File Nos. 33-7497
811-4765
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. 23 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 23 [X]
(Check appropriate box or boxes.)
DREYFUS 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, 1999 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)
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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 post-effective amendment.
----
Dreyfus Premier California Municipal Bond Fund
Investing for income exempt from federal and California state income taxes
PROSPECTUS June 1, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
The Fund
Dreyfus Premier California Municipal Bond Fund
---------------------------------
Ticker Symbols CLASS A: PRCAX
CLASS B: PRCBX
CLASS C: DPACX
Contents
The Fund
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Goal/Approach INSIDE COVER
Main Risks 1
Past Performance 1
Expenses 2
Management 3
Financial Highlights 4
Your Investment
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Account Policies 6
Distributions and Taxes 8
Services for Fund Investors 9
Instructions for Regular Accounts 10
For More Information
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INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.
GOAL/APPROACH
The fund seeks to maximize current income exempt from federal and California
state income taxes, as is consistent with the preservation of capital. To pursue
this goal, the fund normally invests substantially all of its assets in
municipal bonds that provide income exempt from federal and California state
income taxes.
The fund will invest at least 70% of its assets in investment grade municipal
bonds or the unrated equivalent as determined by Dreyfus. For additional yield,
it may invest up to 30% of its assets in municipal bonds rated below investment
grade ("high yield" or "junk" bonds) or the unrated equivalent as determined by
Dreyfus.
The portfolio manager buys and sells bonds based on credit quality, financial
outlook and yield potential. Bonds with deteriorating credit quality are
potential sell candidates, while those offering higher yields are potential buy
candidates.
Concepts to understand
MUNICIPAL BONDS: debt securities that provide income free from federal income
tax. Municipal bonds are typically divided into two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit
of the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenue derived from a
specific revenue source, such as charges for water and sewer service or highway
tolls
<PAGE>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices and, therefore, in the fund's share
price as well. As a result, the value of your investment in the fund could go up
and down, which means that you could lose money.
Other risk factors could have an effect on the fund's performance:
* if an issuer fails to make timely interest or
principal payments, or if there is a decline in the credit quality of a bond
or a perception of a decline, the bond's value could fall, potentially
lowering the fund's share price
* California's economy and revenues underlying
its municipal bonds may decline
* investing primarily in a single state may make
the fund's portfolio securities more sensitive to risks specific to the stat
* lower-rated, higher-yielding municipal
obligations are subject to greater credit risk, including the risk of
default, than investment grade obligations; lower-rated bonds tend to be more
volatile and less liquid
Although the fund's objective is to generate income exempt from federal and
California state income taxes, interest from some of its holdings may be subject
to the federal alternative minimum tax. In addition, the fund occasionally may
invest in taxable bonds and municipal bonds that are exempt only from federal
personal income tax.
Other potential risks
The fund may invest in certain derivatives, such as futures and options.
Derivatives can be illiquid and highly sensitive to changes in their underlying
security, interest rate or index and, as a result, can be highly volatile. A
small investment in certain derivatives could have a potentially large impact on
the fund's performance.
PAST PERFORMANCE
The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's Class A performance from year to year. The
performance figures do not reflect sales loads, and would be lower if they did.
The second table compares the fund's performance over time to that of the Lehman
Brothers Municipal Bond Index, a widely recognized unmanaged index of bond
performance. These returns include applicable sales loads. Both tables assume
the reinvestment of dividends. Of course, past performance is no guarantee of
future results.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
CLASS A SHARES
[Exhibit A]
BEST QUARTER: Q1 '95 +7.07%
WORST QUARTER: Q1 '94 -5.14%
<TABLE>
<CAPTION>
THE FUND'S CLASS A YEAR-TO-DATE TOTAL RETURN AS OF 3/31/99 WAS 0.49%.
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Average annual total return AS OF 12/31/98
Since
Inception date 1 Year 5 Years 10 Years inception
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<S> <C> <C> <C> <C> <C>
CLASS A (11/10/86) 0.33% 4.43% 7.27% --
CLASS B (1/15/93) 0.68% 4.54% -- 6.08%
CLASS C (6/2/95) 3.33% -- -- 5.54%
LEHMAN BROTHERS
MUNICIPAL BOND INDEX 6.48% 6.22% 8.22% 7.21%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 12/31/92 IS USED AS THE
BEGINNING VALUE ON 1/15/93.
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
The Fund 1
<PAGE 1>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>
Fee table
CLASS A CLASS B CLASS C
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SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)
Maximum front-end sales charge on purchases
<S> <C> <C> <C>
AS A % OF OFFERING PRICE 4.50 NONE NONE
Maximum contingent deferred sales charge (CDSC)
AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00
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ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)
% OF AVERAGE DAILY NET ASSETS
Management fees .55 .55 .55
Rule 12b-1 fee NONE .50 .75
Shareholder services fee .25 .25 .25
Other expenses .14 .15 .12
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TOTAL .94 1.45 1.67
</TABLE>
<TABLE>
<CAPTION>
* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
Expense example
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
CLASS A $542 $736 $947 $1,553
CLASS B
WITH REDEMPTION $548 $759 $992 $1,470**
WITHOUT REDEMPTION $148 $459 $792 $1,470**
CLASS C
WITH REDEMPTION $270 $526 $907 $1,976
WITHOUT REDEMPTION $170 $526 $907 $1,976
</TABLE>
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the fund's portfolio and
assisting in all aspects of its operation.
RULE 12B-1 FEE: the fee paid to the fund's distributor to finance the sale of
Class B and Class C shares. Because this fee is paid out of the fund's assets on
an ongoing basis, over time it will increase the cost of your investment and may
cost you more than paying other types of sales charges.
SHAREHOLDER SERVICES FEE: a fee paid to the fund's distributor for shareholder
account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.
2
<PAGE 2>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $120
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus an annual management fee of 0.55% of the fund's average net assets.
Dreyfus is the primary mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$389 billion of assets under management and $1.9 trillion of assets under
administration and custody, Mellon provides a full range of banking, investment
and trust products and services to individuals, businesses and institutions.
Mellon is headquartered in Pittsburgh, Pennsylvania.
The fund is managed by Stephen C. Kris. Mr. Kris has managed the fund since
January 1996 and has been employed by Dreyfus as a portfolio manager since
February 1988.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
The Fund 3
<PAGE 3>
FINANCIAL HIGHLIGHTS
The following tables describe the performance of each share class for the fiscal
periods indicated. "Total return" shows how much your investment in the fund
would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These figures have been
independently audited by Ernst & Young LLP, whose report, along with the fund's
financial statements, is included in the annual report.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
CLASS A 1999 1998 1997 1996 1995
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PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 13.00 12.58 12.97 12.24 13.64
Investment operations: Investment income -- net .56 .60 .65 .67 .72
Net realized and unrealized gain
(loss) on investments .12 .53 (.24) 1.02 (.80)
Total from investment operations .68 1.13 .41 1.69 (.08)
Distributions: Dividends from investment income -- net (.56) (.61) (.64) (.67) (.72)
Dividends from net realized gain on investments (.34) (.10) (.16) (.29) (.60)
Total distributions (.90) (.71) (.80) (.96) (1.32)
Net asset value, end of period 12.78 13.00 12.58 12.97 12.24
Total return (%)* 5.39 9.27 3.31 14.15 (4.34)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .94 .95 .92 .93 .90
Ratio of net investment income to average net assets (%) 4.36 4.71 5.18 5.22 5.72
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- -- -- -- .02
Portfolio turnover rate (%) 101.36 103.75 39.76 92.42 37.39
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Net assets, end of period ($ x 1,000) 144,855 152,416 163,030 185,187 191,939
* EXCLUSIVE OF SALES LOAD.
YEAR ENDED JANUARY 31,
CLASS B 1999 1998 1997 1996 1995
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PER-SHARE DATA ($)
Net asset value, beginning of period 13.01 12.59 12.98 12.25 13.64
Investment operations: Investment income -- net .50 .53 .59 .60 .65
Net realized and unrealized gain
(loss) on investments .12 .53 (.25) 1.02 (.79)
Total from investment operations .62 1.06 .34 1.62 (.14)
Distributions: Dividends from investment income -- net (.50) (.54) (.57) (.60) (.65)
Dividends from net realized gain on investments (.34) (.10) (.16) (.29) (.60)
Total distributions (.84) (.64) (.73) (.89) (1.25)
Net asset value, end of period 12.79 13.01 12.59 12.98 12.25
Total return (%)* 4.86 8.69 2.79 13.55 (4.77)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.45 1.46 1.44 1.45 1.42
Ratio of net investment income to average net assets (%) 3.85 4.18 4.66 4.69 5.17
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- -- -- -- .02
Portfolio turnover rate (%) 101.36 103.75 39.76 92.42 37.39
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Net assets, end of period ($ x 1,000) 23,810 24,942 20,341 21,530 18,981
</TABLE>
* EXCLUSIVE OF SALES LOAD.
4
<TABLE>
<CAPTION>
<PAGE 4>
YEAR ENDED JANUARY 31,
CLASS C 1999 1998 1997 1996(1)
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PER-SHARE DATA ($)
<S> <C> <C> <C> <C>
Net asset value, beginning of period 13.04 12.61 12.98 12.98
Investment operations: Investment income -- net .47 .50 .54 .37
Net realized and unrealized gain (loss) on investments .12 .53 (.21) .29
Total from investment operations .59 1.03 .33 .66
Distributions: Dividends from investment income -- net (.47) (.50) (.54) (.37)
Dividends from net realized gain on investments (.34) (.10) (.16) (.29)
Total distributions (.81) (.60) (.70) (.66)
Net asset value, end of period 12.82 13.04 12.61 12.98
Total return (%)(2) 4.63 8.42 2.67 7.90(3)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) 1.67 1.68 1.77 4.42(3)
Ratio of net investment income to average net assets (%) 3.68 3.92 4.33 4.31(3)
Portfolio turnover rate (%) 101.36 103.75 39.76 92.42
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Net assets, end of period ($ x 1,000) 1,236 1,135 1,029 1
</TABLE>
(1) FROM JUNE 2, 1995 (COMMENCEMENT OF INITIAL OFFERING) TO JANUARY 31, 1996.
(2) EXCLUSIVE OF SALES LOAD.
(3) ANNUALIZED.
The Fund 5
<PAGE 5>
Your Investment
ACCOUNT POLICIES
THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser. Third
parties with whom you open a fund account may impose policies, limitations and
fees which are different from those described here.
YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a
contigent deferred sales charge (CDSC).
* CLASS A shares may be appropriate for investors who prefer to pay the
fund's sales charge up front rather than upon the sale of their shares, want to
take advantage of the reduced sales charges available on larger investments
and/or have a longer-term investment horizon
* CLASS B shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a longer-term investment horizon
* CLASS C shares may be appropriate for investors who wish to avoid a
front-end sales charge, put 100% of their investment dollars to work immediately
and/or have a shorter-term investment horizon
Your financial representative can help you choose the share class that is
appropriate for you.
Share class charges
EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Consult your financial representative
or the SAI to see if this may apply to you. Shareholders owning Class B shares
on or prior to November 30, 1996, may be eligible for a lower CDSC.
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<TABLE>
<CAPTION>
Sales charges
CLASS A -- CHARGED WHEN YOU BUY SHARES
Sales charge Sales charge
deducted as a % as a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------
<S> <C> <C>
Less than $50,000 4.50% 4.70%
$50,000 -- $99,999 4.00% 4.20%
$100,000 -- $249,999 3.00% 3.10%
$250,000 -- $499,999 2.50% 2.60%
$500,000 -- $999,999 2.00% 2.00%
$1 million or more* 0.00% 0.00%
* A 1.00% CDSC may be charged on any shares sold within one year of purchase (except shares bought through
reinvestment).
- ----------------------------------------------------------------------------------------------------------------
CLASS B -- CHARGED WHEN YOU SELL SHARES
CDSC as a % of your initial
Time since you bought investment or your redemption
the shares you are selling (whichever is less)
- --------------------------------------------------------------------------------
</TABLE>
Up to 2 years 4.00%
2 -- 4 years 3.00%
4 -- 5 years 2.00%
5 -- 6 years 1.00%
More than 6 years Shares will automatically
convert to Class A
Class B shares also carry an annual Rule 12b-1 fee of 0.50% of the class's
average daily net assets.
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CLASS C -- CHARGED WHEN YOU SELL SHARES
A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
Reduced Class A sales charge
LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.
RIGHT OF ACCUMULATION: lets you add the value of any Class A, B or C shares in
this fund or any other Dreyfus Premier fund sold with a sales load that you
already own to the amount of your next Class A investment for purposes of
calculating the sales charge.
CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.
6
<PAGE 6>
Buying shares
THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. The fund's investments are generally valued based on fair
value as determined by an independent pricing service approved and supervised by
the fund's board. Because the fund seeks tax-exempt income, it is not
recommended for purchase in IRAs or other qualified plans.
ORDERS TO BUY AND SELL SHARES RECEIVED BY DEALERS by the close of trading on the
NYSE and transmitted to the distributor or its designee by the close of its
business day (normally 5:15 p.m. Eastern time) will be based on the NAV
determined as of the close of trading on the NYSE that day.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B and C
are offered at NAV, but generally are subject to higher annual operating
expenses and a CDSC.
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME through your financial representative,
or you can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity. Any certificates representing fund shares being sold must be
returned with your redemption request. Your order will be processed promptly,
and you will generally receive the proceeds within a week.
TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult your financial
representative or the SAI for details.
BEFORE SELLING OR WRITING A CHECK against recently purchased shares, please note
that if the fund has not yet collected payment for the shares you are selling,
it may delay sending the proceeds for up to eight business days or until it has
collected payment.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment 7
<PAGE 7>
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as more
than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's
total assets
* change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or during
unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; accounts participating in automatic
investment programs; accounts opened through a financial institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 30 days, the fund may close your account and
send you the proceeds.
DISTRIBUTIONS AND TAXES
THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income once a month, and distributes any net capital gains it has realized once
a year. Each share class will generate a different dividend because each has
different expenses. Your distributions will be reinvested in the fund unless you
instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
THE FUND ANTICIPATES that virtually all of its income dividends will be exempt
from federal and California state income taxes. However, any dividends and
capital gains from taxable investments are taxable as ordinary income, whether
or not you reinvest them. The tax status of any distribution is the same
regardless of how long you have been in the fund and whether you reinvest your
distributions or take them in cash. In general, distributions are federally
taxable as follows:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------
INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except for tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.
The table above also can provide a guide for potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.
8
<PAGE 8>
SERVICES FOR FUND INVESTORS
THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
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For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts withdrawn do not exceed 12% annually
of the account value at the time the shareholder elects to participate in the
plan.
Checkwriting privilege -- Class A only
YOU MAY WRITE REDEMPTION CHECKS against your account for Class A shares in
amounts of $500 or more. These checks are free; however, a fee will be charged
if you request a stop payment or if the transfer agent cannot honor a redemption
check due to insufficient funds or another valid reason. Please do not postdate
your checks or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $500 OR MORE from one class of the fund into the
same class of another Dreyfus Premier fund. You can request your exchange by
contacting your financial representative. Be sure to read the current prospectus
for any fund into which you are exchanging before investing. Any new account
established through an exchange will generally have the same privileges as your
original account (as long as they are available). There is currently no fee for
exchanges, although you may be charged a sales load when exchanging into any
fund that has a higher one.
TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contacting your financial representative.
Reinvestment privilege
UPON WRITTEN REQUEST YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.
Account statements
EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Your Investment 9
<PAGE 9>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and a check to: Name of Fund
P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional Processing
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* ABA# 021000018
* DDA# 8900119306
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable
Call us to obtain an account number. Return your application with the account
number on the application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900119306
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.
TO SELL SHARES
Write a redemption check (Class A only) OR write a letter of instruction that
includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see page 7).
Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing
WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.
TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.
CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.
AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.
Be sure to maintain an account balance of $5,000 or more.
To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
10
<PAGE 10>
<Application PAGE 1>
<Application PAGE 2>
NOTES
<PAGE>
For More Information
Dreyfus Premier California Municipal Bond Fund
- --------------------------------------
SEC file number: 811-4766
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1999 Dreyfus Service Corporation
023P0699
<PAGE>
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1999
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,
1999, 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 Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing in the Annual Report are
incorporated by reference into this Statement of Additional Information.
TABLE OF CONTENTS
Page
Description of the Fund..................................B-2
Management of the Fund ..................................B-16
Management Arrangements .................................B-21
How to Buy Shares .......................................B-24
Distribution Plan and Shareholder Services Plan .........B-28
How to Redeem Shares ....................................B-30
Shareholder Services ....................................B-34
Determination of Net Asset Value ........................B-38
Dividends, Distributions and Taxes ......................B-38
Portfolio Transactions ..................................B-41
Performance Information .................................B-42
Information About the Fund ..............................B-43
Counsel and Independent Auditors ........................B-45
Appendix A ..............................................B-46
Appendix B ..............................................B-64
DESCRIPTION OF THE FUND
The Fund is a Massachusetts business trust that commenced operations on
November 10, 1986. The Fund is an open-end, management investment company,
known as a municipal bond fund. The Fund is a diversified fund, which means
that, with respect to 75% of the Fund's total assets, the Fund will not
invest more than 5% of its assets in the securities of any single issuer.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
Certain Portfolio Securities
The following information supplements and should be read in conjunction with
the Fund's Prospectus.
Municipal Obligations. The Fund will invest primarily in the debt
securities of the State of California, its political subdivisions,
authorities and corporations, the interest from which is, in the opinion of
bond counsel to the issuer, exempt from Federal and State of California
personal income taxes (collectively, "California Municipal Obligations").
To the extent acceptable California Municipal Obligations are at any time
unavailable for investment by the Fund, the Fund will invest temporarily in
other debt securities the interest from which is, in the opinion of bond
counsel to the issuer, exempt from Federal, but not State of California,
income tax. The Fund will invest at least 80% of the value of its net
assets (except when maintaining a temporary defensive position) in Municipal
Obligations. Municipal Obligations are debt obligations issued by states,
territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities,
or multistate agencies or authorities, the interest from which, in the
opinion of bond counsel to the issuer, is 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.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation, and rating of the issue.
Certain Tax Exempt Obligations. The Fund may purchase floating and variable
rate demand notes and bonds, which are tax exempt obligations ordinarily
having stated maturities in excess of one year, but which permit the holder
to demand payment of principal at any time or at specified intervals.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amount
borrowed. Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value,
plus accrued interest. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right
to redeem is dependent on the ability of the borrower to pay principal and
interest on demand. Each obligation purchased by the Fund will meet the
quality criteria established for the purchase of Municipal Obligations.
Tax Exempt Participation Interests. The Fund may purchase from financial
institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to
the total principal amount of the Municipal Obligation. These instruments
may have fixed, floating or variable rates of interest. If the
participation interest is unrated, it will be backed by an irrevocable
letter of credit or guarantee of a bank that the Fund's Board has determined
meet prescribed quality standards for banks, or the payment obligation
otherwise will be collateralized by U.S. Government securities. For certain
participation interests, the Fund will have the right to demand payment, on
not more than seven days' notice, for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest.
As to these instruments, the Fund intends to exercise its right to demand
payment only upon a default under the terms of the Municipal Obligation, as
needed to provide liquidity to meet redemptions, or to maintain or improve
the quality of its investment portfolio.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event
of foreclosure might prove difficult. 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.
Tender Option Bonds. The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing
interest at a fixed rate substantially higher than prevailing short-term tax
exempt rates, that has been coupled with the agreement of a third party,
such as a bank, broker-dealer or other financial institution, pursuant to
which such institution grants the security holders the option, at periodic
intervals, to tender their securities to the institution and receive the
face value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the difference between
the Municipal Obligation's fixed coupon rate and the rate, as determined by
a remarketing or similar agent at or near the commencement of such period,
that would cause the securities, coupled with the tender option, to trade at
par on the date of such determination. Thus, after payment of this fee, the
security holder effectively holds a demand obligation that bears interest at
the prevailing short-term tax exempt rate. The Manager, on behalf of the
Fund, will consider on an ongoing basis the creditworthiness of the issuer
of the underlying Municipal Obligations, of any custodian and of the third
party provider of the tender option. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a default
in payment of principal or interest on the underlying Municipal Obligations
and for other reasons.
The Fund will purchase tender option bonds only when 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.
Custodial Receipts. The Fund may purchase custodial receipts representing
the right to receive certain future principal and interest payments on
Municipal Obligations which underlie the custodial receipts. A number of
different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of Municipal Obligations
deposits such obligations with a custodian in exchange for two classes of
custodial receipts. The two classes have different characteristics, but, in
each case, payments on the two classes are based on payments received on the
underlying Municipal Obligations. One class has the characteristics of a
typical auction rate security, where at specified intervals its interest
rate is adjusted, and ownership changes, based on an auction mechanism.
This class's interest rate generally is expect to be below the coupon rate
of the underlying Municipal Obligations and generally is at a level
comparable to that of 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 apart 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.
Ratings of Municipal Obligations. The Fund will invest at least 70% of the
value of its net assets in 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 IBCA,
Inc. ("Fitch" and, together with Moody's and S&P, the "Rating Agencies").
The Fund may invest up to 30% of the value of its net assets in Municipal
Obligations which, in the case of bonds, are rated lower than Baa by Moody's
and BBB by S&P and Fitch and as low as the lowest ratings assigned by the
Rating Agencies. The Fund also may invest in securities which, while not
rated, are determined by the Manager to be of comparable quality to the
rated securities in which the Fund may invest; for purposes of the 70%
requirement described in this paragraph, such unrated securities will be
considered to have the rating so determined.
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended January 31, 1999, computed
on a monthly basis, was as follows:
Percenta
Fitch or Moody's or S&P ge
of Value
AAA Aaa AAA 48.7%
AA Aa AA 15.2%
A A A 9.6%
BBB Baa BBB 12.3%
BB Ba BB .9%
D D D .1%
F-1+/F-1 VMIG1/MIG1, P-1 SP-1+,SP-1,
A1+/A1 7.2%
Not Not Rated Not Rated 6.0% 1
Rated --------
100%
1 Those securities which are not rated have been determined by the
Manager to be of comparable quality to securities in the following
rating categories: AAA/Aaa (3.3%), Aa/AA (.4%), Baa/BBB (1.4%) and
Ba/BB (.9%).
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 the
Rating Agencies 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 Prospectus and this Statement of
Additional Information. The ratings of the Rating Agencies represent their
opinions as to the quality of the Municipal Obligations which they undertake
to rate. It should be emphasized, however, that ratings are relative and
subjective and are not absolute standards of quality. Although these
ratings may be an initial criterion for selection of portfolio investments,
the Manager also will evaluate these securities and the creditworthiness of
the issuers of such securities.
Taxable Investments. From time to time, on a temporary basis other
than for temporary defensive purposes (but not to exceed 20% of the value of
the Fund's net assets) or for temporary defensive purposes, the Fund may
invest in taxable short-term investments ("Taxable Investments") consisting
of: notes of issuers having, at the time of purchase, a quality rating
within the two highest grades of 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.
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. 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.
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 securities that are subject to legal or contractual
restrictions on resale, and repurchase agreements providing for settlement
in more than seven days after notice. As to these securities, the Fund is
subject to a risk that should the Fund desire to sell them when a ready
buyer is not available at a price the Fund deems representative of their
value, the value of the Fund's net assets could be adversely affected.
Investment Techniques
The following information supplements and should be read in conjunction
with the Fund's Prospectus. The Fund's use of certain of the investment
techniques described below may give rise to taxable income.
Borrowing Money. The Fund may borrow to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"), which permits
an investment company to borrow in an amount up to 33-1/3% of the value of
its total assets. The Fund currently intends to borrow money only for
temporary or emergency (not leveraging) purposes in an amount up to 15% of
the value of its total assets (including the amount borrowed) valued at the
lesser of cost or market, less liabilities (not including the amount
borrowed) at the time borrowing is made. While borrowings exceed 5% 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 the
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 subsequently 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 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. At no time will more than
15% of the value of the Fund's net assets be in deposits on short sales
against the box.
Until the Fund closes its short position or replaces the borrowed
security, the Fund 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.
Derivatives. The Fund may invest in, or enter into, derivatives, such
as options and futures, for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and
the portfolio as a whole. Derivatives permit the Fund to increase or
decrease the level of risk, or change the character of the risk, to which
its portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities. However,
derivatives may entail investment exposures that are greater than their cost
would suggest, meaning that a small investment in derivatives could have a
large potential impact on the Fund's performance.
If the Fund invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if its
derivatives were poorly correlated with its other investments, or if the
Fund were unable to liquidate its position because of an illiquid secondary
market. The market for many derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for derivatives.
Although the Fund will not be a commodity pool, certain derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission
which limit the extent to which the Fund can invest in such derivatives.
The Fund may invest in futures contracts and options with respect thereto
for hedging purposes without limit. However, the Fund may not invest in
such contracts and options for other purposes if the sum of the amount of
initial margin deposits and premiums paid for unexpired options with respect
to such contracts, other than for bona fide hedging purposes, exceeds 5% of
the liquidation value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on such contracts and options;
provided, however, that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the
5% limitation.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
derivatives. Exchange-traded derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such derivatives.
This guarantee usually is supported by a daily 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 securities
being hedged and the price movements of the futures contract. For example,
if the Fund uses futures to hedge against the possibility of a decline in
the market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit
of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets to cover its obligations relating to its transactions in
derivatives. To maintain this required cover, the Fund may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a derivative position at a reasonable price. In
addition, the segregation of such assets will have the effect of limiting
the Fund's ability otherwise to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase
or sell an amount of a specific debt security at a future date at a specific
price.
Options--In General. The Fund may invest up to 5% of its assets,
represented by the premium paid, in the purchase of call and put options.
The Fund may write (i.e., sell) covered call and put option contracts to the
extent of 20% of the value of its net assets at the time such option
contracts are written. A call option gives the purchaser of the option the
right to buy, and obligates the writer to sell, the underlying security or
securities at the exercise price at any time during the option period, or at
a specific date. Conversely, a put option gives the purchaser of the option
the right to sell, and obligates the writer to buy, the underlying security
or securities at the exercise price at any time during the option period, or
at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written
by the Fund is covered when, among other things, the Fund segregates cash or
liquid securities having a value equal to or greater than the exercise price
of the option to fulfill the obligation undertaken. The principal reason
for writing covered call and put options is to realize, through the receipt
of premiums, a greater return than would be realized on the underlying
securities alone. The Fund receives a premium from writing covered call or
put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Successful use by the Fund of options will be subject to the Manager's
ability to predict correctly movements in interest rates. To the extent the
Manager's predictions are incorrect, the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in
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.
Lending Portfolio Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to
be entitled to payments in amounts equal to the interest or other
distributions payable on the loaned securities which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-
1/3% of the value of the Fund's total assets, and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Such
loans are terminable by the Fund at any time upon specified notice. The
Fund might experience risk of loss if the institution with which it has
engaged in a portfolio loan transaction breaches its agreement with the
Fund. In connection with its securities lending transactions, the Fund may
return to the borrower or a third party which is unaffiliated with the Fund,
and which is acting as a "placing broker," a part of the interest earned
from the investment of collateral received for securities loaned.
Forward Commitments. The Fund may purchase or sell Municipal
Obligations and other securities on a forward commitment, when-issued or
delayed delivery basis, which means that delivery and payment take place a
number of days after the date of the commitment to purchase. The payment
obligation and the interest rate receivable on a forward commitment or when-
issued security are fixed when the Fund enters into the commitment, but the
Fund does not make payment until it receives delivery from the counterparty.
The Fund will commit to purchase such securities only with the intention of
actually acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. The Fund will
segregate permissible liquid assets at least equal at all times to the
amount of the Fund's purchase commitments.
Municipal Obligations and other securities purchased on a forward
commitment or when-issued basis are subject to changes in value (generally
changing in the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of
the creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates. Securities purchased on a when-issued basis may
expose the Fund to risks because they may experience such fluctuations prior
to their actual delivery. Purchasing securities on a forward commitment or
when-issued basis can involve the additional risk that the yield available
in the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Investment Consideration and Risks
Investing in Municipal Obligations. The Fund may invest more than 25%
of the value of its total assets in Municipal Obligations which are related
in such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects. 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 Manager 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 Internal Revenue Code of 1986, as amended
(the "Code"), relating to the issuance of Municipal Obligations may reduce
the volume of Municipal Obligations qualifying for Federal tax exemption.
One effect of these provisions could be to increase the cost of the
Municipal Obligations available for purchase by the Fund and thus reduce
available yield. Shareholders should consult their tax advisers concerning
the effect of these provisions on an investment in the Fund. Proposals that
may restrict or eliminate the income tax exemption for interest on Municipal
Obligations may be introduced in the future. If any such proposal were
enacted that would reduce the availability of Municipal Obligations for
investment by the Fund so as to adversely affect Fund shareholders, the Fund
would reevaluate its investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal Obligation as
taxable, the Fund would treat such security as a permissible Taxable
Investment within the applicable limits set forth herein.
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. A severe recession
from 1990 through fiscal 1994 reduced revenues and increased expenditures
for social welfare programs, resulting in 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, 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 causing the State to rely increasingly on external debt markets to
meet its cash needs. 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. 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 review "Appendix A" which more fully sets forth
these and other risk factors.
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 below investment grade by the Rating Agencies (commonly known as junk
bonds). They may be subject to greater risks with respect to the issuing
entity and to greater market fluctuations than certain lower yielding,
higher rated Municipal Obligations. See "Appendix B" for a general
description of the Rating Agencies' ratings of Municipal Obligations.
Although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
bonds. The Fund will rely on the Manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer.
You should be aware that the market values of many of these bonds tend
to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by the Rating Agencies to
be, on balance, predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market price
and yield and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the
issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for the Fund to obtain accurate market quotations
for purposes of valuing the Fund's portfolio and calculating its net asset
value. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of these
securities. In such cases, judgment may play a greater role in valuation
because less reliable, objective data may be available.
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession would disrupt severely the market for
such securities and have an adverse impact on the value of such securities,
and could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon which would 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."
Simultaneous Investments. Investment decisions for the Fund are made
independently from those of other investment companies advised by the
Manager. If, however, such other investment companies desire to invest in,
or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
Investment Restrictions
The Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the
1940 Act) of the Fund's outstanding voting shares. In addition, the Fund
has adopted investment restrictions numbered 1 through 10 as fundamental
policies. 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 or the Statement of
Additional Information 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 or the Statement of Additional
Information 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.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Fund
and those companies that furnish services to the Fund. These companies are
as follows:
The Dreyfus Corporation............. Investment Adviser
Premier Mutual Fund Services, Inc... Distributor
Dreyfus Transfer, Inc. ............. Transfer Agent
The Bank of New York ............. Custodian
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He also is
a director of The Noel Group, Inc., a venture capital company (for
which, from February 1995 until November 1997, he was Chairman of the
Board), The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk
management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly, Belding Heminway, Inc.), a button packager
and distributor, Career Blazers, Inc. (formerly, Staffing Resources,
Inc.), a temporary placement agency, and Century Business Services,
Inc., a provider of various outsourcing functions for small and medium
sized companies. 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
until December 31, 1994, he was a director of Mellon Bank Corporation.
He is 55 years old and his address is 200 Park Avenue, New York, New
York 10166.
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, IMS
Health, a service provider of marketing information and information
technology, The Dun & Bradstreet Corporation, MCI WorldCom and Mutual
of America Life Insurance Company. He is 65 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 55 years old and her address is c/o
New York University School of Law, 40 Washington Square South, New
York, New York 10012.
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, including President of The New York
Psychoanalytic Society, and has published many articles on subjects in
the field of psychoanalysis. He is 66 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 79 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
served as Chairman of Citizens Union, an organization which strives to
reform and modernize city and state government from June 1994 until
June 1997. He is 56 years old and his address is 70 Lincoln Center
Plaza, New York, New York 10023-6583.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
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, 1999, 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, 1998, were as follows:
Total
Aggregate Compensation
Name of Board Compensation from Fund and
Member from Fund
Fund** Complex Paid to
Board Member
Joseph S. DiMartino $6,875 $619,660(187)
Clifford L. $5,500 $ 80,918(38)
Alexander, Jr.
Peggy C. Davis $5,500 $ 64,000(29)
Ernest Kafka $5,000 $ 57,500(29)
Saul B. Klaman $5,500 $ 64,000(29)
Nathan Leventhal $5,500 $ 64,000(29)
_________________________
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Fund, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $588 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 41 years old.
MARGARET W. CHAMBERS, Vice President and Secretary. Senior Vice President
and General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, she was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P. From January 1986 to July
1996, she was an associate with the law firm of Ropes & Gray. She is
38 years old.
STEPHANIE D. PIERCE, Vice President, Assistant Secretary and Assistant
Treasurer. Vice President and Client Development Manager of Funds
Distributor, Inc., and an officer of other investment companies advised
or administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was Second
Vice President with Chase Manhattan Bank. She is 30 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and 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 34 years old.
GEORGE A. RIO, Vice President and Assistant Treasurer. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by the
Manager. From June 1995 to March 1998, he was Senior Vice President
and Senior Key Account Manager for Putnam Mutual Funds. From May 1994
to June 1995, he was Director of Business Development for First Data
Corporation. He is 43 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., 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 36 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. He is 29 years old.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of Funds Distributor,
Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1994 to July 1996, he was
Assistant Counsel at Forum Financial Group. From October 1992 to March
1994, he was employed by Putnam Investments in legal and compliance
capacities. He is 33 years old.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was a Fund Accountant
for Investors Bank & Trust Company. She is 26 years old.
ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
March 1990 to May 1996, she was employed by U.S. Trust Company of New
York where she held various sales and marketing positions. She is 37
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 3, 1999.
As of May 3, 1999, the following entities owned of record 5% or more of
the outstanding shares of beneficial interest of the Fund: Class A shares -
MLPF&S for the Sole Benefit of its Customers, 4800 Deer Lake Drive E Fl 3,
Jacksonville, Florida 32246-6484 - 9.76%; Class B shares-MLPF&S for the Sole
Benefit of its Customers, 4800 Deer Lake Drive E Fl 3, Jacksonville, Florida
32246-6484 - 8.02%; Class C shares-Leo S. Kolligan, 1100 W. Shaw Ave.,
Fresno, California 93711-3708 - 32.60%; Aileen A. Cox Trust, 3625 1st Ave.,
Apartment 12, San Diego, California 92103-4036 - 30.75%; MLPF&S for the Sole
Benefit of its Customers, 4800 Deer Lake Drive E Fl 3, Jacksonville, Florida
32246-6484 - 24.41%. 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 ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). 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.
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 15, 1998. 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:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman--Institutional and a
director; Lawrence S. Kash, Vice Chairman and a director; J. David Officer,
Vice Chairman and a director; Ronald P. O'Hanley III, Vice Chairman; William
T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Diane P. Durnin, Vice President--Product
Development; Patrice M. Kozlowski, Vice President--Corporate Communications;
Mary Beth Leibig, Vice President--Human Resources; Andrew S. Wasser, Vice
President--Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G. Elliott,
Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions, and provides
the Fund with portfolio managers who are authorized by the Fund's Board to
execute purchases and sales of securities. The Fund's portfolio managers
are Joseph P. Darcy, A. Paul Disdier, Douglas J. Gaylor, Karen M. Hand,
Stephen C. Kris, Richard J. Moynihan, W. Michael Petty, 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 may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not
including the management fee paid by the Fund. The Distributor may use part
or all of such payments to pay Service Agents (as defined below) in respect
of these services. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
Under the Manager's personal securities trading policy (the "Policy"),
the Manager's employees must preclear personal transactions in securities
not exempt under the Policy. In addition, the Manager's employees must
report their personal securities transactions and holdings, which are
reviewed for compliance with the Policy. In that regard, portfolio managers
and other investment personnel also are subject to the oversight of Mellon's
Investment Ethics committee. Portfolio managers and other investment
personnel who comply with the Policy's preclearance and disclosure
procedures, and the requirements of the Committee, may be permitted to
purchase, sell or hold securities which also may be or are held in fund(s)
they manage or for which they otherwise provide investment advice.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include 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 the value of the Fund's average daily net assets. For the fiscal
years ended January 31, 1997, 1998 and 1999, the management fees paid by the
Fund amounted to $1,056,016, $1,000,358 and $945,926, respectively.
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.
Distributor. The Distributor, located at 60 State Street, Boston,
Massachusetts 02109, serves as the Fund's distributor on a best efforts
basis pursuant to an agreement which is renewable annually.
For the fiscal years ended January 31, 1997, 1998 and 1999, the
Distributor retained $6,342, $5,509 and $9,504.35, respectively, from sales
loads on Class A shares and $36,352, $50,705 and $30,597, respectively, from
contingent deferred sales charges ("CDSC") on Class B shares. For the
fiscal years ended January 31, 1997, 1998 and 1999, the Distributor retained
$1, $0 and $1,222, respectively, from the CDSC on Class C shares.
The Distributor, at its expense, may provide promotional incentives to
dealers that sell shares of funds advised by the Manager which are sold with
a sales load, such as the Dreyfus Premier Funds. In some instances, those
incentives may be offered only to certain dealers who have sold or may sell
significant amounts of shares.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus
Transfer, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the
Manager, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's
transfer and dividend disbursing agent. Under a transfer agency agreement
with the Fund, the Transfer Agent arranges for the maintenance of
shareholder account records for the Fund, the handling of certain
communications between shareholders and the Fund and the payment of
dividends and distributions payable by the Fund. For these services, the
Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses.
The Bank of New York (the "Custodian"), 90 Washington Street, New York,
New York 10286, is the Fund's custodian. The Custodian has no part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund. Under a custody agreement with the Fund,
the Custodian holds the Fund's securities and keeps all necessary accounts
and records. For its custody services, the Custodian receives a monthly fee
based on the market value of the Fund's assets held in custody and receives
certain securities transactions charges.
HOW TO BUY SHARES
General. Fund shares 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
Manager or any of its affiliates or subsidiaries, directors of the Manager,
Board members of a fund advised by the Manager, including members of the
Fund's Board, or the spouse or minor child of any of the foregoing 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. 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 the Fund's Prospectus and this Statement of
Additional Information, 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 Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time.
Fund shares also may be purchased through Dreyfus-Automatic Asset
Builderr and Dreyfus 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.
Fund shares are sold on a continuous basis. Net asset value per share
is determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), on each day the New York
Stock Exchange is open for business. For purposes of determining net asset
value, options and futures contracts will be valued 15 minutes after the
close of trading on the floor of the New York Stock Exchange. Net asset
value per share of each Class is computed by dividing the value of the
Fund's net assets represented by such Class (i.e., the value of its assets
less liabilities) by the total number of shares of such Class outstanding.
The Fund's investments are valued based on market value or, where market
quotations are not readily available, based on fair value as determined in
good faith by the Fund's Board. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of
Net Asset Value."
If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the New York Stock Exchange (currently 4:00 p.m.,
New York time) on a business day, Fund shares will be purchased at the
public offering price determined as of the close of trading on the floor of
the New York Stock Exchange on that day. Otherwise, Fund shares will be
purchased at the public offering price determined as of the close of trading
on the floor of the New York Stock Exchange on the next business day, except
where shares are purchased through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the New York Stock Exchange on any business day
and transmitted to the Distributor or its designee by the close of its
business day (normally 5:15 p.m., New York time) will be based on the public
offering price per share determined as of the close of trading on the floor
of the New York Stock Exchange on that day. Otherwise, the orders will be
based on the next determined public offering price. It is the dealer's
responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day.
Class A Shares. The public offering price for Class A shares is the
net asset value per share of that Class plus a sales load as shown below:
Total
Sales
Load
As a % of As a % of Dealers'
Amount of offering net asset Reallowance
Transaction price per value per as a % of
share share Offering
Price
Less than $50,000 4.50 4.70 4.25
$50,000 to less than 4.00 4.20 3.75
$100,000
$100,000 to less 3.00 3.10 2.75
than $250,000
$250,000 to less 2.50 2.60 2.25
than $500,000
$500,000 to less 2.00 2.00 1.75
than $1,000,000
$1,000,000 or more -0- -0- -0-
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 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 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 aggregating less than $50,000 subject to the schedule of
sales charges set forth above at a price based upon the net asset value of
the Fund's Class A shares on January 31, 1999:
NET ASSET VALUE per Share....................$12.78
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share)................$ .60
Per Share Offering Price to
the Public................................$13.38
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 the sale of such 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 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 Manager or any of its affiliates or subsidiaries, directors of the
Manager, Board members of a fund advised by the Manager, including members
of the Fund's Board, or the spouse or minor child of any of the foregoing.
Class A shares may be purchased at net asset value through certain
broker-dealers and other financial institutions which have entered into an
agreement with the Distributor, which includes a requirement that such
shares be sold for the benefit of clients participating in a "wrap account"
or a similar program under which such clients pay a fee to such broker-
dealer or other financial institution.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a registered
open-end management investment company not managed by the Manager 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 been subject to an
initial sales charge or a contingent 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).
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 in the Fund's Prospectus and in this
Statement of Additional Information under "How to Redeem Shares--Contingent
Deferred Sales Charge--Class B Shares." The Distributor compensates certain
Service Agents for selling Class B 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.
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. 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. 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 Manager 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 above, where the aggregate investment,
including such purchase, is $50,000 or more. If, for example, you
previously purchased and still hold Class A shares, or shares of any other
Eligible Fund or combination thereof, with an aggregate current market value
of $40,000 and subsequently purchase Class A shares or shares of an Eligible
Fund having a current value of $20,000, the sales load applicable to the
subsequent purchase would be reduced to 4.0% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Service Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is
subject to confirmation of your holdings through a check of appropriate
records.
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone
if you have checked the appropriate box and supplied the necessary
information on the Account Application or have filed a Shareholder Services
Form with the Transfer Agent. The proceeds will be transferred between the
bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution which is
an Automated Clearing House ("ACH") member may be so designated.
Dreyfus TeleTransfer purchase orders may be made at any time.
Purchase orders received by 4:00 p.m., New York time, on any day the
Transfer Agent and the New York Stock Exchange are open for business will
be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New
York time, on any day the Transfer Agent and the New York Stock Exchange
are open for business, or orders made on Saturday, Sunday or any 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 Dreyfus
TeleTransfer Privilege, the initial payment for purchase of shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file.
If the proceeds of a particular redemption are to be wired to an account at
any other bank, the request must be in writing and signature-guaranteed.
See "How to Redeem Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. You may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still
applicable.
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 12b-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 the
Fund's Class B and Class C shares, pursuant to which the Fund pays the
Distributor for distributing each such Class of shares a fee at the annual
rate of .50% of the value of the average daily net assets of Class B and
.75% of the value of the average daily net assets of Class C. The Fund's
Board believes that there is a reasonable likelihood that the Distribution
Plan will benefit the Fund and holders of its 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 Fund's
Board, and by the Board members who are not "interested persons" (as defined
in the 1940 Act) of the Fund and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any agreements
entered into in connection with 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 15, 1998. As to the relevant Class of shares of the
Fund, 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 in any agreements entered into in connection with the Distribution
Plan or by vote of holders of a majority of such Class of shares.
For the fiscal year ended January 31, 1999, the Fund was charged
$119,442 and $9,465, with respect to Class B and Class C shares,
respectively, pursuant to 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 the Fund's Class A, Class B
and Class C shares a fee at the annual rate of .25% 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 such
shareholder accounts. Under the Shareholder Services Plan, the Distributor
may make payments to 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 by the Board at a meeting
held on July 15, 1998. 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, 1999, the Fund was charged
$367,090, $59,721 and $3,155 with respect to Class A, Class B and Class C
shares, respectively, pursuant to the Shareholder Services Plan.
HOW TO REDEEM SHARES
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 the Class B
shares acquired through reinvestment of dividends or capital gain
distributions, plus (ii) increases in the net asset value of your Class B
shares above the dollar amount of all your payments for the purchase of
Class B shares held by you at the time of redemption.
If the aggregate value of 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 for 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;
Year Since CDSC as a % of
Purchase Payment Amount Invested
Was Made or
Redemption
Proceeds
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
Purchase Payment Amount Invested
Was Made or
Redemption
Proceeds
First ...................... 3.00
Second...................... 3.00
Third ...................... 2.00
Fourth...................... 2.00
Fifth ...................... 1.00
Sixth ...................... 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation 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 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 the investment.
Assuming at the time of the redemption the net asset value had 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.
Contingent Deferred Sales Charge--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 $1,000,000, (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 pursuant to the Automatic
Withdrawal Plan, as described below. If the Fund's Board determines to
discontinue the waiver of the CDSC, the disclosure herein 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 Fund's Prospectus or this Statement of Additional Information 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.
Check Redemption Privilege--Class A Only. The Fund provides Redemption
Checks ("Checks") to investors in Class A shares automatically upon opening
an account unless you specifically refuse the Check Redemption Privilege by
checking the applicable "No" box on the Account Application. Checks will be
sent only to the registered owner(s) of the account and only to the address
of record. The Check Redemption Privilege may be established for an
existing account by a separate signed Shareholder Services Form. The
Account Application or Shareholder Services Form must be manually signed by
the registered owner(s). Checks are drawn on your Fund account and may be
made payable to the order of any person in an amount of $500 or more. When
a Check is presented to the Transfer Agent for payment, the Transfer Agent,
as your agent, will cause the Fund to redeem a sufficient number of full and
fractional Class A shares in your account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a copy of the
Check will be returned to you. You generally will be subject to the same
rules and regulations that apply to checking accounts, although election of
this Privilege creates only a shareholder-transfer agent relationship with
the Transfer Agent.
You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, the Transfer Agent will
honor, upon presentment, even if presented before the date of the Check, all
postdated Checks which are dated within six months of presentment for
payment, if they are otherwise in good order.
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Check upon your request or if the Transfer Agent cannot honor a
Check due to insufficient funds or other valid reason. If the amount of the
Check is greater than the value of the Class A shares in your account, the
Check will be returned marked insufficient funds. Checks should not be used
to close an account.
Redemption Through a Selected Dealer. If you are a customer of a
Selected Dealer, you may make redemption requests to your Selected Dealer.
If the Selected Dealer transmits the redemption request so that it is
received by the Transfer Agent prior to the close of trading on the floor of
the New York Stock Exchange (currently 4:00 p.m., New York time), the
redemption request will be effective on that day. If a redemption request
is received by the Transfer Agent after the close of trading on the floor of
the New York Stock Exchange, the redemption request will be effective on the
next business day. It is the responsibility of the Selected Dealer to
transmit a request so that it is received in a timely manner. The proceeds
of the redemption are credited to your account with the Selected Dealer.
See "How to Buy Shares" for a discussion of additional conditions or fees
that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the New York Stock Exchange
on any business day and transmitted to the Distributor or its designee prior
to the close of its business day (normally 5:15 p.m., New York time) are
effected at the price determined as of the close of trading on the floor of
the New York Stock Exchange on that day. Otherwise, the shares will be
redeemed at the next determined net asset value. It is the responsibility
of the Selected Dealer to transmit orders on a timely basis. The Selected
Dealer may charge the shareholder a fee for executing the order. This
repurchase arrangement is discretionary and may be withdrawn at any time.
Reinvestment Privilege. 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
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, your account will be credited with an amount
equal to CDSC previously paid upon redemption of the Class A or Class B
shares reinvested. The Reinvestment Privilege may be exercised only once.
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be designated. Holders of jointly registered
Fund or bank accounts may redeem through the Dreyfus TeleTransfer Privilege
for transfer to their bank account not more than $250,000 within any 30-day
period. Redemption proceeds will be on deposit in your account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. You should be aware that if you have selected the Dreyfus
TeleTransfer Privilege, any request for a wire redemption will be effected
as a Dreyfus TeleTransfer transaction through the ACH system unless more
prompt transmittal specifically is requested. See "How to Buy Shares--
Dreyfus 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 and is a fundamental policy of the fund which may not be changed
without shareholder approval. In the case of requests for redemption in
excess of such amount, the Fund's Board reserves the right to make payments
in whole or in part in securities or other assets of the Fund in case of an
emergency or any time a cash distribution would impair the liquidity of the
Fund to the detriment of the existing shareholders. In such event, the
securities would be valued in the same manner as the Fund's portfolio is
valued. If the recipient sells such securities, brokerage charges might be
incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
SHAREHOLDER SERVICES
Fund Exchanges. 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 of certain other funds managed or administered by the Manager, to
the extent such shares are offered for sale in such client's state of
residence. 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: 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.
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), but if the sales load applicable to the
Offered Shares exceeds the maximum sales load that could have been
imposed in connection with the Purchased Shares (at the time the
Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds, and for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held
since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item D above, your Service Agent must
notify the Transfer Agent of your prior ownership of such Class A shares and
your account number.
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 for an Exchange Account only can
be made into certain other funds manage or administered by the Manager. 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 Dreyfus Auto-Exchange
Privilege, Dreyfus Dividend Sweep and the Automatic Withdrawal Plan.
To request an exchange, your Service Agent acting on your 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 you check the applicable "No" box on the
Account Application, indicating that you specifically refuse this privilege.
By using the Telephone Exchange Privilege, you authorize the Transfer Agent
to act on telephonic instructions (including over The Dreyfus Touchr
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. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal administrative fee in
accordance with rules promulgated by the Securities and Exchange Commission.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
being required for shares of the same Class of the fund into which the
exchange is being made.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits you 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 of which you
are a shareholder. This Privilege is available only for existing accounts.
Shares will be exchanged on the basis of relative net asset value as
described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by you. You will be notified if your account falls below the
amount designated to be exchanged under this Privilege. In this case, your
account will fall to zero unless additional investments are made in excess
of the designated amount prior to the next Auto-Exchange transaction.
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. Shares may be exchanged only
between accounts having identical names and other identifying designations.
The Fund Exchanges service or the Dreyfus Auto-Exchange Privilege may be
modified or terminated at any time upon notice to shareholders.
Dreyfus-Automatic Asset Builderr. Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you.
Dreyfus Government Direct Deposit Privilege. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security, or certain veterans', military or other payments from the U.S.
Government automatically deposited into your Fund account. You may deposit
as much of such payments as you elect.
Dreyfus Dividend Options. Dividend Sweep allows you to invest
automatically your 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 you are 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 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"), but if the sales load applicable to
the Offered Shares exceeds the maximum sales load charged by the
fund from which dividends or distributions are being swept
(without giving effect to any reduced loads), the difference will
be deducted.
D. Dividends and distributions paid by a fund 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.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a
fee for this service.
Automatic Withdrawal 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.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, your shares will be reduced and eventually may be depleted.
Automatic Withdrawal may be terminated at any time by you, the Fund or the
Transfer Agent. Shares for which stock 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 shareholders account will be subject to a CDSC on the amounts exceeding
12% of the initial account value. Withdrawals of 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 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 of the Fund 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. Purchase 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.
DETERMINATION OF NET ASSET VALUE
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service") approved
by the Fund's Board. When, in the judgment of the Service, quoted bid
prices for investments are readily available and are representative of the
bid side of the market, these investments are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). 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, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that the Fund qualified as a "regulated investment
company" under the Code for the fiscal year ended January 31, 1999, 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), and must meet certain asset
diversification and other requirements. If the Fund did not qualify as a
regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management or
investment practices or policies by any government agency.
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 aggregate 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 or
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 as 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, and 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 on
straddle positions may be treated as short-term capital gains or ordinary
income.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally apply if the Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short
sale, futures, forward, or offsetting notional principal contract
(collectively, a "Contract") respecting the same or substantially identical
property or (2) holds an appreciated financial position that is a Contract
and then acquires property that is the same as, or substantially identical
to, the underlying property. In each instance, with certain exceptions, the
Fund generally will be taxed as if the appreciated financial position were
sold at its fair market value on the date the Fund enters into the financial
position or acquires the property, respectively. Transactions that are
identified as hedging or straddle transactions under other provisions of the
Code can be subject to the constructive sale provisions.
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 and may be
selected based upon their sales of shares of the Fund or other funds advised
by the Manager or its affiliates.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising the Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses of
its research department.
The aggregate amount of transactions during the last fiscal year in
newly issued debt instruments in fixed price public offerings directed to an
underwriter in consideration of, among other things, research services
provided was $0.
PERFORMANCE INFORMATION
Current yield for the 30-day period ended January 31, 1999 for Class A
was 3.63%, for Class B was 3.30% and for Class C was 3.13%. 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 1998 Federal and State of California personal
income tax rate of 45.22%, the tax equivalent yield for the 30-day period
ended January 31, 1999 for Class A was 6.63%, for Class B was 6.02% and for
Class C was 5.71%. 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, 1999 for Class A was 0.67%, 4.41% and 7.22%, respectively. The
average annual total return for the 1, 5 and 6.05 year periods ended January
31, 1999 for Class B was 0.92%, 4.53% and 6.30%, respectively. The average
annual total return for the 1 and 3.67 year periods ended January 31, 1999
for Class C was 3.65% and 5.71%, 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, 1999 was 127.28%. Based on
net asset value per share, the total return for Class A was 138.01% 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,
1999 was 44.76%. Without giving effect to the applicable CDSC, the total
return for Class B was 44.76% 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, 1999 was 22.62%. 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 not as being representative of the
Fund's past or future performance.
Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Bank Rate MonitorT, N. Palm Beach, FL 33408, IBC's Money
Fund ReportT, Morningstar, Inc. and other industry publications.
Advertising materials for the Fund also 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 also may refer to statistical or
other information concerning trends relating to investment companies, as
compiled by industry associations such as the Investment Company Institute.
INFORMATION ABOUT THE FUND
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive or subscription rights and are freely
transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of Board
members or the appointment of auditors. However, the holders of at least 10%
of the shares outstanding and entitled to vote may require the Fund to hold
a special meeting of shareholders for purposes of removing a Board member
from office. Fund shareholders may remove a Board member by the affirmative
vote of two-thirds of the Fund's outstanding voting shares. In addition,
the Board will call a meeting of shareholders for the purpose of electing
Board members if, at any time, less than a majority of the Board members
then holding office have been elected by shareholders.
The Fund is organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts. Under Massachusetts law,
shareholders could, under certain circumstances, be held personally liable
for the obligations of the Fund. However, the Fund's Agreement and
Declaration of Trust ("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 Board member. 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 a
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 a
way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term
market movements. A pattern of frequent purchases and exchanges can be
disruptive to efficient portfolio management and, consequently, can be
detrimental to the Fund's performance and its shareholders. Accordingly, if
the Fund's management determines that an investor is following a market-
timing strategy or is otherwise engaging in excessive trading, the Fund,
with or without prior notice, may temporarily or permanently terminate the
availability of Fund Exchanges, or reject in whole or part any purchase or
exchange request, with respect to such investor's account. Such investors
also may be barred from purchasing other funds in the Dreyfus Family of
Funds. Generally, an investor who makes more than four exchanges out of the
Fund during any calendar year or who makes exchanges that appear to coincide
with a market-timing strategy may be deemed to be engaged in excessive
trading. Accounts under common ownership or control will be consider as one
account for purposes of determining a patter of excessive trading. In
addition, the Fund may refuse or restrict purchase or exchange requests by
any person or group if, in the judgment of the Fund's management, the Fund
would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected
or if the Fund receives or anticipates receiving simultaneous orders that
may significantly affect the Fund (e.g., amounts equal to 1% or more of the
Fund's total assets). If an exchange request is refused, the Fund will take
no other action with respect to the shares until it receives further
instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would
be disruptive to efficient portfolio management or would adversely affect
the Fund. The Fund's policy on excessive trading applies to investors who
invest in the Fund directly or through financial intermediaries, but does
not apply to the Dreyfus Auto-Exchange Privilege, to any automatic
investment or withdrawal privilege described herein, or to participants in
employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange
requests based on their separate components - redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case,
the redemption request would be processed at the Fund's next determined net
asset value but the purchase order would be effective only at the net asset
value next determined after the fund being purchased receives proceeds of
the redemption, which may result in the purchase being delayed.
To offset the relatively higher costs of servicing smaller accounts,
the Fund will charge regular accounts with balances below $2,000 an annual
fee of $12. The valuation of accounts and the deductions are expected to
take place during the last four months of each year. The fee will be waived
for any investor whose aggregate Dreyfus mutual fund investments total at
least $25,000, and will not apply to accounts participating in automatic
investment programs or opened through a securities dealer, bank or other
financial institution, or to other fiduciary accounts.
The Fund will send 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 $24 billion in tax exempt assets.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the
Fund.
APPENDIX A
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
RISK FACTORS--INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
The following information is a summary of special factors affecting
investments in California Municipal Securities and is drawn from the
Official Statement issued by the State for its public bond issue on December
9, 1998. The sources of payment for such obligations and the marketability
thereof may be affected by financial or other difficulties experienced by
the State of California and certain of its municipalities and public
authorities. It does not purport to be a complete description and is based
on information from official statements relating to securities offerings of
California issuers.
State Finances
The Budget Process
The State's fiscal year begins on July 1 and ends on June 30. The
State operates on a budget basis, using a modified accrual system of
accounting, with revenues credited in the period in which they are
measurable and available and expenditures debited in the period in which the
corresponding liabilities are incurred.
The annual budget is proposed by the Governor by January 10 of each
year for the next fiscal year (the "Governor's Budget"). Under State law,
the annual proposed Governor's Budget cannot provide for projected
expenditures in excess of projected revenues and balances available from
prior fiscal years. Following the submission of the Governor's Budget, the
Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only
through an appropriation made by law. The primary source of the annual
expenditure authorizations is the Budget Act as approved by the Legislature
and signed by the Governor. The Budget Act must be approved by a two-thirds
majority vote of each House of the Legislature. The Governor may reduce or
eliminate specific line items in the Budget Act or any other appropriations
bill without vetoing the entire bill. Such individual line-item vetoes are
subject to override by a two-thirds majority vote of each House of the
Legislature.
Appropriations also may be included in legislation other than the
Budget Act (except for K-14 education) must be approved by a two-thirds
majority vote in each House of the Legislature and be signed by the
Governor. Bills containing K-14 education appropriations only require a
simple majority vote. Continuing appropriations, available without regard
to fiscal year, may also be provided by statute or the State Constitution.
Funds necessary to meet an appropriation need not be in the State
Treasury at the time such appropriation is enacted; revenues may be
appropriated in anticipation of their receipt.
The General Fund
The moneys of the State are segregated into the General Fund and over
900 Special Funds, including Bond, Trust and Pension Funds. The General
Fund consists of revenues received by the State Treasury and not required by
law to be credited to any other fund, as well as earnings from the
investment of State moneys not allocable to another fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most of the major revenue sources of the State.
The General Fund may be expended as a consequence of appropriation measures
enacted by the Legislature and approved by the Governor, as well as
appropriations pursuant to various constitutional authorizations and
initiative statutes.
The Special Fund for Economic Uncertainties
The Special Fund for Economic Uncertainties ("SFEU") is funded with
General Fund revenues and was established to protect the State from
unforeseen revenue reductions and/or unanticipated expenditure increases.
Amounts in the SFEU may be transferred by the State Controller as necessary
to meet cash needs of the General Fund. The State Controller is required to
return moneys so transferred without payment of interest as soon as there
are sufficient moneys in the General Fund.
The legislation creating the SFEU contains a continuous appropriation
from the General Fund authorizing the State Controller to transfer to the
SFEU, as of the end of each fiscal year, the lesser of (i) the unencumbered
balance in the General Fund and (ii) the difference between the State's
"appropriations subject to limitation" for the fiscal year then ended and
its "appropriations limit" as defined in Section 8 of Article XIII B of the
State Constitution and established in the Budget Act for that fiscal year,
as jointly estimated by the State's Legislative Analyst's Office and the
Department of Finance. In certain circumstances, moneys in the SFEU may be
used in connection with disaster relief.
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 State Controller is required to add the balance in
the SFEU to the balance in the General Fund so as to show the total moneys
then available for General Fund purposes.
The SFEU projection reflects the enactment of the Budget Act on August
21, 1998. This figure contains the latest revenue projections and
expenditure amounts appropriated in the Budget Act and trailer bills at that
point in time. As in any year, the Budget Act and related trailer bills are
not the only pieces of legislation which appropriate funds. Other factors
including re-estimates of revenues and expenditures, existing statutory
requirements, and additional legislation introduced and passed by the
Legislature may impact the reserve amount.
In the Budget Act for Fiscal Year 1998-99, signed on August 21, 1998,
the Department of Finance projects the SFEU will have a balance of about
$1.255 billion at June 30, 1999.
Prior Fiscal Years' Financial Results
Fiscal Years Prior to 1995-96
Pressures on the State's budget in the late 1980's and early 1990's
were caused by a combination of external economic conditions (including a
recession which began in 1990) and growth of the largest General Fund
Programs - K-14 education, health, welfare and corrections - at rates faster
than the revenue base. During this period, expenditures exceeded revenues
in four out of six years up to 1992-93, and the State accumulated and
sustained a budget deficit approaching $2.8 billion at its peak at June 30,
1993. Between the 1991-92 and 1994-95 Fiscal Years, each budget required
multibillion dollar actions to bring projected revenues and expenditures
into balance, including significant cuts in health and welfare program
expenditures; transfers of program responsibilities and funding from the
State to local governments, transfer of about $3.6 billion in annual local
property tax revenues from other local governments to local school
districts, thereby reducing State funding for schools under Proposition 98;
and revenue increases (particularly in the 1991-92 Fiscal Year Budget), most
of which were for a short duration.
Despite these budget actions, the effects of the recession led to
large, unanticipated budget deficits. By the 1993-94 Fiscal Year, the
accumulated 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-
94, 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.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts
"borrowed" from future fiscal years and hence not shown in the annual
budget, was to significantly reduce the State's cash resources available to
pay its ongoing obligations. When the Legislature and the Governor failed
to adopt a budget for the 1992-93 Fiscal Year by July 1, 1992, which would
have allowed the State to carry out its normal annual cash flow borrowing to
replenish its cash reserves, the State Controller issued registered warrants
to pay a variety of obligations representing prior years' or continuing
appropriations, and mandates from court orders. Available funds were used
to make constitutionally-mandated payments, such as debt service on bonds
and warrants. Between July 1 and September 4, 1992, when the budget was
adopted, the State Controller issued a total of approximately $3.8 billion
of registered warrants.
For several fiscal years during the recession, the State was forced to
rely 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.
1995-96 and 1996-97 Fiscal Years
The State's financial condition improved markedly during the 1995-96,
1996-97 and 1997-98 fiscal years, with a combination of better than expected
revenues, slowdown in growth of social welfare programs, and continued
spending restraint based on the actions taken in earlier years. The State's
cash position also improved, and no external deficit borrowing has occurred
over the end of these three fiscal years.
The economy grew strongly during these fiscal years, and as a result,
the General Fund took in substantially greater tax revenues (around $2.2
billion in 1995-96, $1.6 billion in 1996-97 and $2.2 billion in 1997-98)
than were initially planned when the budgets were enacted. These additional
funds were largely directed to school spending as mandated by Proposition
98, and to make up shortfalls from reduced federal health and welfare aid in
1995-96 and 1996-97. The accumulated budget deficit from the recession
years was finally eliminated. The Department of Finance estimates that the
State's budget reserve (the SFEU) totaled $639.8 million as of June 30, 1997
and $1.782 billion at June 30, 1998.
The following were major features of the 1997-98 Budget Act:
1. For the second year in a row, the Budget contained a large
increase in funding for K-14 education under Proposition 98,
reflecting strong revenues which exceeded initial budgeted
amounts. Part of the nearly $1.75 billion in increased spending
was allocated to prior fiscal years. Funds were provided to fully
pay for the cost-of-living-increase component of Proposition 98,
and to extend the class size reduction and reduction and reading
initiatives.
2. The Budget Act reflected the $1.228 billion pension case judgment
payment, and brought funding of the State's pension contribution
back to the quarterly basis which existed prior to the deferral
actions which were invalidated by the courts.
3. Funding from the General Fund for the University of California and
California State University was increased by about 6 percent ($121
million and $107 million, respectively), and there was no increase
in student fees.
4. Because of the effect of the pension payment, most other State
programs were continued at 1996-97 levels, adjusted for caseload
changes.
5. Health and welfare costs were contained, continuing generally the
grant levels from prior years, as part of the initial
implementation of the new CalWORKs program.
6. Unlike prior years, this Budget Act did not depend on uncertain
federal budget actions. About $300 million in federal funds,
already included in the federal FY 1997 and 1998 budgets, was
included in the Budget Act, to offset incarceration costs for
illegal aliens.
7. The Budget Act contained no tax increases, and no tax reductions.
The Renters Tax Credit was suspended for another year, saving
approximately $500 million.
The Department of Finance released updated estimates for the 1997-98
Fiscal Year on January 9, 1998 as part of the Governor's 1998-99 Fiscal Year
Budget Proposal. Total revenues and transfers are projected at $52.9
billion, up approximately $360 million from the Budget Act projection.
Expenditures for the fiscal year are expected to rise approximately $200
million above the original Budget Act, to $53.0 billion. The balance in the
budget reserve, the SFEU, is projected to be $329 million at June 30, 1998,
compared to $461 million at June 30, 1997.
Current State Budget
1998-99 Fiscal Year Budget
When the Governor released his proposed 1998-99 Fiscal Year Budget on
January 9, 1998, he projected General Fund revenues for the 1998-99 Fiscal
Year of $55.4 billion, and proposed expenditures in the same amount. By
the time the Governor released the May Revision to the 1998-99 Budget ("May
Revision") on May 14, 1998, the Administration projected that revenues for
the 1997-98 and 1998-99 Fiscal Years combined would be more than $4.2
billion higher than was projected in January. The Governor proposed that
most of this increased revenue be dedicated to fund a 75% cut in the Vehicle
License Fee ("VLF").
The Legislature passed the 1998-99 Budget Bill on August 11, 1998, and
the Governor signed it on August 21, 1998. Some 33 companion bills necessary
to implement the budget were also signed. In signing the Budget Bill, the
Governor used his line-item veto power to reduce expenditures by $1.360
billion from the General Fund, and $160 million from Special Funds. Of this
total, the Governor indicated that about $250 million of vetoed funds were
"set aside" to fund programs for education. Vetoed items included education
funds, salary increases and many individual resources and capital projects.
The 1998-99 Budget Act is based on projected General Fund revenues and
transfers of $57.0 billion (after giving effect to various tax reductions
enacted in 1997 and 1998), a 4.2% increase from the revised 1997-98 figures.
Special Fund revenues were estimated at $14.3 billion. The revenue
projections were based on the May Revision. Economic problems overseas since
that time may affect the May Revision projections. See "Economic
Assumptions" below.
After giving effect to the Governor's vetoes, the Budget Act provides
authority for expenditures of $57.3 billion from the General Fund (a 7.3%
increase from 1997-98), $14.7 billion from Special Funds, and $3.4 billion
from bond funds. The Budget Act projects a balance in the SFEU at June 30,
1999 (but without including the "set aside" veto amount) of $1.255 billion,
a little more than 2% of General Fund revenues. The Budget Act assumes the
State will carry out its normal intra-year cash flow borrowing in the amount
of $1.7 billion of revenue anticipation notes, which were issued on October
1, 1998.
The most significant feature of the 1998-99 budget was agreement on a
total of $1.4 billion of tax cuts. The central element is a bill which
provides for a phased-in reduction of the VLF. Since the VLF is currently
transferred to cities and counties, the bill provides for the General Fund
to replace the lost revenues. Starting on January 1, 1999, the VLF will be
reduced by 25%, at a cost to the General Fund of approximately $500 million
in the 1998-99 Fiscal Year and about $1 billion annually thereafter.
In addition to the cut in VLF, the 1998-99 budget includes both
temporary and permanent increase in the personal income tax dependent credit
($612 million General Fund cost in 1998-99, but less in future years), a
nonrefundable renters tax credit ($133 million), and various targeted
business tax credits ($106 million).
Other significant elements of the 1998-99 Budget Act are as follows:
1. Proposition 98 funding for K-12 schools is increased by $1.7
billion in General Fund moneys over revised 1997-98 levels, about $300
million higher than the minimum Proposition 98 guaranty. An additional $600
million was appropriated to "settle up" prior years' Proposition 98
entitlements, and was primarily devoted to one-time uses such as block
grants, deferred maintenance, and computer and laboratory equipment. Of the
1998-99 funds, major new programs include money for instructional and
library materials, deferred maintenance, support for increasing the school
year to 180 days and reduction of class sizes in Grade 9. The Governor held
$250 million of education funds which were vetoed as set-aside for enactment
of additional reforms. Overall, per-pupil spending for K-12 schools under
Proposition 98 is increased to $5,695, more than one-third higher than the
level in the last recession year of 1993-94. The Budget also includes $250
million as repayment of prior years' loans to schools, as part of the
settlement of the CTA v. Gould lawsuit.
2. Funding for higher education increased substantially above the
level called for in the Governor's four-year compact. General Fund support
was increased by $340 million (15.6%) for the University of California and
$267 million (14.1%) for the California State University system. In
addition, Community Colleges received a $300 million (6.6%) increase under
Proposition 98.
3. The Budget includes increased funding for health, welfare and
social services programs. A 4.9% grant increase was included in the basic
welfare grants, the first increase in those grants in 9 years. Future
increases will depend on sufficient General Fund revenue to trigger the
phased cuts in VLF described above.
4. Funding for the judiciary and criminal justice programs increased
by about 11% over 1997-98, primarily to reflect increased State support for
local trial courts and rising prison population.
5. Various other highlights of the Budget included new funding for
resources projects, dedication of $376 million of General Fund moneys for
capital outlay projects, funding of a 3% State employee salary increase,
funding of 2,000 new Department of Transportation positions to accelerate
transportation construction projects, and funding of the Infrastructure and
Economic Development Bank ($50 million).
6. The State of California received approximately $167 million of
federal reimbursements to offset costs related to the incarceration of
undocumented alien felons for federal fiscal year 1997. The State
anticipates receiving approximately $195 million in federal reimbursements
for federal fiscal year 1998.
After the Budget Act was signed, and prior to the close of the
Legislative session on August 31, 1998, the Legislature passed a variety of
fiscal bills. The Governor had until September 30, 1998 to sign or veto
these bills. The bills with the most significant fiscal impact which the
Governor signed include $235 million for certain water system improvements
in Southern California, $243 million for the State's share of the purchase
of environmentally sensitive forest lands, $178 million for state prisons,
$160 million for housing assistance ($40 million of which was included in
the 1998-99 Budget Act and an additional $120 million reflected in
Proposition IA), and $125 million for juvenile facilities. The Governor also
signed bills totaling $223 million for education programs which were part of
the Governor's $250 million veto "set aside," and $32 million for local
governments fiscal relief. In addition, he signed a bill reducing by $577
million the State's obligation to contribute to the State Teachers'
Retirement System in the 1998-99 Fiscal Year.
Based solely on the legislation enacted, on a net basis, the reserve
for June 30, 1999, was reduced by $256 million. On the other hand, 1997-98
revenues have been increased by $160 million. The revised June 30, 1999,
reserve is projected to be $1,159 million or $96 million below the level
projected at the Budget Act. The reserve projected in the Budget Act was
$1,255 million. It is important to emphasize that the new reserve level is
based on 1998-99 revenue and expenditure assumptions as of the Budget Act
except to augment for legislation signed after the budget enactment. These
assumptions will not be updated until the 1999-00 Governor's Budget is
released on January 10, 1999. In November, 1998, the Legislative Analyst's
Office released a report predicting that General Fund revenues for 1998-99
would be somewhat lower, and expenditures somewhat higher, than the Budget
Act forecasts, but the net variance would be within the projected $1.2
billion year-end reserve amount.
Local Governments
The primary units of local government in California are the counties,
ranging in population from 1,200 in Alpine County to almost 9,600,000 in Los
Angeles County. Counties are responsible for the provision of many basic
services, including indigent health care, welfare, jails and public safety
in unincorporated areas. There are also about 480 incorporated cities, and
thousands of other special districts formed for education, utility and other
services. The fiscal condition of local governments has been constrained
since the enactment of "Proposition 13" in 1978, which reduced and limited
the future growth of property taxes, and limited the ability of local
governments to impose "special taxes" (those devoted to a specific purpose)
without two-thirds voter approval. Counties, in particular, have had fewer
options to raise revenues than many other local government entities, and
have been required to maintain many services.
Historically, funding for the State's trial court system was divided
between the State and the counties. However, Chapter 850, Statutes of 1997,
implemented a restructuring of the State's trial court funding system.
Funding for the courts, with the exception of costs for facilities, local
judicial benefits, and revenue collection, was consolidated at the State
level. The county contribution for both their general fund and fine and
penalty amounts is capped at the 1994-95 level and becomes part of the Trial
Court Trust Fund, which supports all trial court operations. The State
assumed responsibility for future growth in trial court funding. The
consolidation of funding is intended to streamline the operation of the
courts, provide a dedicated revenue source, and relieve fiscal pressure on
the counties. Beginning in 1998-99, the county general fund contribution
for court operations is reduced by $300 million, including $10.7 million to
buy out the contribution of the 20 smallest counties, and cities will retain
$62 million in fine and penalty revenue previously remitted to the state;
the General Fund backfilled the $362 million revenue loss to the Trial Court
Trust Fund. In addition to this general fund backfill, a $50 million
augmentation is included in the 1998 Budget Act for the trial courts to fund
workload increases and high priority issues such as court security. In
1999-2000, the county general fund contribution will be further reduced by
an additional $92 million to buy out the next 17 smallest counties and
reduce by 10 percent of the general fund contribution of the remaining 21
counties.
The entire statewide welfare system has been changed in response to the
change in federal welfare law enacted in 1996 (see "Welfare Reform" above).
Under the CalWORKs program, counties are given flexibility to develop their
own plans, consistent with state law, to implement the program and to
administer many of its elements, and their costs for administrative and
supportive services are capped at the 1996-97 levels. Counties are also
given financial incentives if, at the individual county level or statewide,
the CalWORKs program produces savings associated with specified standards.
Counties will still be required to provide "general assistance" aid to
certain persons who cannot obtain welfare from other programs.
In the aftermath of Proposition 13, the State provided aid from the
General Fund to make up some of the loss of property tax moneys, including
taking over the principal responsibility for funding K-12 schools and
community colleges. During the recession, the Legislature eliminated most of
the remaining components of post-Proposition 13 aid to local government
entities other than K-14 education districts, although it has also provided
additional funding sources (such as sales taxes) and reduced certain
mandates for local services. Since then the State has also provided
additional funding to counties and cities through such programs as health
and welfare realignment, welfare reform, trial court restructuring, the COPs
program supporting local public safety departments, and various other
measures.
In 1996, voters approved Proposition 218, entitled the "Right to Vote
on Taxes Act," which incorporates new Articles XIIIC and XIIID into the
California Constitution. These new provisions place limitations on the
ability of local government agencies to impose or raise various taxes, fees,
charges and assessments without voter approval. Certain "general taxes"
imposed after January 1, 1995 must be approved by voters in order to remain
in effect. In addition, Article XIIIC clarifies the right of local voters
to reduce taxes, fees, assessments or charges through local initiatives.
There are a number of ambiguities concerning the Proposition and its impact
on local governments and their bonded debt which will require interpretation
by the courts or the Legislature. Proposition 218 does not affect the State
or its ability to levy or collect taxes.
On December 23, 1997, a consortium of California counties filed a test
claim with the Commission on State Mandates (the "Commission") asking the
Commission to determine whether the property tax shift from counties to the
Educational Revenue Augmentation Fund, which is a funding source for
schools, is a reimbursable state mandated cost. On August 11, 1998, the
State Department of Justice, on behalf of the State Department of Finance,
filed a rebuttal in opposition to the counties' claim. The issue is
currently scheduled to be heard by the Commission on October 22, 1998. The
fiscal impact to the State General fund if the Commission determines that
the property tax shifts created a reimbursable state mandate could total
approximately $8 billion for the 1996-97 ($2.5 billion), 1997-98 ($2.6
billion) and 1998-99 ($2.7 billion) property tax shifts. Ongoing costs to
the State General Fund would be approximately $2.7 billion annually. Any
Commission decision adverse to the State can be appealed to the courts.
State Appropriations Limit
The State is subject to an annual appropriations limit imposed by
Article XIII B of the State Constitution (the "Appropriations Limit"). The
Appropriations Limit does not restrict appropriations to pay debt service on
the Bonds or other voter-authorized bonds.
Article XIII B prohibits the State from spending "appropriations
subject to limitation" in excess of the Appropriations Limit.
"Appropriations subject to limitation," with respect to the State, 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 that entity in providing the regulation, product or
service," but "proceeds of taxes" exclude most state subventions to local
governments, tax refunds and some benefit payments such as unemployment
insurance. No limit is imposed on appropriations of funds which are not
"proceeds of taxes," such as reasonable user charges or fees and certain
other non-tax funds.
Not included in the Appropriations Limit are appropriations for the
debt service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply
with mandates of courts or the federal government, appropriations for
qualified capital outlay projects, appropriations of revenues derived from
any increase in gasoline taxes and motor vehicle weight fees above January
1, 1990 levels, and appropriation of certain special taxes imposed by
initiative (e.g., cigarette and tobacco taxes). The Appropriations Limit
may also be exceeded in cases of emergency.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in State 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. The
Appropriations Limit is tested over consecutive two-year periods. Any
excess of the aggregate "proceeds of taxes" received over such two-year
transfers to K-14 districts and refunds to taxpayers.
The Legislature has enacted legislation to implement Article XIII B
which defines certain terms used in Article XIII B and sets forth the
methods for determining the Appropriations Limit. California Government
Code Section 7912 requires an estimate of the 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.
In the Budget Act for Fiscal Year 1998-99 enacted August 21, 1998, the
Department of Finance projects the State's Appropriations Subject to
Limitations will be $6.3 billion under the State's Appropriations Limit in
Fiscal Year 1998-99.
Proposition 98
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the
"Classroom Instructional Improvement and Accountability Act." Proposition 98
changed State funding of public education below the university level and the
operation of the State 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 on June 5, 1990), K-14
schools are guaranteed the greater of (a) in general, a fixed percent 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 XIII B by reference to State per capita personal
income) and enrollment ("Test 2"), or (c) a third test, which would replace
Test 2 in any year when the percentage growth in per capita General Fund
revenues from the prior year plus one half of one percent is less than the
percentage growth in State 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. Legislation
adopted prior to the end of the 1988-89 Fiscal Year, implementing
Proposition 98, determined the K-14 schools' funding guarantee under Test 1
to be 40.3 percent of the General Fund tax revenues, based on 1986-87
appropriations. However, that percent has been adjusted to approximately 35
percent to account for a subsequent redirection of local property taxes,
since such redirection directly affects the share of General Fund revenues
to schools.
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. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIII B limit to K-14 schools.
During the recent recession, General Fund revenues for several years
were less than originally projected, so that the original Proposition 98
appropriations turned out to be higher than the minimum percentage provided
in the law. The Legislature responded to these developments by designating
the "extra" Proposition 98 payments in one year as a "loan" from future
years' Proposition 98 entitlements, and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. By implementing these actions, per-pupil
funding from Proposition 98 sources stayed almost constant at approximately
$4,200 from Fiscal Year 1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, called California Teachers' Association
v. Gould, which challenged the validity of these off-budget loans. The
settlement of this case, finalized in July, 1996, provides, among other
things, that both the State and K-14 schools share in the repayment of prior
years' emergency loans to schools. Of the total $1.76 billion in loans, the
State will repay $935 million by forgiveness of the amount owed, while
schools will repay $825 million. The State share of the repayment will be
reflected as an appropriation above the current Proposition 98 base
calculation. The schools' share of the repayment will count as
appropriations that count toward satisfying the Proposition 98 guarantee, or
from "below" the current base. Repayments are spread over the eight-year
period of 1994-95 through 2001-02 to mitigate any adverse fiscal impact.
Substantially increased General Fund revenues, above initial budget
projections, in the fiscal years 1994-95 and thereafter have resulted or
will result in retroactive increases in Proposition 98 appropriations from
subsequent fiscal years' budgets. Because of the State's increasing
revenues, per-pupil funding at the K-12 level has increased by about 36%
from the level in place from 1991-92 through 1993-94, and is estimated at
about $5,695 per ADA in 1998-99. A significant amount of the "extra"
Proposition 98 monies in the last few years have been allocated to special
programs, most particularly an initiative to allow each classroom from
grades K-3 to have no more than 20 pupils by the end of the 1997-98 school
year. There are also new initiatives increasing instructional time, for
purchasing new instructional and library materials, and expanding teacher
preparation and support.
ECONOMY AND POPULATION
Introduction
California's economy, the largest among the 50 states and one of the
largest in the world, has major components in high technology, trade,
entertainment, agriculture, manufacturing, tourism, construction and
services. Since 1994, California's economy has been performing strongly
after suffering a deep recession between 1990-94.
Population and Labor Force
The State's July 1, 1997 population of over 32.9 million represented
over 12 percent of the total United States population.
California's population is concentrated in metropolitan areas. As of
the April 1, 1990 census, 96 percent resided in the 23 Metropolitan
Statistical Areas in the State. As of July 1, 1997, the 5-county Los
Angeles area accounted for 49 percent of the State's population, with 16.0
million residents, and the 10-county San Francisco Bay Area represented 21
percent, with a population of 6.9 million.
The following table shows California's population data for 1992 through
1997.
Population 1992-97
% %
Increase Increase California
California Over United Over as % of
Year Population(a) Preceding States Preceding United
Year Population(a) Year States
1992 31,188,000 2.0 255,011,000 1.2 12.2
1993 31,517,000 1.1 257,795,000 1.1 12.2
1994 31,790,000 0.9 260,372,000 1.0 12.2
1995 32,063,000 0.9 262,890,000 1.0 12.2
1996 32,383,000 1.0 265,284,000 0.9 12.2
1997 32,957,000 1.8 267,575,000 0.9 12.3
________________________
(a)Population as of July 1.
SOURCE: U.S. Department of Commerce, Bureau of the Census; State of
California, Department of Finance.
The following table presents civilian labor force data for the resident
population, age 16 and over, for the years 1992 to 1997.
Labor Force
1992-97
Labor Force Trends (Thousands) Unemployment Rate(%)
Year Labor Employment California United States
Force
1992 15,404 13,973 9.3 7.5
1993 15,359 13,918 9.4 6.9
1994 15,450 14,122 8.6 6.1
1995 15,412 14,203 7.8 5.6
1996 15,568 14,444 7.2 5.4
1997 15,971 14,965 6.3 4.9
____________________
SOURCE: State of California, Employment Development Department.
Employment, Income, Construction and Retail Sales
The following table shows California's nonagricultural employment
distribution and growth for 1990 and 1997.
Payroll Employment By Major Sector
1990 and 1997
Employment % Distribution
(Thousands) of Employment
Industry Sector 1990 1997 1990 1997
Mining 39 29 0.3 0.2
Construction 605 554 4.8 4.2
Manufacturing
Nondurable goods 721 728 5.7 5.5
High Technology 686 517 5.4 3.9
Other Durable goods 690 669 5.4 5.1
Transportation and 624 663 4.9 5.1
Utilities
Wholesale and Retail 3,002 3,057 23.7 23.2
Trade
Finance, Insurance
and Real Estate 825 756 6.5 5.7
Services 3,395 4,051 26.8 30.8
Government
Federal 362 285 2.9 2.2
State and Local 1,713 1,858 13.5 14.1
TOTAL
AGRICULTURAL 12,66 13,167 100 100
2
___________________
SOURCE: State of California, Employment Development Department and State of
California, Department of Finance.
The following tables show California's total and per capita income
patterns for selected years.
Total Personal Income 1992-97
California
Year Millions %Change California % of
U.S.
1992 684,674 4.8(*) 13.1
1993 698,130 2.0 12.8
1994(a) 718,321 2.9 12.5
1995 754,269 5.0 12.4
1996 798,020 5.8 12.5
1997 846,017 6.0 12.5
_____________________
(*)Change from prior year.
(a)Reflects Northridge earthquake, which caused an estimated $15 billion
drop in personal income.
Note: Omits income for government employees overseas.
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.
1. Per Capita Personal Income 1992-97
California
Year Californ % United % Change % of U.S.
ia Change States
1992 22,163 3.2(*) 20,546 4.7(*) 107.9
1993 22,388 1.0 21,220 3.3 105.5
1994(a) 23,899 2.3 22,056 3.9 103.8
1995 23,901 4.4 23,063 4.6 103.6
1996 25,050 4.8 24,169 4.8 103.6
1997 26,218 4.7 25,298 4.7 103.6
________________________
(*)Change from prior year.
(a)Reflects Northridge earthquake, which caused an estimated $15 billion
drop in personal income.
SOURCE: U.S. Department of Commerce, Bureau of Economic Analysis.
LITIGATION
In the case of Board of Administration, California Public Employees'
Retirement System, et al. v. Pete Wilson, Governor, et al., plaintiffs
challenged the constitutionality of legislation which deferred payment of
the State's employer contribution to the Public Employees' Retirement System
beginning in Fiscal Year 1992-93. On January 11, 1995, the Sacramento County
Superior Court entered a judgment finding that the legislation
unconstitutionally impaired the vested contract rights of PERS members. The
judgment provides for issuance of a writ of mandate directing State
defendants to disregard the provisions of the legislation, to implement the
statute governing employer contributions that existed before the changes in
the legislation found to be unconstitutional, and to transfer to PERS the
contributions that were unpaid to date. On February 19, 1997, the State
Court of Appeal affirmed the decision of the Superior Court, and the Supreme
Court subsequently refused to hear the case, making the Court of Appeals'
ruling final.
On July 30, 1997, the Controller transferred $1.228 billion from the
General Fund to PERS in repayment of the principal amount determined to have
been improperly deferred. Subsequent State payments to PERS will be made on
a quarterly basis. On July 7, 1998, pursuant to Chapter 94, Statutes of
1998, the State paid PERS $332.7 million for the accrued interest on the
judgment and interest on the unpaid accrued interest amount. See "CURRENT
STATE BUDGET - 1998-99 Fiscal Year Budget" above.
On June 24, 1998, plaintiffs in Howard Jarvis Taxpayers Association et
al. v. Kathleen Connell filed a complaint for certain declaratory and
injunctive relief challenging the authority of the State Controller to make
payments from the State Treasury in the absence of a state budget. On July
21, 1998, the trial court issued a preliminary injunction prohibiting the
State Controller from paying moneys from the State Treasury for fiscal year
1998-99, with certain limited exceptions, in the absence of a state budget.
The preliminary injunction, among other things, prohibited the State
Controller from making any payments pursuant to any continuing
appropriation.
On July 22 and 27, 1998, various employee unions which had intervened
in the case appealed the trial court's preliminary injunction and asked the
Court of Appeal to stay the preliminary injunction. On July 28, 1998, the
Court of Appeal granted the unions' requests and stayed the preliminary
injunction pending the Court of Appeal's decision on the merits of the
appeal. On August 5, 1998, the Court of Appeal denied the plaintiffs'
request to reconsider the stay. Also on July 22, 1998, the State Controller
asked the California Supreme Court to immediately stay the trial court's
preliminary injunction and to overrule the order granting the preliminary
injunction on the merits. On July 29, 1998, the Supreme Court transferred
the State Controller's request to the Court of Appeal. The matters are now
pending before the Court of Appeal.
In Jordan v. Department of Motor Vehicles, plaintiff challenged the
validity and constitutionality of the State's smog impact fee and requested
a refund of the fee. In October 1997, the trial court ruled in favor of
plaintiff and, in addition, ordered the State to provide refunds to all
persons who paid the smog impact fee from three years before the filing of
the lawsuit in 1995 to the present. Plaintiff asserts that the total amount
required to be refunded will exceed $350 million. The State has appealed.
A judgment was entered for plaintiffs in California Ambulance
Association v. Shalala et al., described at page 63 of Exhibit I to this
Appendix. The Ninth Circuit Court of Appeals, however, reversed the trial
court's decision. Plaintiffs filed a petition for certiorari at the United
States Supreme Court, which the State opposed. The petition is currently
pending at the Supreme Court.
A judgment was entered for plaintiff in August 1998 in the case of
Ceridian Corporation v. Franchise Tax Board, described at pages 63-64 of
Exhibit 1. The State will appeal.
In Hathaway, et al. v. Wilson, et al., described at page 65 of Exhibit
1, the plaintiffs and the State reached a settlement which resolved all the
issues presented in the case. Pursuant to the settlement, judgment was
entered in August 1998, requiring the State to return $19,427,000 from the
General Fund to one special fund.
In Thomas Hayes v. Commission on State Mandates, described at page 64
of Exhibit 1, the Commission on State Mandates is now expected to issue a
final consolidated decision in late 1998.
In February 1998, the Court of Appeal in California State Employees
Association v. Wilson, described at page 64 of Exhibit 1, modified, then
affirmed, a judgment in favor of the plaintiffs invalidating the transfer of
$12,290,000 from the State Highway Account to the General Fund.
In July 1998, the parties in Beno v. Sullivan and Welch v. Anderson,
described at page 65 of Exhibit 1, entered into a settlement agreement in
which the State agreed to pay $42 million in return for plaintiffs'
agreement to dismiss both actions.
Information Technology
The State's reliance on information technology in every aspect of its
operations has made Year 2000-related ("Y2K") information technology ("IT")
issues a high priority for the State. The Department of Information
Technology ("DOIT"), an independent office reporting directly to the
Governor, is responsible for ensuring the State's information technology
processes are fully functional before the year 2000. The DOIT has created a
Year 2000 Task Force and a California 2000 Office to establish statewide
policy requirements; to gather, coordinate, and share information; and to
monitor statewide progress. In December 1996, the DOIT began requiring
departments to report on Y2K activities and currently requires departmental
monthly reporting of Y2K status. The DOIT has emphasized to departments that
efforts should be focused on applications that support mission-critical
business practices.
The risks posed by Y2K information technology related issues are not
confined to computer systems, but also include problems presented by
embedded microchips (products or systems that contain microchips to perform
functions such as traffic control, instruments used in hospitals or medical
laboratories, and California Aqueduct monitoring). To address these
problems, the Governor issued Executive Order W-163-97, broadening the
responsibilities of the DOIT to resolve these issues as well as legal
questions associated with Y2K issues. The executive order also required
that mission critical systems be remediated by December 31, 1998, that
purchases of new systems, hardware, software and equipment be Year 2000
compliant and further limited new computer projects to those required by law
until a department's Y2K problems are resolved. The DOIT has also more
recently required departments to address interfacing of State IT systems
with external IT systems, and to report on contingency planning status for
problems which might occur if IT systems are not fully remediated by the end
of 1999.
In its quarterly report for the period ending June 30, 1998 (the "July
Quarterly Report"), the DOIT reported that departments under its supervision
had identified 642 mission critical IT systems out of a total of 2,432
systems. Of the mission-critical systems, 87 were reported as already Y2K
compliant. Of the remaining 555 mission critical systems requiring
remediation, 128 were reported as completed. While the DOIT does not
oversee certain independent State entities, such as the judiciary, the
Legislature, the University of California and California State University
System, it believes these other agencies are well under way with their own
Y2K remediation plans.
In its quarterly report for the period ending September 30, 1998 (the
"October Quarterly Report"), the DOIT updated its survey of State
departments, and reported that the number of mission-critical systems
needing remediation was reduced to 532, and 220 of them had been remediated.
However, the DOIT reported that fewer projects were completed by September
30, 1998 than had been planned by departments, and more projects were
falling into fourth quarter 1998 and first quarter 1999. Thus, some
mission-critical systems (less than 10%) would not meet the Governor's
Executive Order target to be remediated by December 31, 1998.
In late August, 1998, the State Auditor ("BSA") released a report on
"Year 2000 Computer Problems." The BSA surveyed 39 State departments and
compared their status to the March 31, 1998 DOIT quarterly report. (The
work for BSA's report was done before the DOIT July Quarterly Report was
ready.) The BSA Report concluded that some agencies had fallen behind
schedule by as much as 1-3 months compared to their March expectations. The
BSA Report also noted concern that departments were not making adequate
plans to test remediated systems, were not focusing sufficiently on problems
associated with data interface with other governmental and private bodies,
and were not far enough along in developing "business continuation plans" to
ensure continued operations after January 1, 2000 in the event of IT
problems. The DOIT responded in some detail to the BSA report, generally
agreeing with its identification of issue areas, and stating that it was
following up on all areas with the departments.
In the July Quarterly Report, the DOIT estimates total Y2K costs
identified by the departments under its supervision at about $239 million,
of which more than $100 million was projected to be expended in fiscal years
1998-99 and 1999-2000. The October Quarterly Report indicated the total
costs were now estimated to be at least $290 million, and the estimate would
likely increase in the future. These costs are part of much larger overall
IT costs incurred annually by State departments and do not include costs for
remediation for embedded technology, desktop systems and additional costs
resulting from discoveries in the testing process. For fiscal year 1998-99,
the Legislature created a $20 million fund for unanticipated Y2K costs,
which can be increased if necessary.
Although the DOIT reports that State departments are making substantial
progress overall toward the goal of Y2K compliance, the task is very large
and will likely encounter unexpected difficulties. The State cannot predict
whether all mission critical systems will be ready and tested by late 1999
or what impact failure of any particular IT system(s) or of outside
interfaces with State IT systems might have. The State Treasurer's Office
and the State Controller's Office report that they are both on schedule to
complete their Y2K remediation projects by December 31, 1998, allowing full
testing during 1999. These systems include debt service payments on State
debt and the State fiscal and accounting system.
APPENDIX B
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" rating is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among the
factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC, 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.
_______________________________
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
PART C. OTHER INFORMATION
_________________________
Item 23. Exhibits
_______ __________
(a) Registrant's Amended and Restated Agreement and Declaration
of Trust is 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, and Exhibit (1)(b) of Post-Effective
Amendment No. 20 to the Registration Statement on Form N-1A, filed
on March 28, 1997.
(b) Registrant's By-Laws, as amended, 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.
(d) 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.
(e) Distribution Agreement is incorporated by reference to Exhibit (6) of
Post-Effective Amendment No. 15 to the Registration Statement on
Form N-1A, filed on March 30, 1995. Forms of Service Agreement
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.
(g) Amended and Restated Custody Agreement is incorporated by
reference to Exhibit 8(a) of Post-Effect Amendment No. 18 to the
Registration Statement on Form N-1A, filed on March 28, 1996. Sub-
Custodian 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.
(h) 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.
(i) Opinion and consent of Registrant's counsel is 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.
(j) Consent of Independent Auditors.
(m) Rule 12b-1 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.
(n) Financial Data Schedule.
Item 23. Exhibits. - List (continued)
_______ _____________________________________________________
(o) Rule 18f-3 Plan is incorporated by reference to Exhibit 18 of
Post-Effective Amendment No. 16 to the Registration Statement on
From N-1A, filed on June 1, 1997.
Other Exhibits
______________
(a) Powers of Attorney.
(b) Certificate of Assistant Secretary.
Item 24. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 25. 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 May 19, 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
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.
Item 26. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business
consists primarily of providing investment management services
as the investment adviser and manager for sponsored investment
companies registered under the Investment Company Act of 1940
and as an investment adviser to institutional and individual
accounts. Dreyfus also serves as sub-investment adviser to
and/or administrator of other investment companies. Dreyfus
Service Corporation, a wholly-owned subsidiary of Dreyfus,
serves primarily as a registered broker-dealer. Dreyfus
Investment Advisors, Inc., another wholly-owned subsidiary,
provides investment management services to various pension
plans, institutions and individuals.
<TABLE>
<CAPTION>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
Officers and Directors of Investment Adviser
<S> <C> <C> <C>
Name and Position
With Dreyfus Other Businesses Position Held Dates
Christopher M. Condron Franklin Portfolio Associates, LLC* Director 1/97 - Present
Chairman of the Board and
Chief Executive Officer
TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Pareto Partners Partner Representative 11/95 - 5/97
271 Regent Street
London, England W1R 8PP
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 -Present
Mellon Capital Management Director 5/95 -Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 -1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Bank Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Christopher M. Condron The Boston Company, Inc.* Vice Chairman 1/94 - Present
Chairman and Chief Director 5/93 - Present
Executive Officer
(Continued) Laurel Capital Advisors, LLP+ Exec. Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 -Present
Company*
The Boston Company Financial President 6/89 - Present
Strategies, Inc. * Director 6/89 - Present
Mandell L. Berman Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
Burton C. Borgelt DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Bank Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
Stephen E. Canter Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, LLC* Director 2/99 - Present
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Stephen E. Canter Founders Asset Management, LLC Member, Board of 12/97 - Present
President, Chief Operating 2930 East Third Ave. Managers
Officer, Chief Investment Denver, CO 80206 Acting Chief Executive 7/98 - 12/98
Officer, and Director Officer
(Continued)
The Dreyfus Trust Company+++ Director 6/ 95 - Present
Thomas F. Eggers Dreyfus Service Corporation++ Executive Vice President 4/96 - Present
Vice Chairman - Institutional Director 9/96 - Present
and Director
Founders Asset Management, LLC Member, Board of 2/99 - Present
2930 East Third Avenue Managers
Denver, CO 80206
Steven G. Elliott Mellon Bank Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Financial Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+ Chairman 7/89 - 11/97
President 4/88 - 11/97
Chief Executive Officer 4/88 - 11/97
Mellon International Investment Director 9/89 - 8/97
Corporation+
Steven G. Elliott Mellon Financial Services Treasurer 12/87 - Present
Director (Continued) Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
Lawrence S. Kash Dreyfus Investment Director 4/97 - Present
Vice Chairman Advisors, Inc.++
And Director
Dreyfus Brokerage Services, Inc. Chairman 11/97 - Present
401 North Maple Ave. Chief Executive Officer 11/97 - Present
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.++ + Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - Present
Organization, Inc.++ President 1/97 - Present
Seven Six Seven Agency, Inc. ++ Director 1/97 - Present
Dreyfus Insurance Agency of Chairman 5/97 - Present
Massachusetts, Inc.++++ President 5/97 - Present
Director 5/97 - Present
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - Present
Corporation++ President 5/97 - Present
Director 12/94 - Present
Founders Asset Management, LLC Member, Board of 12/97 - Present
2930 East Third Avenue Managers
Denver, CO. 80206
The Boston Company Advisors, Chairman 12/95 - Present
Inc. Chief Executive Officer 12/95 - Present
Wilmington, DE President 12/95 - Present
The Boston Company, Inc.* Director 5/93 - Present
President 5/93 - Present
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Lawrence S. Kash Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Vice Chairman Chairman 9/93 - 1/98
And Director (Continued) President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Martin G. McGuinn Mellon Bank Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
Mellon Financial Vice President 9/86 - 10/97
Corporation (MD)
Rockville, Maryland
J. David Officer Dreyfus Service Corporation++ Executive Vice President 5/98 - Present
Vice Chairman Director 3/99 - Present
And Director
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - Present
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - Present
Services, Inc.* Director 8/96 - Present
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
J. David Officer Mellon Trust of New York Director 6/96 - Present
Vice Chairman and 1301 Avenue of the Americas
Director (Continued) New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon Bank, N.A.+ Executive Vice President 2/94 - Present
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
Richard W. Sabo Founders Asset Management LLC President 12/98 - Present
Director 2930 East Third Avenue Chief Executive Officer 12/98 - Present
Denver, CO. 80206
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
Richard F. Syron American Stock Exchange Chairman 4/94 - Present
Director 86 Trinity Place Chief Executive Officer 4/94 - Present
New York, NY 10006
Ronald P. O'Hanley Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
TBCAM Holdings, Inc.* Chairman 6/98 - Present
Director 10/97 - Present
The Boston Company Asset Chairman 6/98 - Present
Management, LLC* Director 1/98 - 6/98
The Boston Company Asset Director 2/97 - 12/97
Management, Inc. *
Boston Safe Advisors, Inc.* Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 5/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon Equity Associates+ Trustee 2/97 - Present
Chairman 2/97 - Present
Mellon-France Corporation+ Director 3/97 - Present
Ronald P. O'Hanley Laurel Capital Advisors+ Trustee 3/97 - Present
Vice Chairman (Continued)
Mark N. Jacobs Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - Present
Organization, Inc.++
William H. Maresca The Dreyfus Trust Company+++ Director 3/97 - Present
Controller
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 -Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Assistant Treasurer 3/93 - Present
Organization, Inc.++
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
William T. Sandalls, Jr. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97-12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
William T. Sandalls, Jr. Dreyfus-Lincoln, Inc. Director 12/96 - Present
Executive Vice President 4500 New Linden Hill Road President 1/97 - Present
(Continued) Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
Dreyfus Partnership President 1/97 - 6/97
Management, Inc.++ Director 1/96 - 6/97
Dreyfus Service Organization, Director 1/96 - 6/97
Inc.++ Executive Vice President 1/96 - 6/97
Treasurer 10/96- Present
Dreyfus Insurance Agency of Director 5/97 - Present
Massachusetts, Inc.++++ Treasurer 5/97- Present
Executive Vice President 5/97 - Present
Diane P. Durnin Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development Division
Patrice M. Kozlowski None
Vice President - Corporate
Communications
Mary Beth Leibig None
Vice President -
Human Resources
Theodore A. Schachar Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
Dreyfus Investment Advisors, Inc.++ Vice President - Tax 10/96 - Present
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Inc.++ Vice President - Tax 10/96 - Present
Wendy Strutt None
Vice President
Richard Terres None
Vice President
Andrew S. Wasser Mellon Bank Corporation+ Vice President 1/95 - Present
Vice-President -
Information Systems
James Bitetto The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
Steven F. Newman Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
_______________________________
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ The address of the business so indicated is 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
++++ The address of the business so indicated is 53 State Street, Boston, Massachusetts 02109.
</TABLE>
Item 27. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) 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 Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Debt and Equity Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) The Dreyfus/Laurel Tax-Free Municipal Funds
40) Dreyfus LifeTime Portfolios, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus MidCap Index Fund
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus U.S. Treasury Intermediate Term Fund
60) Dreyfus U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Premier California Municipal Bond Fund
66) Dreyfus Premier Equity Funds, Inc.
67) Dreyfus Premier International Funds, Inc.
68) Dreyfus Premier GNMA Fund
69) Dreyfus Premier Worldwide Growth Fund, Inc.
70) Dreyfus Premier Municipal Bond Fund
71) Dreyfus Premier New York Municipal Bond Fund
72) Dreyfus Premier State Municipal Bond Fund
73) Dreyfus Premier Value Fund
74) Dreyfus Short-Intermediate Government Fund
75) Dreyfus Short-Intermediate Municipal Bond Fund
76) The Dreyfus Socially Responsible Growth Fund, Inc.
77) Dreyfus Stock Index Fund, Inc.
78) Dreyfus Tax Exempt Cash Management
79) The Dreyfus Third Century Fund, Inc.
80) Dreyfus Treasury Cash Management
81) Dreyfus Treasury Prime Cash Management
82) Dreyfus Variable Investment Fund
83) Dreyfus Worldwide Dollar Money Market Fund, Inc.
84) Founders Funds, Inc.
85) General California Municipal Bond Fund, Inc.
86) General California Municipal Money Market Fund
87) General Government Securities Money Market Fund, Inc.
88) General Money Market Fund, Inc.
89) General Municipal Bond Fund, Inc.
90) General Municipal Money Market Funds, Inc.
91) General New York Municipal Bond Fund, Inc.
92) 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 Chief Treasurer
Compliance Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Jean M. O'Leary+ Assistant Vice President, None
Assistant Secretary and
Assistant Clerk
William J. Nutt+ Chairman of the Board None
Stephanie D. Pierce++ Vice President Vice President,
Assistant Secretary
and Assistant
Treasurer
Patrick W. McKeon+ Vice President None
Joseph A. Vignone+ Vice President None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 28. 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, NY 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 29. Management Services
_______ ___________________
Not Applicable
Item 30. 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 i n 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 under 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 20th day of May, 1999.
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, 05/20/99
______________________________ Financial and Accounting Officer)
Marie E. Connolly and
Treasurer
/s/Joseph S. DiMartino* Chairman of the Board 05/20/99
_____________________________
Joseph S. DiMartino
/s/Clifford L. Alexander, Jr.* Board member 05/20/99
______________________________
Clifford L. Alexander, Jr.
/s/Peggy C. Davis* Board member 05/20/99
______________________________
Peggy C. Davis
/s/Ernest Kafka* Board member 05/20/99
______________________________
Ernest Kafka
/s/Saul B. Klaman* Board member 05/20/99
______________________________
Saul B. Klaman
/s/Nathan Leventhal* Board member 05/20/99
______________________________
Nathan Leventhal
*BY: __________________________
Stephanie Pierce,
Attorney-in-Fact
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
INDEX OF EXHIBITS
_________________________
ITEM PAGE
_____ ______
(23) Exhibits:
(11) Consent of Independent Auditors
(17) Financial Data Schedule
Other Exhibits
(a) Power of Attorney
(b) Certificate of Assistant Secretary
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Counsel and Independent Auditors" and to the use of our
report dated March 8, 1999, which is incorporated by reference, in this
Registration Statement (Form N-1A 33-7498) of Dreyfus Premier California
Municipal Bond Fund.
ERNST & YOUNG LLP
New York, New York
May 18, 1999
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<ARTICLE> 6
<CIK> 0000797925
<NAME> DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 1
<NAME> CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 158783
<INVESTMENTS-AT-VALUE> 167274
<RECEIVABLES> 6727
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174012
<PAYABLE-FOR-SECURITIES> 3755
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 356
<TOTAL-LIABILITIES> 4111
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 160573
<SHARES-COMMON-STOCK> 11333
<SHARES-COMMON-PRIOR> 11720
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 837
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8491
<NET-ASSETS> 144855
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9109
<OTHER-INCOME> 0
<EXPENSES-NET> 1742
<NET-INVESTMENT-INCOME> 7367
<REALIZED-GAINS-CURRENT> 3964
<APPREC-INCREASE-CURRENT> (2541)
<NET-CHANGE-FROM-OPS> 8790
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6402)
<DISTRIBUTIONS-OF-GAINS> (3783)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 726
<NUMBER-OF-SHARES-REDEEMED> (1522)
<SHARES-REINVESTED> 409
<NET-CHANGE-IN-ASSETS> (8591)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1313
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 946
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1742
<AVERAGE-NET-ASSETS> 146836
<PER-SHARE-NAV-BEGIN> 13.00
<PER-SHARE-NII> .56
<PER-SHARE-GAIN-APPREC> .12
<PER-SHARE-DIVIDEND> (.56)
<PER-SHARE-DISTRIBUTIONS> (.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.78
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000797925
<NAME> DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 2
<NAME> CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 158783
<INVESTMENTS-AT-VALUE> 167274
<RECEIVABLES> 6727
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174012
<PAYABLE-FOR-SECURITIES> 3755
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 356
<TOTAL-LIABILITIES> 4111
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 160573
<SHARES-COMMON-STOCK> 1862
<SHARES-COMMON-PRIOR> 1917
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 837
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8491
<NET-ASSETS> 23810
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9109
<OTHER-INCOME> 0
<EXPENSES-NET> 1742
<NET-INVESTMENT-INCOME> 7367
<REALIZED-GAINS-CURRENT> 3964
<APPREC-INCREASE-CURRENT> (2541)
<NET-CHANGE-FROM-OPS> 8790
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (919)
<DISTRIBUTIONS-OF-GAINS> (613)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 270
<NUMBER-OF-SHARES-REDEEMED> (405)
<SHARES-REINVESTED> 79
<NET-CHANGE-IN-ASSETS> (8591)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1313
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 946
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1742
<AVERAGE-NET-ASSETS> 23889
<PER-SHARE-NAV-BEGIN> 13.01
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> .12
<PER-SHARE-DIVIDEND> (.50)
<PER-SHARE-DISTRIBUTIONS> (.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.79
<EXPENSE-RATIO> .015
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000797925
<NAME> DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 3
<NAME> CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 158783
<INVESTMENTS-AT-VALUE> 167274
<RECEIVABLES> 6727
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174012
<PAYABLE-FOR-SECURITIES> 3755
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 356
<TOTAL-LIABILITIES> 4111
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 160573
<SHARES-COMMON-STOCK> 96
<SHARES-COMMON-PRIOR> 87
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 837
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8491
<NET-ASSETS> 1236
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9109
<OTHER-INCOME> 0
<EXPENSES-NET> 1742
<NET-INVESTMENT-INCOME> 7367
<REALIZED-GAINS-CURRENT> 3964
<APPREC-INCREASE-CURRENT> (2541)
<NET-CHANGE-FROM-OPS> 8790
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46)
<DISTRIBUTIONS-OF-GAINS> (44)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121
<NUMBER-OF-SHARES-REDEEMED> (115)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (8591)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1313
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 946
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1742
<AVERAGE-NET-ASSETS> 1262
<PER-SHARE-NAV-BEGIN> 13.04
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> .12
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> (.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.82
<EXPENSE-RATIO> .017
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
J35-006-023-004-A-MSW
Item 23.(b)
Other Exhibits (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret W. Chambers,
Marie E. Connolly, Christopher J. Kelley, Kathleen K. Morrisey, Michael S.
Petrucelli, Stephanie Pierce and Elba Vasquez and each of them, with full
power to act without the other, his or her true and lawful attorney-in-fact
and agent, with 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, full 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. June 15, 1998
- --------------------------------
Clifford L. Alexander, Jr.
/s/Peggy C. Davis June 15, 1998
- --------------------------------
Peggy C. Davis
/s/Joseph S. DiMartino June 15, 1998
- --------------------------------
Joseph S. DiMartino
/s/Ernst Kafka June 15, 1998
- --------------------------------
Ernst Kafka
/s/Saul B. Klaman June 15, 1998
- --------------------------------
Saul B. Klaman
/s/Nathan Leventhal June 15, 1998
- --------------------------------
Nathan Leventhal
J34-006-023-004/023-A-MSW
Item 23.(b)
Other Exhibits (b)
DREYFUS PREMIER CALIFORNIA MUNICIPAL BOND FUND
Certificate of Assistant Secretary
The undersigned, Stephanie D. Pierce, Vice President, Assistant
Treasurer 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
Margaret W. Chambers, Marie E. Connolly, Christopher J. Kelley, Kathleen K.
Morrisey, Michael S. Petrucelli, Stephanie Pierce and Elba Vasquez 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 Margaret W. Chambers, Marie E.
Connolly, Christopher J. Kelley, Kathleen K. Morrisey,
Michael S. Petrucelli, Stephanie Pierce and Elba Vasquez
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, and each of them,
shall have the 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 March 25, 1999.
/s/ Stephanie D. Pierce
-------------------------
Stephanie D. Pierce
Vice President, Assistant
Treasurer and Assistant
Secretary
