerling, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the
Fund's Board. The Manager is responsible for investment decisions, and
provides the Fund with portfolio managers who are authorized by the Fund's
Board to execute purchases and sales of securities. The Fund's portfolio
managers are Joseph P. Darcy, A. Paul Disdier, Douglas J. Gaylor, Karen M.
Hand, Stephen C. Kris, Richard J. Moynihan, 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 Board's review at the meeting subsequent to
such transactions.
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.
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 without limitation, the following:
taxes, interest, brokerage fees and commissions, if any, fees of Board
members who are not officers, directors, employees or holders of 5% or
more of the outstanding voting securities of the Manager, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory
fees, charges of custodians, transfer and dividend disbursing agents'
fees, certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of independent pricing services, costs
of maintaining the Fund's existence, costs attributable to investor
services (including, without limitation, telephone and personnel
expenses), costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders, costs of shareholders' reports and meetings and any
extraordinary expenses. In addition, shares of each Class are subject to
an annual service fee and Class B and Class C shares are subject to an
annual distribution fee. See "Distribution Plan and Shareholder Services
Plan."
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. For the
fiscal years ended January 31, 1994, 1995 and 1996, the management fees
payable by the Fund amounted to $1,365,438, $1,264,646 and $1,152,436,
respectively, which amounts were reduced by $362,893, $51,429 and $0,
respectively, pursuant to undertakings in effect in 1994 and 1995,
resulting in net fees paid to the Manager of $1,002,545 in fiscal 1994,
$1,213,217 in fiscal 1995 and $1,152,436 in fiscal 1996.
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 SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis 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 funds in the Dreyfus Family of Funds and for certain
other investment companies. In some states, certain financial
institutions effecting transactions in Fund shares may be required to
register as dealers pursuant to state law.
For the fiscal year ended January 31, 1996, the Distributor retained
$8,546 from sales loads on Class A shares and $36,352 from contingent
deferred sales charges ("CDSC") on Class B shares. For the period August
24, 1994 through January 31, 1995, the Distributor retained $7,754 from
the sales loads on Class A shares and $30,616 from the CDSC on Class B
shares. For the period February 1, 1994 through August 23, 1994 and for
the fiscal year ended January 31, 1994, Dreyfus Service Corporation, as
the Fund's distributor during such periods, retained $17,596 and $60,338,
respectively, from sales loads on Class A shares, and $33,555 and $17,606,
respectively from CDSCs on Class B shares. For the period from June 2,
1995 through January 31, 1996, no amount was retained from CDSCs on Class
C shares.
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.
Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of
Class A shares of the Fund aggregating less than $50,000 subject to the
schedule of sales changes set forth in the Fund's Prospectus at a price
based upon the net asset value of the Class A shares on January 31, 1996.
Net Asset Value per Share. . . . . . . . . . . . . . . . . $ 12.97
Per Share Sales Charge - 4.5% of offering price
(4.7% of net asset value per share). . . . . . . . . . . $ .61
-------
Per Share Offering Price to Public . . . . . . . . . . . . $ 13.58
=======
Using Federal Funds. Dreyfus Transfer, 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.
TeleTransfer Privilege. TeleTransfer purchase orders may be made at
any time. Purchase orders received by 4:00 p.m., New York time, on any
business day the Transfer Agent and the New York Stock Exchange are open
for business will be credited to the shareholder's Fund account on the
next bank business day following such purchase order. Purchase orders
made after 4:00 p.m., New York time, on any business day the Transfer
Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. 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 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 B and Class C shares are subject to a Distribution Plan and
Class A, Class B and Class C shares are subject to a Shareholder Services
Plan.
Distribution Plan. Rule l2b-1 (the "Rule") adopted by the Securities
and Exchange Commission under the 1940 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 has adopted such a plan (the "Distribution Plan") with respect to
Class B and Class C shares, pursuant to which the Fund pays the
Distributor for distributing Class B and Class C shares. The Fund's Board
believes that there is a reasonable likelihood that the Distribution Plan
will benefit the Fund and holders of Class B and Class C shares.
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 Board for its review. In addition, the Distribution Plan
provides that it may not be amended to increase materially the costs which
holders of Class B or Class C shares may bear for distribution pursuant to
the Distribution Plan without the approval of such shareholders and that
other material amendments of the Distribution Plan must be approved by the
Board, and by the Board members who are not "interested persons" (as
defined in the 1940 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 Board members cast in person at a meeting called for the
purpose of voting on the Distribution Plan. The Distribution Plan was
last so approved at a meeting held on July 19, 1995. As to each such
Class, the Distribution Plan may be terminated at any time by vote of a
majority of the Board members who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Distribution
Plan, or by vote of holders of a majority of such Class of shares.
For the fiscal year ended January 31, 1996, the Fund paid the
Distributor $102,032 with respect to Class B, and $5 with respect to Class
C, under the Distribution Plan.
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. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquires regarding the
Fund and providing reports and other information, and services related to
the maintenance of such shareholder accounts. Under the Shareholder
Services Plan, the Distributor may make payments to certain financial
institutions (which may include banks), Selected Dealers 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 Board for its review. In addition, the Shareholder
Services Plan provides that material amendments must be approved by the
Fund's Board and by the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund and 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 of the Board members cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan.
The Shareholder Services Plan was last so approved on July 19, 1995. As
to each Class of shares, the Shareholder Services Plan is terminable at
any time by vote of a majority of the Board members 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 fiscal year ended January 31, 1996, the Fund paid the
Distributor $472,817 with respect to Class A, $51,016 with respect to
Class B, and $2 with respect to Class C, under the Shareholder Services
Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem 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
investor's Fund account. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The Account
Application, Shareholder Services Form 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 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 Fund's Board reserves the right to make payments in whole or
in part in securities (which may include non-marketable 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
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. 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 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
Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service")
approved by the Fund's Board. When, in the judgment of the Service,
quoted bid prices for investments are readily available and are
representative of the bid side of the market, these investments are valued
at the mean between the quoted bid prices (as obtained by the Service from
dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of municipal bonds of
comparable quality, coupon, maturity and type; indications as to values
from dealers; and general market conditions. The Service may employ
electronic data processing techniques and/or a matrix system to determine
valuations. The Service's procedures are reviewed by the Fund's officers
under the general supervision of the Fund's Board. Expenses and fees,
including the management fee (reduced by the expense limitation, if any)
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,
1996, 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. 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 investment in an economic sense although taxable as stated 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, any 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 of the
Code. As such, all or a portion of any short- or long-term capital gain
from certain "straddle" and/or conversion transactions may be
recharacterized 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, 1995 and 1996 was 37.39% and 92.42%, 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."
Current yield for the 30-day period ended January 31, 1996 for Class
A was 4.32%, for Class B was 3.99% and for Class C was 3.85%. 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, 1996 for Class A was 8.04%, for Class B was 7.42% and
for Class C was 7.16%. 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 9.227 year periods
ended January 31, 1996 for Class A was 8.98%, 7.41% and 7.26%,
respectively. The average annual total return for the 1 and 3.047 year
periods ended January 31, 1996 for Class B was 10.55% and 6.62%,
respectively. The average annual total return for the period from June 2,
1995 (commencement of initial offering of Class C) through January 31,
1996 for Class C was 6.47%. 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) through January 31, 1996 was 91.03%. Based
on net asset value per share, the total return for Class A was 100.06% 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,
1996 was 21.57%. Without giving effect to the applicable CDSC, the total
return for Class B was 23.57% for this period. The total return for Class
C for the period June 2, 1995 (commencement of initial offering of Class C
shares) through January 31, 1996 was 4.28%. Without giving effect to the
applicable CDSC, the total return for Class C was 5.28% 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.
From time to time, advertising materials for the Fund may include
biographical information relating to its portfolio managers and may refer
to, or include commentary by a portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest of investors.
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.
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.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager,
P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer
and dividend disbursing agent. Under a transfer agency agreement with the
Fund, the Transfer Agent arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications
between shareholders and the Fund and the payment of dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. For the period December 1, 1995
(effective date of transfer agency agreement) through January 31, 1996,
the Fund paid the Transfer Agent $11,891.
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian. Neither the Transfer Agent nor The Bank of New
York 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 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
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 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 have been 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 has caused increased expenditures for
health and welfare programs. The State also has 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 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 which matured 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 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) projected $42.4 billion of General Fund revenues and
transfers and $41.7 billion of budgeted expenditures. In addition, the
1994-95 Budget Act anticipated 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 proposed 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 was 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 "County Funds") filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the County Funds had suffered significant market losses in their
investments, causing a liquidity crisis for the County 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 County Funds. As
of mid-January 1995, following a restructuring of most of the County
Funds' assets to increase their liquidity and reduce their exposure to
interest rate increases, the County estimated the County 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 monies
in the County 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 also may 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 $43 million to the General Fund from the SFEU and
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 $36.060 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year was $37.55 billion, and
the appropriations subject to limitations were 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 $18.5 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 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. Chapter 66
also reduced 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 exceeded 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 increased the 1993-94
Proposition 98 guarantee to $13.8 billion, which exceeded the minimum
guarantee in that year by $272 million and provided per pupil funding of
$4,225.
The 1995-96 Governor's Budget adjusted the 1993-94 minimum guarantee
to reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect
changes in the statutory continuous appropriation for apportionments. The
revised appropriations exceeded the minimum guarantee by $32 million.
This appropriation level still provided per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted
for changes in factors described above, and was calculated to be $14.9
billion. Within the minimum guarantee, the dollars per pupil were
maintained at the prior year's level; consequently, the 1994-95 minimum
guarantee included a loan repayment of $135 million, and the per-pupil
funding increased 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
1992-93 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 38% of General
Fund revenue in 1992-93. Bank and corporation tax revenues comprised
about 11% of General Fund revenue in 1992-93. 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 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 and the SFEU was fully
depleted by June 30, 1990. This date essentially coincided with the date
of the most recent recession, and the State subsequently accumulated a
budget deficit in the SFEU approaching $2.8 billion at its peak. The
State's budget problems in recent years also have 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 provided for expenditures of $57.4 billion and consisted of
General Fund expenditures of $40.8 billion and Special Fund and Bond Fund
expenditures of $16.6 billion. The Department of Finance estimated 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 represented 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 were
very close to the projections made in the Governor's Budget of January 10,
1994, which was 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 had already been made in the last three years. The Governor's
Budget Proposal, as updated in May and June 1994 proposed a two-year
solution to pass the accumulated deficit. 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 1995 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 were 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%, below
forecast, and that year-to-date General Fund revenues were $110 million,
or 0.4%, 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-
96 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
1994. 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 in 1994.
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 and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will
include: (1) likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature and provisions of
the obligation; and (3) protection afforded by, and relative position of,
the obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small
degree.
A
Principal and interest payments on bonds in this category are
regarded as safe. This rating describes the third strongest capacity for
payment of debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the
issuer to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management
performance appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" rating is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among
the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues could show substantial variations with the revenue flow
possibly being subject to erosion over time. Basic security provisions
are no more than adequate. Management performance could be stronger.
BB, B, CCC, CC, 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
payments.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic
conditions to meet timely payments of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC rating.
C
The rating C 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 sign 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 (+)
designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
The designation A-1 by S&P 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. Capacity for timely payment on
issues with an A-2 designation is strong. However, the relative degree of
safety is not as high as for issues designated A-1.
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 the 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 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.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins
in earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a wide range of financial
markets and assured sources of alternative liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations.
This ordinarily will be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have 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 in 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
STATEMENT OF INVESTMENTS JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-92.6% AMOUNT VALUE
_______ _______
<S> <C> <C>
CALIFORNIA-86.5%
Anaheim Public Financing Authority, Tax Allocation Revenue
(Redevelopment Project Alpha) 6.45%, 12/28/2018 (Insured; MBIA)......... $ 4,000,000 $ 4,413,280
Antelope Valley Hospital District, Insured COP 7.30%, 1/1/2006.............. 2,400,000 2,576,376
California:
6.90%, 4/1/2005......................................................... 2,000,000 2,339,100
5.25%, 10/1/2011........................................................ 5,250,000 5,221,912
6.125%, 10/1/2011....................................................... 2,875,000 3,238,285
5.25%, 10/1/2018........................................................ 7,200,000 6,976,872
California Department of Water Resources, Revenue
(Central Valley Project) 4.75%, 12/1/2025............................... 3,120,000 2,810,184
California Educational Facilities Authority, Revenue, Refunding
(Saint Mary's College) 5%, 10/1/2012.................................... 4,000,000 3,752,120
California Health Facilities Financing Authority, Revenue
(Saint Francis Memorial Hospital) 5.875%, 11/1/2023..................... 4,500,000 4,555,170
California Housing Finance Agency, Home Mortgage Revenue:
6.70%, 8/1/2025......................................................... 2,000,000 2,074,040
7.50%, 8/1/2029......................................................... 1,135,000 1,188,390
8%, 8/1/2029............................................................ 525,000 556,852
7.60%, 8/1/2030......................................................... 1,605,000 1,703,467
7.70%, 8/1/2030......................................................... 1,200,000 1,272,072
California Pollution Control Financing Authority, SWDR (North County
Recycling
Center) 6.75%, 7/1/2011 (LOC; Union Bank of Switzerland) (a)............ 2,500,000 2,533,700
California Public Works Board, LR:
(Secretary of State):
6.75%, 12/1/2012...................................................... 3,475,000 3,805,855
6.50%, 12/1/2008 (b).................................................. 1,400,000 1,639,932
(University of California Projects) 5.50%, 6/1/2014..................... 8,000,000 8,003,920
California Statewide Communities Development Authority, COP, Revenue,
Refunding
(Pacific Homes) 5.90%, 4/1/2009......................................... 4,340,000 4,515,596
Compton, COP, Refunding 7.50%, 8/1/2015 (LOC; Mitsui Trust and Banking) (a). 2,000,000 2,135,060
Contra Costa County, Water District Revenue 6%, 10/1/2011 (Insured; MBIA) (b) 1,725,000 1,855,048
Escondido Unified School District, Refunding 5.125%, 9/1/2015 (Insured; FGIC) (c) 1,500,000 1,470,870
Eureka Public Financing Authority, Tax Allocation Revenue, Refunding
(Eureka Redevelopment Projects) 6.25%, 11/1/2011 (Insured; CGIC)........ 2,000,000 2,169,260
Fairfield, Water Revenue, Refunding 5.375%, 4/1/2017 (Insured; AMBAC) (c)... 5,250,000 5,253,675
Fontana Redevelopment Agency, Tax Allocation Revenue
(North Fontana Redevelopment Project) 7.25%, 9/1/2020................... 4,250,000 4,607,595
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2030................................................... 40,000,000 4,660,400
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
Long Beach, Harbor Revenue 5.25%, 5/15/2025 (Insured; MBIA)................. $ 3,000,000 $ 2,876,490
Los Angeles, Wastewater Systems Revenue
7.10%, 2/1/2021 (Insured; MBIA, Prerefunded 2/1/1999) (d)............... 2,200,000 2,447,984
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue
5.25%, 7/1/2023 (Insured; AMBAC)........................................ 5,000,000 4,854,800
Los Angeles Harbor Department, Revenue 7.60%, 10/1/2018..................... 750,000 867,728
Madera County, COP (Valley Children's Hospital):
6.25%, 3/15/2006 (Insured; MBIA)........................................ 2,250,000 2,508,435
6.50%, 3/15/2009 (Insured; MBIA)........................................ 3,370,000 3,848,439
Menlo Park Community Development Agency, Tax Allocation, Refunding
(Las Pulgas Community Development Project) 6.55%, 10/1/2011 (Insured;
AMBAC).................................................................. 2,000,000 2,301,000
Monrovia Redevelopment Agency, Tax Allocation, Refunding
(Central Redevelopment Project) 6.70%, 5/1/2021 (Insured; AMBAC)........ 2,000,000 2,204,640
Mount Shasta, HR, COP (Mercy Medical Center)
7.25%, 7/1/2019 (Prerefunded 7/1/1999) (d).............................. 1,855,000 2,088,229
Nevada County, COP (Western Nevada Co. Solid Waste-McCourtney Road Landfill)
7.50%, 6/1/2021......................................................... 2,200,000 2,270,840
Northern California Power Agency, Public Power Revenue, Refunding
(Hydroelectric Project No. 1):
6.30%, 7/1/2018....................................................... 6,000,000 6,845,640
7.15%, 7/1/2024....................................................... 4,415,000 4,785,507
Orange County, Special Tax (Community Facilities District No. 87):
7.75%, 8/15/2014........................................................ 2,375,000 2,437,296
7.80%, 8/15/2015 (Prerefunded 8/15/2000) (d)............................ 2,000,000 2,337,780
Orange Cove, Irrigation District Revenue, COP
(Rehabilitation Project) 7.25%, 2/1/2012................................ 3,000,000 3,195,870
Pittsburg Public Financing Authority, Wastewater Revenue, Refunding
5.125%, 6/1/2015 (Insured; FGIC)........................................ 2,700,000 2,628,747
Richmond Joint Powers Financing Authority, Revenue 7.25%, 5/15/2013......... 1,500,000 1,684,605
Riverside County, SFMR 7.80%, 5/1/2021 (Collateralized; GNMA)............... 1,250,000 1,612,438
Roseville, Special Tax (Community Facilities District No. 1) 7.70%, 9/1/2020 2,000,000 2,081,240
Sacramento County, Special Tax (Community Facilities District No. 1):
8.20%, 12/1/2010........................................................ 2,250,000 2,434,815
8.25%, 12/1/2020........................................................ 2,000,000 2,163,180
Sacramento Municipal Utility District, Electric Revenue 7.875%, 8/15/2016... 2,900,000 3,248,899
Sacramento Schools Insurance Authority, Revenue
(Workers Compensation Program) 5.75%, 6/1/2003.......................... 3,930,000 4,126,028
San Diego County Water Authority, Water Revenue, COP 5.607%, 4/23/2008 (b).. 4,000,000 4,223,680
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
San Diego Public Facilities Financing Authority, Sewer Revenue
5%, 5/15/2015 (Insured; FGIC)........................................... $ 3,010,000 $ 2,906,787
San Joaquin Hills Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2022................................................... 15,000,000 2,998,050
San Jose - Santa Clara Water Financing Authority, Sewer Revenue
5.375%, 11/15/2015 (Insured; FGIC)...................................... 1,125,000 1,124,899
Simi Valley, Single Family Residential Mortgage Revenue 7.625%, 8/1/2022 (e) 2,000,000 1,200,000
Southern California Rapid Transit District, COP
(Worker's Compensation Fund) 6%, 7/1/2010............................... 2,045,000 2,167,168
University of California, Revenue, Refunding (Multiple Purpose Projects):
5%, 9/1/2014 (Insured; AMBAC)........................................... 4,000,000 3,879,760
5%, 9/1/2023 (Insured; AMBAC)........................................... 8,500,000 8,020,600
Vista, MFHR (Vista Hacienda Project) 6.95%, 4/1/2017........................ 3,000,000 3,191,490
Waterford Public Financing Authority, Revenue 8.20%, 9/15/2020.............. 2,615,000 2,087,764
U.S. RELATED-6.1%
Puerto Rico Commonwealth Highway and Transportation Authority, Revenue
5.50%, 7/1/2013......................................................... 7,250,000 7,400,800
Puerto Rico Electric Power Authority, Power Revenue, Refunding 7.125%, 7/1/2014 2,000,000 2,181,900
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,000,000 3,260,550
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $185,744,249)................... $195,823,109
=======
SHORT-TERM MUNICIPAL INVESTMENTS-7.4%
CALIFORNIA-6.4%
California Pollution Control Financing Authority, RRR, VRDN:
(Delano Project) 3.25% (LOC; ABN-Amro Bank) (a,f)....................... $ 4,600,000 $ 4,600,000
(Ultra Power-Rocklin):
3.90% (LOC; Bank of America National Trust and Savings Association) (a,f) 1,200,000 1,200,000
3.90% (LOC; Bank of America National Trust and Savings Association) (a,f) 1,800,000 1,800,000
Santa Clara Transportation District, Crossover Revenue, VRDN
3.75% (LOC; Sumitomo Bank) (a,f)........................................ 5,800,000 5,800,000
U.S. RELATED-1.0%
Puerto Rico Electric Power Authority, Power Revenue 3.24%, 7/1/2023 (g)..... 2,200,000 2,200,000
_______
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $15,600,000)...................................................... $ 15,600,000
=======
TOTAL INVESTMENTS-100.0%
(cost $201,344,249)..................................................... $211,423,109
=======
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
CGIC Capital Guaranty Insurance Corporation Insurance Corporation
COP Certificate of Participation MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
GNMA Government National Mortgage Association SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
LR Lease Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (H) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ __________ ____________
<S> <C> <C> <C>
AAA Aaa AAA 40.9%
AA Aa AA 4.5
A A A 32.5
BBB Baa BBB 8.8
D D D .6
F1 MIG1, VMIG1 & P1 SP1, A1 6.3
Not Rated (i) Not Rated (i) Not Rated (i) 6.4
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) Wholly held by the custodian in a segregated account as collateral
for when-issued securities.
(c) Purchased on a delayed delivery or when-issued basis.
(d) 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.
(e) Non-income producing security; interest payments in default.
(f) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(g) Inverse floater security - the interest rate is subject to change
periodically.
(h) Fitch currently provides creditworthiness information for a limited
number of investments.
(i) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's, have been determined by the 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, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $201,344,249)-see statement..................................... $211,423,109
Cash.................................................................... 1,733,868
Interest receivable..................................................... 2,876,499
Receivable for shares of Beneficial Interest subscribed................. 14,321
Prepaid expenses........................................................ 6,790
_______
216,054,587
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 96,128
Due to Distributor...................................................... 52,761
Payable for investment securities purchased............................. 9,043,987
Payable for shares of Beneficial Interest redeemed...................... 84,051
Accrued expenses........................................................ 59,674 9,336,601
______ _______
NET ASSETS ................................................................ $206,717,986
=======
REPRESENTED BY:
Paid-in capital......................................................... $194,276,770
Accumulated undistributed net realized gain on investments.............. 2,362,356
Accumulated net unrealized appreciation on investments-Note 3........... 10,078,860
_______
NET ASSETS at value......................................................... $206,717,986
=======
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 14,277,414
=======
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,659,307
=======
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 81
=======
NET ASSET VALUE per share:
Class A Shares
($185,187,120 / 14,277,414 shares).................................... $12.97
=======
Class B Shares
($21,529,815 / 1,659,307 shares)...................................... $12.98
=======
Class C Shares
($1,051 / 81 shares).................................................. $12.98
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED JANUARY 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,901,785
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,152,436
Shareholder servicing costs-Note 2(c)................................. 662,327
Distribution fees-Note 2(b)........................................... 102,037
Professional fees..................................................... 54,939
Trustees' fees and expenses-Note 2(d)................................. 35,811
Custodian fees........................................................ 24,327
Registration fees..................................................... 7,191
Prospectus and shareholders' reports.................................. 3,223
Miscellaneous......................................................... 22,278
______
TOTAL EXPENSES.................................................... 2,064,569
______
INVESTMENT INCOME-NET............................................. 10,837,216
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,212,253
Net unrealized appreciation on investments.............................. 10,659,485
______
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 16,871,738
______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $27,708,954
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JANUARY 31,
________________________________
1995 1996
_______ _______
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 13,051,960 $ 10,837,216
Net realized gain on investments........................................ 1,759,018 6,212,253
Net unrealized appreciation (depreciation) on investments for the year.. (27,102,766) 10,659,485
_______ _______
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (12,291,788) 27,708,954
_______ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (12,067,054) (9,879,785)
Class B shares........................................................ (984,906) (957,402)
Class C shares........................................................ _ (29)
Net realized gain on investments:
Class A shares........................................................ (1,316,480) (4,193,091)
Class B shares........................................................ (128,731) (474,312)
Class C shares........................................................ _ (23)
_______ _______
TOTAL DIVIDENDS................................................... (14,497,171) (15,504,642)
_______ _______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 12,980,330 7,850,834
Class B shares........................................................ 6,515,990 2,433,172
Class C shares........................................................ _ 1,000
Dividends reinvested:
Class A shares........................................................ 6,079,502 6,858,326
Class B shares........................................................ 709,931 978,162
Class C shares........................................................ _ 52
Cost of shares redeemed:
Class A shares........................................................ (47,805,009) (32,515,537)
Class B shares........................................................ (3,113,197) (2,012,025)
_______ _______
(DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... (24,632,453) (16,406,016)
_______ _______
TOTAL (DECREASE) IN NET ASSETS.............................. (51,421,412) (4,201,704)
NET ASSETS:
Beginning of year....................................................... 262,341,102 210,919,690
_______ _______
End of year............................................................. $210,919,690 $206,717,986
======= =======
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ _____________________________ _______
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31, YEAR ENDED
_____________________________ _____________________________
JANUARY 31,
CAPITAL SHARE TRANSACTIONS: 1995 1996 1995 1996 1996*
_______ _______ ________ _______ ________
<S> <C> <C> <C> <C> <C>
Shares sold............. 1,040,833 611,979 506,103 191,459 77
Shares issued for dividends
reinvested............ 489,182 534,099 57,245 76,108 4
Shares redeemed......... (3,847,929) (2,546,673) (252,804) (157,990) _
_______ _______ ________ _______ ________
NET INCREASE (DECREASE)
IN SHARES
`OUTSTANDING...... (2,317,914) (1,400,595) 310,544 109,577 81
======= ======= ======== ======= ========
*From June 2, 1995 (commencement of initial offering) to January 31,
1996.
See notes to financial statements.
</TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated June 3, 1996.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier California Municipal Bond Fund (the "Fund") is registered under
the Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company. The Fund's investment objective is to maximize
current income exempt from Federal and, where applicable, from State personal
income taxes to the extent consistent with the preservation of capital. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank. N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund offers Class A, Class B and Class
C shares. 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 at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three 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
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
normally declared and paid annually, but the Fund may make distributions on a
more frequent basis to comply with the distribution requirements of the
Internal Revenue Code. 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 (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first
$30 million, 2% of the next $70 million and 11\2% of the excess over $100
million of the average value of the Fund's net assets in accordance with
California "blue sky" regulations. There was no expense reimbursement for the
year ended January 31, 1996.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $11,891 for the period from
December 1, 1995 through January 31, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $11,623 during the year ended January 31, 1996 from commissions
earned on sales of the Fund's shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, 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 shares and .75 of 1% of the value of the average
daily net assets of Class C shares. For the period ended January 31, 1996,
$102,032 was charged to the Fund for the Class B shares and $5 was charged to
the Fund for the Class C shares.
(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, Class B and Class C shares for the provision of certain services.
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. For the period ended January 31, 1996,
$472,817, $51,016 and $2 were charged to Class A, B and C shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and
an attendance fee of $500 per meeting. The Chairman of the Board receives an
additional 25% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended January 31, 1996
amounted to $188,136,590 and $215,416,205, respectively.
At January 31, 1996, accumulated net unrealized appreciation on
investments was $10,078,860, consisting of $11,535,635 gross unrealized
appreciation and $1,456,775 gross unrealized depreciation.
At January 31, 1996, 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, 1996, 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, 1996 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, 1996, 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 and Young LLP signature logo]
New York, New York
March 5, 1996
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 -- For the period from
November 10, 1986 (commencement of operations) to
January 31, 1987 and for each of the nine years ended
January 31, 1996.
Included in Part B of the Registration Statement:
Statement of Investments -- January 31, 1996.
Statement of Assets and Liabilities --January 31,
1996.
Statement of Operations -- year ended January 31,
1996.
Statement of Changes in Net Assets -- for the years
ended January 31, 1995 and 1996.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors,
dated March 5, 1996.
All Schedules 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) Registrant's Custody Agreement.
(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 is incorporated by reference to
Exhibit (9) of Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A, filed on June 1, 1995.
(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.
Item 24. Financial Statements and Exhibits - List (continued)
(15) Distribution Plan is incorporated by reference to Exhibit (15)
of Post-Effective Amendment No. 16 to the Registration Statement
on Form N-1A, filed on June 1, 1995.
(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 is incorporated by reference to
Exhibit (18) of Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A, filed on June 1, 1995.
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 7, 1996
Beneficial Interest
(par value $.001)
Class A 3,277
Class B 561
Class C 2
Item 27. Indemnification
Reference is made to Article VIII of the Registrant's Amended
and Restated Declaration of Trust 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.
The application of these provisions is limited by Article 10 of
the Registrant's By-Laws, as amended, incorporated by reference
to Exhibit (2) of Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A, filed on March 30, 1994,
and by the following undertaking set forth in the rules
promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In
the event that a claim for indemnification is against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a trustee, officer or
controlling person of the registrant in the successful
defense of any such action, suit or proceeding) is asserted
by such trustee, officer or controlling person in connection
with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in such Act and will be governed by the final adjudication of
such issue.
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:
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****;
Mellon Bank, N.A.****
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
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*****;
Vice Chairman of the Board:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****;
Operating Officer The Boston Company*****;
and a Director Deputy Director:
Mellon Trust****;
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****;
President:
Boston Safe Deposit and Trust Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
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*****;
Laurel Capital Advisors****;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.****;
Boston Safe Deposit and Trust
Company*****;
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
Director:
Dreyfus Precious Metals, Inc.*;
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, Inc.***;
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
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.*****
Dreyfus Service Corporation*
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++
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President- Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
Dreyfus Service Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* 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 131 Second Street, Lewes,
Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ 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 GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Capital Value Fund, Inc.
14) Dreyfus Cash Management
15) Dreyfus Cash Management Plus, Inc.
16) Dreyfus Connecticut Intermediate Municipal Bond Fund
17) Dreyfus Connecticut Municipal Money Market Fund, Inc.
18) Dreyfus Florida Intermediate Municipal Bond Fund
19) Dreyfus Florida Municipal Money Market Fund
20) The Dreyfus Fund Incorporated
21) Dreyfus Global Bond Fund, Inc.
22) Dreyfus Global Growth Fund
23) Dreyfus GNMA Fund, Inc.
24) Dreyfus Government Cash Management
25) Dreyfus Growth and Income Fund, Inc.
26) Dreyfus Growth and Value Funds, Inc.
27) Dreyfus Growth Opportunity Fund, Inc.
28) Dreyfus Income Funds
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) The Dreyfus/Laurel Investment Series
38) Dreyfus Stock Index Fund, Inc.
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus Michigan Municipal Money Market Fund, Inc.
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus Ohio Municipal Money Market Fund, Inc.
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Short-Intermediate Government Fund
66) Dreyfus Short-Intermediate Municipal Bond Fund
67) Dreyfus Investment Grade Bond Funds, Inc.
68) The Dreyfus Socially Responsible Growth Fund, Inc.
69) Premier Strategic Investing
70) Dreyfus Tax Exempt Cash Management
71) The Dreyfus Third Century Fund, Inc.
72) Dreyfus Treasury Cash Management
73) Dreyfus Treasury Prime Cash Management
74) Dreyfus Variable Investment Fund
75) Dreyfus Worldwide Dollar Money Market Fund, Inc.
76) General California Municipal Bond Fund, Inc.
77) General California Municipal Money Market Fund
78) General Government Securities Money Market Fund, Inc.
79) General Money Market Fund, Inc.
80) General Municipal Bond Fund, Inc.
81) General Municipal Money Market Fund, Inc.
82) General New York Municipal Bond Fund, Inc.
83) General New York Municipal Money Market Fund
84) Dreyfus S&P 500 Index Fund
85) Dreyfus MidCap Index Fund
86) Premier Insured Municipal Bond Fund
87) Premier California Municipal Bond Fund
88) Premier Equity Funds, Inc.
89) Premier Global Investing, Inc.
90) Premier GNMA Fund
91) Premier Growth Fund, Inc.
92) Premier Municipal Bond Fund
93) Premier New York Municipal Bond Fund
94) Premier State Municipal Bond Fund
95) Premier Strategic Growth 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
Executive 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
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
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. First Data Investor 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. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 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 28th day of May, 1996.
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 05/28/96
______________________________ Officer) and Treasurer
Marie E. Connolly
/s/Joseph F. Tower, III* Assistant Treasurer (Principal 5/28/96
______________________________ Accounting and Financial Officer)
Joseph F. Tower, III
/s/Clifford L. Alexander, Jr.* Trustee 5/28/96
______________________________
Clifford L. Alexander, Jr.
/s/Peggy C. Davis* Trustee 5/28/96
______________________________
Peggy C. Davis
/s/Joseph S. DiMartino* Chairman of the Board 5/28/96
______________________________ of Trustees
Joseph S. DiMartino
/s/Ernest Kafka* Trustee 5/28/96
______________________________
Ernest Kafka
/s/Saul B. Klaman* Trustee 5/28/96
______________________________
Saul B. Klaman
/s/Nathan Leventhal* Trustee 5/28/96
______________________________
Nathan Leventhal
*BY: __________________________
Eric B. Fischman,
Attorney-in-Fact
Premier California Municipal Bond Fund
INDEX OF EXHIBITS
Page
(8)(a) Custody Agreement
(11) Consent of Independent Auditors
CUSTODY AGREEMENT
Custody Agreement made as of January 17, 1990 between
PREMIER CALIFORNIA TAX EXEMPT BOND FUND, a business trust
organized and existing under the laws of the Commonwealth of
Massachusetts, having its principal office and place of business
at 666 Old Country Road, Garden City, New York 11530
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New
York corporation authorized to do a banking business, having its
principal office and place of business at 48 Wall Street, New
York, New York 10015 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have
the following meanings:
1. "Authorized Person" shall be deemed to include the
Treasurer, the Controller or any other person, whether or not
any such person is an Officer or employee of the Fund, duly
authorized by the Trustees of the Fund to give Oral Instructions
and Written Instructions on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix A or such other
Certificate as may be received by the Custodian from time to
time.
2. "Available Balance" shall mean for any given day
during a calendar year the aggregate amount of Federal Funds
held in the Fund's custody account(s) at The Bank of New York,
or its successors, as of the close of such day or, if such day
is not a business day, the close of the preceding business day.
3. "Bankruptcy" shall mean with respect to a party
such party's making a general assignment, arrangement or
composition with or for the benefit of its creditors, or
instituting or having instituted against it a proceeding seeking
a judgment of insolvency or bankruptcy or the entry of an order
for relief under the Federal bankruptcy law or any other relief
under any bankruptcy or insolvency law or other similar law
affecting creditors' rights, or if a petition is presented for
the winding up or liquidation of the party or a resolution is
passed for its winding up or liquidation, or it seeks, or
becomes subject to, the appointment of an administrator,
receiver, trustee, custodian or other similar official for it or
for all or substantially all of its assets or its taking any
action in furtherance of, or indicating its consent to approval
of, or acquiescence in, any of the foregoing.
4. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and Federal
agency securities, its successor or successors and its nominee
or nominees.
5. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise price,
as specified therein, to purchase from the writer thereof the
specified underlying Securities.
6. "Certificate" shall mean any notice, instruction,
or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually
received by the Custodian and signed on behalf of the Fund by
any two Officers of the Fund.
7. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange qualified
to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a
clearing member.
8. "Collateral Account" shall mean a segregated
account so denominated and pledged to the Custodian as security
for, and in consideration of, the Custodian's issuance of (a)
any Put Option guarantee letter or similar document described in
paragraph 8 of Article V herein, or (b) any receipt described in
Article V or VIII herein.
9. "Consumer Price Index" shall mean the U.S.
Consumer Price Index, all items and all urban consumers, U.S.
city average 1982-84 equals 100, as first published without
seasonal adjustment by the Bureau of Labor Statistics, the
Department of Labor, without regard to subsequent revisions or
corrections by such Bureau.
10. "Covered Call Option" shall mean an exchange
traded option entitling the holder, upon timely exercise and
payment of the exercise price, as specified therein, to purchase
from the writer thereof the specified Securities (excluding
Futures Contracts) which are owned by the writer thereof and
subject to appropriate restrictions.
11. "Depository" shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the
Securities and Exchange Commission, its successor or successors
and its nominee or nominees, provided the Custodian has received
a certified copy of a resolution of the Fund's Trustees
specifically approving deposits in DTC. The term "Depository"
shall further mean and include any other person authorized to
act as a depository under the Investment Company Act of 1940,
its successor or successors and its nominee or nominees,
specifically identified in a certified copy of a resolution of
the Fund's Trustees specifically approving deposits therein by
the Custodian.
12. "Earnings Credit" shall mean for any given day
during a calendar year the product of (a) the Federal Funds Rate
for such date minus .25%, and (b) 82% of the Available Balance.
13. "Federal Funds" shall mean immediately available
same day funds.
14. "Federal Funds Rate" shall mean, for any day, the
Federal Funds (Effective) interest rate so denominated as
published in Federal Reserve Statistical Release H.I5 (519) and
applicable to such day and each succeeding day which is not a
business day.
15. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities, including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at
an agreed upon price.
16. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
17. "Futures Contract Option" shall mean an option
with respect to a Futures Contract.
18. "Margin Account" shall mean a segregated account
in the name of a broker, dealer, futures commission merchant or
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant or Clearing Member,
or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant
or Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund
may from time to time determine. Securities held in the
Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the
Custodian's effecting an appropriate entry on its books and
records.
19. "Merger" shall mean (a) with respect to the Fund,
the consolidation or amalgamation with, merger into, or transfer
of all or substantially all of its assets to, another entity,
where the Fund is not the surviving entity, and (b) with respect
to the Custodian, any consolidation or amalgamation with, merger
into, or transfer of all or substantially all of its assets to,
another entity, except for any such consolidation, amalgamation,
merger or transfer of assets between the Custodian and The Bank
of New York Company, Inc. or any subsidiary thereof, or the
Irving Bank Corporation or any subsidiary thereof, provided that
the surviving entity agrees to be bound by the terms of this
Agreement.
20. "Money Market Security" shall be deemed to
include, without limitation, debt obligations issued or
guaranteed as to principal and interest by the government of the
United States or agencies or instrumentalities thereof,
commercial paper, certificates of deposit and bankers'
acceptances, repurchase and reverse repurchase agreements with
respect to the same and bank time deposits, where the purchase
and sale of such securities normally requires settlement in
Federal funds on the same date as such purchase or sale.
21. "O.C.C." shall mean Options Clearing Corporation,
a clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its
nominee or nominees.
22. "Officers" shall be deemed to include the
President, any Vice President, the Secretary, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Treasurer or
any other person or persons duly authorized by the Fund's
Trustees to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix B or such other
Certificate as may be received by the Custodian from time to
time.
23. "Option" shall mean a Call Option, Covered Call
Option, Stock Index Option and/or a Put Option.
24. "Oral Instructions" shall mean verbal
instructions actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person.
25. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer
thereof for the exercise price.
26. "Reverse Repurchase Agreement" shall mean an
agreement pursuant to which the Fund sells Securities and agrees
to repurchase such Securities at a described or specified date
and price.
27. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
stock and other instruments or rights having characteristics
similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public
authorities (including, without limitation, general obligation
bonds, revenue bonds and industrial bonds and industrial
development bonds), bonds, debentures, notes, mortgages or other
obligations, and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase, sell or
subscribe for the same, or evidencing or representing any other
rights or interest therein, or any property or assets.
28. "Segregated Security Account" shall mean an
account maintained under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the
custody account in which certain Securities and/or other assets
of the Fund shall be deposited and withdrawn from time to time
in accordance with Certificates received by the Custodian in
connection with such transactions as the Fund may from time to
time determine.
29. "Shares" shall mean the shares of beneficial
interest of the Fund, each of which, in the case of a Fund
having Series, is allocated to a particular Series.
30. "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties agree to take
or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the value of a
particular stock index at the close of the last business day of
the contract and the price at which the futures contract is
originally struck.
31. "Stock Index Option" shall mean an exchange
traded option entitling the holder, upon timely exercise, to
receive an amount of cash determined by reference to the
difference between the exercise price and the value of the index
on the date of exercise.
32. "Written Instructions" shall mean written
communications actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person by telex or any other such
system whereby the receiver of such communications is able to
verify by codes or otherwise with a reasonable degree of
certainty the authenticity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of all the Securities and moneys at any
time owned by the Fund during the period of this Agreement,
except that (a) if the Custodian fails to provide for the
custody of any of the Fund's Securities and moneys located or to
be located outside the United States in a manner satisfactory to
the Fund, the Fund shall be permitted to arrange for the custody
of such Securities and moneys located or to be located outside
the United States other than through the Custodian at rates to
be negotiated and borne by the Fund and (b) if the Custodian
fails to continue any existing sub-custodial or similar
arrangements on substantially the same terms as exist on the
date of this Agreement, the Fund shall be permitted to arrange
for such or similar services other than through the Custodian at
rates to be negotiated and borne by the Fund. The Custodian
shall not charge the Fund for any such terminated services after
the date of such termination.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of
this Article and in Article VIII, the Fund will deliver or cause
to be delivered to the Custodian all Securities and all moneys
owned by it, including cash received for the issuance of its
shares, at any time during the period of this Agreement. The
Custodian will not be responsible for such Securities and such
moneys until actually received by it. The Custodian will be
entitled to reverse any credits made on the Fund's behalf where
such credits have been previously made and moneys are not
finally collected. The Fund shall deliver to the Custodian a
certified resolution of the Fund's Trustees approving,
authorizing and instructing the Custodian on a continuous and
on-going basis to deposit in the Book-Entry System all
Securities eligible for deposit therein and to utilize the
Book-Entry System to the extent possible in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
Securities collateral. Prior to a deposit of Securities of the
Fund in the Depository the Fund shall deliver to the Custodian a
certified resolution of the Fund's Trustees approving,
authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository
all Securities eligible for deposit therein and to utilize the
Depository to the extent possible in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and moneys of the Fund
deposited in either the Book-Entry System or the Depository will
be represented in accounts which include only assets held by the
Custodian for customers, including, but not limited to, accounts
in which the Custodian acts in a fiduciary or representative
capacity. Prior to the Custodian's accepting, utilizing and
acting with respect to Clearing Member confirmations for Options
and transactions in Options as provided in this Agreement, the
Custodian shall have received a certified resolution of the
Fund's Board of Trustees approving, authorizing and instructing
the Custodian on a continuous and on-going basis, until
instructed to the contrary by a Certificate actually received by
the Custodian, to accept, utilize and act in accordance with
such confirmations as provided in this Agreement.
2. The Custodian shall credit to a separate account
in the name of the Fund all moneys received by it for the
account of the Fund, and shall disburse the same only:
(a) In payment for Securities purchased, as provided
in Article IV hereof;
(b) In payment of dividends or distributions, as
provided in Article XI hereof;
(c) In payment of original issue or other taxes, as
provided in Article XII hereof;
(d) In payment for Shares redeemed by it, as provided
in Article XII hereof;
(e) Pursuant to Certificates setting forth the name
and address of the person to whom the payment is to be made, and
the purpose for which payment is to be made; or
(f) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian, as provided in
Article XV hereof.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary of all transfers to or from the account of the Fund
during said day. Where Securities are transferred to the
account of the Fund, the Custodian shall also by book-entry or
otherwise identify as belonging to the Fund a quantity of
Securities in a fungible bulk of Securities registered in the
name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the
Custodian shall furnish the Fund with a detailed statement of
the Securities and moneys held for the Fund under this
Agreement.
4. Except as otherwise provided in paragraph 7 of
this Article and in Article VIII, all Securities held for the
Fund, which are issued or issuable only in bearer form, except
such Securities as are held in the Book-Entry System, shall be
held by the Custodian in that form; all other Securities held
for the Fund may be registered in the name of the Fund, in the
name of any duly appointed registered nominee of the Custodian
as the Custodian may from time to time determine, or in the name
of the Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository, any Securities which it
may hold for the account of the Fund and which may from time to
time be registered in the name of the Fund. The Custodian shall
hold all such Securities which are not held in the Book-Entry
System or in the Depository in a separate account in the name of
the Fund physically segregated at all times from those of any
other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or the Depository with respect to Securities therein
deposited, shall with respect to all Securities held for the
Fund in accordance with this Agreement:
(a) Collect all income due or payable and, in any
event, if the Custodian receives a written notice from the Fund
specifying that an amount of income should have been received by
the Custodian within the last 90 days, the Custodian will
provide a conditional payment of income within 60 days from the
date the Custodian received such notice, unless the Custodian
reasonably concludes that such income was not due or payable to
the Fund, provided that the Custodian may reverse any such
conditional payment upon its reasonably concluding that all or
any portion of such income was not due or payable, and provided
further that the Custodian shall not be liable for failing to
collect on a timely basis the full amount of income due or
payable in respect of a "floating rate instrument" or "variable
rate instrument" (as such terms are defined under Rule 2a-7
under the Investment Company Act of 1940, as amended) if it has
acted in good faith, without negligence or willful misconduct.
(b) Present for payment and collect the amount
payable upon such Securities which are called, but only if
either (i) the Custodian receives a written notice of such call,
or (ii) notice of such call appears in one or more of the
publications listed in Appendix C annexed hereto, which may be
amended at any time by the Custodian upon five business days'
prior notification to the Fund;
(c) Present for payment and collect the amount
payable upon all Securities which may mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as Custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws
or the laws or regulations of any other taxing authority now or
hereafter in effect; and
(f) Hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein deposited,
for the account of the Fund all rights and similar securities
issued with respect to any Securities held by the Custodian
hereunder.
6. Upon receipt of a Certificate and not otherwise,
the Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents,
authorizations, and any other instruments whereby the authority
of the Fund as owner of any Securities may be exercised;
(b) Deliver any Securities held for the Fund in
exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege;
(c) Deliver any Securities held for the Fund to any
protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to
evidence such delivery;
(d) Make such transfers or exchanges of the assets of
the Fund and take such other steps as shall be stated in said
order to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount
payable upon Securities not described in preceding paragraph
5(b) of this Article which may be called as specified in the
Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, Option or Futures Contract Option until after it shall
have determined, or shall have received a Certificate from the
Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to
such availability, the Custodian shall comply with Section 17(f)
of the Investment Company Act of 1940, as amended, in connection
with the purchase, sale, settlement, closing out or writing of
Futures Contracts, Options or Futures Contract Options by making
payments or deliveries specified in Certificates received by the
Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer
or futures commission merchant of a statement or confirmation
reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or futures commission
merchants with respect to such Futures Contracts, Options or
Futures Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the
name of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that payments to or
deliveries from the Margin Account shall be made in accordance
with the terms and conditions of the Margin Account Agreement.
Whenever any such instruments or certificates are available, the
Custodian shall, notwithstanding any provision in this Agreement
to the contrary, make payment for any Futures Contract, Option
or Futures Contract Option for which such instruments or such
certificates are available only against the delivery to the
Custodian of such instrument or such certificate, and deliver
any Futures Contract, Option or Futures Contract Option for
which such instruments or such certificates are available only
against receipt by the Custodian of payment therefor. Any such
instrument or certificate delivered to the Custodian shall be
held by the Custodian hereunder in accordance with, and subject
to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS,
FUTURES CONTRACTS, FUTURES CONTRACT OPTIONS AND REVERSE
REPURCHASE AGREEMENTS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of any Option, Futures Contract,
Futures Contract Option or Reverse Repurchase Agreement, the
Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such purchase:
(a) the name of the issuer and the title of the Securities; (b)
the number of shares or the principal amount purchased and
accrued interest, if any; (c) the date of purchase and
settlement; (d) the purchase price per unit; (e) the total
amount payable upon such purchase; (f) the name of the person
from whom or the broker through whom the purchase was made, and
the name of the clearing broker, if any; and (g) the name of the
broker to which payment is to be made. The Custodian shall,
upon receipt of Securities purchased by or for the Fund, pay out
of the moneys held for the account of the Fund the total amount
payable to the person from whom, or the broker through whom, the
purchase was made, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral
Instructions or Written Instructions.
2. Promptly after each sale of Securities by the
Fund, other than a sale of any Option, Futures Contract, Futures
Contract Option or Reverse Repurchase Agreement, the Fund shall
deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
Certificate, Oral Instructions or Written Instructions,
specifying with respect to each such sale: (a) the name of the
issuer and the title of the Security; (b) the number of shares
or principal amount sold, and accrued interest, if any; (c) the
date of sale; (d) the sale price per unit; (e) the total amount
payable to the Fund upon such sale; (f) the name of the broker
through whom or the person to whom the sale was made, and the
name of the clearing broker, if any; and (g) the name of the
broker to whom the Securities are to be delivered. The
Custodian shall deliver the Securities upon receipt of the total
amount payable to the Fund upon such sale, provided that the
same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions. Subject
to the foregoing, the Custodian may accept payment in such form
as shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing
among dealers in Securities.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the type
of Option (put or call); (b) the name of the issuer and the
title and number of shares subject to such Option or, in the
case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options purchased;
(c) the expiration date; (d) the exercise price; (e) the dates
of purchase and settlement; (f) the total amount payable by the
Fund in connection with such purchase; (g) the name of the
Clearing Member through which such Option was purchased; and (h)
the name of the broker to whom payment is to be made. The
Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such
Clearing Member for the account of the Custodian (or any duly
appointed and registered nominee of the Custodian) as custodian
for the Fund, out of moneys held for the account of the Fund,
the total amount payable upon such purchase to the Clearing
Member through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph l hereof, the Fund shall deliver
to the Custodian a Certificate specifying with respect to each
such sale: (a) the type of Option (put or call); (b) the name
of the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock Index
Options sold; (c) the date of sale; (d) the sale price; (e) the
date of settlement; (f) the total amount payable to the Fund
upon such sale; and (g) the name of the Clearing Member through
which the sale was made. The Custodian shall consent to the
delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding
paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the
Fund, provided that the same conforms to the total amount
payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any
Call Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Call Option: (a) the name of
the issuer and the title and number of shares subject to the
Call Option; (b) the expiration date; (c) the date of exercise
and settlement; (d) the exercise price per share; (e) the total
amount to be paid by the Fund upon such exercise; and (f) the
name of the Clearing Member through which such Call Option was
exercised. The Custodian shall, upon receipt of the Securities
underlying the Call Option which was exercised, pay out of the
moneys held for the account of the Fund the total amount payable
to the Clearing Member through whom the Call Option was
exercised, provided that the same conforms to the total amount
payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the name of the issuer and
the title and number of shares subject to the Put Option; (b)
the expiration date; (c) the date of exercise and settlement;
(d) the exercise price per share; (e) the total amount to be
paid to the Fund upon such exercise; and (f) the name of the
Clearing Member through which such Put Option was exercised.
The Custodian shall, upon receipt of the amount payable upon the
exercise of the Put Option, deliver or direct the Depository to
deliver the Securities, provided the same conforms to the amount
payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any
Stock Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
type of Stock Index Option (put or call); (b) the number of
Options being exercised; (c) the stock index to which such
Option relates; (d) the expiration date; (e) the exercise price;
(f) the total amount to be received by the Fund in connection
with such exercise; and (g) the Clearing Member from which such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same;
(b) the expiration date; (c) the exercise price; (d) the premium
to be received by the Fund; (e) the date such Covered Call
Option was written; and (f) the name of the Clearing Member
through which the premium is to be received. The Custodian
shall deliver or cause to be delivered, in exchange for receipt
of the premium specified in the Certificate with respect to such
Covered Call Option, such receipts as are required in accordance
with the customs prevailing among Clearing Members dealing in
Covered Call Options and shall impose, or direct the Depository
to impose, upon the underlying Securities specified in the
Certificate such restrictions as may be required by such
receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time
to refuse to issue any receipts for Securities in the possession
of the Custodian and not deposited with the Depository
underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the name of the issuer
and the title and number of shares subject to the Covered Call
Option; (b) the Clearing Member to whom the underlying
Securities are to be delivered; and (c) the total amount payable
to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6
of this Article, the Custodian shall deliver, or direct the
Depository to deliver, the underlying Securities as specified in
the Certificate for the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the name of the issuer and
the title and number of shares for which the Put Option is
written and which underlie the same; (b) the expiration date;
(c) the exercise price; (d) the premium to be received by the
Fund; (e) the date such Put Option is written; (f ) the name of
the Clearing Member through which the premium is to be received
and to whom a Put Option guarantee letter is to be delivered;
(g) the amount of cash, and/or the amount and kind of
Securities, if any, to be deposited in the Segregated Security
Account; and (h) the amount of cash and/or the amount and kind
of Securities to be deposited into the Collateral Account. The
Custodian shall, after making the deposits into the Collateral
Account specified in the Certificate, issue a Put Option
guarantee letter substantially in the form utilized by the
Custodian on the date hereof, and deliver the same to the
Clearing Member specified in the Certificate against receipt of
the premium specified in said Certificate. Notwithstanding the
foregoing, the Custodian shall be under no obligation to issue
any Put Option guarantee letter or similar document if it is
unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund
shall promptly deliver to the Custodian a Certificate
specifying: (a) the name of the issuer and title and number of
shares subject to the Put Option; (b) the Clearing Member from
which the underlying Securities are to be received; (c) the
total amount payable by the Fund upon such delivery; (d) the
amount of cash and/or the amount and kind of Securities to be
withdrawn from the Collateral Account; and (e) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Segregated Security Account. Upon the return
and/or cancellation of any Put Option guarantee letter or
similar document issued by the Custodian in connection with such
Put Option, the Custodian shall pay out of the moneys held for
the account of the Fund the total amount payable to the Clearing
Member specified in the Certificate as set forth in such
Certificate, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes a Stock Index Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) whether
such Stock Index Option is a put or a call; (b) the number of
Options written; (c) the stock index to which such Option
relates; (d) the expiration date; (e) the exercise price; (f)
the Clearing Member through which such Option was written; (g)
the premium to be received by the Fund; (h) the amount of cash
and/or the amount and kind of Securities, if any, to be
deposited in the Segregated Security Account; (i) the amount of
cash and/or the amount and kind of Securities, if any, to be
deposited in the Collateral Account; and (j) the amount of cash
and/or the amount and kind of Securities, if any, to be
deposited in a Margin Account, and the name in which such
account is to be or has been established. The Custodian shall,
upon receipt of the premium specified in the Certificate, make
the deposits, if any, into the Segregated Security Account
specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among
Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2)
make the deposits into the Margin Account specified in the
Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) such information as may be necessary to identify the Stock
Index Option being exercised; (b) the Clearing Member through
which such Stock Index Option is being exercised; (c) the total
amount payable upon such exercise, and whether such amount is to
be paid by or to the Fund; (d) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Margin
Account; and (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Segregated Security
Account and the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account.
Upon the return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this Article,
the Custodian shall pay to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical
to a previously written Option described in paragraphs 6, 8 or
10 of this Article in a transaction expressly designated as a
"Closing Purchase Transaction" in order to liquidate its
position as a writer of an Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect
to the Option being purchased: (a) that the transaction is a
Closing Purchase Transaction; (b) the name of the issuer and the
title and number of shares subject to the Option, or, in the
case of a Stock Index Option, the stock index to which such
Option relates and the number of Options held; (c) the exercise
price; (d) the premium to be paid by the Fund; (e) the
expiration date; (f) the type of Option (put or call); (g) the
date of such purchase; (h) the name of the Clearing Member to
which the premium is to be paid; and (i) the amount of cash
and/or the amount and kind of Securities, if any, to be
withdrawn from the Collateral Account, a specified Margin
Account or the Segregated Security Account. Upon the
Custodian's payment of the premium and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8
or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the
Custodian shall remove, or direct the Depository to remove, the
previously imposed restrictions on the Securities underlying the
Call Option.
13. Upon the expiration or exercise of, or
consummation of a Closing Purchase Transaction with respect to,
any Option purchased or written by the Fund and described in
this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of
Article III herein, and upon the return and/or cancellation of
any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, the Margin Account
and/or the Segregated Security Account as may be specified in a
Certificate received in connection with such expiration,
exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract (or with
respect to any number of identical Futures Contract(s)): (a)
the category of Futures Contract (the name of the underlying
stock index or financial instrument); (b) the number of
identical Futures Contracts entered into; (c) the delivery or
settlement date of the Futures Contract(s); (d) the date the
Futures Contract(s) was (were) entered into and the maturity
date; (e) whether the Fund is buying (going long) or selling
(going short) on such Futures Contract(s); (f) the amount of
cash and/or the amount and kind of Securities, if any, to be
deposited in the Segregated Security Account; (g) the name of
the broker, dealer or futures commission merchant through which
the Futures Contract was entered into; and (h) the amount of fee
or commission, if any, to be paid and the name of the broker,
dealer or futures commission merchant to whom such amount is to
be paid. The Custodian shall make the deposits, if any, to the
Margin Account in accordance with the terms and conditions of
the Margin Account Agreement. The Custodian shall make payment
of the fee or commission, if any, specified in the Certificate
and deposit in the Segregated Security Account the amount of
cash and/or the amount and kind of Securities specified in said
Certificate.
2. (a) Any variation margin payment or similar
payment required to be made by the Fund to a broker, dealer or
futures commission merchant with respect to an outstanding
Futures Contract shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar
payment from a broker, dealer or futures commission merchant to
the Fund with respect to an outstanding Futures Contract shall
be received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Futures Contract;
(b) with respect to a Stock Index Futures Contract, the total
cash settlement amount to be paid or received, and with respect
to a Financial Futures Contract, the Securities and/or amount of
cash to be delivered or received; (c) the broker, dealer or
futures commission merchant to or from which payment or delivery
is to be made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Segregated Security Account.
The Custodian shall make the payment or delivery specified in
the Certificate and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b)
the Futures Contract being offset. The Custodian shall make
payment of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein, and make such withdrawals from the
Segregated Security Account as may be specified in such
Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures
Contract Option by the Fund, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the type of Futures Contract Option (put
or call); (b) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (c) the
expiration date; (d) the exercise price; (e) the dates of
purchase and settlement; (f) the amount of premium to be paid by
the Fund upon such purchase; (g) the name of the broker or
futures commission merchant through which such option was
purchased; and (h) the name of the broker or futures commission
merchant to whom payment is to be made. The Custodian shall pay
the total amount to be paid upon such purchase to the broker or
futures commission merchant through whom the purchase was made,
provided that the same conforms to the amount set forth in such
Certificate.
2. Promptly after the sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the type of
Futures Contract Option (put or call); (b) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (c) the date of sale; (d) the sale price; (e) the date
of settlement; (f) the total amount payable to the Fund upon
such sale; and (g) the name of the broker or futures commission
merchant through which the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3 Whenever a Futures Contract Option purchased by
the Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the particular Futures Contract Option (put or
call) being exercised; (b) the type of Futures Contract
underlying the Futures Contract Option; (c) the date of
exercise; (d) the name of the broker or futures commission
merchant through which the Futures Contract Option is exercised;
(e) the net total amount, if any, payable by the Fund; (f) the
amount, if any, to be received by the Fund; and (g) the amount
of cash and/or the amount and kind of Securities to be deposited
in the Segregated Security Account. The Custodian shall make
the payments, if any, and the deposits, if any, into the
Segregated Security Account as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract
Option, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Futures Contract
Option: (a) the type of Futures Contract Option (put or call);
(b) the type of Futures Contract and such other information as
may be necessary to identify the Futures Contract underlying the
Futures Contract Option; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund; (f)
the name of the broker or futures commission merchant through
which the premium is to be received; and (g) the amount of cash
and/or the amount and kind of Securities, if any, to be
deposited in the Segregated Security Account. The Custodian
shall, upon receipt of the premium specified in the Certificate,
make the deposits into the Segregated Security Account, if any,
as specified in the Certificate. The deposits, if any, to be
made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
particular Futures Contract Option exercised; (b) the type of
Futures Contract underlying the Futures Contract Option; (c) the
name of the broker or futures commission merchant through which
such Futures Contract Option was exercised; (d) the net total
amount, if any, payable to the Fund upon such exercise; (e) the
net total amount, if any, payable by the Fund upon such
exercise; and (f) the amount of cash and/or the amount and kind
of Securities to be deposited in the Segregated Security
Account. The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in such
Certificate make the payments, if any, and the deposits, if any,
into the Segregated Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is
written by the Fund and which is a Put Option is exercised, the
Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the particular Futures Contract Option
exercised; (b) the type of Futures Contract underlying such
Futures Contract Option; (c) the name of the broker or futures
commission merchant through which such Futures Contract Option
is exercised; (d) the net total amount, if any, payable to the
Fund upon such exercise; (e) the net total amount, if any,
payable by the Fund upon such exercise; and (f) the amount and
kind of Securities and/or cash to be withdrawn from or deposited
in the Segregated Security Account, if any. The Custodian
shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in the Certificate, make the payments,
if any, and the deposits, if any, into the Segregated Security
Account as specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as
a writer of such Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to the Futures Contract Option being purchased: (a)
that the transaction is a closing transaction; (b) the type of
Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract
Option; (c) the exercise price; (d) the premium to be paid by
the Fund; (e) the expiration date; (f) the name of the broker or
futures commission merchant to which the premium is to be paid;
and (g) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Segregated Security
Account. The Custodian shall effect the withdrawals from the
Segregated Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be
made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration or exercise of, or
consummation of a closing transaction with respect to, any
Futures Contract Option written or purchased by the Fund and
described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein, and (b) make
such withdrawals from, and/or, in the case of an exercise, such
deposits into, the Segregated Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals
from the Margin Account, if any, shall be made by the Custodian
in accordance with the terms and conditions of the Margin
Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sale, the Fund shall
deliver to the Custodian a Certificate specifying: (a) the name
of the issuer and the title of the Security; (b) the number of
shares or principal amount sold, and accrued interest or
dividends, if any; (c) the dates of the sale and settlement; (d)
the sale price per unit; (e) the total amount credited to the
Fund upon such sales, if any; (f) the amount of cash and/or the
amount and kind of Securities, if any, which are to be deposited
in a Margin Account and the name in which such Margin Account
has been or is to be established; (g) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in a
Segregated Security Account; and (h) the name of the broker
through which such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming such
sale and that the total amount credited to the Fund upon such
sale, if any, as specified in the Certificate is held by such
broker for the account of the Custodian (or any nominee of the
Custodian) as custodian of the Fund, issue a receipt or make the
deposits into the Margin Account and the Segregated Security
Account specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing-out:
(a) the name of the issuer and the title of the Security; (b)
the number of shares or the principal amount, and accrued
interest or dividends, if any, required to effect such
closing-out to be delivered to the broker; (c) the dates of the
closing-out and settlement; (d) the purchase price per unit; (e)
the net total amount payable to the Fund upon such closing-out;
(f) the net total amount payable to the broker upon such
closing-out; (g) the amount of cash and the amount and kind of
Securities to be withdrawn, if any, from the Margin Account; (h)
the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Segregated Security Account; and
(i) the name of the broker through which the Fund is effecting
such closing-out. The Custodian shall, upon receipt of the net
total amount payable to the Fund upon such closing-out and the
return and/or cancellation of the receipts, if any, issued by
the custodian with respect to the short sale being closed-out,
pay out of the moneys held for the account of the Fund to the
broker the net total amount payable to the broker, and make the
withdrawals from the Margin Account and the Segregated Security
Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse
Repurchase Agreement with respect to Securities and money held
by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate, Oral
Instructions or Written Instructions specifying: (a) the total
amount payable to the Fund in connection with such Reverse
Repurchase Agreement; (b) the broker or dealer through or with
which the Reverse Repurchase Agreement is entered; (c) the
amount and kind of Securities to be delivered by the Fund to
such broker or dealer; (d) the date of such Reverse Repurchase
Agreement; and (e) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in a Segregated Security
Account in connection with such Reverse Repurchase Agreement.
The Custodian shall, upon receipt of the total amount payable to
the Fund specified in the Certificate, Oral Instructions or
Written Instructions make the delivery to the broker or dealer,
and the deposits, if any, to the Segregated Security Account,
specified in such Certificate, Oral Instructions or Written
Instructions.
2. Upon the termination of a Reverse Repurchase
Agreement described in paragraph 1 of this Article, the Fund
shall promptly deliver a Certificate or, in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate, Oral Instructions or Written Instructions to the
Custodian specifying: (a) the Reverse Repurchase Agreement
being terminated; (b) the total amount payable by the Fund in
connection with such termination; (c) the amount and kind of
Securities to be received by the Fund in connection with such
termination; (d) the date of termination; (e) the name of the
broker or dealer with or through which the Reverse Repurchase
Agreement is to be terminated; and (f) the amount of cash and/or
the amount and kind of Securities to be withdrawn from the
Segregated Security Account. The Custodian shall, upon receipt
of the amount and kind of Securities to be received by the Fund
specified in the Certificate, Oral Instructions or Written
Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Segregated Security Account,
specified in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE X
CONCERNING MARGIN ACCOUNTS, SEGREGATED SECURITY
ACCOUNTS AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Segregated Security Account
as specified in a Certificate received by the Custodian. Such
Certificate shall specify the amount of cash and/or the amount
and kind of Securities to be deposited in, or withdrawn from,
the Segregated Security Account. In the event that the Fund
fails to specify in a Certificate the name of the issuer, the
title and the number of shares or the principal amount of any
particular Securities to be deposited by the Custodian into, or
withdrawn from, a Segregated Securities Account, the Custodian
shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments
from a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose benefit,
the account was established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In
accordance with applicable law, the Custodian may enforce its
lien and realize on any such property whenever the Custodian has
made payment or delivery pursuant to any Put Option guarantee
letter or similar document or any receipt issued hereunder by
the Custodian. In the event the Custodian should realize on any
such property net proceeds which are less than the Custodian's
obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed
the Custodian by the Fund within the scope of Article XIII
herein.
5. On each business day, the Custodian shall furnish
the Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close of
business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker,
dealer or futures commission merchant specified in the name of a
Margin Account a copy of the statement furnished the Fund with
respect to such Margin Account.
6. Promptly after the close of business on each
business day in which cash and/or Securities are maintained in a
Collateral Account, the Custodian shall furnish the Fund with a
Statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding
the delivery to the Fund of such statement, the Fund shall
furnish to the Custodian a Certificate or Written Instructions
specifying the then market value of the securities described in
such statement. In the event such then market value is
indicated to be less than the Custodian's obligation with
respect to any outstanding Put Option, guarantee letter or
similar document, the Fund shall promptly specify in a
Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of
the resolution of the Trustees, certified by the Secretary or
any Assistant Secretary, either (i) setting forth the date of
the declaration of a dividend or distribution, the date of
payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of that date and the
total amount payable to the Dividend Agent of the Fund on the
payment date, or (ii) authorizing the declaration of dividends
and distributions on a daily basis and authorizing the Custodian
to rely on Oral Instructions, Written Instructions or a
Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall
be determined, the amount payable per share to the shareholders
of record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such
resolution, Oral Instructions, Written Instructions or
Certificate, as the case may be, the Custodian shall pay out of
the moneys held for the account of the Fund the total amount
payable to the Dividend Agent of the Fund.
ARTICLE XII
SALE AND REDEMPTION OF SHARES OF BENEFICIAL INTEREST
1. Whenever the Fund shall sell any of its Shares, it
shall deliver to the Custodian a Certificate duly specifying:
(a) The number of Shares sold, trade date, and price;
and
(b) The amount of money to be received by the
Custodian for the sale of such Shares.
2. Upon receipt of such money from the Transfer
Agent, the Custodian shall credit such money to the account of
the Fund.
3. Upon issuance of any of the Fund's Shares in
accordance with the foregoing provisions of this Article, the
Custodian shall pay, out of the money held for the account of
the Fund, all original issue or other taxes required to be paid
by the Fund in connection with such issuance upon the receipt of
a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
shall hereafter redeem any of its Shares, it shall furnish to
the Custodian a Certificate specifying:
(a) The number of Shares redeemed; and
(b) The amount to be paid for the Shares redeemed.
5. Upon receipt from the Transfer Agent of an advice
setting forth the number of Shares received by the Transfer
Agent for redemption and that such Shares are valid and in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held for the account of the
Fund of the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the
redemption of any of the Fund's Shares, whenever its Shares are
redeemed pursuant to any check redemption privilege which may
from time to time be offered by the Fund, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part of
such check redemption privilege out of the money held in the
account of the Fund for such purposes.
ARTICLE XIII
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion
advance funds on behalf of the Fund which results in an
overdraft because the moneys held by the Custodian for the
account of the Fund shall be insufficient to pay the total
amount payable upon a purchase of Securities as set forth in a
Certificate or Oral Instructions issued pursuant to Article IV,
or which results in an overdraft for some other reason, or if
the Fund is for any other reason indebted to the Custodian
(except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this
Article XIII), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund payable on demand
and shall bear interest from the date incurred at a rate per
annum (based on a 360-day year for the actual number of days
involved) equal to the Federal Funds Rate plus 1/2%, such rate
to be adjusted on the effective date of any change in such
Federal Funds Rate but in no event to be less than 6% per annum,
except that any overdraft resulting from an error by the
Custodian shall bear no interest. Any such overdraft or
indebtedness shall be reduced by an amount equal to the total of
all amounts due the Fund which have not been collected by the
Custodian on behalf of the Fund when due because of the failure
of the Custodian to make timely demand or presentment for
payment. In addition, the Fund hereby agrees that the Custodian
shall have a continuing lien and security interest in and to any
property at any time held by it for the benefit of the Fund or
in which the Fund may have an interest which is then in the
Custodian's possession or control or in possession or control of
any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time to
charge any such overdraft or indebtedness together with interest
due thereon against any balance of account standing to the
Fund's credit on the Custodian's books. For purposes of this
Section 1 of Article XIII, "overdraft" shall mean a negative
Available Balance.
2. The Fund will cause to be delivered to the
Custodian by any bank (including, if the borrowing is pursuant
to a separate agreement, the Custodian) from which it borrows
money for investment or for temporary or emergency purposes
using Securities as collateral for such borrowings, a notice or
undertaking in the form currently employed by any such bank
setting forth the amount which such bank will loan to the Fund
against delivery of a stated amount of collateral. The Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to each such borrowing: (a) the name of the bank;
(b) the amount and terms of the borrowing, which may be set
forth by incorporating by reference an attached promissory note,
duly endorsed by the Fund, or other loan agreement; (c) the time
and date, if known, on which the loan is to be entered into; (d)
the date on which the loan becomes due and payable; (e) the
total amount payable to the Fund on the borrowing date; (f) the
market value of Securities to be delivered as collateral for
such loan, including the name of the issuer, the title and the
number of shares or the principal amount of any particular
Securities; and (g) a statement specifying whether such loan is
for investment purposes or for temporary or emergency purposes
and that such loan is in conformance with the Investment Company
Act of 1940 and the Fund's prospectus. The Custodian shall
deliver on the borrowing date specified in a Certificate the
specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the
loan payable, provided that the same conforms to the total
amount payable as set forth in the Certificate. The Custodian
may, at the option of the lending bank, keep such collateral in
its possession, but such collateral shall be subject to all
rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver
such Securities as additional collateral as may be specified in
a Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian,
and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the name of the issuer, the
title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XIV
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. If the Fund is permitted by the terms of its
Agreement and Declaration of Trust and as disclosed in its most
recent and currently effective prospectus to lend its portfolio
Securities, within 24 hours after each loan of portfolio
Securities the Fund shall deliver or cause to be delivered to
the Custodian a Certificate specifying with respect to each such
loan: (a) the name of the issuer and the title of the
Securities; (b) the number of shares or the principal amount
loaned; (c) the date of loan and delivery; (d) the total amount
to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the
premium, if any, separately identified; and (e) the name of the
broker, dealer or financial institution to which the loan was
made. The Custodian shall deliver the Securities thus
designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities.
The Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or Depository only
in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in accordance
with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
name of the issuer and the title of the Securities to be
returned; (b) the number of shares or the principal amount to be
returned; (c) the date of termination; (d) the total amount to
be delivered by the Custodian (including the cash collateral for
such Securities minus any offsetting credits as described in
said Certificate); and (e) the name of the broker, dealer or
financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned
from the broker, dealer, or financial institution to which such
Securities were loaned and upon receipt thereof shall pay, out
of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the
Certificate.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the
Custodian nor its nominee shall be liable for any loss or
damage, including counsel fees, resulting from its action or
omission to act or otherwise, either hereunder or under any
Margin Account Agreement, except for any such loss or damage
arising out of its own negligence or willful misconduct. The
Custodian may, with respect to questions of law arising
hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund or of its
own counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage resulting
from the use of the Book-Entry System or any Depository arising
by reason of any negligence, misfeasance or willful misconduct
on the part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into, and
shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold or written by or for the Fund, the legality of
the purchase, sale or writing thereof, or the propriety of the
amount paid or received therefor;
(b) The legality of the issue or sale of any of the
Fund's Shares, or the sufficiency of the amount to be received
therefor;
(c) The legality of the redemption of any of the
Fund's Shares, or the propriety of the amount to be paid
therefor;
(d) The legality of the declaration or payment of any
dividend by the Fund;
(e) The legality of any borrowing by the Fund using
Securities as collateral;
(f) The legality of any loan of portfolio Securities
pursuant to Article XIV of this Agreement, nor shall the
Custodian be under any duty or obligation to see to it that any
cash collateral delivered to it by a broker, dealer or financial
institution or held by it at any time as a result of such loan
of portfolio Securities of the Fund is adequate collateral for
the Fund against any loss it might sustain as a result of such
loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check
or notify the Fund that the amount of such cash collateral held
by it for the Fund is sufficient collateral for the Fund, but
such duty or obligation shall be the sole responsibility of the
Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial
institution to which portfolio Securities of the Fund are lent
pursuant to Article XIV of this Agreement makes payment to it of
any dividends or interest which are payable to or for the
account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian
shall promptly notify the Fund in the event that such dividends
or interest are not paid and received when due; or
(g) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Segregated
Security Account or Collateral Account in connection with
transactions by the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment to
the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see
that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the
amount the Fund is entitled to receive, or to notify the Fund of
the Custodian's receipt or non-receipt of any such payment;
provided however that the Custodian, upon the Fund's written
request, shall, as Custodian, demand from any broker, dealer,
futures commission merchant or Clearing Member identified by the
Fund the payment of any variation margin payment or similar
payment that the Fund asserts it is entitled to receive pursuant
to the terms of a Margin Account Agreement or otherwise from
such broker, dealer, futures commission merchant or Clearing
Member.
3. The Custodian shall not be liable for, or
considered to be the Custodian of, any money, whether or not
represented by any check, draft or other instrument for the
payment of money, received by it on behalf of the Fund until the
Custodian actually receives and collects such money directly or
by the final crediting of the account representing the Fund's
interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and
shall not be liable for ascertaining or acting upon any calls,
conversions, exchange, offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in
the Depository which may mature or be redeemed, retired, called
or otherwise become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on Securities
held in the Depository, the Custodian shall make a claim against
the Depository on behalf of the Fund, except that the Custodian
shall not be under any obligation to appear in, prosecute or
defend any action, suit or proceeding in respect to any
Securities held by the Depository which in its opinion may
involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be
furnished as often as may be required.
5. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount due
to the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount, if
the Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation,
unless and until (i) it shall be directed to take such action by
a Certificate and (ii) it shall be assured to its satisfaction
of reimbursement of its costs and expenses in connection with
any such action.
7. The Custodian may appoint one or more banking
institutions as Depository or Depositories or as Sub-Custodian
or Sub-Custodians, including, but not limited to, banking
institutions located in foreign countries, of Securities and
moneys at any time owned by the Fund, upon terms and conditions
approved in a Certificate, which shall, if requested by the
Custodian, be accompanied by an approving resolution of the
Fund's Board of Trustees adopted in accordance with Rule 17f-5
under the Investment Company Act of 1940, as amended.
8. The Custodian shall not be under any duty or
obligation to ascertain whether any Securities at any time
delivered to or held by it for the account of the Fund are such
as properly may be held by the Fund under the provisions of its
Agreement and Declaration of Trust.
9. (a) The Custodian shall be entitled to receive
and the Fund agrees to pay to the Custodian all reasonable
out-of-pocket expenses and such compensation and fees as are
specified on Schedule A hereto. The Custodian shall not deem
amounts payable in respect of foreign custodial services to be
out-of-pocket expenses, it being the parties' intention that all
fees for such services shall be as set forth on Schedule B
hereto and shall be provided for the term of this Agreement
without any automatic or unilateral increase. The Custodian
shall have the right to unilaterally increase the figures on
Schedule A on or after March 1, 1991 and on or after each
succeeding March 1 thereafter by an amount equal to 50% of the
increase in the Consumer Price Index for the calendar year
ending on the December 31 immediately preceding the calendar
year in which such March 1 occurs, provided, however, that
during each such annual period commencing on a March 1, the
aggregate increase during such period shall not be in excess of
10%. Any increase by the Custodian shall be specified in a
written notice delivered to the Fund at least thirty days prior
to the effective date of the increase. The Custodian may charge
such compensation and any expenses incurred by the Custodian in
the performance of its duties pursuant to such agreement against
any money held by it for the account of the Fund. The Custodian
shall also be entitled to change against any money held by it
for the account of the Fund the amount of any loss, damage,
liability or expense, including counsel fees, for which it shall
be entitled to reimbursement under the provisions of this
Agreement. The expenses which the Custodian may charge against
the account of the Fund include, but are not limited to, the
expenses of Sub-Custodians and foreign branches of the Custodian
incurred in settling outside of New York City transactions
involving the purchase and sale of Securities of the Fund.
(b) The Fund shall receive a credit for each
calendar month against such compensation and fees of the
Custodian as may be payable by the Fund with respect to such
calendar month in an amount equal to the aggregate of its
Earnings Credit for such calendar month. In no event may any
Earnings Credits be carried forward to any fiscal year other
than the fiscal year in which it was earned, or, unless
permitted by applicable law, transferred to, or utilized by, any
other person or entity, provided that any such transferred
Earnings Credit can be used only to offset compensation and fees
of the Custodian for services rendered to such transferee and
cannot be used to pay the Custodian's out-of-pocket expenses.
For purposes of this subsection (b), the Fund is permitted to
transfer Earnings Credits only to The Dreyfus Corporation, its
affiliates and/or any investment company now or in the future
sponsored by The Dreyfus Corporation or any of its affiliates or
for which The Dreyfus Corporation or any of its affiliates acts
as the sole investment adviser or as the principal distributor,
and Daiwa Money Fund Inc. For purposes of this sub-section (b),
a fiscal year shall mean the twelve-month period commencing on
the effective date of this Agreement and on each anniversary
thereof.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by the Custodian pursuant to Article IV or XI hereof. The Fund
agrees to forward to the Custodian a Certificate or facsimile
thereof, confirming such Oral Instructions or Written
Instructions in such manner so that such Certificate or
facsimile thereof is received by the Custodian, whether by hand
delivery, telex or otherwise, by the close of business of the
same day that such Oral Instructions or Written Instructions are
given to the Custodian. The Fund agrees that the fact that such
confirming instructions are not received by the Custodian shall
in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions, provided
such instructions reasonably appear to have been received from
an Authorized Person.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund
which are in the possession of the Custodian shall be the
property of the Fund. Such books and records shall be prepared
and maintained as required by the Investment Company Act of
1940, as amended, and other applicable securities laws and rules
and regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and records
during the Custodian's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and
records shall be provided by the Custodian to the Fund or the
Fund's authorized representative at the Fund's expense.
13. The Custodian shall provide the Fund with any
report obtained by the Custodian on the system of internal
accounting control of the Book-Entry System or the Depository,
or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time
to time.
14. The Fund agrees to indemnify the Custodian
against and save the Custodian harmless from all liability,
claims, losses and demands whatsoever, including attorney's
fees, howsoever arising or incurred because of or in connection
with the Custodian's payment or non-payment of checks pursuant
to paragraph 6 of Article XII as part of any check redemption
privilege program of the Fund, except for any such liability,
claim, loss and demand arising out of the Custodian's own
negligence or willful misconduct.
15. Subject to the foregoing provisions of this
Agreement, the Custodian may deliver and receive Securities, and
receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or
dealers in such Securities.
16. The Custodian shall have no duties or responsibi-
lities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
ARTICLE XVI
TERMINATION
1. (a) Except as provided in subparagraphs (b), (c)
and (d) herein, neither party may terminate this Agreement until
the earlier of the following: (i) August 31, 1993, and (ii) the
third anniversary of the earliest date on which none of the
companies listed on Schedule C hereto is a transfer agency
customer of the Custodian. Any such termination may be effected
only by the terminating party giving to the other party a notice
in writing specifying the date of such termination, which shall
be not less than two hundred seventy (270) days after the date
of giving of such notice.
(b) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its
obligations under this Agreement and such breach has remained
uncured for a period of thirty days after the Custodian's
receipt from the Fund of written notice specifying such breach.
(c) Either party, immediately upon written
notice to the other party, may terminate this Agreement upon the
Merger or Bankruptcy of the other party.
(d) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its
obligations under the "Amendment to Transfer Agency Agreements"
dated August 18, 1989 and has not cured such breach as promptly
as practicable and in any event within seven days of its receipt
of written notice of such breach, provided that the Custodian
shall not be permitted to cure any such material breach arising
from the willful misconduct of the Custodian.
In the event notice of termination is given by the
Fund, it shall be accompanied by a copy of a resolution of the
Fund's Trustees certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating
a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event notice of
termination is given by the Custodian, the Fund shall, on or
before the termination date, deliver to the Custodian a copy of
a resolution of its Trustees, certified by the Secretary or any
Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth
in such notice, this Agreement shall terminate and the Custodian
shall, upon receipt of a notice of acceptance by the successor
custodian, on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall
then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding
paragraph, the Fund shall, upon the date specified in the notice
of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund, be deemed to be its own
custodian, and the Custodian shall thereby be relieved of all
duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book-Entry
System, in any Depository or by a Clearing Member which cannot
be delivered to the Fund, to hold such Securities hereunder in
accordance with this Agreement.
ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate
signed by two of the present Officers of the Fund under its
seal, setting forth the names and the signatures of the present
Authorized Persons. The Fund agrees to furnish to the Custodian
a new Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or
in the event that other or additional Authorized Persons are
elected or appointed. Until such new Certificate shall be
received, the Custodian shall be fully protected in acting under
the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the
last delivered Certificate.
2. Annexed hereto as Appendix B is a Certificate
signed by two of the present Officers of the Fund under its
seal, setting forth the names and the signatures of the present
Officers of the Fund. The Fund agrees to furnish to the
Custodian a new Certificate in similar form in the event any
such present Officer ceases to be an Officer of the Fund, or in
the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signatures of the Officers
as set forth in the last delivered Certificate.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, shall be sufficiently given if addressed to the
Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10015, or at such other
place as the Custodian may from time to time designate in
writing.
4. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Fund, shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at 666 Old Country Road,
Garden City, New York 11530, or at such other place as the Fund
may from time to time designate in writing.
5. This Agreement may not be amended or modified in
any manner except by a written agreement executed by both
parties with the same formality as this Agreement and approved
by a resolution of the Fund's Trustees.
6. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors
and assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of
the Fund, authorized or approved by a resolution of its
Trustees.
7. This Agreement shall be construed in accordance
with the laws of the State of New York.
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
9. This Agreement has been executed on behalf of the
Fund by the undersigned Officer of the Fund in his capacity as
an Officer of the Fund. The obligations of this Agreement shall
only be binding upon the assets and property of the Fund and
shall not be binding upon any Trustee, Officer or shareholder of
the Fund individually.
10. This agreement shall not be effective on the date
hereof and instead shall become effective on January 18, 1990.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto
duly authorized, and their respective corporate seals to be
hereunto affixed, as of the day and year first above written.
Premier California Tax Exempt Bond Fund
By: __________________________
Attest:
______________________
THE BANK OF NEW YORK
By: __________________________
Attest:
______________________
Appendix A
PREMIER CALIFORNIA TAX EXEMPT BOND FUND
AUTHORIZED SIGNATORIES:
CASH ACCOUNT AND/OR CUSTODIAN
ACCOUNT FOR PORTFOLIO SECURITIES
TRANSACTIONS
Group I Group II
All current Fund officers, Paul Casti, Jr. Alan Eisner
Frank Greene, John Bale, Jeffey Nachman Lawrence
Greene
Michael Condon, Steven John Pyburn Julian
Smerling
Powanda and Richard Cassaro Joseph DiMartino Thomas Durante
Robert Dubuss James Windels
Joseph Connolly Paul Molloy
Gregory Gruber
Cash Account
1. Fees payable to The Bank of New York pursuant to written
agreement with the Fund for services rendered in its
capacity as Custodian or agent of the Fund, or to The
Shareholder Services Group, Inc. in its capacity as
Transfer
Agent or agent of the Fund:
Two (2) signatures required, one of which must be
from Group II, except that an officer of the Fund
who also is listed in Group II shall sign only
once.
2. Other expenses of the Fund, $5,000 and under:
Any combination of two (2) signatures from either
Group I or Group II, or both such Groups, except
that an officer of the Fund who also is listed in
Group II shall sign only once.
3. Other expenses of the Fund, over $5,000 but not over
$25,000:
Two (2) signatures required, one of which must be
from Group II, except that an officer of the Fund
who also is listed in Group II shall sign only
once.
4. Other expenses of the Fund, over $25,000:
Two (2) signatures required, one from Group I or
Group II, including any one of the following:
Paul Casti, Jr., James Windels, Jeffrey Nachman,
John Pyburn or Alan Eisner, except that no
individual shall be authorized to sign more than
once.
Custodian Account for Portfolio Securities Transactions
Two (2) signatures required from any of the following:
All current Fund officers, and Joseph DiMartino,
Robert Dubuss, Alan Eisner, Lawrence Greene,
Julian Smerling, Alan Brown, Richard Cassaro,
Paul Disdier, Alfonso Fulgieri, Gregory Gruber,
Michael Condon, Steven Powanda, Linda Raffinello, Ann
Weintraub, Michael Charash and Theresa Viviano.
PREMIER CALIFORNIA TAX EXEMPT BOND FUND
CUSTODY AGREEMENT
APPENDIX B
The undersigned Officers of the Fund do hereby certify
that the following individuals, whose specimen signatures are on
file with The Bank of New York, have been duly elected or
appointed by the Fund's Board to the position set forth opposite
their names and have qualified therefor:
Name Position
Richard J. Moynihan President and Investment Officer
A. Paul Disdier Vice President and Investment Officer
Karen M. Hand Vice President and Investment Officer
Stephen C. Kris Vice President and Investment Officer
L. Lawrence Troutman Vice President and Investment Officer
Samuel J. Weinstock Vice President and Investment Officer
Monica S. Wieboldt Vice President and Investment Officer
Elie M. Genadry Vice President
Daniel C. Maclean Vice President
Donald A. Nanfeldt Vice President
John J. Pyburn Treasurer
Mark N. Jacobs Secretary
Christine Pavalos Assistant Secretary
Jeffrey N. Nachman Controller
Title: Title:
CUSTODY AGREEMENT
APPENDIX C
The following, are designated publications for
purposes of paragraph 5(b) of Article III:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our report
dated March 5, 1996, in this Registration Statement (Form N-1A 33-7498)
of Premier California Municipal Bond Fund.
ERNST & YOUNG LLP
New York, New York
May 23, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000797925
<NAME> PREMIER CALIFORNIA MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 201344
<INVESTMENTS-AT-VALUE> 211423
<RECEIVABLES> 2891
<ASSETS-OTHER> 1741
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216055
<PAYABLE-FOR-SECURITIES> 9044
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 293
<TOTAL-LIABILITIES> 9337
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194277
<SHARES-COMMON-STOCK> 14278
<SHARES-COMMON-PRIOR> 15678
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2362
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10079
<NET-ASSETS> 185187
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12902
<OTHER-INCOME> 0
<EXPENSES-NET> 2065
<NET-INVESTMENT-INCOME> 10837
<REALIZED-GAINS-CURRENT> 6212
<APPREC-INCREASE-CURRENT> 10659
<NET-CHANGE-FROM-OPS> 27708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9880)
<DISTRIBUTIONS-OF-GAINS> (4193)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 612
<NUMBER-OF-SHARES-REDEEMED> (2547)
<SHARES-REINVESTED> 534
<NET-CHANGE-IN-ASSETS> (4202)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 818
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1152
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2065
<AVERAGE-NET-ASSETS> 189127
<PER-SHARE-NAV-BEGIN> 12.24
<PER-SHARE-NII> .67
<PER-SHARE-GAIN-APPREC> 1.02
<PER-SHARE-DIVIDEND> (.67)
<PER-SHARE-DISTRIBUTIONS> (.29)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.97
<EXPENSE-RATIO> .001
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000797925
<NAME> PREMIER CALIFORNIA MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 201344
<INVESTMENTS-AT-VALUE> 211423
<RECEIVABLES> 2891
<ASSETS-OTHER> 1741
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216055
<PAYABLE-FOR-SECURITIES> 9044
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 293
<TOTAL-LIABILITIES> 9337
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194277
<SHARES-COMMON-STOCK> 1659
<SHARES-COMMON-PRIOR> 1550
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2362
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10079
<NET-ASSETS> 21530
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12902
<OTHER-INCOME> 0
<EXPENSES-NET> 2065
<NET-INVESTMENT-INCOME> 10837
<REALIZED-GAINS-CURRENT> 6212
<APPREC-INCREASE-CURRENT> 10659
<NET-CHANGE-FROM-OPS> 27708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (958)
<DISTRIBUTIONS-OF-GAINS> (474)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 191
<NUMBER-OF-SHARES-REDEEMED> (158)
<SHARES-REINVESTED> 76
<NET-CHANGE-IN-ASSETS> (4202)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 818
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1152
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2065
<AVERAGE-NET-ASSETS> 20406
<PER-SHARE-NAV-BEGIN> 12.25
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> 1.02
<PER-SHARE-DIVIDEND> (.60)
<PER-SHARE-DISTRIBUTIONS> (.29)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.98
<EXPENSE-RATIO> .015
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000797925
<NAME> PREMIER CALIFORNIA MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 003
<NAME> CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<INVESTMENTS-AT-COST> 201344
<INVESTMENTS-AT-VALUE> 211423
<RECEIVABLES> 2891
<ASSETS-OTHER> 1741
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 216055
<PAYABLE-FOR-SECURITIES> 9044
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 293
<TOTAL-LIABILITIES> 9337
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194277
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2362
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10079
<NET-ASSETS> 1
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12902
<OTHER-INCOME> 0
<EXPENSES-NET> 2065
<NET-INVESTMENT-INCOME> 10837
<REALIZED-GAINS-CURRENT> 6212
<APPREC-INCREASE-CURRENT> 10659
<NET-CHANGE-FROM-OPS> 27708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (4202)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 818
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1152
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2065
<AVERAGE-NET-ASSETS> 1
<PER-SHARE-NAV-BEGIN> 12.98
<PER-SHARE-NII> .37
<PER-SHARE-GAIN-APPREC> .29
<PER-SHARE-DIVIDEND> (.37)
<PER-SHARE-DISTRIBUTIONS> (.29)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.98
<EXPENSE-RATIO> .044
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
