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. 20 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 20 [X]
(Check appropriate box or boxes.)
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
(Formerly, 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 1, 1997 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, 1997 was filed on March 27, 1997.
DREYFUS 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, 28
5 Management of the Fund 11
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 28
7 Purchase of Securities Being Offered 12
8 Redemption or Repurchase 20
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-31
13 Investment Objectives and Policies B-2
14 Management of the Fund B-12
15 Control Persons and Principal B-16
Holders of Securities
16 Investment Advisory and Other B-16
Services
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS 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-28
18 Capital Stock and Other Securities B-29
19 Purchase, Redemption and Pricing B-18, B-21,
of Securities Being Offered B-25
20 Tax Status B-26
21 Underwriters Cover, B-18
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-5
Investment Adviser
29 Principal Underwriters C-9
30 Location of Accounts and Records C-12
31 Management Services C-12
32 Undertakings C-12
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
Registration Mark
PROSPECTUS JUNE 1, 1997
Dreyfus 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 1, 1997,
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. The
Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information
regarding the Fund. For a free copy of the Statement of Additional
Information, 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............................. 11
How to Buy Shares.................................. 12
Shareholder Services............................... 16
How to Redeem Shares............................... 20
Distribution Plan and Shareholder Services Plan.... 25
Dividends, Distributions and Taxes................. 25
Performance Information............................ 27
General Information................................ 28
Appendix........................................... 30
Page 2
<TABLE>
<CAPTION>
FEE TABLE
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
........ (as a percentage of offering price) 4.50% none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) none* 4.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees........................... .55% .55% .55%
12b-1 Fees................................ none .50% .75%
Other Expenses ........................... .37% .40% .47%
Total Fund Operating Expenses............. .92% 1.45% 1.77%
EXAMPLE
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) except where noted, redemption
at the end of each time period: CLASS A CLASS B CLASS C
1 YEAR..................................... $ 54 $ 55/$15** $28/$18**
3 YEARS..................................... $ 73 $ 76/$46** $56
5 YEARS..................................... $ 94 $ 99/$79** $96
10 YEARS.................................... $153 $ 145*** $208
* 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. 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,"
"How to Redeem 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 January 31,
-----------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year $12.92 $11.82 $12.00 $12.02 $12.23 $12.58 $12.80 $13.64 $12.24 $12.97
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment
income-net... . .84 .89 .89 .89 .82 .80 .77 .72 .67 .65
Net realized and
unrealized gain (loss)
on investments . (1.10) .18 .02 .21 .36 .39 .94 (.80) 1.02 (.24)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS... . (.26) 1.07 .91 1.10 1.18 1.19 1.71 (.08) 1.69 .41
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net... (.84) (.89) (.89) (.89) (.82) (.80) (.77) (.72) (.67) (.64)
Dividends from net realized
gain on investments ._ ._ ._ ._ (.01) (.17) (.10) (.60) (.29) (.16)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.84) (.89) (.89) (.89) (.83) (.97) (.87) (1.32) (.96) (.80)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year.. $11.82 $12.00 $12.02 $12.23 $12.58 $12.80 $13.64 $12.24 $12.97 $12.58
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT
RETURN(1).... (1.61%) 9.52% 7.82% 9.45% 10.02% 9.78% 13.62% (4.34%) 14.15% 3.31%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets ._ ._ ._ .11% .47% .65% .78% .90% .93% .92%
Ratio of net investment
income to average
net assets... 7.22% 7.41% 7.20% 7.19% 6.62% 6.30% 5.71% 5.72% 5.22% 5.18%
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% 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% 39.76%
Net Assets, end of year
(000's omitted) $2,713 $12,063 $58,714 $166,095 $218,703 $224,555 $245,435 $191,939 $185,187 $163,030
(1)Exclusive of sales load.
</TABLE>
Page 4
<TABLE>
<CAPTION>
Class B Shares Class C Shares
----------------------------------------------- ---------------------
Year Ended January 31, Year Ended January 31,
----------------------------------------------- ---------------------
1993(1) 1994 1995 1996 1997 1996(2) 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year $12.69 $12.81 $13.64 $12.25 $12.98 $12.98 $12.98
------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net .03 .69 .65 .60 .59 .37 .54
Net realized and unrealized gain
(loss) on investments .12 .93 (.79) 1.02 (.25) .29 (.21)
------- ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT
OPERATIONS .15 1.62 (.14) 1.62 .34 .66 .33
------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment
income-net.. (.03) (.69) (.65) (.60) (.57) (.37) (.54)
Dividends from net realized
gain on investments ._ (.10) (.60) (.29) (.16) (.29) (.16)
------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS (.03) (.79) (1.25) (.89) (.73) (.66) (.70)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $12.81 $13.64 $12.25 $12.98 $12.59 $12.98 $12.61
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3) 25.98%(4) 12.91% (4.77%) 13.55% 2.79% 7.90%(4) 2.67%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets 1.07%(4) 1.31% 1.42% 1.45% 1.44% 4.42%(4) 1.77%
Ratio of net investment income
to average net assets 4.92%(4) 4.90% 5.17% 4.69% 4.66% 4.31%(4) 4.33%
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% 39.76% 92.42% 39.76%
Net Assets, end of year
(000's omitted) $325 $16,906 $18,981 $21,530 $20,341 $1 $1,029
(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 the Fund's 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 4% contingent deferred sales charge ("CDSC"), which
is assessed if you redeem Class B shares within six years of purchase.
See "How to Buy Shares _ Class B Shares" and "How to Redeem Shares _
Contingent
Page 5
Deferred Sales Charge _ Class B Shares." These shares also are
subject to an annual service fee at the rate of .25 of 1% of the value of
the average daily net assets of Class B. In addition, Class B shares are
subject to an annual distribution fee at the rate of .50 of l% of the
value of the average daily net assets of Class B. See "Distribution Plan
and Shareholder Services Plan." The distribution fee paid by Class B will
cause such Class to have a higher expense ratio and to pay lower
dividends than Class A. Approximately six years after the date of
purchase, Class B shares automatically will convert to Class A shares,
based on the relative net asset 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 A and
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 $100,000 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
corpo-
Page 6
rations, 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 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 ("S&P") or Fitch Investors Service,
L.P. ("Fitch"). The Fund may invest up to 30% of the value of
Page 7
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 BBB by S&P and Fitch are regarded as having an adequate
capacity to pay principal and interest, while those rated Baa by Moody's
are considered medium grade obligations which lack outstanding investment
characteristics and have speculative characteristics. Investments rated
Ba or lower by Moody's and BB or lower by S&P and Fitch ordinarily
provide higher yields but involve greater risk because of their
speculative characteristics. The Fund may invest in Municipal Obligations
rated C by Moody's or D by S&P or Fitch, which is 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. See "Dividends, Distributions and Taxes." For a
discussion of the investment techniques and their related risks, see
"Investment Considerations and Risks" and "Appendix -- Investment
Techniques" 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
Page 8
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.
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.
Because a severe recession between 1990-94 reduced revenues and increased
expenditures for social welfare programs, from the late 1980's until
1992-93, the State of California had a period of budget imbalance. During
this period, expenditures exceeded revenues in four out of six years, and
the State accumulated and sustained a budget deficit in its budget
reserve, the Special Fund for Economic Uncertainties, approaching $2.8
billion at its peak at June 30, 1993. By the 1993-94 fiscal year, the
accumulated budget deficit was so large that it was impractical to budget
to retire it in one year, so a two-year program was implemented, using
the issuance of revenue anticipation warrants to carry a portion of the
deficit over the end of the fiscal year. When the economy failed to
recover sufficiently in 1993-1994, a second two-year plan was implemented
in 1994-95, again using cross-fiscal year revenue anticipation warrants
to partly finance the deficit into the 1995-96 fiscal year.
As a consequence of the accumulated budget deficits, the
State's cash resources available to pay its ongoing obligations were
significantly reduced. During the past several fiscal years, the State
was forced to rely increasingly on external debt markets to meet its cash
needs, as a succession of notes and revenue anticipation warrants were
issued in the period from June 1992 to July 1994, often needed to pay
previously maturing notes or warrants. These borrowings were used also
in part to spread out the repayment of the accumulated budget deficit
over the end of a fiscal year, as noted earlier. The last and largest of
these borrowings was $4.0 billion of revenue anticipation warrants which
were issued in July 1994 and matured on April 25, 1996.
As a result of the deterioration in the State's budget and
cash situation, between October 1991 and July 1994 the ratings on the
State's general obligation bonds were reduced by S&P from AAA to A, by
Moody's from Aaa to A1 and by Fitch from AAA to A. Although as a result
of California's improved economy the ratings on the State's general
obligation bonds are currently rated A+ by S&P, A1 by Moody's, and A+ by
Fitch, there can be no assurance that such ratings will continue for any
given period of time or that they will not be revised or withdrawn by any
such rating agencies, if in their respective judgments, circumstances so
warrant. In addition, future budget problems or a deterioration in
California's general financial condition 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.
Page 9
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 investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration.
If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
Taxable Investment within the applicable limits set forth herein.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon
securities and pay-in-kind bonds (bonds which pay interest through the
issuance of additional bonds). 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 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
Page 10
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, 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 April 30, 1997,
The Dreyfus Corporation managed or administered approximately $83 billion
in assets for approximately 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
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., AFCO Credit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its subsidiaries,
including The Dreyfus Corporation, Mellon managed more than $259 billion
in assets as of March 31, 1997, including approximately $88 billion in
proprietary mutual fund assets. As of March 31, 1997, Mellon, through
various subsidiaries, provided non-investment services, such as custodial
or administration services, for more than $1.061 trillion in assets,
including approximately $58 billion in mutual fund assets.
For the fiscal year ended January 31, 1997, 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 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.
Page 11
In allocating brokerage transactions, The Dreyfus 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 60 State Street, 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 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. 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
"The Dreyfus Family of Funds." Payments which are mailed should be sent
to Dreyfus Premier California Municipal Bond Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. If you are opening a new account,
please enclose 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.
Neither initial nor subsequent investments should be made by third party
check.
Page 12
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,
together with the Fund's DDA#8900119306/Dreyfus Premier California
Municipal Bond Fund, 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, and must indicate the
Class of shares being purchased. If your initial purchase of Fund shares
is by wire, please call 1-800-554-4611 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.
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 of each Class 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.
Page 13
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>
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 one year of
purchase. The Distributor may pay Service Agents an amount up to 1% of
the net asset value of Class A shares purchased by their clients that are
subject to a CDSC. 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
Page 14
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 as the Fund. In some instances, these incentives
may be offered only to certain dealers who have sold or may sell
significant amounts of such shares.
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 selling 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 Dreyfus
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.
Page 15
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 calling 1-800-554-4611
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 certain other funds
managed or administered by The Dreyfus Corporation. No CDSC is charged
when an investor exchanges into an Exchange Account; however, the
applicable CDSC will be imposed when shares are redeemed from an Exchange
Account or other applicable Fund account. Upon redemption, the applicable
CDSC will be calculated without regard to the time such shares were held
in an Exchange Account. See "How to Redeem 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 1-800-554-4611 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 1-800-554-4611.
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
Page 16
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, by a separate signed Shareholder Services Form, available by
calling 1-800-554-4611, or by oral request from any of the authorized
signatories on the account by calling 1-800-554-4611. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-554-4611. 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 administrative fee in accordance with
rules promulgated by the Securities and Exchange Commission. The Fund
reserves the right to reject any exchange request in whole or in part. The
availability of Fund Exchanges may be modified or terminated at any time
upon notice to shareholders. 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 Dreyfus
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
Page 17
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 Dreyfus 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 Dreyfus 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 1-800-554-4611. 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 1-800-554-4611. You may cancel your participation in this
Privilege or change the amount of purchase at any time by mailing written
notification to Dreyfus Premier California Municipal Bond Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into
your Fund account. You may deposit as much of such payments as you elect.
To enroll in Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Service Agent or by calling 1-800-554-4611. 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 Dreyfus 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
Page 18
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 1-800-554-4611.
You may cancel these privileges by mailing written notification to Dreyfus
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
1-800-554-4611. 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.
No CDSC with respect to Class B shares will be imposed on
withdrawals made under the Automatic Withdrawal Plan, provided that the
amounts withdrawn under the plan do not exceed on an annual basis 12% of
the account value at the time the shareholder elects to participate in
the Automatic Withdrawal Plan. Withdrawals with respect to Class B shares
under the Automatic Withdrawal Plan that exceed on an annual basis 12% of
the value of the shareholder's account will be subject to a CDSC on the
amounts exceeding 12% of the initial account value. Withdrawals with
respect to Class A shares subject to a CDSC and Class C shares under 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 1-800-554-4611, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased in a
13-month period pursuant to the terms and conditions set forth in the
Letter of Intent. A minimum initial purchase of $5,000 is required. To
compute the applicable sales load, the offering price of shares you hold
(on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above
may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase
Page 19
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 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
BUILDERRegistration Mark 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.
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.
Page 20
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 for
Class B shares, except for Class B shares purchased by shareholders who
beneficially owned Class B shares on November 30, 1996:
<TABLE>
<CAPTION>
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
<S> <C>
First.................................................... 4.00
Second................................................... 4.00
Third.................................................... 3.00
Fourth................................................... 3.00
Fifth.................................................... 2.00
Sixth.................................................... 1.00
The following table sets forth the rates of the CDSC for
Class B shares purchased by shareholders who beneficially owned Class B
shares on November 30, 1996:
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 six years (five
years for shareholders beneficially owning Class B shares on November 30,
1996); then of amounts representing the cost of shares purchased six years
(five years for shareholders beneficially owning Class B shares on November
30, 1996) prior to the redemption; and finally, of amounts representing
the cost
Page 21
of shares held for the longest period of time within the applicable
six-year period (five-year period for shareholders beneficially
owning Class B shares on November 30, 1996).
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 4%
(the applicable rate in the second year after purchase) for a total CDSC
of $9.60.
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 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, (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 and (e) redemptions made pursuant to the Automatic Withdrawal
Plan, as described in the Fund's Prospectus. 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. 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
Page 22
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 1-800-554-4611. The prospectus will contain
information concerning minimum investment requirements and other
conditions that may apply to your purchase.
You may redeem Fund shares by telephone if you have checked
the appropriate box on the 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 (including over The Dreyfus
TouchRegistration Mark automated telephone system) 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 Dreyfus Premier California
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
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
Page 23
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 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 calling 1-800-554-4611 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.
Page 24
REINVESTMENT PRIVILEGE -- Upon written request, you may reinvest up
to the number of Class A or Class B shares you have redeemed, within 45
days of redemption, at the then-prevailing net asset value without a
sales load, or reinstate your account for the purpose of exercising Fund
Exchanges. Upon reinvestment, with respect to Class B shares or Class A
shares if such shares were subject to a CDSC, the shareholder's account
will be credited with an amount equal to the CDSC previously paid upon
redemption of the Class A or Class B shares reinvested. 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.
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
Page 25
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 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, or (ii) a factor in
determining the extent to which a shareholder's Social Security benefits
are taxable. If the Fund purchases such securities, the portion of the
Fund's dividends related thereto will not necessarily be tax exempt to an
investor who is subject to the alternative minimum tax and/or tax on
Social Security benefits and may cause an investor to be subject to such
taxes.
Notice as to the tax status of your dividends and
distributions will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and distributions from securities gains, if any, paid during
the year. These statements set forth the dollar amount of income exempt
from Federal tax and the dollar amount, if any, subject to Federal tax.
These dollar amounts will vary depending on the size and length of time
of your investment in the Fund. If the Fund pays dividends derived from
taxable income, it intends to designate as taxable the same
Page 26
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.
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.
Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of taxable
dividends, distributions from net realized securities gains and the
proceeds of any redemption, regardless of the extent to which gain or
loss may be realized, paid to a shareholder if such shareholder fails to
certify either that the TIN furnished in connection with opening an
account is correct or that such shareholder has not received notice from
the IRS of being subject to backup withholding as a result of a failure
to properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect
or if a shareholder has failed to properly report taxable dividend and
interest income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account, and may be
claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified
for the fiscal year ended January 31, 1997 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.
Page 27
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 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 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
Page 28
(the "Trust Agreement") dated July 24, 1985, and commenced operations on
November 10, 1986. Before July 2, 1990, the Fund's name was Premier
California Tax Exempt Bond Fund and before March 31, 1997, its name was
Premier California Municipal Bond Fund. The Fund is authorized to issue
an unlimited number of shares of beneficial interest, par value $.001 per
share. The Fund's shares are classified into three classes _ Class A,
Class B and Class C . Each share has one vote and shareholders will vote
in the aggregate and not by class except as otherwise required by law.
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,
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 29
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 its Derivatives were poorly correlated with its other investments, or
if the Fund were unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or suddenly can
become, illiquid. Changes in liquidity may result in significant, rapid
and unpredictable changes in the prices for Derivatives.
Page 30
Although the Fund is not a commodity pool, certain
Derivatives subject the Fund to the rules of the Commodity Futures
Trading Commission which limit the extent to which the Fund can invest in
such Derivatives. The Fund may invest in futures contracts and options
with respect thereto for hedging purposes without limit. However, the
Fund may not invest in such contracts and options for other purposes if
the sum of the amount of initial margin deposits and premiums paid for
unexpired options with respect to such contracts, other than bona fide
hedging purposes, exceeds 5% of the liquidation value of the Fund's
assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case
of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.
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 permissible liquid assets in a segregated account to cover
its obligations relating to its transactions in Derivatives. To maintain
this required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate
a Derivative position at a reasonable price.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest or other
distributions payable on the loaned securities which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed
33 1/3 % of the value of the Fund's total assets, and the Fund will
receive collateral consisting of cash, U. S. Government securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable 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 or sell Municipal
Obligations and other securities on a forward commitment, when-issued or
delayed delivery basis, which means that delivery and payment take place
a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate receivable on a forward
commitment or when-issued security are fixed when the Fund enters into
the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such
securities only with the intention of actually acquiring the securities,
but the Fund may sell these securities before the settlement date if it
is deemed advisable. A segregated account of the Fund consisting of
permissible liquid assets 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
Page 31
amounts at varying rates of interest, pursuant to direct arrangements
between the Fund, as lender, and the borrower. These obligations permit
daily changes in the amount borrowed. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations,
although they are redeemable at face value, plus accrued interest.
Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Each obligation purchased by the Fund will meet the quality
criteria established for the purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS -- The Fund may purchase from
financial institutions participation interests in Municipal Obligations
(such as industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Fund an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the
Municipal Obligation. These instruments may have fixed, floating or
variable rates of interest. If the participation interest is unrated, it
will be backed by an irrevocable letter of credit or guarantee of a bank
that the Fund's Board has determined meets prescribed quality standards
for banks, or the payment obligation otherwise will be collateralized by
U.S. Government securities. For certain participation interests, the Fund
will have the right to demand payment, on not more than seven days'
notice, for all or any part of the Fund's participation interest in the
Municipal Obligation, plus accrued interest. As to these instruments, the
Fund intends to exercise its right to demand payment only upon a default
under the terms of the Municipal Obligation, as needed to provide
liquidity to meet redemptions, or to maintain or improve the quality of
its investment portfolio.
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
Page 32
Obligations deposits such obligations with a custodian in exchange for
two classes of custodial receipts. The two classes have different
characteristics, but, in each case, payments on the two classes are based
on payments received on the underlying Municipal Obligations. One class
has the characteristics of a typical auction rate security, where at
specified intervals its interest rate is adjusted, and ownership changes,
based on an auction mechanism. This class's interest rate generally is
expected to be below the coupon rate of the underlying Municipal
Obligations and generally is at a level comparable to that of a Municipal
Obligation of similar quality and having a maturity equal to the period
between interest rate adjustments. The second class bears interest at a
rate that exceeds the interest rate typically borne by a security of
comparable quality and maturity; this rate also is adjusted, but in this
case inversely to changes in the rate of interest of the first class. 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.
Page 33
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.
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.
Page 34
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 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.
Page 35
Copy Rights 1997 Dreyfus Service Corporation 023p060197
Page 36
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Premier California Municipal Bond Fund (the "Fund"), dated June 1,
1997, 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-16
Purchase of Shares B-18
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-26
Portfolio Transactions B-28
Performance Information B-29
Information About the Fund B-31
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-31
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
Municipal Obligations. The average distribution of investments (at
value) in Municipal Obligations by ratings for the fiscal year ended January
31, 1997, 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 51.4%
AA Aa AA 5.7
A A A 27.3
BBB Baa BBB 5.2
BB Ba BB 2.1
D D D .3
F-1+\F-1 VMIG1\MIG1, SP-1+, SP-1, 1.4
P-1 A1+\A1
Not Rated Not Rated Not Rated 6.6*
------
100.0%
======
______________________________
* Included under the Not Rated category are securities comprising 6.6% of
the Fund's market value which, while not rated, have been determined by
the Manager to be of comparable quality to securities in the following
rating categories: AAA/Aaa (1.2%), A/A (1.0%), Baa/BBB (3.5%) and
Ba/BB (.9%).
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 permissible liquid assets, 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 permissible
liquid assets 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, or at a specific date.
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. Because
a severe recession between 1990-94 reduced revenues and increased
expenditures for social welfare programs, from the late 1980's until 1992-
93, the State of California had a period of budget imbalance. During this
period, expenditures exceeded revenues in four out of six years, and the
State accumulated and sustained a budget deficit in its budget reserve, the
Special Fund for Economic Uncertainties, approaching $2.8 billion at its
peak at June 30, 1993. By the 1993-94 fiscal year, the accumulated budget
deficit was so large that it was impractical to budget to retire it in one
year, so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit over the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-1994,
a second two-year plan was implemented in 1994-95, again using cross-fiscal
year revenue anticipation warrants to partly finance the deficit into the
1995-96 fiscal year.
As a consequence of the accumulated budget deficits, the State's cash
resources available to pay its ongoing obligations were significantly
reduced. During the past several fiscal years, the State was forced to
rely increasingly on external debt markets to meet its cash needs, as a
succession of notes and revenue anticipation warrants were issued in the
period from June 1992 to July 1994, often needed to pay previously maturing
notes or warrants. These borrowings were used also in part to spread out
the repayment of the accumulated budget deficit over the end of a fiscal
year, as noted earlier. The last and largest of these borrowings was $4.0
billion of revenue anticipation warrants which were issued in July 1994 and
matured on April 25, 1996.
As a result of the deterioration in the State's budget and cash
situation, between October 1991 and July 1994 the ratings on the State's
general obligation bonds were reduced by S&P from AAA to A, by Moody's from
Aaa to A1 and by Fitch from AAA to A. Although as a result of California's
improved economy the ratings on the State's general obligation bonds are
currently rated A+ by S&P, A1 by Moody's, and A+ by Fitch, there can be no
assurance that such ratings will continue for any given period of time or
that they will not be revised or withdrawn by any such rating agencies, if
in their respective judgments, circumstances so warrant. In addition,
future budget problems or a deterioration in California's general financial
condition may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay the principal
of, such California municipal Obligations. You should obtain and review a
copy of the Statement of Additional Information which more fully sets forth
these and other risk factors.
Lower Rated Bonds. 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
Considerations 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.
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, Cognizant Corporation, a service provider of marketing
information and information technology, The Dun & Bradstreet
Corporation, MCI Communications Corporation, Mutual of America Life
Insurance Company and TLC Beatrice Investment and Holdings, Inc. He
is 63 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 54 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. He is also
Chairman of the Board of Noel Group, Inc., a venture capital company;
and a director of the Muscular Dystrophy Association, HealthPlan
Services Corporation, Carlyle Securities Industries Inc. (formerly
Belding Heminway, Inc.), a button packager and distributor, Curtis
Industries, Inc., a national distributor of security products,
chemicals, and automotive and other hardware, and Staffing Resources,
Inc. For more than five years prior to January 1995, he was
President, a director and, until August 1994, Chief Operating Officer
of the Manager and Executive Vice President and a director of Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager and,
until August 24, 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. He
is 53 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 64 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 77 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 54 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, 1997, 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, 1996, 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. $5,500 $82,436 (17)
Peggy C. Davis $5,500 $73,084 (15)
Joseph S. DiMartino $6,790 $517,075 (93)
Ernest Kafka $5,500 $69,584 (15)
Saul B. Klaman $5,500 $73,584 (15)
Nathan Leventhal $5,500 $71,084 (15)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $583 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. She is 39 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. He is 32 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Senior Vice
President and Director of Client Services and Treasury Operations of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by the Manager. From March 1994 to November
1995, he was Vice President and Division Manager for First Data
Investor Services Group. From 1989 to 1994, he was Vice President,
Assistant Treasurer and Tax Director - Mutual Funds of The Boston
Company, Inc. He is 40 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor since September 1995, and an officer of
other investment companies advised or administered by the Manager.
She is 27 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by the Manager. From September 1989 to July 1994, she
was an Assistant Vice President and Client Manager for The Boston
Company, Inc. She is 32 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Director of
Strategic Client Initiatives for Funds Distributor, Inc. and an
officer of other investment companies advised or administrated by the
Manager. From December 1989 through November 1996, he was employed by
GE Investments where he held various financial, business development
and compliance positions. He also served as Treasurer of the GE Funds
and as Director of GE Investment Services. He is 35 years old.
JOSEPH S. TOWER, III, Vice President and 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 34 years old.
DOUGLAS C. CONROY, Vice President and Assistant Treasurer. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From April 1993 to January 1995, Mr. Conroy was a Senior
Fund Accountant for Investors Bank and Trust Company. From December
1991 to March 1993, Mr. Conroy was employed as a Fund Accountant at
The Boston Company. He is 27 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised or
administered by the Manager. From August 1993 to May 1996, he attended
Hofstra University School of Law. Prior to August 1993, he was employed
as an Associate Examiner at the National Association of Securities
Dealers. He 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 20, 1997.
As of May 20, 1997, the following persons owned of record 5% or more of
the outstanding shares of beneficial interest of the Fund: Class A shares
- - Merrill Lynch Pierce Fenner & Smith Inc. House A/C, 4800 Deer Lake Drive
E, Jacksonville, Florida 32246-6484 - 9.66%; Class B shares - Merrill Lynch
Pierce Fenner & Smith Inc. House A/C, 4800 Deer Lake Drive E, Jacksonville,
Florida 32246-6484 - 5.74%; Class C shares - Merrill Lynch Pierce Fenner &
Smith Inc. House A/C, 4800 Deer Lake Drive E, Jacksonville, Florida 32246-
6484 - 49.21%; Aileen A. Cox Trust, 3625 1st Avenue, Apartment 12, San
Diego, California 92103-4036 - 33.70%; Marjorie G. Schow, 1025 E Avenue,
Cornado, California 92118-2810 - 16.79%. 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 17, 1996. The Agreement is terminable without penalty, on 60
days' notice, by the Fund's Board or by vote of the holders of a majority of
the Fund's outstanding 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: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jefferey N. Nachman, Vice President-Mutual Fund Accounting;
Andrew S. Wasser, Vice President-Information Systems; William V. Healey,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt and Frank V.
Cahouet, 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, 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.
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, 1995, 1996 and 1997, the management fees payable by
the Fund amounted to $1,264,646, $1,152,436 and $1,056,016, respectively.
The management fee payable for fiscal 1995 was reduced by $51,429 pursuant
to an undertaking in effect, resulting in a net fee paid to the Manager of
$1,213,217 in fiscal 1995.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage fees, interest on
borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the management
fee, exceed the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be, on a monthly
basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF 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 Dreyfus
Premier Family of Funds, funds in the Dreyfus Family of Funds and 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 period August 24, 1994 through January 31, 1995 and for fiscal
year ended January 31, 1996 and 1997, the Distributor retained $7,754,
$8,546 and $6,342, respectively, from sales loads on Class A shares and
$30,616, $32,671 and $36,352, respectively, from contingent deferred sales
charges ("CDSC") on Class B shares. For the period June 2, 1995
(commencement of initial offering) through January 31, 1996 and for the
fiscal year ended January 31, 1997, the Distributor retained $0 and $1,
respectively, from the CDSC on Class C shares. For the period February 1,
1994 through August 23, 1994, Dreyfus Service Corporation, as the Fund's
distributor during such period, retained $17,596 from sales loads on Class A
shares, and $33,555 from the CDSC on Class B 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, 1997.
Net Asset Value per Share $ 12.58
Per Share Sales Charge - 4.5% of offering price
(4.7% of net asset value per share) $ .59
Per Share Offering Price to Public $ 13.17
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 17, 1996. 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, 1997, the Fund paid the
Distributor $103,726 with respect to Class B, and $2,183 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 17, 1996. 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, 1997, the Fund paid the
Distributor $427,417 with respect to Class A, $51,863 with respect to Class
B, and $727 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 Class A
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 might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
SHAREHOLDER SERVICES
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 other
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 instructions (including over The Dreyfus Touchr automated
telephone system) 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 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 Dreyfus Premier
Family of Funds or certain funds in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. Shares will be exchanged
on the basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this Privilege
is effective three business days following notification by the investor. 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.
Dividend Sweep. Dividend Sweep allows investors to invest
automatically dividends or dividends and capital gain distributions, if any,
from the Fund in shares of the same Class of another fund in the Dreyfus
Premier Family of Funds or certain funds in 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, 1997, 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, 1996 and 1997 was 92.42% and 39.76%, 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, 1997 for Class A
was 4.39%, for Class B was 4.08% 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 1996 Federal and State of California personal
income tax rate of 45.22%, the tax equivalent yield for the 30-day period
ended January 31, 1997 for Class A was 8.01%, for Class B was 7.45% and for
Class C was 7.03%. 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 10 year periods ended
January 31, 1997 for Class A was (1.33)%, 6.09% and 6.52%, respectively.
The average annual total return for the 1 and 4.047 year periods ended
January 31, 1997 for Class B was (1.10)% and 5.67%, respectively. The
average annual total return for the 1 and 1.67 year periods ended January
31, 1997 for Class C was 1.70% and 4.77%, respectively. Average annual
total return is calculated by determining the ending redeemable value of an
investment purchased at net asset value (maximum offering price in the case
of Class A) per share with a hypothetical $1,000 payment made at the
beginning of the period (assuming the reinvestment of dividends and
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result. A Class's average total return figures
calculated in accordance with such formula assume that in the case of Class
A the maximum sales load had been deducted from the hypothetical initial
investment at the time of purchase or in the case of Class B or Class C the
maximum applicable CDSC has been paid upon redemption at the end of the
period.
The total return for Class A for the period November 10, 1986
(commencement of operations) through January 31, 1997 was 97.36%. Based on
net asset value per share, the total return for Class A was 106.68% 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,
1997 was 25.03%. Without giving effect to the applicable CDSC, the total
return for Class B was 27.01% 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, 1997 was 8.09%. 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 fiscal year ended January 31, 1997, the Fund
paid the Transfer Agent $67,419.
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, 180 Maiden Lane, New York, New York 10038-
4982, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as 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. However, at June 30, 1996, according to
the Department of Finance, the State's Special Fund for Economic
Uncertainties ("SFEU") had a small negative balance of about $87 million,
all but eliminating the accumulated budget deficit from the early 1990's.
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 matured on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995. The State issued
$3.0 billion of revenue anticipation notes for the 1996-97 fiscal year on
August 7, 1996, which mature on June 30, 1997.
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 1996-97 Fiscal Year Budget projects $47.6 billion of General Fund
revenues and transfers and $47.3 billion of budgeted expenditures.
The 1997-98 Fiscal Year Budget was released by the Governor on January
9, 1997. It projects $50.7 billion of General fund revenues and transfer
and $50.3 billion of budgeted expenditures and projects a balance in the
SFEU of $553 million on June 30, 1998.
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.
State Finances. State moneys are segregated into the General Fund and
approximately 800 Special Funds, including Bond, Trust and Pension 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, 1996, the General Fund had outstanding loans from the SFEU and Special
Funds in the amount of $1.5 billion.
Articles XIIIA, XIIIB, XIIIC and XIIID 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.
The limit for the 1993-94 fiscal year was $36.06 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The limit for the 1994-95 fiscal year was $37.55 billion, and the
appropriations subject to limitations were $5.93 billion under the limit.
The limit for the 1995-96 fiscal year was $39.31 billion, and the
appropriations subject to limitations were $5.12 billion under the limit.
The estimated limit for the 1996-97 fiscal year was $42.00 billion, and the
appropriations subject to limitations were estimated to be $7.12 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.
In November, 1996, State voters approved Proposition 218, which added
Articles XIIIC and XIIID to the State Constitution generally requiring voter
approval of most tax or fee increases by local governments and curtailing
local governments' use of benefit assessments to fund certain property-
related services to finance infrastructure. The amendments extended to all
local government entities the requirement that all taxes for general
purposes be approved by a majority vote and that all taxes for special
purposes be approved by a two-thirds majority vote (including the
ratification of those taxes that have been imposed since January 1, 1995 up
to the effective date of the amendments). Proposition 218 also limits the
use of special assessments or "property-related" fees to services or
infrastructure that confer a "special benefit" to specific property; police,
fire and other services are now deemed to benefit the public at large and,
therefore, could not be funded by special assessments. finally, the
amendments enable the voters to use their initiative power to repeal
previously-authorized taxes, assessments, fees and charges.
Sources of Tax Revenue. The California personal income tax, which in
1995-96 contributed about 45% 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 returned to 9.3%, and the AMT rate dropped 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 34% of General Fund
revenue in 1995-96. Bank and corporation tax revenues comprised about 13%
of General Fund revenue in 1995-96. 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 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General
Fund revenues and transfers of $44.1 billion, a 3.5% increase from the prior
year. Expenditures were budgeted at $43.4 billion, a 4% increase. The
Budget Act also projected Special Fund revenues of $12.7 billion and
appropriated Special Fund expenditures of $13.0 billion.
Final data for the 1995-96 Fiscal Year showed revenues and transfers of
$46.1 billion, some $2 billion over the original fiscal year estimate, which
was attributed to the strong economic recovery. Expenditures also
increased, to an estimated $45.4 billion, as a result of the requirement to
expend revenues for schools under Proposition 98, and among other things,
failure of the federal government to enact welfare reform during the fiscal
year and to budget new aid for illegal immigrant costs, both of which had
been counted on to allow reductions in State costs. The SFEU had a small
negative balance of about $87 million at June 30, 1996, all but eliminating
the accumulated budget deficit from the early 1990's. Available internal
borrowable resources (available cash, after payment of all obligations due)
on June 30, 1996 was about $3.8 billion, representing a significant
improvement in the State's cash position, and ending the need for deficit
borrowing over the end of the fiscal year. The State's improved cash
position allowed it to repay the $4.0 billion Revenue Anticipation Warrant
issue on April 25, 1996, and to issue only $2.0 billion in revenue
anticipation notes during the fiscal year, which matured on June 28, 1996.
The 1996-97 Budget Act was signed by the Governor on July 15, 1996,
along with various implementing bills. The governor vetoed about $82
million of appropriations (both General Fund and special Fund). With the
signing of the budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest
budget reserve in the SFEU of $305 million, as of June 30, 1997. The
Department of Finance projected that, on June 30, 1997, the State's
available internal borrowable (cash) resources will be $2.9 billion, and
after payment of all obligations due by that date, so that no cross-fiscal
year borrowing will be needed.
Revenues - The Legislature rejected the Governor's proposed 15% cut in
personal income taxes (to be phased over three years), but did not approve a
5% cut in bank and corporation taxes, to be effective for income years
starting on January 1, 1997. As a result, revenues for the Fiscal Year were
estimated to total $47.643 billion, a 3.3% increase over the final estimated
1995-96 revenues. Special Fund revenues were estimated to be $13.3 billion.
Expenditures - the Budget Act contained General Fund appropriations
totaling $47.251 billion, a 4.0% increase over the final estimated 1995-96
expenditures. Special Fund expenditures were budgeted at $12.6 billion.
With the continued strong economic recovery in the State, the
Department of Finance has estimated, in connection with the release of the
Governor's 1997-98 Budget Proposal, that revenues for the 1996-97 Fiscal
Year will exceed initial projections by about $760 million. This increase
will be offset by higher expenditures for K-14 school aid (pursuant to
Proposition 98) and for health and welfare costs, because federal law
changes and other federal actions did not provide as much assistance to the
State as was initially planned in the Budget Act. The Department's updated
projections show a balance in the SFEU of $197 million, slightly lower than
projected in July, 1996. The Department also projects the State's cash
position will be stronger than originally estimated, with unused internal
borrowable resources at June 30, 1997 of about $4.3 billion.
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>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS JANUARY 31, 1997
Principal
Long-Term Municipal Investments_97.3% Amount Value
_____________ _____________
<S> <C> <C>
California_89.9%
Anaheim Public Financing Authority, Tax Allocation Revenue
(Redevelopment Project Alpha) 6.45%, 12/28/2018 (Insured; MBIA)......... $ 4,000,000 $ 4,311,840
Antelope Valley Hospital District, Insured COP 7.30%, 1/1/2006.............. 2,400,000 2,510,856
California:
5.25%, 10/1/2011........................................................ 5,250,000 5,167,890
6.125%, 10/1/2011....................................................... 2,875,000 3,131,392
5.25%, 10/1/2018........................................................ 7,200,000 6,820,632
California Educational Facilities Authority, Revenue, Refunding (Saint Mary's College)
5%, 10/1/2012........................................................... 4,000,000 3,721,920
California Health Facilities Financing Authority, Revenue
(Saint Francis Memorial Hospital) 5.875%, 11/1/2023..................... . 4,500,000 4,578,975
California Housing Finance Agency, Home Mortgage Revenue:
6.15%, 8/1/2016......................................................... 3,000,000 3,041,970
6.70%, 8/1/2025......................................................... 1,960,000 2,044,104
7.50%, 8/1/2029......................................................... 920,000 955,659
8%, 8/1/2029............................................................ 445,000 465,056
7.60%, 8/1/2030......................................................... 1,515,000 1,595,022
7.70%, 8/1/2030......................................................... 905,000 950,377
California Pollution Control Financing Authority, SWDR (North County Recycling
Center) 6.75%, 7/1/2011 (LOC; Union Bank of Switzerland) (a)............ 2,500,000 2,895,900
California Public Works Board, LR:
(Secretary of State):
6.50%, 12/1/2008...................................................... 1,400,000 1,585,080
6.75%, 12/1/2012 (Prerefunded 12/1/2002) (b).......................... 3,475,000 3,945,723
(University of California Projects) 5.50%, 6/1/2014..................... 8,000,000 7,928,800
Compton, COP, Refunding 7.50%, 8/1/2015 (LOC; Mitsui Trust and Banking) (a). 2,000,000 2,109,360
Contra Costa County, Water District Revenue 6%, 10/1/2011 (Insured; MBIA)... 1,475,000 1,552,762
Escondido Unified School District, Refunding 5.125%, 9/1/2015 (Insured; FGIC) 3,250,000 3,100,012
Eureka Public Financing Authority, Tax Allocation Revenue, Refunding
(Eureka Redevelopment Projects) 6.25%, 11/1/2011 (Insured; CGIC)........ 2,000,000 2,127,860
Fairfield, Water Revenue, Refunding 5.375%, 4/1/2017 (Insured; AMBAC)....... 9,250,000 8,907,657
Fontana Redevelopment Agency, Tax Allocation Revenue
(North Fontana Redevelopment Project) 7.25%, 9/1/2020................... 4,250,000 4,334,320
Fremont Unified School District, Alameda County 5.875%, 8/1/2016............ 2,000,000 2,040,220
Fresno, Sewer Revenue 5%, 9/1/2023 (Insured; MBIA).......................... 2,000,000 1,820,860
Los Angeles County Public Works Financing Authority, LR, Refunding 5.25%, 9/1/2015 1,565,000 1,513,558
Los Angeles Harbor Department, Revenue 6.25%, 8/1/2026 (Insured; MBIA)...... 2,320,000 2,421,593
Madera County, COP (Valley Children's Hospital):
6.25%, 3/15/2006 (Insured; MBIA)........................................ 2,250,000 2,455,583
6.50%, 3/15/2009 (Insured; MBIA)........................................ 3,370,000 3,790,812
Premier California Municipal Bond Fund
Statement of Investments (continued) January 31, 1997
Principal
Long-Term Municipal Investments (continued) Amount Value
___________ ___________
California (continued)
Monrovia Redevelopment Agency, Tax Allocation, Refunding
(Central Redevelopment Project) 6.70%, 5/1/2021 (Insured; AMBAC)........ $ 2,000,000 $ 2,188,400
Mount Shasta, HR, COP (Mercy Medical Center)
7.25%, 7/1/2019 (Prerefunded 7/1/1999) (b).............................. 1,830,000 1,997,335
Nevada County, COP (Western Nevada Co. Solid Waste-McCourtney Road Landfill)
7.50%, 6/1/2021......................................................... 2,200,000 2,278,562
Northern California Power Agency, Public Power Revenue, Refunding
(Hydroelectric Project No. 1):
6.30%, 7/1/2018....................................................... 6,000,000 6,571,380
7.15%, 7/1/2024....................................................... 4,395,000 4,616,025
Orange County, Special Tax (Community Facilities District No. 87):
7.75%, 8/15/2014........................................................ 2,375,000 2,439,434
7.80%, 8/15/2015 (Prerefunded 8/15/2000) (b)............................ 2,000,000 2,254,760
Orange Cove, Irrigation District Revenue, COP (Rehabilitation Project)
7.25%, 2/1/2012 (Prerefunded 2/1/2001) (b).............................. 3,000,000 3,353,250
Richmond Joint Powers Financing Authority, Revenue
7.25%, 5/15/2013 (Prerefunded 5/15/2000) (b)............................ 1,500,000 1,655,685
Riverside County, SFMR 7.80%, 5/1/2021 (Collateralized; GNMA)............... 1,250,000 1,608,450
Roseville, Special Tax (Community Facilities District No. 1) 7.70%, 9/1/2020 2,000,000 2,069,560
Sacramento County, Special Tax (Community Facilities District No. 1):
8.20%, 12/1/2010........................................................ 2,250,000 2,428,358
8.25%, 12/1/2020........................................................ 2,000,000 2,139,320
San Diego County Water Authority, Water Revenue, COP 5.681%, 4/23/2008...... 4,000,000 4,185,880
San Diego Public Facilities Financing Authority, Sewer Revenue:
5%, 5/15/2015 (Insured; FGIC)........................................... 3,010,000 2,806,313
5%, 5/15/2020 (Insured; FGIC)........................................... 2,000,000 1,824,160
San Jose_Santa Clara Water Financing Authority, Sewer Revenue
5.375%, 11/15/2015 (Insured; FGIC)...................................... 1,125,000 1,104,041
Santa Rosa, Wastewater Revenue, Refunding (Wastewater Project)
5%, 9/1/2022 (Insured; FGIC)............................................ 4,500,000 4,103,730
Simi Valley, Single Family Residential Mortgage Revenue 7.625%, 8/1/2022 (c) 1,159,856 197,176
Southern California Rapid Transit District, COP (Worker's Compensation Fund)
6%, 7/1/2010............................................................ 2,045,000 2,135,471
University of California, Revenue:
Hospital_UC Davis Medical Center 5.75%, 7/1/2012 (Insured; AMBAC)....... 5,000,000 5,145,300
Refunding (Multiple Purpose Projects) 5%, 9/1/2023 (Insured; AMBAC)..... 8,500,000 7,578,345
Vista, MFHR (Vista Hacienda Project) 6.95%, 4/1/2017........................ 3,000,000 3,135,300
West Covina Redevelopment Agency, Community Facilities District, Special Tax
6%, 9/1/2022............................................................ 3,000,000 3,057,150
Premier California Municipal Bond Fund
Statement of Investments (continued) January 31, 1997
Principal
Long-Term Municipal Investments (continued) Amount Value
___________ ___________
U.S. Related_7.4%
Puerto Rico Commonwealth Highway and Transportation Authority, Revenue
5.50%, 7/1/2013......................................................... $ 7,250,000 $ 7,395,363
Puerto Rico Electric Power Authority, Power Revenue, Refunding 7.125%, 7/1/2014 2,000,000 2,147,460
Virgin Islands Public Financing Authority Revenue, 7.30%, 10/1/2018......... 3,100,000 3,851,161
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $169,573,213)................... $176,093,162
============
Short-Term Municipal Investments_2.7%
California_2.0%
Chula Vista, Industrial Development Revenue, Refunding (San Diego Gas) VRDN 3.55% (d) $ 1,300,000 $ 1,300,000
Irvine Ranch Water District, Refunding, VRDN
3.70% (LOC; Bank of America Trust and Savings Association) (a,d)........ 2,200,000 2,200,000
U.S. Related_.7%
Puerto Rico Commonwealth Government Development Bank, VRDN 3.20% (d)........ 1,300,000 1,300,000
_____________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $4,800,000).................... $ 4,800,000
=============
TOTAL INVESTMENTS_100.0% (cost $174,373,213)................................ $180,893,162
=============
</TABLE>
<TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
Summary of Abbreviations
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LR Lease Revenue
CGIC Capital Guaranty Insurance Corporation MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
FGIC Financial Guaranty Insurance Company MFHR Multi-Family Housing 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
</TABLE>
<TABLE>
Summary of Combined Ratings (Unaudited)
Fitch (e) or Moody's or Standard & Poor's Percentage of Value
____ __________ _________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 54.9%
AA Aa AA 5.0
A A A 23.2
BBB Baa BBB 5.5
BB Ba BB 2.4
DDD D D .1
F1 MIG1, VMIG1 & P1 SP1, A1 2.7
Not Rated (f) Not Rated (f) Not Rated (f) 6.2
_______
100.0%
========
</TABLE>
Notes to Statement of Investments:
(a) Secured by letters of credit.
(b) 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.
(c) Non-income producing security; interest payments in default.
(d) 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.
(e) Fitch currently provides creditworthiness information for a limited
number of investments.
(f) Securities which, while not rated by Fitch, Moody's and 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>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1997
Cost Value
____________ ____________
<S> <C> <C> <C>
ASSETS: Investments in securities_See Statement of Investments $174,373,213 $180,893,162
Cash....................................... 472,142
Interest receivable........................ 2,992,308
Receivable for shares of Beneficial Interest subscribed 562,362
Prepaid expenses........................... 6,468
______________
184,926,442
______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 85,998
Due to Distributor......................... 48,014
Payable for shares of Beneficial Interest redeemed 337,571
Accrued expenses........................... 54,770
______________
526,353
______________
NET ASSETS.................................................................. $184,400,089
==============
REPRESENTED BY: Paid-in capital............................ $178,260,196
Accumulated undistributed investment income_net181,948
Accumulated net realized gain (loss) on investments (562,004)
Accumulated net unrealized appreciation (depreciation)
....................... on investments_Note 3 6,519,949
______________
NET ASSETS.................................................................. $184,400,089
==============
</TABLE>
<TABLE>
NET ASSET VALUE PER SHARE
_________________________
Class A Class B Class C
________________ ____________ ____________
<S> <C> <C> <C>
Net Assets.................................................. $163,030,239 $20,340,892 $1,028,958
Shares Outstanding.......................................... 12,958,395 1,616,035 81,621
NET ASSET VALUE PER SHARE................................... $12.58 $12.59 $12.61
======= ======= ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED JANUARY 31, 1997
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME Interest Income............................ $11,714,875
EXPENSES: Management fee_Note 2(a)................... $ 1,056,016
Shareholder servicing costs _Note 2(c)..... 579,587
Distribution fees_Note 2(b)................ 105,909
Professional fees.......................... 48,083
Trustees' fees and expenses_Note 2(d)...... 34,458
Custodian fees............................. 20,494
Prospectus and shareholders' reports....... 14,121
Registration fees.......................... 6,517
Miscellaneous.............................. 17,207
____________
Total Expenses....................... 1,882,392
____________
INVESTMENT INCOME_NET....................................................... 9,832,483
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS_Note 3:
Net realized gain (loss) on investments.... $ (566,869)
Net unrealized appreciation (depreciation) on investments (3,558,911)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... (4,125,780)
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 5,706,703
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
January 31, 1997 January 31, 1996
_____________________ ___________________
<S> <C> <C>
OPERATIONS:
Investment income_net.................................................. $ 9,832,483 $ 10,837,216
Net realized gain (loss) on investments................................ (566,869) 6,212,253
Net unrealized appreciation (depreciation) on investments.............. (3,558,911) 10,659,485
________________ ________________
Net Increase (Decrease) in Net Assets Resulting from Operations...... 5,706,703 27,708,954
________________ ________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net:
Class A shares....................................................... (8,690,991) (9,879,785)
Class B shares....................................................... (946,983) (957,402)
Class C shares....................................................... (12,561) (29)
Net realized gain on investments:
Class A shares....................................................... (2,095,781) (4,193,091)
Class B shares....................................................... (255,409) (474,312)
Class C shares....................................................... (6,301) (23)
________________ ________________
Total Dividends...................................................... (12,008,026) (15,504,642)
________________ ________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares....................................................... 8,651,433 7,850,834
Class B shares....................................................... 1,280,059 2,433,172
Class C shares....................................................... 1,027,540 1,000
Dividends reinvested:
Class A shares....................................................... 5,153,147 6,858,326
Class B shares....................................................... 814,039 978,162
Class C shares....................................................... 18,682 52
Cost of shares redeemed:
Class A shares....................................................... (30,300,379) (32,515,537)
Class B shares....................................................... (2,638,241) (2,012,025)
Class C shares....................................................... (22,854) ____
________________ ________________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions (16,016,574) (16,406,016)
________________ ________________
Total Increase (Decrease) in Net Assets.......................... (22,317,897) (4,201,704)
NET ASSETS:
Beginning of Period.................................................... 206,717,986 210,919,690
________________ ________________
End of Period.......................................................... $184,400,089 $206,717,986
=============== ================
UNDISTRIBUTED INVESTMENT INCOME_NET........................................ $ 181,948 $ ____
________________ ________________
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Year Ended Year Ended
January 31, 1997 January 31, 1996
________________ ________________
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Class A
________
Shares sold............................................................ 683,893 611,979
Shares issued for dividends reinvested................................. 410,136 534,099
Shares redeemed........................................................ (2,413,048) (2,546,673)
________________ ________________
Net Increase (Decrease) in Shares Outstanding (1,319,019) (1,400,595)
=============== ================
Class B
________
Shares sold............................................................ 101,503 191,459
Shares issued for dividends reinvested................................. 64,758 76,108
Shares redeemed........................................................ (209,533) (157,990)
________________ ________________
Net Increase (Decrease) in Shares Outstanding (43,272) 109,577
=============== ================
Class C*
________
Shares sold............................................................ 81,879 77
Shares issued for dividends reinvested................................. 1,482 4
Shares redeemed........................................................ (1,821) ____
________________ ________________
Net Increase (Decrease) in Shares Outstanding 81,540 81
=============== ================
* From June 2, 1995 (commencement of initial offering) to January 31, 1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated June 1, 1997.
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 diversified, open-end
management investment company. 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. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A.
On October 31, 1996, the Board of Trustees approved, subject to approval
by the shareholders of the California Series (the "Series") of Premier
Insured Municipal Bond Fund, an Agreement and Plan of Reorganization
providing for the transfer of all or substantially all of the Series' assets
and liabilities to the Fund in a tax free exchange of shares of Beneficial
Interest of the Fund at net asset value and the assumption of stated
liabilities (the "Exchange"). The Series' Special Meeting of shareholders on
February 27, 1997 was adjourned to a later date so that further solicitation
of votes could occur.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund is authorized to issue an
unlimited number of $.001 par value shares in the following classes of
shares: Class A, Class B and Class C. 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 six years of purchase (five years for shareholders
beneficially owning Class B shares on November 30, 1996) 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 classes include the services offered to and the expenses borne by
each class and certain voting rights.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(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.
Premier California Municipal Bond Fund
NOTES TO FINANCIAL STATEMENTS (continued)
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, 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.
The Fund has an unused capital loss carryover of approximately $461,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to January 31, 1997. The
carryover does not include net realized securities losses from November 1,
1996 through January 31, 1997, which are treated, for Federal income tax
purposes as arising in fiscal 1998. If not applied, the carryover expires in
fiscal 2005.
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 value
of the Fund's average daily net assets and is payable monthly.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $2,272 during the period ended January 31, 1997 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. During the period ended January 31, 1997,
$103,726 was charged to the Fund for the Class B shares and $2,183 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 (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. During the period ended January 31,
1997, $427,417, $51,863 and $727 were charged to Class A, B and C shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
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 $67,419 during the period ended January 31, 1997.
(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.
Premier California Municipal Bond Fund
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3_Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended January 31, 1997
amounted to $74,526,774 and $90,179,818, respectively.
At January 31, 1997, accumulated net unrealized appreciation on
investments was $6,519,949, consisting of $8,108,372 gross unrealized
appreciation and $1,588,423 gross unrealized depreciation.
At January 31, 1997, 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, 1997, 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 financial statements and financial highlights. Our procedures included
confirmation of securities owned as of January 31, 1997 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, 1997, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[Ernst & Young signature logo]
New York, New York
March 3, 1997
DREYFUS 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 each of the ten
years in the period ended January 31, 1997.
Included in Part B of the Registration Statement:
Statement of Investments -- January 31, 1997.
Statement of Assets and Liabilities --January 31, 1997.
Statement of Operations -- year ended January 31, 1997.
Statement of Changes in Net Assets -- for the years
ended January 31, 1996 and 1997.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors, dated
March 3, 1997.
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)(a) 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.
(1)(b) Amendment to Agreement and Declaration of Trust.
(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 is incorporated by Reference to
Exhibit (8)(a) of Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A, filed on March 28, 1996.
(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.
(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.
(17) Financial Data Schedule.
(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
(b) The Certificate of Assistant Secretary
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 20, 1997
Beneficial Interest
(par value $.001)
Class A 3,022
Class B 634
Class C 5
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.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
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
W. KEITH SMITH Chairman and Chief Executive Officer:
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***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director 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:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
World Balanced Fund++++;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
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*;
Dreyfus America Fund+++;
World Balanced Fund++++;
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.
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
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 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 69, Route 'd'Esch,
L-1470 Luxembourg.
++++ The address of the business so indicated is 69, Route 'd'Esch,
L-2953 Luxembourg.
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 Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier Global Investing, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Growth Fund, Inc.
67) Dreyfus Premier Insured Municipal Bond Fund
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Fund
72) Dreyfus S&P 500 Index Fund
73) Dreyfus Short-Intermediate Government Fund
74) Dreyfus Short-Intermediate Municipal Bond Fund
75) The Dreyfus Socially Responsible Growth Fund, Inc.
76) Dreyfus Stock Index Fund, Inc.
77) Dreyfus Tax Exempt Cash Management
78) The Dreyfus Third Century Fund, Inc.
79) Dreyfus Treasury Cash Management
80) Dreyfus Treasury Prime Cash Management
81) Dreyfus Variable Investment Fund
82) Dreyfus Worldwide Dollar Money Market Fund, Inc.
83) General California Municipal Bond Fund, Inc.
84) General California Municipal Money Market Fund
85) General Government Securities Money Market Fund, Inc.
86) General Money Market Fund, Inc.
87) General Municipal Bond Fund, Inc.
88) General Municipal Money Market Fund, Inc.
89) General New York Municipal Bond Fund, Inc.
90) General New York Municipal Money Market 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 Vice President
and Chief Financial Officer and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Roy M. Moura+ First Vice President None
Dale F. Lampe+ Vice President None
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Elizabeth A. Keeley++ Assistant Vice President Vice President
and Assistant
Secretary
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 Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares 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, 1997.
DREYFUS 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 05/28/97
______________________________ Officer) and Treasurer
Marie E. Connolly
/s/Joseph F. Tower, III* Assistant Treasurer (Principal 5/28/97
______________________________ Accounting and Financial Officer)
Joseph F. Tower, III
/s/Clifford L. Alexander, Jr.* Trustee 5/28/97
______________________________
Clifford L. Alexander, Jr.
/s/Peggy C. Davis* Trustee 5/28/97
______________________________
Peggy C. Davis
/s/Joseph S. DiMartino* Chairman of the Board 5/28/97
______________________________ of Trustees
Joseph S. DiMartino
/s/Ernest Kafka* Trustee 5/28/97
______________________________
Ernest Kafka
/s/Saul B. Klaman* Trustee 5/28/97
______________________________
Saul B. Klaman
/s/Nathan Leventhal* Trustee 5/28/97
______________________________
Nathan Leventhal
*BY: __________________________
Elizabeth A. Keeley,
Attorney-in-Fact
Dreyfus Premier California Municipal Bond Fund
INDEX OF EXHIBITS
-----------------
Page
----
(1)(b) Amendment to Agreement and Declaration of Trust
(11) Consent of Independent Auditors
(17) Financial Data Schedule
(24)(b) Power of Attorney
Certificate of Assistant Secretary
PREMIER CALIFORNIA MUNICIPAL BOND FUND
ARTICLES OF AMENDMENT
Premier California Municipal Bond Fund, a business trust formed
by an Agreement and Declaration of Trust dated July 24, 1985 pursuant to the
laws of The Commonwealth of Massachusetts (the "Trust"), hereby certifies to the
Secretary of State of The Commonwealth of Massachusetts that:
FIRST: The Agreement and Declaration of Trust of the Trust is
hereby amended by striking out Article I, Section 1 and inserting in lieu
thereof the following:
"Section 1. Name. This Trust shall be known as 'Dreyfus
Premier California Municipal Bond Fund.'"
SECOND: The amendment to the Agreement and Declaration of Trust
herein made was duly approved at a meeting of the Trustees of the Trust on
January 8, 1997 pursuant to Article IX, Section 8 of the Agreement and
Declaration of Trust.
IN WITNESS WHEREOF, Premier California Municipal Bond Fund has
caused these Articles to be filed in its name and on its behalf by its Trustees.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
By: /s/ JOSEPH S. DIMARTINO
Joseph S. DiMartino, Trustee
By: /s/ CLIFFORD L. ALEXANDER, JR.
Clifford L. Alexander, Jr., Trustee
By: /s/ PEGGY C. DAVIS
Peggy C. Davis, Trustee
By: /s/ ERNEST KAFKA
Ernest Kafka, Trustee
By: /s/ SAUL B. KLAMAN
Saul B. Klaman, Trustee
By: /s/ NATHAN LEVENTHAL
Nathan Leventhal, Trustee
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
On this 8th day of January, 1997, before me personally appeared
the above-named Trustees of the Trust, to me known, and known to me to be the
persons described in and who executed the foregoing instrument, and who duly
acknowledged to me that they had executed the same.
Notary Public
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 3, 1997, in this Registration Statement (Form N-1A 33-7498)
of Dreyfus Premier California Municipal Bond Fund.
ERNST & YOUNG LLP
New York, New York
May 27, 1997
<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-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 174373
<INVESTMENTS-AT-VALUE> 180893
<RECEIVABLES> 3555
<ASSETS-OTHER> 478
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184926
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 526
<TOTAL-LIABILITIES> 526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 178260
<SHARES-COMMON-STOCK> 12958
<SHARES-COMMON-PRIOR> 14277
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (562)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6520
<NET-ASSETS> 163030
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11715
<OTHER-INCOME> 0
<EXPENSES-NET> 1883
<NET-INVESTMENT-INCOME> 9832
<REALIZED-GAINS-CURRENT> (567)
<APPREC-INCREASE-CURRENT> (3559)
<NET-CHANGE-FROM-OPS> 5707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8691)
<DISTRIBUTIONS-OF-GAINS> (2096)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 684
<NUMBER-OF-SHARES-REDEEMED> (2413)
<SHARES-REINVESTED> 410
<NET-CHANGE-IN-ASSETS> (22318)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2362
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1056
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1883
<AVERAGE-NET-ASSETS> 170967
<PER-SHARE-NAV-BEGIN> 12.97
<PER-SHARE-NII> .650
<PER-SHARE-GAIN-APPREC> (.240)
<PER-SHARE-DIVIDEND> (.640)
<PER-SHARE-DISTRIBUTIONS> (.160)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.58
<EXPENSE-RATIO> .009
<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-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 174373
<INVESTMENTS-AT-VALUE> 180893
<RECEIVABLES> 3555
<ASSETS-OTHER> 478
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184926
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 526
<TOTAL-LIABILITIES> 526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 178260
<SHARES-COMMON-STOCK> 1616
<SHARES-COMMON-PRIOR> 1659
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (562)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6520
<NET-ASSETS> 20341
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11715
<OTHER-INCOME> 0
<EXPENSES-NET> 1883
<NET-INVESTMENT-INCOME> 9832
<REALIZED-GAINS-CURRENT> (567)
<APPREC-INCREASE-CURRENT> (3559)
<NET-CHANGE-FROM-OPS> 5707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (947)
<DISTRIBUTIONS-OF-GAINS> (255)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 102
<NUMBER-OF-SHARES-REDEEMED> (210)
<SHARES-REINVESTED> 65
<NET-CHANGE-IN-ASSETS> (22318)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2362
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1056
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1883
<AVERAGE-NET-ASSETS> 20745
<PER-SHARE-NAV-BEGIN> 12.98
<PER-SHARE-NII> .590
<PER-SHARE-GAIN-APPREC> (.250)
<PER-SHARE-DIVIDEND> (.570)
<PER-SHARE-DISTRIBUTIONS> (.160)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.59
<EXPENSE-RATIO> .014
<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-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 174373
<INVESTMENTS-AT-VALUE> 180893
<RECEIVABLES> 3555
<ASSETS-OTHER> 478
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184926
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 526
<TOTAL-LIABILITIES> 526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 178260
<SHARES-COMMON-STOCK> 82
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 182
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (562)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6520
<NET-ASSETS> 1029
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11715
<OTHER-INCOME> 0
<EXPENSES-NET> 1883
<NET-INVESTMENT-INCOME> 9832
<REALIZED-GAINS-CURRENT> (567)
<APPREC-INCREASE-CURRENT> (3559)
<NET-CHANGE-FROM-OPS> 5707
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13)
<DISTRIBUTIONS-OF-GAINS> (6)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 82
<NUMBER-OF-SHARES-REDEEMED> (2)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> (22318)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2362
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1056
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1883
<AVERAGE-NET-ASSETS> 291
<PER-SHARE-NAV-BEGIN> 12.98
<PER-SHARE-NII> .540
<PER-SHARE-GAIN-APPREC> (.210)
<PER-SHARE-DIVIDEND> (.540)
<PER-SHARE-DISTRIBUTIONS> (.160)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.61
<EXPENSE-RATIO> .018
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Item 24.(b)
Other Exhibits (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Elizabeth A. Keeley,
Marie E. Connolly, Richard W. Ingram, Mark A. Karpe and John E. Pelletier
and each of them, with full power to act without the other, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all
amendments to the Registration Statement of Dreyfus Premier California
Municipal Bond Fund (including post-effective amendments and amendments
thereto), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, fund power and authority to do and perform each and every act and
thing ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
/s/Clifford L. Alexander, Jr. November 7, 1996
- --------------------------------
Clifford L. Alexander, Jr.
/s/Peggy C. Davis November 7, 1996
- --------------------------------
Peggy C. Davis
/s/Joseph S. DiMartino November 7, 1996
- --------------------------------
Joseph S. DiMartino
/s/Ernst Kafka November 7, 1996
- --------------------------------
Ernst Kafka
/s/Saul B. Klaman November 7, 1996
- --------------------------------
Saul B. Klaman
/s/Nathan Leventhal November 7, 1996
- --------------------------------
Nathan Leventhal
ITEM 24.(b)
OTHER EXHIBIT (b)
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
Certificate of Assistant Secretary
The undersigned, Elizabeth A. Keeley, Vice President and Assistant
Secretary of Dreyfus Premier California Municipal Bond Fund (the "Fund"),
hereby certifies that set forth below is a copy of the resolution adopted by
the Fund's Board authorizing the signing by Elizabeth A. Keeley, Marie E.
Connolly, Richard W. Ingram, Mark A. Karpe and John Pelletier on behalf of
the proper officers of the Fund pursuant to a power of attorney:
RESOLVED, that the Registration Statement and any
and all amendments and supplements thereto, may be
signed by any one of Elizabeth A. Keeley, Marie E.
Connolly, Richard W. Ingram, Mark A. Karpe and John
Pelletier as the attorney-in-fact for the proper
officers of the Fund, with full power of substitution
and resubstitution; and that the appointment of each of
such persons as such attorney-in-fact hereby is
authorized and approved; and that such attorneys-in-
fact, and each of them, shall have full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in connection with
such Registration Statement and any and all amendments
and supplements thereto, as fully to all intents and
purposes as the officer, for whom he or she is acting as
attorney-in-fact, might or could do in person.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Fund on May 28, 1997.
-----------------------
Elizabeth A. Keeley
Vice President and
Assistant Secretary
