_____________________________________________________________________________
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
SEPTEMBER 3, 1996
As Revised February 12, 1997
_____________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus California Tax Exempt Bond Fund, Inc. (the "Fund"), dated September
3, 1996, as it may be revised from time to time. To obtain a copy of the
Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S and Canada -- Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-12
Management Agreement B-16
Purchase of Shares B-17
Shareholder Services Plan B-19
Redemption of Shares B-19
Shareholder Services B-22
Determination of Net Asset Value B-24
Dividends, Distributions and Taxes B-25
Portfolio Transactions B-27
Performance Information B-28
Information About the Fund B-29
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-29
Appendix A B-31
Appendix B B-44
Financial Statements B-53
Report of Independent Auditors B-69
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the Fund"
and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended May 31,
1996, as computed on a monthly basis, was as follows:
Fitch Investors Moody's Investors Standard & Poor's
Service, L.P. Service, Inc. Ratings Group Percent of
("Fitch") or ("Moody's") or ("S&P") Value
AAA Aaa AAA 56.0%
AA Aa AA 13.3%
A A A 16.8%
BBB Baa BBB 2.5%
F-1 VMIG 1/MIG 1/P-1 SP-1/A-1 3.4%1
Not Rated Not Rated Not Rated 8.0%2
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100.0%
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__________________
1 Included in these categories are tax exempt notes rated within the two
highest grades by Fitch, Moody's or S&P. Therefore, these securities,
together with Municipal Obligations rated Baa or better by Moody's or
BBB or better by S&P or Fitch, are taken into account at the time of a
purchase to ensure that the Fund's portfolio meets the 80% minimum
quality standard discussed in the Fund's Prospectus.
2 Included in the Not Rated category are securities comprising 8.0% of the
Fund's market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following
ratings categories: Aaa/AAA (.3%), A (.5%), Baa/BBB (6.8%), Ba/BB (.2%),
B/B (.1%), and F-2/MIG2/P2/SP2/A2 (.1%).
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public purposes for which
Municipal Obligations may be issued include refunding outstanding obli
gations, obtaining funds for general operating expenses and lending such
funds to other public institutions and facilities. In addition, certain
types of industrial development bonds are issued by or on behalf of public
authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, indus
trial, port or parking facilities, air or water pollution control facilities
and certain local facilities for water supply, gas, electricity, or sewage or
solid waste disposal; the interest paid on such obligations may be exempt
from Federal income tax, although current tax laws place substantial
limitations on the size of such issues. Such obligations are considered to
be Municipal Obligations if the interest paid thereon qualifies as exempt
from Federal income tax in the opinion of bond counsel to the issuer. There
are, of course, variations in the security of Municipal Obligations, both
within a particular classification and between classifications.
Floating and variable rate demand obligations are tax exempt obligations
ordinarily having stated maturities in excess of one year, but which permit
the holder to demand payment of principal at any time, or at specified
intervals not exceeding one year. The issuer of such obligations ordinarily
has a corresponding right, after a given period, to prepay in its discretion
the outstanding principal amount of the obligations plus accrued interest
upon a specified number of days' notice to the holders thereof. The interest
rate on a floating rate demand obligation is based on a known lending rate,
such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a particular
offering, maturity of the obligation and rating of the issue. The imposition
of the management fee, as well as other operating expenses, will have the
effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily
associated with Municipal Obligations. Although lease obligations do not
constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation ordinarily is
backed by the municipality's covenant to budget for, appropriate and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease or installment purchase payments in future years
unless money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove
difficult. The staff of the Securities and Exchange Commission currently
considers certain lease obligations to be illiquid. Determination as to the
liquidity of such securities is made in accordance with guidelines
established by the Fund's Board. Pursuant to such guidelines, the Board has
directed the Manager to monitor carefully the Fund's investment in such
securities with particular regard to (1) the frequency of trades and quotes
for the lease obligation; (2) the number of dealers willing to purchase or
sell the lease obligation and the number of the 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 mechanics of transfer; and (5) such other factors concerning the
trading market for the lease obligation as the Manager may deem relevant. In
addition, in evaluating the liquidity and credit quality of a lease
obligation that is unrated, the Fund's Board has directed the Manager to
consider (a) whether the lease can be cancelled; (b) what assurance there is
that the assets represented by the lease can be sold; (c) the strength of the
lessee's general credit (e.g., its debt, administrative, economic, and
financial characteristics); (d) the likelihood that the municipality will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to the operations of the municipality
(e.g., the potential for an "event of nonappropriation"); (e) the legal
recourse in the event of failure to appropriate; and (f) such other factors
concerning credit quality as the Manager may deem relevant. The Fund will
not invest more than 15% of the value of its net assets in lease obligations
that are illiquid and in other illiquid securities. See "Investment
Restriction No. 13" below.
The Fund will purchase tender option bonds only when it is satisfied
that the custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the
underlying Municipal Obligations and that payment of any tender fees will not
have the effect of creating taxable income for the Fund. Based on the tender
option bond agreement, the Fund expects to be able to value the tender option
bond at par; however, the value of the instrument will be monitored to assure
that is valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Manager will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given by Moody's, S&P or Fitch for Municipal Obligations may
change as a result of changes in such organizations or their rating systems,
the Fund will attempt to use comparable ratings as standards for its
investments in accordance with the investment policies contained in the
Prospectus and this Statement of Additional Information. The ratings of
Moody's, S&P and Fitch represent their opinions as to the quality of the
Municipal Obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute
standards of quality. Although these ratings may be an initial criterion for
selection of portfolio investments, the Manager also will evaluate these
securities and the creditworthiness of the issuers of such securities.
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities purchased by
the Fund pursuant to Rule 144A under the Securities Act of 1933, as amended,
the Fund intends to treat such securities as liquid securities in accordance
with procedures approved by the Fund's Board. Because it is not possible to
predict with assurance how the market for restricted securities pursuant to
Rule 144A will develop, the Fund's Board has directed the Manager to monitor
carefully the Fund's investments in such securities with particular regard to
trading activity, availability of reliable price information and other
relevant information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to Rule
144A, the Fund's investing in such securities may have the effect of
increasing the level of illiquidity in its investment portfolio during such
period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S. Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Interest may fluctuate based on generally
recognized reference rates or the relationship of rates. While the U.S.
Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always
do so, since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the ob
ligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally are
limited to London branches of domestic banks that have total assets in excess
of one billion dollars. Time deposits which may be held by the Fund will not
benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of
a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and of the drawer to pay the full amount of
the instrument upon maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
In a repurchase agreement, the Fund buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. The Fund's
custodian or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the Staff of the
Securities and Exchange Commission to be loans by the Fund that enters into
them. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Fund will enter into repurchase agreements only with domestic
banks with total assets in excess of $1 billion, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. Repurchase
agreements could involve risks in the event of a default or insolvency of the
other party to the agreement, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities.
Management Policies
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest than
"traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease
the level of risk, or change the character of the risk, to which its
portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
Derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter Derivatives. Therefore, each party to an over-
the-counter Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of counterparties
to over-the-counter Derivatives in the same manner as it would review the
credit quality of a security to be purchased by the Fund. Over-the-counter
Derivatives are less liquid than exchange-traded Derivatives since the other
party to the transaction may be the only investor with sufficient
understanding of the Derivative to be interested in bidding for it.
Futures Transactions--In General. The Fund may enter into futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade. Engaging in
these transactions involves risk of loss to the Fund which could adversely
affect the value of the Fund's net assets. Although the Fund intends to
purchase or sell futures contracts only if there is an active market for such
contracts, no assurance can be given that a liquid market will exist for any
particular contract at any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in
a particular contract, no trades may be made that day at a price beyond that
limit or trading may be suspended for specified periods during the trading
day. Futures contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation
of futures positions and potentially subjecting the Fund to substantial
losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the transaction
being hedged and the price movements of the futures contract. For example,
if the Fund uses futures to hedge against the possibility of a decline in the
market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit of
the increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate cash or high
quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting
the Fund's ability otherwise to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase or
sell an amount of a specific debt security at a future date at a specific
price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities and interest rate futures
contracts. A call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, the underlying security or securities at
the exercise price at any time during the option period, or at a specific
date. Conversely, a put option gives the purchaser of the option the right
to sell, and obligates the writer to buy, the underlying security or
securities at the exercise price at any time during the option period or at a
specific date.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may cease
to exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, at
times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading rotations,
restrictions on certain types of orders or trading halts or suspensions in
one or more options. There can be no assurance that similar events, or
events that may otherwise interfere with the timely execution of customers'
orders, will not recur. In such event, it might not be possible to effect
closing transactions in particular options.
Successful use by the Fund of options will be subject to the Manager's
ability to predict correctly movements in interest rates. To the extent the
Manager's predictions are incorrect, the Fund may incur losses.
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, appropriate disclosure will be
provided in the Fund's Prospectus or this Statement of Additional
Information.
Lending Portfolio Securities. In connection with its securities lending
transactions, the Fund may return to the borrower or a third party which is
unaffiliated with the Fund, and which is acting as a "placing broker," a part
of the interest earned from the investment of collateral received from
securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must be
able to terminate the loan at any time; (4) the Fund must receive reasonable
interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in connection
with the loan.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to changes
in value (generally changing in the same way, i.e., appreciating when
interest rates decline and depreciating when interest rates rise) based upon
the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on
a when-issued basis may expose the Fund to risks because they may experience
such fluctuations prior to their actual delivery. Purchasing securities on a
when-issued basis can involve the additional risk that the yield available in
the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a 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 Considerations and Risks
Investing in California Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain amendments
to the California Constitution and other statues that limit the taxing and
spending authority of California governmental entities, as well as from the
general financial condition of the State of California. From mid-1990 to
late 1993, the State suffered a recession with the worst economic, fiscal and
budget conditions since the 1930s. As a result, the State experienced
recurring budget deficits for four of its five fiscal years ended June 30,
1992. The State had operating surpluses of approximately $109 million in
fiscal 1992-93 and $917 million in 1993-94. However, at June 30, 1994,
according to California's Department of Finance, the State's Special Fund for
Economic Uncertainties had an accumulated deficit, on a budget basis, of
approximately $1.8 billion. A further consequence of the large budget
imbalances over the last three fiscal years has been that the State depleted
its available cash resources and has had to use a series of external
borrowings to meet its cash needs. To meet its cash flow needs in the 1994-
95 fiscal year, the State issued, in July and August 1994, $4.0 billion of
revenue anticipation warrants and $3.0 billion of revenue anticipation notes.
The 1994-95 budget Act contains a plan to retire a projected $1.025 billion
deficit in the 1995-96 fiscal year. As a result of the deterioration of the
State's budget and cash situation between October 1991 and July 1994, the
rating on the State's general obligation bonds was reduced by S&P from AAA to
A, by Moody's from Aaa to A1 and by Fitch AAA to A. These and other factors
may have the effect of impairing the ability of the issuers of California
Municipal Obligations to pay interest on, or repay principal of, such
California Municipal Obligations. Investors should review "Appendix A" which
sets forth additional information relating to investing in California
Municipal Obligations.
Lower Rated Bonds. The Fund is permitted to invest in securities rated
Ba by Moody's and BB by S&P and Fitch, and as low as the lowest rating
assigned by Moody's, S&P or Fitch. Such bonds, though higher yielding, are
characterized by risk. See "Description of the Fund--Investment
Considerations and Risks--Lower Rated Bonds" in the Prospectus for a
discussion of certain risks and "Appendix B" for a general description of
Moody's, S&P and Fitch ratings of Municipal Obligations. Although ratings
may be useful in evaluating the safety of interest and principal payments,
they do not evaluate the market value risk of these bonds. The Fund will
rely on the Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by S&P, Moody's and Fitch
to be, on balance, predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally is
not as liquid as the secondary market for higher rated securities. The lack
of a liquid secondary market may have an adverse impact on market price and
yield and the Fund's ability to dispose of particular issues when necessary
to meet the Fund's liquidity needs or in response to a specific economic
event such as a deterioration in the creditworthiness of the issuer. The
lack of a liquid secondary market for certain securities also may make it
more difficult for the Fund to obtain accurate market quotations for purposes
of valuing the Fund's portfolio and calculating its net asset value. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of these securities. In such
cases, judgment may play a greater role in valuation because less reliable
objective data may be available.
These bonds may be particularly susceptible to economic downturn. It is
likely that any economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities.
In addition, it is likely that any such economic downturn could adversely
affect the ability of the issuers of such securities to repay principal and
pay interest thereon and increase the incidence of default for such
securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with the Distributor or any other 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, in which the Fund may invest up to 5% of
its total assets. Zero coupon bonds carry an additional risk in that, unlike
bonds which pay interest throughout the period to maturity, the Fund will
realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. See "Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 7 as
fundamental policies, which cannot be changed without approval by the holders
of a majority (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the Fund's outstanding voting shares. Investment
restrictions numbered 8 through 12 are not fundamental policies and may be
changed by a vote of a majority of the Board members at any time. The Fund
may not:
1. Invest more than 25% of its assets in the securities of issuers in
any single industry; provided that there shall be no limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
securities issued by banks and obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
2. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowings to no more than 33-1/3% of the Fund's
total assets). For purposes of this investment restriction, the entry into
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not constitute
borrowing.
3. Purchase or sell real estate, 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 options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts 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. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements; 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 Board.
6. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent that the activities permitted in
Investment Restrictions numbered 2, 3 and 10 may be deemed to give rise to a
senior security.
7. Sell securities short or purchase securities on margin, but the
Fund may make margin deposits in connection with transactions in options,
forward contracts, futures contracts, including those relating to indices,
and options on futures contracts or indices.
8. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or
as otherwise provided in the Fund's Prospectus.
9. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure borrowings for temporary or
emergency purposes and to the extent related to the deposit of assets in
escrow in connection with the purchase of securities on a when-issued or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to options, futures contracts, including those
related to indices, and options on futures contracts or indices.
11. 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 (including municipal
lease/purchase agreements) that are not subject to the demand feature
described in the Fund's Prospectus, floating and variable rate demand
obligations as to which the Fund cannot exercise the demand feature described
in the Fund's Prospectus on less than seven days' notice and as to which
there is no secondary market) if, in the aggregate, more than 15% of its net
assets would be so invested.
12. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 1, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as
an "industry".
If a percentage restriction is adhered to at the time of investment, a
later increase in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Board member who is deemed to be an "interested person" of
the Fund, as defined in the 1940 Act, is indicated by an asterisk.
Board Members of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also
Chairman of the Board of Noel Group, Inc., a venture capital company;
and a director of The Muscular Dystrophy Association, HealthPlan
Services Corporation, Belding Heminway Company, Inc., a manufacturer and
marketer of industrial threads and buttons, Curtis Industries, Inc., a
national distributor of security products, chemicals, and automotive and
other hardware, and Staffing Resources, Inc. For more than five years
prior to January 1995, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 24, 1994, the Fund's
distributor. From August 1994 to December 31, 1994, he was a director
of Mellon Bank Corporation. He is 52 years old and his address is 200
Park Avenue, New York, New York 10166.
*DAVID W. BURKE, Board Member. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From August 1994 to December 31, 1994, Mr.
Burke was a Consultant to the Manager, and from October 1990 to August
1994, he was Vice President and Chief Administrative Officer of the
Manager. From 1977 to 1990, Mr. Burke was involved in the management of
national television news, as Vice President and Executive Vice President
of ABC News, and subsequently as President of CBS News. He is 60 years
old and his address is Box 654, Eastham, Massachusetts 02642.
SAMUEL CHASE, Board Member. Since 1982, President of Samuel Chase & Company,
Ltd., an economic consulting firm. He is 64 years old and his address
is 10380 Springhill Road, Belgrade, Montana 59714.
GORDON J. DAVIS, Board Member. Since October 1994, a senior partner with the
law firm of LeBoeuf, Lamb, Greene & MacRae. From 1983 to September
1994, Mr. Davis was a senior partner with the law firm of Lord Day &
Lord, Barrett Smith. From 1978 to 1983, he was Commissioner of Parks
and Recreation for the City of New York. He is also a director of
Consolidated Edison, a utility company, and Phoenix Home Life Insurance
Company and a member of various other corporate and not-for-profit
boards. He is 55 years old and his address is 241 Central Park West,
New York, New York 10023.
JONI EVANS, Board Member. Senior Vice President of the William Morris Agency
since September 1993. From September 1987 to May 1993, Executive Vice
President of Random House Inc. and, from January 1991 to May 1993,
President and Publisher of Turtle Bay Books; from January 1987 to
December 1990, Publisher of Random House-Adult Trade Division; from
September 1985 to September 1987, President of Simon and Schuster-Trade
Division. She is 54 years old and her address is 1325 Avenue of the
Americas, New York, New York 10019.
ARNOLD S. HIATT, Board Member. Chairman of The Stride Rite Foundation. From
1969 to June 1992, Chairman of the Board, President or Chief Executive
Officer of The Stride Rite Corporation, a multi-divisional footwear
manufacturing and retailing company. Mr. Hiatt is also a director of
The Cabot Corporation. He is 69 years old and his address is 400
Atlantic Avenue, Boston, Massachusetts 02110.
DAVID J. MAHONEY, Board Member. President of David Mahoney Ventures since
1983. From 1968 to 1983, he was Chairman and Chief Executive Officer of
Norton Simon Inc., a producer of consumer products and services. Mr.
Mahoney is also a director of Intracoastal Health Systems, Inc. He is
73 years old and his address is 745 Fifth Avenue, Suite 700, New York,
New York 10151.
BURTON N. WALLACK, Board Member. President and co-owner of Wallack Management
Company, a real estate management company managing real estate in the
New York City area. He is 45 years old and his address is 18 East 64th
Street, New York, New York 10021.
For so long as the Fund's plan described in the section "Shareholder
Services Plan" remains 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 Directors 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 by the Fund to each Board member for the fiscal year ended
May 31, 1996, and by all other funds in the Dreyfus Family of Funds for which
such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for the year
ended December 31, 1995, were as follows:
Total Compensation
From Fund and
Aggregate Fund Complex
Name of Board Compensation From Paid to Board
Member Fund* Member
Joseph S. DiMartino $8,750 $ 448,618 (94)
David W. Burke $7,000 $ 253,654 (51)
Samuel Chase $7,000 $ 54,250 (13)
Gordon J. Davis $7,000 $ 76,575 (24)
Joni Evans $6,500 $ 46,750 (13)
Arnold S. Hiatt $6,500 $ 50,500 (13)
David J. Mahoney $6,000 $ 47,250 (13)
Burton N. Wallack $7,000 $ 54,250 (13)
_____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $2,992 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she served as
Vice President and Controller, and later as Senior Vice President, of
The Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992 to
July 1994, he served as Counsel for The Boston Company Advisors, Inc.
From August 1990 to February 1992, he was employed as an associate at
Ropes & Gray. He is 32 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Senior Vice
President and Director of Client Services and Treasury Operations of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by the Manager. From March 1994 to November
1995, he was Vice President and Division Manager for First Data Investor
Services Group. From 1989 to 1994, he was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds of The Boston Company, Inc.
He is 40 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by the Manager. From September 1989 to July 1994, she was
an Assistant Vice President and Client Manager for The Boston Company,
Inc. She is 32 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Director of
Strategic Client Initiatives for Funds Distributor, Inc. From December,
1989 through November, 1996 he was employed with GE Investments where he
held various financial, business development and compliance positions.
He is 35 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From April 1993 to January 1995, he was a Senior Fund
Accountant for Investors Bank & Trust Company. From December 1991 to
March 1993, he was employed as a Fund Accountant at The Boston Company,
Inc. He is 27 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised or
administered by the Manager. From August 1993 to May 1996, he attended
Hofstra University School of Law. Prior to August 1993, he was employed
as an Associate Examiner at the National Association of Securities
Dealers, Inc. He is 27 years old.
ELIZABETH KEELEY, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor and
an officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 34 years old.
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 August 1, 1996.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the
Fund, provided that in either event the continuance also is approved by a
majority of the Board members who are not "interested persons" (as defined in
the 1940 Act) of the Fund or the Manager, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Agreement was
approved by Fund shareholders on August 2, 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
April 17, 1996. The Agreement is terminable without penalty, on not more
than 60 days' notice, by the Fund's Board or by vote of the holders of a
majority of the Fund's outstanding voting shares, or, upon not less than 90
days' notice, by the Manager. The Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E. Canter,
Vice Chairman, Chief Investment Officer and a director; Lawrence S. Kash,
Vice Chairman--Distribution and a director; William T. Sandalls, Jr., Senior
Vice President and Chief Financial Officer; William F. Glavin, Jr., Vice
President--Corporate Development; Mark N. Jacobs, Vice President, General
Counsel and Secretary; Patrice M. Kozlowski, Vice President--Corporate
Communications; Mary Beth Leibig, Vice President--Human Resources; Jeffrey N.
Nachman, Vice President--Mutual Fund Accounting; Andrew S. Wasser, Vice
President--Information Systems; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, and Frank V. Cahouet, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides the
Fund with portfolio managers who are authorized by the Fund's Board to
execute purchases and sales of securities. The Fund's portfolio managers
are: Richard J. Moynihan, Joseph P. Darcy, A. Paul Disdier, Douglas Gaylor,
Karen M. Hand, Stephen C. Kris, 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. All purchases and sales are reported for the Board members' review
at the meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: taxes, interest, loan commitment fees, interest
and distributions paid on securities sold short, 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 corporate existence, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and corporate
meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders and any extraordinary expenses.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services, the Fund pays the Manager a
monthly management fee at the annual rate of .60 of 1% of the value of the
Fund's average daily net assets. All fees and expenses are accrued daily and
deducted before declaration of dividends to investors. The management fees
paid to the Manager for the fiscal years ended May 31, 1994, 1995 and 1996
amounted to $10,861,852, $9,237,533 and $8,764,933, 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
1 1/2% of the value of the Fund's average net assets for the fiscal year, the
Fund may deduct from the payment to be made to the Manager under the
Agreement, or the Manager will bear, such excess expense. 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. During the fiscal year ended
May 31, 1996, no expense reimbursements were made pursuant to such
limitations.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies. In some states,
certain financial institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
Transactions Through Securities Dealers. Fund shares may be purchased
and redeemed through securities dealers which may charge a nominal
transaction fee for such services. Some dealers will place Fund shares in an
account with their firm. Dealers also may require that the customer not take
physical delivery of stock certificates; the customer not request redemption
checks to be issued in the customer's name; fractional shares not be
purchased; monthly income distributions be taken in cash; or other
conditions.
There is no sales charge by the Fund or the Distributor, although
securities dealers, banks and other institutions may make reasonable charges
to investors for their services. The services provided and the applicable
fees are established by each dealer or other institution acting independently
of the Fund. The Fund has been given to understand that these fees may be
charged for customer services, including, but not limited to, same-day
investment of client funds; same-day access to client funds; advice to
customers about the status of their accounts, yield currently being paid or
income earned to date; provision of periodic account statements showing
security and money market positions; other services available from the
dealer, bank or other institution; and assistance with inquiries related to
their investment. Any such fees will be deducted monthly from the investor's
account, which on smaller accounts could constitute a substantial portion of
distributions. Small, inactive, long-term accounts involving monthly service
charges may not be in the best interest of investors. Investors should be
aware that they may purchase Fund shares directly from the Fund without
imposition of any maintenance or service charges, other than those already
described herein.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services
Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such an answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Plan provides that material
amendments of the 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 Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The 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 Plan. The Plan was last so approved on April 17, 1996. The
Plan is terminable 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 Plan.
For the fiscal year ended May 31, 1996, $377,878 was chargeable to the
Fund under the Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Redemption Fee. For shares acquired by purchase or exchange after May
9, 1997, the Fund will deduct a redemption fee equal to .10% of the net asset
value of Fund shares redeemed (including redemptions through the use of the
Fund Exchanges service) less than fifteen days following the issuance of such
shares. The redemption fee will be deducted from the redemption proceeds and
retained by the Fund.
No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Automatic Withdrawal Plan or Dreyfus
Auto-Exchange Privilege, (2) through accounts that are reflected on the
records of the Transfer Agent as omnibus accounts approved by Dreyfus Service
Corporation, (3) through accounts established by securities dealers, banks or
other financial institutions approved by Dreyfus Service Corporation that
utilize the National Securities Clearing Corporation's networking system, or
(4) acquired through the reinvestment of dividends or capital gains
distributions. The redemption fee may be waived, modified or terminated at
any time.
Check Redemption Privilege. An investor may indicate on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks ("Checks") drawn on the investor's Fund
account. Checks will be sent only to the registered owner(s) of the account
and only to the address of record. The Account Application, Shareholder
Services Form or later written request must be manually signed by the
registered owner(s). Checks may be made payable to the order of any person
in an amount of $500 or more. When a Check is presented to the Transfer
Agent for payment, the Transfer Agent, as the investor's agent, will cause
the Fund to redeem a sufficient number of full or fractional shares in the
investor's account to cover the amount of the Check. Dividends are earned
until the Check clears. After clearance, a copy of the Check will be
returned to the investor. Investors generally will be subject to the same
rules and regulations that apply to checking accounts, although election of
this Privilege creates only a shareholder-transfer agent relationship with
the Transfer Agent.
If the amount of the Check is greater than the value of the shares in an
investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Fund will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption proceeds ($1,000
minimum) will be transferred by Federal Reserve wire only to the commercial
bank account specified by the investor on the Account Application or
Shareholder Services Form, or to a correspondent bank if the investor's bank
is not a member of the Federal Reserve System. Fees ordinarily are imposed
by such bank usually are borne by the investor. Immediate notification by
the correspondent bank to the investor's bank is necessary to avoid a delay
in crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmission:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through the
Automated Clearing House ("ACH") system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Shares--Dreyfus
TeleTransfer Privilege."
Stock 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 holder
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. For more information with respect to signature-guarantees,
please call the telephone number listed on the cover.
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 proper approval of the Securities and Exchange Commission. In
the case of requests for redemption in excess of such amount, the Fund's
Board reserves the right to make payments in whole or in part in securities
(which may include non-marketable securities) or other assets 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 sold such securities, brokerage
charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such other periods
as the Securities and Exchange Commission by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. A .10% redemption fee will be charged upon an exchange
of Fund shares where the exchange occurs less than 15 days following the
issuance of such shares. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
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"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load
that could have been imposed in connection with the Purchased
Shares (at the time the Purchased Shares were acquired),
without giving effect to any reduced loads, the difference will
be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor 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 Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be the investor, or a representative
of the investor's Service Agent, and reasonably believed by the Transfer Agent
to be genuine. Telephone exchanges may be subject to limitations as to the
amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For
Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among the
funds in the Dreyfus Family of Funds. To exchange shares held in personal
retirement plans, the shares exchanged must have a current value of at least
$100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is available
only for existing accounts. Shares will be exchanged on the basis of
relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor will
be notified if his account falls below the amount designated to be exchanged
under this Privilege. In this case, an investor's account will fall to zero
unless additional investments are made in excess of the designated amount
prior to the next Auto-Exchange transaction. Shares held under IRA and other
retirement plans are eligible for this Privilege. Exchanges of IRA shares
may be made between IRA accounts and from regular accounts to IRA accounts,
but not from IRA accounts to regular accounts. With respect to all other
retirement accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield
on the shares. If withdrawal payments exceed reinvested dividends and distri
butions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the Dreyfus
Family of Funds of which the investor is a shareholder. Shares 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 by a fund may be invested
without imposition of a sales load in shares of other funds
that are offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving
effect to any reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be
imposed upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service") approved
by the Fund's Board. When, in the judgment of the Service, quoted bid prices
for investments are readily available and are representative of the bid side
of the market, these investments are valued at the mean between the quoted
bid prices (as obtained by the Service from dealers in such securities) and
asked prices (as calculated by the Service based upon its evaluation of the
market for such securities). Other investments (which constitute a majority
of the portfolio securities) are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices
of municipal bonds of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. The
Service may employ electronic data processing techniques and/or a matrix
system to determine valuations. The Service's procedures are reviewed by the
Fund's officers under the general supervision of the Fund's Board. Expenses
and fees, including the management fee (reduced by the expense limitation, if
any), are accrued daily and are taken into account for the purpose of
determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."
Management believes that the Fund has qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), for the fiscal year ended May 31, 1996 and the Fund intends to
continue to so qualify, if such qualification is in the best interests of its
shareholders. To qualify as a regulated investment company, the Fund must
distribute at least 90% of its net income (consisting of net investment
income from tax exempt obligations and net short-term capital gains) to its
shareholders, must derive less than 30% of its annual gross income from gain
on the sale of securities held for less than three months, and must meet
certain asset diversification and other requirements. Accordingly, the Fund
may be restricted in the selling of securities held for less than three
months. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.
The Code provides that if a shareholder has not held his 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. In
addition, any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the net asset value of his shares
below the cost of his investment. Such a distribution would be a return on
investment in an economic sense although taxable as stated under "Dividends,
Distributions and Taxes" in the Prospectus.
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, 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. Dividends derived from
taxable investments, together with distributions from any net realized
short-term securities gains, generally are taxable as ordinary income for
Federal income tax purposes whether or not reinvested. Distributions from
net realized long-term securities gains generally are taxable as long-term
capital gains to a shareholder who is a citizen or resident of the United
States, whether or not reinvested and regardless of the length of time the
shareholder has held his shares.
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 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.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of the gain
realized from the 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,
option and "straddle" transactions, 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 realized by the Fund 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 characterized in the manner described above.
Offsetting positions held by the Fund involving certain financial
futures contracts or 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 as ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in financial futures contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options 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." If no election is made, to the extent the straddle rules apply
to positions established by the Fund, losses realized by the Fund will be
deferred to the extent of unrealized gain in any offsetting positions.
Moreover, as a result of the straddle and the conversion transaction rules,
short-term capital loss on straddle positions may be recharacterized as long-
term capital loss, and long-term capital gain may be recharacterized as short-
term capital gain or ordinary income.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such portion
in order to maintain its qualification as a regulated investment company. In
such case, the Fund may have to dispose of securities which it might
otherwise have continued to hold in order to generate cash to satisfy these
distribution requirements.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases
and sales usually are placed with those dealers from which it appears that
the best price or execution will be obtained. Usually no brokerage
commissions, as such, are paid by the Fund for such purchases and sales, al
though the price paid usually includes an undisclosed compensation to the
dealer acting as agent. The prices paid to underwriters of newly-issued
securities usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers ordinarily
are executed at a price between the bid and asked price. No brokerage
commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by the
Manager in advising the Fund. Although it is not possible to place a dollar
value on these services, it is the opinion of the Manager that the receipt
and study of such services should not reduce the overall expenses of its
research department.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
The Fund's current yield for the 30-day period ended May 31, 1996 was
5.15%. 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 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 distributions, and (b) the net asset value per share on the last day of
the period less any undistributed earned income per share reasonably expected
to be declared as a dividend shortly thereafter. The quotient is then added
to 1, and that sum is raised to the 6th power, after which 1 is subtracted.
The current yield is then arrived at by multiplying the result by 2.
Based upon a combined 1996 Federal and California personal income tax
rate of 46.24%, the Fund's tax equivalent yield for the 30-day period ended
May 31, 1996 was 9.58%. 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 quoted 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 39.6% tax
rate has been used. For California personal income tax purposes, an 11% tax
rate has been used. The tax equivalent figure, however, does not include 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 yield.
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 Fund's average annual total return for the 1, 5 and 10 year periods
ended May 31, 1996 was 1.58%, 5.51% and 6.42%, respectively. Average annual
total return is calculated by determining the ending redeemable value of an
investment purchased 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.
The Fund's total return for the period July 26, 1983 to May 31, 1996 was
158.31%. Total return is calculated by subtracting the amount of the Fund's
net asset value 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 dividing
the result by the net asset value per share at the beginning of the period.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and are not representative of the Fund's
past or future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or events,
actual or proposed tax legislation, or to statistical or other information
concerning trends relating to investment companies, as compiled by industry
associations such as the Investment Company Institute. From time to time,
advertising materials for the Fund also may refer to Morningstar ratings and
related analyses supporting the ratings.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and nonassessable. Fund shares
are of one class and have equal rights as to dividends and in liquidation.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-of-
pocket expenses. For the period December 1, 1995 (effective date of transfer
agency agreement) through May 31, 1996, the Fund paid the Transfer Agent
$216,265. The Bank of New York, 90 Washington Street, New York, New York
10286, is the Fund's custodian. Neither the Transfer Agent nor The Bank of
New York has any part in determining the investment policies of the Fund or
which portfolio securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-
4925, 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
Certain California (the "State") constitutional amendments, legislative
measures, executive orders, civil actions and voter initiatives, as well as
the general financial condition of the State, could adversely affect the
ability of issuers of California Municipal Obligations to pay interest and
principal on such obligations. The following information constitutes only a
brief summary, does not purport to be a complete description, and is based on
information drawn from official statements relating to securities offerings
of the State of California and various local agencies, available as of the
date of this Statement of Additional Information. While the Fund has not
independently verified such information, it has no reason to believe that
such information is not correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, were all severely affected. Job losses
have been the worst of any post-war recession. Unemployment reached 10.1% in
January 1994, but fell sharply to 7.7% in October and November 1994.
According to the State's Department of Finance, recovery from the recession
in California began in 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also has caused increased expenditures for
health and welfare programs. The State also has been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health and welfare, and
corrections) growing at rates higher than the growth rates for the principal
revenue sources of the General Fund. As a result, the State experienced
recurring budget deficits in the late 1980s and early 1990s. The State
Controller reported that expenditures exceeded revenues for four of the five
fiscal years ending with 1991-92. The State had an operating surplus of
approximately $109 million in 1992-93 and $836 million in 1993-94. However,
at June 30, 1994, according to the Department of Finance, the State's Special
Fund for Economic Uncertainties ("SFEU") still had a deficit, on a budget
basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in future
fiscal years. To meet its cash flow needs in the 1994-95 fiscal year the
State issued, in July and August 1994, $4.0 billion of revenue anticipation
warrants which mature on April 25, 1996, and $3.0 billion of revenue
anticipation notes which matured on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1" and
by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) projected $42.4 billion of General Fund revenues and
transfers and $41.7 billion of budgeted expenditures. In addition, the 1994-
95 Budget Act anticipated deferring retirement of about $1 billion of the
accumulated budget deficit to the 1995-96 fiscal year when it is intended to
be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposed General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which was
estimated to leave a balance of approximately $92 million in the budget
reserve, the SFEU, at June 30, 1996 after repayment of the accumulated budget
deficits. The Budget proposal was based on a number of assumptions,
including receipt of $830 million from the Federal government to offset costs
of undocumented and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "County Funds") filed for protection
under Chapter 9 of the Federal Bankruptcy Code, after reports that the County
Funds had suffered significant market losses in their investments, causing a
liquidity crisis for the County Funds and the County. More than 200 other
public entities, most of which, but not all, are located in the County, were
also depositors in the County Funds. As of mid-January 1995, following a
restructuring of most of the County Funds' assets to increase their liquidity
and reduce their exposure to interest rate increases, the County estimated
the County Funds' loss at about $1.69 billion, or about 23% of their initial
deposits of approximately $7.5 billion. Many of the entities which deposited
monies in the County Funds, including the County, faced interim and/or
extended cash flow difficulties because of the bankruptcy filing and may be
required to reduce programs or capital projects. The County has embarked on
a fiscal recovery plan based on sharp reductions in services and personnel,
and rescheduling of outstanding short term debt using certain new revenues
transferred to the County from other local governments pursuant to special
legislation enacted in October 1995.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated 6.8
on the Richter Scale struck Los Angeles causing significant damage to public
and private structures and facilities. Although some individuals and
businesses suffered losses totaling in the billions of dollars, the overall
effect of the earthquake on the regional and State economy is not expected to
be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be transferred
by the Controller as necessary to meet cash needs of the General Fund. The
Controller is required to return moneys so transferred without payment of
interest as soon as there are sufficient moneys in the General Fund. For
budgeting and accounting purposes, any appropriation made from the SFEU is
deemed an appropriation from the General Fund. For year-end reporting
purposes, the Controller is required to add the balance in the SFEU to the
balance in the General Fund so as to show the total monies then available for
General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June 30,
1994, the General Fund had outstanding loans in the aggregate principal
amount of $43 million to the General Fund from the SFEU and outstanding loans
in the aggregate principal amount of $5.2 billion, which consisted of $4.0
billion of internal loans to the General Fund from the SFEU and other Special
Funds and $1.2 billion of external loans represented by the 1994 revenue
anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue Law
Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that additional
taxes may be levied by cities, counties and special districts only upon
approval of not less than a two-thirds vote of the "qualified electors" of
such district, and requires not less than a two-thirds vote of each of the
two houses of the State Legislature to enact any changes in State taxes for
the purpose of increasing revenues, whether by increased rate or changes in
methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that purpose
beginning in the 1978-79 fiscal year. In recent years, in addition to such
increased expenditures, the indexing of personal income tax rates (to adjust
such rates for the effects of inflation), the elimination of certain
inheritance and gift taxes and the increase of exemption levels for certain
other such taxes had a moderating impact on the growth in State revenues. In
addition, the State has increased expenditures by providing a variety of tax
credits, including renters' and senior citizens' credits and energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from regulatory
licenses, user charges or other fees to the extent that such proceeds exceed
"the cost reasonably borne by such entity in providing the regulation,
product or service." One of the exclusions from these limitations is "debt
service" (defined as "appropriations required to pay the cost of interest and
redemption charges, including the funding of any reserve or sinking fund
required in connection therewith, on indebtedness existing or legally
authorized as of January 1, 1979 or on bonded indebtedness thereafter
approved" by the voters). In addition, appropriations required to comply
with mandates of courts or the Federal government and, pursuant to
Proposition 111 enacted in June 1990, appropriations for qualified capital
outlay projects and appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels are
not included as appropriations subject to limitation. In addition, a number
of recent initiatives were structured or proposed to create new tax revenues
dedicated to certain specific uses, with such new taxes expressly exempted
from the Article XIIIB limits (e.g., increased cigarette and tobacco taxes
enacted by Proposition 99 in 1988). The appropriations limit also may be
exceeded in cases of emergency. However, unless the emergency arises from
civil disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable, for
any transfer of financial responsibility of providing services to or from
another unit of government. The measurement of change in population is a
blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined appropriations
limits for those two years is divided equally between transfers to
K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and population
(using different definitions, which were modified by Proposition 111).
Commencing with the 1991-92 fiscal year, the State's appropriations limit is
adjusted annually based on the actual 1986-87 limit, and as if Proposition
111 had been in effect. The State Legislature has enacted legislation to
implement Article XIIIB which defines certain terms used in Article XIIIB and
sets forth the methods for determining the State's appropriations limit.
Government Code Section 7912 requires an estimate of the State's
appropriations limit to be included in the Governor's Budget, and thereafter
to be subject to the budget process and established in the Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit. The
limit for the 1992-93 fiscal year was $35.01 billion, and the appropriations
subject to limitation were $7.53 billion under the limit. The limit for the
1993-94 fiscal year was $36.60 billion, and the appropriations subject to
limitation were $6.74 billion under the limit. The limit for the 1994-95
fiscal year was $37.55 billion, and the appropriations subject to limitations
were $5.93 billion under the limit. The estimated limit for the 1995-96
fiscal year is $39.31 billion, and the appropriations subject to limitations
are estimated to be $6.47 billion under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-14
schools a minimum share of General Fund revenues. Under Proposition 98 (as
modified by Proposition 111, which was enacted in June 1990), K-14 schools
are guaranteed the greater of (a) 40.3% of General Fund revenues ("Test 1"),
(b) the amount appropriated to K-14 schools in the prior year, adjusted for
changes in the cost of living (measured as in Article XIIIB by reference to
California per capita personal income) and enrollment ("Test 2"), or (c) a
third test, which would replace the second test in any year when the
percentage growth in per capita General Fund revenues from the prior year
plus .5% is less than the percentage growth in California per capita personal
income ("Test 3"). Under "Test 3," schools would receive the amount
appropriated in the prior year adjusted for changes in enrollment and per
capita General Fund revenues, plus an additional small adjustment factor. If
"Test 3" is used in any year, the difference between "Test 3" and "Test 2"
would become a "credit" to schools which would be the basis of payments in
future years when per capita General Fund revenue growth exceeds per capita
personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools' minimum
funding formula for a one-year period. In the fall of 1989, the Legislature
and the Governor utilized this provision to avoid having 40.3% of revenues
generated by a special supplemental sales tax enacted for earthquake relief
go to K-14 schools. Proposition 98 also contains provisions transferring
certain State tax revenues in excess of the Article XIIIB limit to K-14
schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.5 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to be
substantially below expectations. By the time the Governor's Budget was
introduced in January 1992, it became clear that per capita growth in General
Fund revenues for 1991-92 would be far smaller than the growth in California
per capita personal income and the Governor's Budget therefore reflected a
reduction in Proposition 98 funding in 1991-92 by applying "Test 3" rather
than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years without
exceeding it, the Legislature enacted several bills as part of the 1992-93
budget package which responded to the fiscal crisis in education funding.
Fiscal year 1991-92 Proposition 98 appropriations for K-14 schools were
reduced by $1.083 billion. In order to not adversely impact cash received by
school districts, however, a short-term loan was appropriated from the non-
Proposition 98 State General Fund. The Legislature then appropriated $16.6
billion to K-14 schools for 1992-93 (the minimum guaranteed by Proposition
98), but designated $1.083 billion of this amount to "repay" the prior year
loan, thereby reducing cash outlays in 1992-93 by that amount. In addition
to reducing the 1991-92 fiscal year appropriations for K-14 schools by $1.083
billion and converting the amount to a loan (the "inter-year adjustment"),
Chapter 703, Statutes of 1992 also made an adjustment to "Test 1," based on
the additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40% to
37%. Additionally, Chapter 703 contained a provision that if an appellate
court should determine that the "Test 1" recalculation or the inter-year
adjustment is unconstitutional, unenforceable or invalid, Proposition 98
would be suspended for the 1992-93 fiscal year, with the result that K-14
schools would receive the amount intended by the 1992-93 Budget Act
compromise.
The State Controller stated in October 1992 that, because of a drafting
error in Chapter 703, he could not implement the $1.083 billion reduction of
the 1991-92 school funding appropriation, which was part of the inter-year
adjustment. The Legislature untimely enacted corrective legislation as part
of the 1993-94 Budget package to implement the $1.083 billion inter-year
adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-12
schools in order to maintain per-average daily attendance ("ADA") funding at
the same level as 1991-92, at $4,187. An additional loan of $241 million was
made to community college districts. These loans are to be repaid from
future Proposition 98 entitlements. (The teachers' organization lawsuit also
seeks to declare invalid the provision making the $732 million a loan
"repayable" from future years' Proposition 98 funds. Including both State
and local funds, and adjusting for the loans and repayments, on a cash basis,
total Proposition 98 K-12 funding in 1992-93 increased to $21.5 billion, 2.4%
more than the amount in 1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported
pupil enrollment, the 1993-94 Budget Act projected that the 1992-93
Proposition 98 Budget Act appropriations of $16.6 billion exceeded a revised
minimum guarantee by $313 million. As a result, the 1993-94 Budget Act
reverted $25 million in 1992-93 appropriations to the General Fund. Limiting
the reversion to this amount ensures that per ADA funding for general
purposes will remain at the prior year level of $4,217 per pupil. The 1993-
94 Governor's Budget subsequently proposed deficiency funding of $121 million
for school apportionments and special education, increasing funding per pupil
in 1992-93 to $4,244. The 1993-94 Budget Act also designated $98 million in
1992-93 appropriations toward satisfying prior years' guarantee levels, an
obligation that resulted primarily from updating State tax revenues for 1991-
92, and designates $190 million as a loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding
level at $13.5 billion based on the "Test 3" calculation where the guarantee
is determined by the change in per capita growth in General Fund revenues,
which are projected to decrease on a year-over-year basis. This amount also
takes into account increased property taxes transferred to school districts
from other local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93) provided
a new loan of $609 million to K-12 schools in order to maintain per ADA
funding at $4,217 and a loan of $178 million to community colleges. These
loans have been combined with the K-14 1992-93 loans into one loan totalling
$1.760 billion. Repayment of this loan would be from future years'
Proposition 98 entitlements, and would be conditioned on maintaining current
funding levels per pupil for K-12 schools. Chapter 66 also reduced the "Test
1" percentage to 35% to reflect the property tax shift among local government
agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K-14 schools based on Test 2. This exceeded the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil at
$4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as well
as an anticipated deficiency in special education fundings. These and other
minor appropriation adjustments increased the 1993-94 Proposition 98
guarantee to $13.8 billion, which exceeded the minimum guarantee in that year
by $272 million and provided per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusted the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect changes
in the statutory continuous appropriation for apportionments. The revised
appropriations exceeded the minimum guarantee by $32 million. This
appropriation level still provided per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted for
changes in factors described above, and was calculated to be $14.9 billion.
Within the minimum guarantee, the dollars per pupil were maintained at the
prior year's level; consequently, the 1994-95 minimum guarantee included a
loan repayment of $135 million, and the per-pupil funding increased to
$4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within
the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1994-95 contributed about 43% of General Fund revenues, is closely modeled
after the Federal income tax law. It is imposed on net taxable income (gross
income less exclusions and deductions). The tax is progressive with rates
ranging from 1% to 9.3%. Personal, dependent, and other credits are allowed
against the gross tax liability. In addition, taxpayers may be subject to an
alternative minimum tax ("AMT") which is much like the Federal AMT. This is
designed to ensure that excessive use of tax preferences does not reduce
taxpayers' liabilities below some minimum level. Legislation enacted in July
1991 added two new marginal tax rates, at 10% and 11%, effective for tax
years 1991 through 1995.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 34% of General Fund
revenue in 1994-95. Bank and corporation tax revenues comprised about 13% of
General Fund revenue in 1994-95. In 1989, Proposition 99 added a 25 cents
per pack excise tax on cigarettes, and a new equivalent excise tax on other
tobacco products. Legislation enacted in 1993 added an additional 2 cents
per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict, and
the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit in
the SFEU approaching $2.8 billion at its peak. The State's budget problems
in recent years also have been caused by a structural imbalance which has
been identified by the current and previous Administrations. The largest
General Fund programs -- K-14 education, health, welfare and corrections --
were increasing faster than the revenue base, driven by the State's rapid
population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance and
to close large "budget gaps" which were identified. The Legislature and
Governor eventually agreed on significant cuts in program expenditures, some
transfers of program responsibilities and funding from the State to local
governments, revenue increases (particularly in the 1991-92 fiscal year
budget), and various one-time adjustments and accounting changes. However,
as the recession took hold and deepened after the summer of 1990, revenues
dropped sharply and expenditures for health and welfare programs increased as
job losses mounted, so that the State ended each of the 1990-91 and 1991-92
fiscal years with an unanticipated deficit in the budget reserve, the SFEU,
as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous two
fiscal years, the Controller in April 1992 indicated that cash resources
(including borrowing from Special Funds) would not be sufficient to meet all
General Fund obligations due on June 30 and July 1, 1992. On June 25, 1992,
the Controller issued $475 million of 1992 Revenue Anticipation Warrants (the
"1992 Warrants") in order to provide funds to cover all necessary payments
from the General Fund at the end of the 1991-92 fiscal year and on July 1,
1992. The 1992 Warrants were paid on July 24, 1992. In addition to the 1992
Warrants, the Controller reported that as of June 30, 1992, the General Fund
had borrowed $1.336 billion from the SFEU and $4.699 billion from other
Special Funds, using all but about $183 million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated budget
deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992, the
State had no legal authority to pay many of its vendors until the budget was
passed. Starting on July 1, 1992, the Controller was required to issue
"registered warrants" in lieu of normal warrants backed by cash to pay many
State obligations. Available cash was used to pay constitutionally mandated
and priority obligations, such as debt service on bonds and revenue
anticipation warrants. Between July 1 and September 4, 1992, the Controller
issued an aggregate of approximately $3.8 billion of registered warrants
payable from the General Fund, all of which were called for redemption by
September 4, 1992 following enactment of the 1992-93 Budget Act and issuance
by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992, and
it was signed by the Governor on September 2, 1992. The 1992-93 Budget Act
provided for expenditures of $57.4 billion and consisted of General Fund
expenditures of $40.8 billion and Special Fund and Bond Fund expenditures of
$16.6 billion. The Department of Finance estimated a balance in the SFEU of
$28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget deficit
of about $2.8 billion, and a negative fund balance of about $2.2 billion (the
difference being certain reserves for encumbrances and school funding costs).
As a result, the State issued $5 billion of revenue anticipation notes and
warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of $39.9
billion. It also proposed Special Fund expenditures of $12.4 billion and
Special Fund revenues of $12.1 billion. The 1993-94 fiscal year represented
the third consecutive year the Governor and the Legislature were faced with a
very difficult budget environment, requiring revenue actions and expenditure
cuts totaling billions of dollars to produce a balanced budget. To balance
the budget in the face of declining revenues, the Governor proposed a series
of revenue shifts from local government, reliance on increased Federal aid
and reductions in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. Unlike previous years, the Governor's
Budget and May Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals designed to produce
a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales tax,
a deferral of operating loss carry forwards, and repeal by initiative of a
sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the second
half of the fiscal year, recessionary conditions continued longer than had
been anticipated when the 1993-94 Budget Act was adopted. Overall, revenues
for the 1993-94 fiscal year were about $800 million lower than original
projections, and expenditures were about $780 million higher, primarily
because of higher health and welfare caseloads, lower property taxes which
require greater State support for K-14 education to make up to shortfall, and
lower than anticipated Federal government payments for immigration-related
costs. The reports in May and June 1994, indicated that revenues in the
second half of the 1993-94 fiscal year were very close to the projections
made in the Governor's Budget of January 10, 1994, which was consistent with
a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-year
adjustments and reconciliations. Personal income tax and sales tax continued
to track projections. The largest factor in the higher than anticipated
revenues was from bank and corporation taxes, which were $140 million (18.4%)
above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of the
1993-94 fiscal year. Nevertheless, because of the $1.5 billion variance from
the original 1993-94 Budget Act assumptions, the General Fund ended the
fiscal year at June 30, 1994 carrying forward an accumulated deficit of
approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants that
matured July 26, 1994, which were needed to fund the State's obligations and
expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget environment
to produce a balanced budget. Many program cost and budgetary adjustments
had already been made in the last three years. The Governor's Budget
Proposal, as updated in May and June 1994, recognized that the accumulated
deficit could not be repaid in one year, and proposed a two-year solution.
The budget proposal set forth revenue and expenditure forecasts and revenue
and expenditure proposals which estimated operating surpluses for the budget
for both 1994-95 and 1995-96, and lead to the elimination of the accumulated
budget deficit, estimated at about $1.8 billion at June 30, 1994, by June 30,
1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt of
about $360 million from the Federal government to reimburse the State's cost
of incarcerating undocumented immigrants, most of which eventually was not
received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1 billion,
a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The 1994-
95 Budget Act also projected Special Fund expenditures of $13.7 billion, a
5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended for
two years (1993 and 1994). A ballot proposition to permanently restore the
renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax credit,
for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that General
Fund revenues for March 1995 were $28 million, or 1.1%, below forecast, and
that year-to-date General Fund revenues were $110 million, or 0.4%, below
forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's 1994-
95 Budget Act.
For the first time in four years, the State entered the upcoming 1995-96
fiscal year with strengthening revenues based on an improving economy. On
January 10, 1995, the Governor presented his 1995-96 Fiscal Year Budget
Proposal (the "Proposed Budget"). The Proposed Budget estimated General Fund
revenues and transfers of $42.5 billion (an increase of 0.2% over 1994-95).
This nominal increase from 1994-95 fiscal year reflected the Governor's
realignment proposal and the first year of his tax cut proposal. Without
these two proposals, General Fund revenues would have been projected at
approximately $43.8 billion, or an increase of 3.3% over 1994-95.
Expenditures were estimated at $41.7 billion (essentially unchanged from 1994-
95). Special Fund revenues were estimated at $13.5 billion (10.7% higher
than 1994-95) and Special Fund expenditures were estimated at $13.8 billion
(12.2% higher than 1994-95). The Proposed Budget projected that the General
Fund would end the fiscal year at June 30, 1996 with a budget surplus in SFEU
of about $92 million, or less than 1% of General Fund expenditures, and will
have repaid all of the accumulated budget deficits. The Department of
Finance projected in June 1996 that the General Fund would end the fiscal
year at June 30, 1996 with a budget surplus in SFEU of $ $28 million.
On January 10, 1996, the Governor released his proposed budget for the
Fiscal Year 1996-97 (the "Governor's Budget"). The Governor requested total
General Fund appropriations of about $45.2 billion, based on projected
revenues and transfers of about $45.6 billion, which would leave a budget
reserve in SFEU at June 30, 1997 of about $400 million. The Governor renewed
a proposal, which had been rejected by the Legislature in 1995, for a 15%
phased cut in individual and corporate tax rates over three years (the budget
proposal assumes this will be enacted, reducing revenues in 1996-97 by about
$600 million). There was also a proposal to restructure trial court funding
in a way which would result in a $300 million decrease in General Fund
revenues. The Governor requested legislation to make permanent a moratorium
on cost of living increases for welfare payments, and suspension of a renters
tax credit, which otherwise would go back into effect in the 1996-97 Fiscal
Year. He further proposed additional cuts in certain health and welfare
programs, and assumed that cuts previously approved by the Legislature will
receive Federal approval. The Governor's Budget proposes increases in
funding for K-12 schools under Proposition 98, for State higher education
systems (with a second year of no student fee increases), and for
corrections. The Governor's Budget projects external cash flow borrowing of
up to $3.2 billion, to mature by June 30, 1997.
Recent Economic Trends. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability, a
solid recovery is now underway. The State's unemployment rate fell sharply
last year, from 10.1% in January to 7.7% in October and November 1994. The
gap between the national and California jobless rates narrowed from 3.4
percentage points at the beginning of 1994 to an average of 2 percentage
points in October and November. The number of unemployed Californians fell
by nearly 400,000 during the year, while civilian employment increased more
than 300,000 in 1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual rate,
reflecting the uninsured damage to residences and unincorporated businesses.
As a result, personal income growth for all of 1994 was about 4.2%. However,
excluding the Northridge effects, growth would have been in excess of 5%.
Personal income is expected to grow 6.6% for 1995.
APPENDIX B
Description of S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at
some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between "A" and "BBB" rating is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of 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 sign (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than
365 days.
A
Issues assigned this rating are regarded as having the greatest capacity
for timely payment. Issues in this category are delineated with the numbers
1, 2 and 3 to indicate the relative degree of safety.
A-1
This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
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. Generally, Moody's provides either a generic rating or a
rating with a numerical modifier of 1 for the bonds in the generic rating
category Aa. Moody's also provides numerical modifiers of 2 and 3 in this
category for bond issues in the health care, higher education and other not-
for-profit sectors; the modifier 1 indicates that the issue ranks in the
higher end of that generic rating category; the modifier 2 indicates that the
issue is in the mid-range of that generic category; and the modifier 3
indicates that the issue is in the low end of the generic category.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment some time in the
future.
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in categories below B. The modifier 1 indicates a ranking for the security
in the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment
of short-term promissory obligations, and will normally be evidenced by
leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate
reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
will normally 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 an adverse
impact on these bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the AAA category covering 12-36 months or the
DDD, DD or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-
1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
_______________________________
1 Included in these categories are tax exempt notes rated within the two
highest grades by Fitch, Moody's or S&P. Therefore, these securities,
together with Municipal Obligations rated Baa or better by Moody's or
BBB or better by S&P or Fitch, are taken into account at the time of a
purchase to ensure that the Fund's portfolio meets the 80% minimum
quality standard discussed in the Fund's Prospectus.
2 Included in the Not Rated category are securities comprising 8.0% of the
Fund's market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following
ratings categories: Aaa/AAA (.3%), A (.5%), Baa/BBB (6.8%), Ba/BB (.2%),
B/B (.1%), and F-2/MIG2/P2/SP2/A2 (.1%).
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-97.0% AMOUNT VALUE
________ ________
<S> <C> <C>
Alameda County, COP:
7.25%, 12/1/2014 (Insured; BIGI) (Prerefunded 12/1/2000) (a,b).......... $ 5,980,000 $ 6,748,968
7.25%, 12/1/2015 (Insured; BIGI) (Prerefunded 12/1/2000) (a)............ 4,045,000 4,565,147
Anaheim Public Finance Authority, Revenue,
Tax Allocation 6.45%, 12/28/2018 (Insured; MBIA)........................ 20,000,000 21,085,800
Bay Area Government Association, Tax Allocation Revenue
(California Redevelopment Agency) 6%, 12/15/2024 (Insured; FSA)......... 11,500,000 11,306,915
Bellflower, COP, Refunding
(Bellflower Civic Center) 7.20%, 10/1/2019 (Insured; MBIA).............. 1,475,000 1,595,301
Berkeley, Health Facilities Revenue, Refunding
(Alta Bates Medical Center) 6.55%, 12/1/2022........................... 17,000,000 16,501,560
Brea Public Finance Authority, Revenue, Tax Allocation (Redevelopment
Project):
6.75%, 8/1/2022 (Insured; MBIA) (Prerefunded 8/1/2001) (a).............. 4,625,000 5,140,225
6.75%, 8/1/2022 (Insured; MBIA)......................................... 1,775,000 1,888,281
California:
5.25%, 10/1/2014........................................................ 4,200,000 3,898,482
5.25%, 10/1/2018........................................................ 4,000,000 3,653,800
5.25%, 10/1/2019........................................................ 15,200,000 13,680,304
6.40%, 2/1/2022......................................................... 29,000,000 29,085,840
Refunding 5.625%, 9/1/2024.............................................. 15,650,000 14,783,303
6.375%, 2/1/2027 (Insured; AMBAC)....................................... 30,000,000 30,230,100
California Department of Veteran Affairs, Home Purchase Revenue
8.30%, 8/1/2019......................................................... 1,000,000 1,037,890
California Department of Water Resources,
Water System Revenue (Central Valley Project)
5.25%, 12/1/2024........................................................ 5,000,000 4,487,800
California Educational Facilities Authority, Revenue:
(Carnegie Institution Washington) 5.60%, 10/1/2023...................... 5,420,000 5,044,231
(Claremont Colleges Pooled Facilities) 6.375%, 5/1/2022................. 3,655,000 3,686,360
(Loyola Marymount University) 5.75%, 10/1/2024.......................... 4,750,000 4,505,280
California Health Facilities Financing Authority, Revenue:
(Adventist Health System-West):
6.40%, 3/1/2002 (Insured; MBIA)....................................... 1,955,000 2,110,892
6.50%, 3/1/2003 (Insured; MBIA)....................................... 2,140,000 2,317,813
(Catholic Health Facilities) 5%, 7/1/2008 (Insured; AMBAC).............. 4,500,000 4,270,680
(Downey Community Hospital):
5.625%, 5/15/2008..................................................... 2,500,000 2,467,850
5.75%, 5/15/2015...................................................... 6,750,000 6,296,400
(Episcopal Homes Foundation) 7.75%, 7/1/2018............................ 4,270,000 4,366,502
(Mills-Peninsula Hospital) 7.50%, 1/15/2000 (Prerefunded 1/15/1997) (a). 800,000 834,376
(Refunding, Children's Hospital) 5.375%, 7/1/2020 (Insured; MBIA)....... 8,270,000 7,590,950
(Robert F. Kennedy Medical Center) 7.75%, 3/1/2014 (Prerefunded 3/1/1998) (a) 1,500,000 1,617,810
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
California Health Facilities Financing Authority, Revenue (continued):
(Saint Joseph's Health System) 6.75%, 7/1/2021 (Prerefunded 7/1/2001) (a) $ 8,500,000 $ 9,415,620
(San Diego Hospital Association) 6.125%, 8/1/2022 (Insured; MBIA)....... 4,250,000 4,265,810
(Stanford University):
6.50%, 11/1/2020 (Prerefunded 11/1/2000) (a).......................... 8,975,000 9,790,289
6.50%, 11/1/2020...................................................... 1,025,000 1,063,202
(Unihealth America) 7.625%, 10/1/2015 (Insured; AMBAC).................. 55,000 59,377
California Housing Finance Agency:
Home Mortage Revenue:
6.30%, 2/1/2008....................................................... 2,770,000 2,828,059
6.35%, 2/1/2009....................................................... 2,945,000 2,995,389
6.40%, 2/1/2010....................................................... 3,110,000 3,174,875
8.20%, 8/1/2017....................................................... 115,000 120,021
8.30%, 8/1/2019....................................................... 155,000 161,347
6.70%, 8/1/2025....................................................... 8,405,000 8,570,747
7.125%, 2/1/2026...................................................... 3,690,000 3,836,198
6.55%, 8/1/2026....................................................... 11,225,000 11,508,319
7.65%, 8/1/2029....................................................... 11,150,000 11,649,074
MFHR 6.30%, 8/1/2026 (Insured; AMBAC)................................... 7,150,000 7,130,052
Multi-Unit Rental Housing Revenue 6.85%, 8/1/2015....................... 3,140,000 3,232,442
Single Family Mortgage:
6.25%, 8/1/2014 (Insured; AMBAC)...................................... 3,650,000 3,658,432
6.25%, 2/1/2018 (Insured; FHA)........................................ 2,000,000 2,007,840
6.30%, 8/1/2024....................................................... 8,000,000 8,037,760
6.45%, 8/1/2025....................................................... 15,355,000 15,618,645
California Pollution Control Financing Authority:
PCR:
(Pacific Gas & Electric Co.):
6.35%, 6/1/2009................................................... 5,000,000 5,082,950
5.85%, 12/1/2023 (Insured; AMBAC)................................. 5,000,000 4,818,250
5.85%, 12/1/2023 (Insured; MBIA) ................................. 20,000,000 19,298,600
(Refunding, Atlantic Richfield Project) 5%, 4/1/2008
(LOC; Wachovia Bank of Georgia N.A.) (c).......................... 10,000,000 9,657,900
(Southern California Edison Co.):
6.40%, 12/1/2024.................................................. 12,600,000 12,684,420
6.40%, 12/1/2024 (Insured; AMBAC)................................. 4,125,000 4,202,055
6.40%, 12/1/2024 (Insured; FGIC).................................. 10,000,000 10,186,800
SWDR:
(Browning Ferris Industry) 6.75%, 9/1/2019............................ 3,400,000 3,532,022
(Keller Canyon Landfill Co. Project) 6.875%, 11/1/2027................ 7,440,000 7,816,166
California Public Works Board, LR:
(Department of Corrections, California State Prison, Susanville)
5.375%, 6/1/2018 (Insured; MBIA)...................................... 7,385,000 6,745,459
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
California Public Works Board, LR (continued):
(Department of Corrections, Calipatria State Prison, Imperial County)
6.50%, 9/1/2017 (Insured; MBIA)....................................... $ 10,000,000 $ 10,777,300
(Department of Corrections, Corcoran II)
5.25%, 1/1/2021 (Insured; AMBAC)...................................... 12,000,000 10,857,120
(Various University of California Projects):
5.50%, 6/1/2014....................................................... 6,750,000 6,286,815
6.70%, 10/1/2017...................................................... 8,000,000 8,396,960
6.375%, 10/1/2019..................................................... 12,775,000 13,015,553
California State University Foundation, Revenue (Sacramento Auxiliary)
5.375%, 10/1/2027 (Insured; MBIA)....................................... 2,530,000 2,309,232
California Statewide Community Development Authority, Revenue,
COP (Saint Joseph Health System):
Refunding 5.50%, 7/1/2009 (Insured; MBIA)............................. 8,645,000 8,408,992
Refunding 5.50%, 7/1/2010 (Insured; MBIA)............................. 9,115,000 8,760,609
6.50%, 7/1/2015....................................................... 7,000,000 7,253,470
Central California Joint Powers Health Financing Authority, COP, Refunding
(Community Hospitals of Central California Project) 5.25%, 2/1/2013..... 5,750,000 5,123,825
Central Coast Water Authority, Revenue
(State Water Project Regional Facilities) 6.60%, 10/1/2022 (Insured; AMBAC) 3,800,000 4,038,222
Chico Public Financing Authority, Revenue
(Southeast Chico Redevelopment Project) 6.625%, 4/1/2021 (Insured; FGIC) 2,000,000 2,098,820
Contra Costa County, COP (Merrithew Memorial Hospital) 6.60%, 11/1/2012..... 10,000,000 10,414,800
Contra Costa Water District, Water Revenue 5%, 10/1/2024 (Insured; MBIA).... 13,000,000 11,246,040
Corona Community Facilities District, Special Tax, Refunding:
7.60%, 9/1/2013......................................................... 5,755,000 5,993,487
7.60%, 9/1/2017......................................................... 3,000,000 3,074,820
7.70%, 9/1/2019......................................................... 2,000,000 2,093,400
Dos Palos Public Financing Authority, Local Agency Revenue 7.90%, 10/1/2020. 3,315,000 2,884,116
East Bay Municipal Utilities District, Revenue:
Wastewater Treatment System:
Refunding 5.50%, 6/1/2013 (Insured; AMBAC)............................ 16,900,000 16,145,922
Refunding 5.55%, 6/1/2020 (Insured; AMBAC)............................ 26,500,000 24,770,345
7.20%, 6/1/2020 (Insured; AMBAC) (Prerefunded 6/1/2000) (a)........... 3,325,000 3,698,830
Water System, Refunding 4.75%, 6/1/2021 (Insured; FGIC)................. 38,435,000 32,102,065
Eldorado County Public Financing Authority, Revenue, Refunding:
5.50%, 2/15/2016 (Insured; FGIC)........................................ 2,000,000 1,901,740
5.50%, 2/15/2021 (Insured; FGIC)........................................ 3,000,000 2,813,220
Emeryville Public Financing Authority, Revenue
(Shellmound Park Redevelopment Project) 6.80%, 5/1/2024................. 2,365,000 2,404,874
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
Fairfield, Water Revenue, Refunding:
5.25%, 4/1/2012 (Insured; AMBAC)........................................ $ 4,310,000 $ 4,098,336
5.25%, 4/1/2013 (Insured; AMBAC)........................................ 4,535,000 4,280,450
5.25%, 4/1/2014 (Insured; AMBAC)........................................ 2,500,000 2,344,275
Folsom, Special Tax (Community Facilities District Number 3) 7.80%, 12/1/2015 1,900,000 1,984,835
Folsom Public Financing Authority, Local Agency Revenue
7.90%, 10/1/2019........................................................ 18,120,000 18,702,920
Fontana, Redevelopment Agency, MFHR, Refunding
(Village Drive) 7.15%, 5/1/2028 (Insured; FHA).......................... 3,955,000 4,104,420
Foothill, Eastern Transportation Corridor Agency, Toll Road Revenue
6%, 1/1/2034............................................................ 19,775,000 18,455,217
Fresno, Sewer Revenue 5.25%, 9/1/2019 (Insured; AMBAC)...................... 3,600,000 3,312,072
Hesperia Water District, COP, Refunding
(Water Facilities Improvement Project) 7.15%, 6/1/2026 (Insured; FGIC).. 4,500,000 4,937,220
Industry Urban Development Agency, Refunding (Civic Recreational Project):
7.375%, 5/1/2015 (Prerefunded 5/1/1997) (a)............................. 765,000 805,377
7.375%, 5/1/2015........................................................ 235,000 242,520
Inglewood, HR (Daniel Freeman Hospital, Inc.) 6.75%, 5/1/2013............... 6,300,000 6,483,141
La Verne Community Facilities District, Special Tax
(Koll Business Center) 7.875%, 3/1/2014................................. 3,625,000 3,835,721
Lake Elsinore Public Financing Authority, Revenue:
Local Agency 8%, 10/1/2020.............................................. 7,670,000 7,022,115
Tax Allocation (Lake Elsinore Redevelopment Project)
6.25%, 2/1/2019 (Insured; FGIC)....................................... 4,220,000 4,262,580
Lincoln Unified School Distict, Special Tax, Refunding (Community Facilities
District Number 1) 5.625%, 9/1/2021 (Insured; AMBAC) (d)................ 4,500,000 4,289,940
Loma Linda, HR, Refunding (Loma Linda University Medical Center Project)
7%, 12/1/2015 (Insured; AMBAC).......................................... 12,355,000 13,303,988
Los Angeles Community Redevelopment Agency, Tax Allocation
(Hollywood Redevelopment Project) 6.10%, 7/1/2022 (Insured; MBIA)....... 4,900,000 4,864,916
Los Angeles County, COP:
(Disney Parking Project)
6.50%, 3/1/2023....................................................... 7,440,000 7,359,946
(Edmund D. Edelman Childrens' Court) 6%, 4/1/2012 (Insured; AMBAC)...... 9,000,000 9,142,290
(Van Nuys Courthouse Project) 9%, 6/1/2015 (Prerefunded 6/1/1996) (a)... 225,000 229,500
Los Angeles County Sanitation Districts Financing Authority, Revenue
(Capital Projects):
5.375%, 10/1/2013..................................................... 4,000,000 3,759,160
5.25%, 10/1/2019...................................................... 2,305,000 2,071,895
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
Los Angeles Department Water and Power, Revenue:
Electric Plant:
5.30%, 2/15/2025...................................................... $ 5,690,000 $ 5,093,802
Crossover Refunding:
5.375%, 9/1/2023.................................................. 2,000,000 1,809,540
5.25%, 11/15/2026 (Insured; MBIA)................................. 15,000,000 13,254,000
5.875%, 9/1/2030 (Insured; FGIC).................................. 4,500,000 4,395,780
7.10%, 1/15/2031...................................................... 2,160,000 2,389,759
Waterworks, Refunding:
5.90%, 5/15/2011 (Insured; FGIC)...................................... 2,190,000 2,239,056
6.40%, 5/15/2028...................................................... 2,435,000 2,512,993
6.375%, 7/1/2034 (Insured; MBIA)...................................... 12,000,000 12,368,040
Los Angeles Harbor Department, Revenue:
6.625%, 8/1/2019........................................................ 3,855,000 4,022,268
6.625%, 8/1/2019 (Insured; AMBAC)....................................... 6,000,000 6,240,660
6.625%, 8/1/2025........................................................ 17,780,000 18,551,474
Los Angeles Municipal Improvement Corp., LR, Refunding
(Central Library Project):
5.375%, 6/1/2011...................................................... 3,725,000 3,453,410
6.30%, 6/1/2016....................................................... 3,500,000 3,509,800
6.30%, 6/1/2018....................................................... 4,250,000 4,251,318
6.35%, 6/1/2020....................................................... 7,700,000 7,716,709
Menlo Park Community Development Agency, Tax Allocation, Refunding
(Las Puglas Community Development Project)
5.375%, 6/1/2022 (Insured; AMBAC)....................................... 11,825,000 10,821,885
Metropolitan Water District of Southern California, Waterworks Revenue:
6.75%, 7/1/2018 (Prerefunded 7/1/2001) (a).............................. 4,750,000 5,261,670
Refunding 4.75%, 7/1/2021 (Insured; MBIA)............................... 31,000,000 25,883,450
Modesto, Multi-Family Housing Mortage Revenue, Refunding 6.40%, 6/1/2029.... 7,723,000 7,824,094
Moreno Valley Unified School District,
Community Facilities District, Special Tax 7.70%, 8/15/2014............. 9,000,000 8,928,900
Moulton Niguel Water District (Improvement District Number 6)
7.25%, 4/1/2016 (Insured; AMBAC) (Prerefunded 4/1/2000) (a)............. 5,000,000 5,556,500
Mount Diablo Hospital District, Revenue
6.125%, 12/1/2020 (Insured; AMBAC) (Prerefunded 12/1/2000) (a).......... 5,000,000 5,396,750
Mount Diablo Unified School District, Community Facilities District, Special
Tax
7.05%, 8/1/2020 (Insured; FGIC)......................................... 3,500,000 3,800,755
Northern California, Transmission Revenue
(California-Oregon Transmission Project):
5.25%, 5/1/2020 (Insured; MBIA)....................................... 14,000,000 12,536,160
6%, 5/1/2024 (Insured; MBIA).......................................... 5,000,000 4,929,750
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
Northern California Power Agency, Power Revenue:
(Hydroelectric Project) 7%, 7/1/2016 (Insured; AMBAC) (Prerefunded 1/1/2016) (a) $ 670,000 $ 773,227
Refunding 7.50%, 7/1/2023 (Insured; AMBAC) (Prerefunded 7/1/2021) (a)... 375,000 439,594
Northridge Water District, COP, Revenue
5.25%, 2/1/2018 (Insured; AMBAC)........................................ 2,500,000 2,269,875
Palmdale Elementary School District, Special Tax,
Community Facilities District number 90:
5.30%, 8/1/2014 (Insured; FSA)........................................ 2,500,000 2,327,375
5.40%, 8/1/2025 (Insured; FSA)........................................ 3,500,000 3,214,330
Pasadena, COP, Refunding (Capital Project) 5.75%, 1/1/2013.................. 1,000,000 960,220
Pasadena Community Development Commission, MFHR, (Civic Center)
6.45%, 12/1/2021 (Insured; FSA)......................................... 15,000,000 15,117,000
Port of Oakland, Revenue:
Port 6.50%, 11/1/2016 (Insured; MBIA)................................... 8,300,000 8,556,802
Special Facilities
(Mitsui O.S.K. Lines Ltd.) 6.80%, 1/1/2019 (LOC; Industrial Bank of Japan) (c) 2,000,000 2,069,220
Rancho Cucamonga Redevelopment Agency, Tax Allocation
(Rancho Cucamonga Redevelopment Project):
7.125%, 9/1/2019 (Insured; MBIA)...................................... 2,455,000 2,648,577
6.75%, 9/1/2020 (Insured; MBIA)....................................... 1,665,000 1,756,708
Redding Redevelopment Agency, TAN, Refunding
(Canby, Hilltop, Cypress) 5%, 9/1/2023 (Insured; FSA)................... 1,285,000 1,098,983
Riverside County Asset Leasing Corp., Leasehold Revenue
(Riverside County Hospital Project) 6.25%, 6/1/2019..................... 7,500,000 7,500,975
Riverside County Community Facilities District, Special Tax:
7.80%, 9/1/2015 (e)..................................................... 6,750,000 3,375,000
8.25%, 9/1/2016......................................................... 4,730,000 4,651,482
Sacramento, COP (Refunding-Public Facilities Project) 6%, 7/1/2012.......... 6,000,000 5,965,980
Sacramento Area Flood Control Agency (Capital Assessment District Number 2)
5.375%, 10/1/2025 (Insured; FGIC)....................................... 2,500,000 2,286,950
Saddleback Community College District, COP
7%, 8/1/2019 (Insured; BIGI)............................................ 2,875,000 3,079,441
San Bernardino County, COP:
(Capital Facilities Project)
6.875%, 8/1/2024...................................................... 5,000,000 5,799,000
(Refunding, Medical Center Financing Project):
5.50%, 8/1/2015 (Insured; MBIA)....................................... 7,030,000 6,697,481
5.50%, 8/1/2022 (Insured; MBIA)....................................... 19,780,000 18,567,486
5.50%, 8/1/2024....................................................... 4,400,000 3,862,496
5%, 8/1/2028 (Insured; MBIA).......................................... 9,000,000 7,695,000
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
San Bernardino County, COP (continued):
(West Valley Detention Center)
5.90%, 11/1/2001 (Insured; MBIA)...................................... $ 1,565,000 $ 1,657,272
San Diego Public Facilities Financing Authority,
Sewer Revenue:
5%, 5/15/2020 (Insured; FGIC)......................................... 20,000,000 17,486,400
5%, 5/15/2025 (Insured; FGIC)......................................... 36,850,000 31,838,769
San Elijo Joint Powers Authority, Revenue
(San Elijo Water Pollution Control Project)
7%, 3/1/2020 (Insured; FGIC) (Prerefunded 3/1/2000) (a)................. 5,500,000 6,055,170
San Francisco Bay Area Rapid Transportation District, Sales Tax Revenue
5.50%, 7/1/2020 (Insured; FGIC)......................................... 10,830,000 10,163,847
San Francisco City and County, SFMR
(FNMA/GNMA Mortgage Backed Securities Program) 7.45%, 1/1/2024.......... 260,000 270,117
San Francisco City and County Airports Commission, International Airport
Revenue,
Refunding:
6.10%, 5/1/2003 (Insured; AMBAC)...................................... 3,000,000 3,209,790
6.20%, 5/1/2004 (Insured; AMBAC)...................................... 1,500,000 1,613,940
5.75%, 5/1/2020 (Insured; FGIC)....................................... 24,005,000 22,938,938
San Francisco City and County Public Utilities Commission, Water Revenue
6.50%, 11/1/2017........................................................ 3,500,000 3,610,670
San Francisco City and County Redevelopment Agency, Multi-Family Revenue
(South Beach Project) 5.50%, 3/1/2014................................... 4,500,000 4,279,410
San Gabriel Valley Schools Financing Authority, Revenue, Refunding
(Pomona Unified School District) 5.50%, 2/1/2024........................ 4,500,000 4,038,975
San Jose Redevelopment Agency, Tax Allocation
(Redevelopment Project) 5.75%, 8/1/2024................................. 10,525,000 9,837,297
San Marcos Public Facilities Authority, Tax Allocation Revenue
6%, 1/1/2006 (Insured; FSA) (Prerefunded 1/1/2002) (a).................. 10,500,000 11,311,650
San Mateo County, COP (Capital Projects Program)
6.50%, 7/1/2017 (Insured; MBIA) (Prerefunded 7/1/2001) (a).............. 6,000,000 6,587,820
Santa Barbara, COP, Refunding (Water System Improvement Project)
6.70%, 4/1/2027 (Insured; AMBAC)........................................ 4,000,000 4,268,800
Santa Clara County, COP (Capital Project)
6.25%, 10/1/2016 (Insured; AMBAC)....................................... 10,000,000 10,110,800
Santa Cruz County, COP (Capital Facilities Project)
6.70%, 9/1/2020 (Insured; MBIA)......................................... 5,000,000 5,310,900
Santa Cruz County Public Financing Authority, Revenue, Refunding
7.10%, 9/1/2021 (Insured; MBIA)......................................... 6,500,000 7,035,340
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
Santa Monica, Malibu Unified School District
(Public School Facilities Reconstruction Projects) 5.50%, 8/1/2018...... $ 9,585,000 $ 8,895,647
Santa Rosa:
Mortgage Revenue, Refunding
(Redwood Park Apartments Projects) 5.625%, 1/1/2026 (Insured; FHA).... 3,310,000 3,104,217
Wastewater Revenue, Refunding (Subregional Wastewater Project)
5%, 9/1/2022 (Insured; FGIC).......................................... 10,000,000 8,691,400
Southern California Public Power Authority, Revenue,
Transmission Project (Refunding - Southern Transmission Project)
6.125%, 7/1/2018........................................................ 1,470,000 1,461,107
Southern California Rapid Transportation District, COP (Workers Compensation
Fund)
6.50%, 7/1/2007 (Insured; MBIA)......................................... 22,900,000 24,517,427
Tracy Area Public Facilities Financing Agency, Special Tax, Refunding,
(Community Facilities District Number 81-1-H)
5.875%, 10/1/2019 (Insured; MBIA)....................................... 7,500,000 7,377,750
University of California:
COP (UCLA Central Chiller/Cogeneration)
6.25%, 11/1/2009 (Prerefunded 11/1/1999) (a).......................... 3,000,000 3,219,419
Revenue (Multiple Purpose Projects):
5.125%, 9/1/2013 (Insured; AMBAC)..................................... 4,845,000 4,449,405
5%, 9/1/2014 (Insured; AMBAC)......................................... 5,835,000 5,219,407
5.125%, 9/1/2018 (Insured; AMBAC)..................................... 7,670,000 6,769,541
5%, 9/1/2023 (Insured; AMBAC)......................................... 10,000,000 8,552,400
West Basin Municipal Water District, COP
6.85%, 8/1/2016 (Insured; AMBAC) (Prerefunded 8/1/2000) (a)............. 6,000,000 6,617,639
________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $1,281,508,804)................................................... $1,288,673,380
========
SHORT-TERM MUNICIPAL INVESTMENTS-3.0%
California Health Facilities Financing Authority, Revenue, VRDN
(Catholic Health Care) 3.40% (f)........................................ $ 5,500,000 $ 5,500,000
California Pollution Control Financing Authority, RRR, VRDN:
(Delano Project):
3.90% (LOC; ABN AMRO Bank N.V.) (c,f)................................. 4,400,000 4,400,000
3.90% (LOC; ABN AMRO Bank N.V.) (c,f)................................. 4,800,000 4,800,000
(Refunding, Ultrapower-Rocklin) 3.95% (f)............................. 2,100,000 2,100,000
Irvine Ranch Water District, Refunding, VRDN
3.45% (f)............................................................... 300,000 300,000
Kern County, COP, VRDN (Kern Public Facilities Project)
3.40% (f)............................................................... 7,955,000 7,955,000
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
Los Angeles County, Metropolitian Transportation Authority, Sales Tax Revenue,
Refunding VRDN 3.35% (Insured; MBIA) (f)................................ $ 7,000,000 $ 7,000,000
Metropolitan Water District of Southern California, Waterworks Revenue,
Refunding,
VRDN 3.35% (Insured; AMBAC) (f)......................................... 7,200,000 7,200,000
________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $39,255,000)...................................................... $ 39,255,000
========
TOTAL INVESTMENTS-100.0%
(cost $1,320,763,804)................................................... $1,327,928,380
========
</TABLE>
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LR Lease Revenue
BIGI Bond Investors Guaranty Insurance MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
FGIC Financial Guaranty Insurance Company MFHR Multi-Family Housing Revenue
FHA Federal Housing Administration PCR Pollution Control Revenue
FNMA Federal National Mortgage Association RRR Resources Recovery Revenue
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GNMA Government National Mortgage Association SWDR Solid Waste Disposal Revenue
HR Hospital Revenue TAN Tax Anticipation Notes
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- ------- ----------------- -------------------
<S> <C> <C> <C>
AAA Aaa AAA 60.3%
AA Aa AA 11.4
A A A 17.2
BBB Baa BBB 3.4
F1 MIG1/P1 SP1/A1 3.0
Not Rated(h) Not Rated(h) Not Rated(h) 4.7
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Wholly held by custodian as collateral for delayed-delivery
security.
(c) Secured by letters of credit.
(d) Purchased on a delayed-delivery basis.
(e) Non-income producing security; interest payment in default.
(f) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $1,320,763,804)-see statement................................... $1,327,928,380
Receivable for investment securities sold............................... 25,891,155
Interest receivable..................................................... 24,397,231
Prepaid expenses........................................................ 25,512
_______
1,378,242,278
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries......................... $ 748,962
Due to Custodian........................................................ 1,773,364
Payable for investment securities purchased............................. 4,339,271
Payable for Common Stock redeemed....................................... 13,662
Accrued expenses and other liabilities.................................. 93,215 6,968,474
_____ _______
NET ASSETS ................................................................ $1,371,273,804
========
REPRESENTED BY:
Paid-in capital......................................................... $1,394,021,530
Accumulated net realized (loss) on investments.......................... (29,912,302)
Accumulated net unrealized appreciation on investments-Note 3........... 7,164,576
_______
NET ASSETS at value applicable to 97,979,939 shares outstanding
(300 million shares of $.01 par value Common Stock authorized).......... $1,371,273,804
========
NET ASSET VALUE, offering and redemption price per share
($1,371,273,804 / 97,979,939 shares).................................... $14.00
========
See notes to financial statements.
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED MAY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 88,488,803
EXPENSES:
Management fee-Note 2(a).............................................. $ 8,764,933
Shareholder servicing costs-Note 2(b)................................. 978,912
Custodian fees........................................................ 104,563
Professional fees..................................................... 89,769
Prospectus and shareholders' reports.................................. 65,133
Directors' fees and expenses-Note 2(c)................................ 60,977
Registration fees..................................................... 27,194
Miscellaneous......................................................... 20,849
______
TOTAL EXPENSES.................................................... 10,112,330
______
INVESTMENT INCOME-NET............................................. 78,376,473
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 5,971,617
Net unrealized (depreciation) on investments............................ (57,311,024)
______
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (51,339,407)
______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 27,037,066
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MAY 31,
__________________________________
1995 1996
_______ _______
<S> <C> <C>
OPERATIONS:
Investment income-net............................................. $ 88,762,640 $ 78,376,473
Net realized gain (loss) on investments........................... (35,847,441) 5,971,617
Net unrealized appreciation (depreciation) on investments for the year 28,991,441 (57,311,024)
_______ _______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ 81,906,640 27,037,066
_______ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net............................................. (88,762,640) (78,376,473)
Net realized gain on investments.................................. (5,043,994) --
_______ _______
TOTAL DIVIDENDS................................................. (93,806,634) (78,376,473)
_______ _______
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................................... 774,956,088 1,244,233,021
Dividends reinvested.............................................. 59,447,230 49,530,321
Cost of shares redeemed........................................... (923,531,181) (1,428,904,541)
_______ _______
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS........ (89,127,863) (135,141,199)
_______ _______
TOTAL (DECREASE) IN NET ASSETS.............................. (101,027,857) (186,480,606)
NET ASSETS:
Beginning of year................................................. 1,658,782,267 1,557,754,410
_______ _______
End of year....................................................... $ 1,557,754,410 $ 1,371,273,804
======== ========
SHARES SHARES
_______ _______
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 54,884,789 86,863,106
Shares issued for dividends reinvested............................ 4,208,309 3,452,140
Shares redeemed................................................... (65,606,330) (99,479,542)
_______ _______
NET (DECREASE) IN SHARES OUTSTANDING............................ (6,513,232) (9,164,296)
======== ========
</TABLE>
See notes to financial statements.
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 3 of the Fund's Prospectus
dated September 3, 1996.
See notes to financial statements.
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus California Tax Exempt Bond Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified
open-end management investment company. The Fund's investment objective is to
provide investors with the maximum amount of current income exempt from
Federal and State of California income taxes as is consistent with the
preservation of capital. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares, which are sold to the public without a
sales charge.
(A) PORTFOLIO VALUATION: The Fund's investments are valued each business
day by an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of municipal securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations
held by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund has an unused capital loss carryover of approximately $29,996,000
available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
May 31, 1996. If not applied, $2,069,000 of the carryover expires in fiscal
2003 and $27,927,000 of the carryover expires in 2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Fund's average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed 11\2% of the average value of the Fund's net
assets for any full fiscal year. There was no expense reimbursement for the
year ended May 31, 1996.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the year ended May 31, 1996, the Fund was charged an aggregate of
$377,878 pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $216,265 for the period from
December 1, 1995 through May 31, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $4,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended May 31, 1996, amounted
to $778,694,036 and $883,180,162, respectively.
At May 31, 1996, accumulated net unrealized appreciation on investments
was $7,164,576, consisting of $33,517,242 gross unrealized appreciation and
$26,352,666 gross unrealized depreciation.
At May 31, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus California Tax Exempt Bond Fund, Inc., including the statement of
investments, as of May 31, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of May 31, 1996 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus California Tax Exempt Bond Fund, Inc. at May 31, 1996,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
July 5, 1996
<TABLE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments--96.4% Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
Alameda County, COP:
7.25%, 12/1/2014 (Insured; BIGI) (Prerefunded 12/1/2000) (a).............. $ 5,980,000 $ 6,765,054
7.25%, 12/1/2015 (Insured; BIGI) (Prerefunded 12/1/2000) (a).............. 4,045,000 4,576,028
Anaheim Public Finance Authority, Revenue,
Tax Allocation 6.45%, 12/28/2018 (Insured; MBIA).......................... 20,000,000 21,893,800
Bay Area Government Association, Tax Allocation Revenue
(California Redevelopment Agency Pool) 6%, 12/15/2024 (Insured; FSA) (b).. 11,500,000 12,033,715
Bellflower, COP, Refunding
(Bellflower Civic Center) 7.20%, 10/1/2019 (Insured; MBIA)................ 1,475,000 1,609,830
Berkeley, Health Facilities Revenue, Refunding
(Alta Bates Medical Center) 6.55%, 12/1/2022 ............................ 17,000,000 17,168,300
Brea Public Finance Authority, Revenue, Tax Allocation (Redevelopment Project):
6.75%, 8/1/2022 (Insured; MBIA) (Prerefunded 8/1/2001) (a)................ 4,625,000 5,205,900
6.75%, 8/1/2022 (Insured; MBIA)........................................... 1,775,000 1,968,315
California:
5.25%, 10/1/2019.......................................................... 15,200,000 14,756,160
Refunding 5.25%, 6/1/2021 (Insured; AMBAC)................................ 22,060,000 21,569,165
Refunding 5.625%, 9/1/2024................................................ 15,650,000 15,836,548
California Department of Veteran Affairs, Home Purchase Revenue 8.30%, 8/1/2019 1,000,000 1,044,460
California Department of Water Resources,
Water System Revenue (Central Valley Project):
5.75%, 12/1/2016........................................................ 9,705,000 9,908,223
5.25%, 12/1/2024........................................................ 9,670,000 9,441,305
California Educational Facilities Authority, Revenue:
(Claremont Colleges Pooled Facilities) 6.375%, 5/1/2022................... 3,655,000 3,841,880
(Refunding, Santa Clara University):
5.75%, 9/1/2021 (Insured; MBIA)......................................... 3,350,000 3,417,101
5.75%, 9/1/2026 (Insured; MBIA)......................................... 6,775,000 6,910,703
California Health Facilities Financing Authority, Revenue:
(Adventist Health System-West):
6.40%, 3/1/2002 (Insured; MBIA)......................................... 1,955,000 2,132,494
6.50%, 3/1/2003 (Insured; MBIA)......................................... 2,140,000 2,336,687
(Catholic Health Facilities) 5%, 7/1/2008 (Insured; AMBAC)................ 4,500,000 4,464,675
(Downey Community Hospital):
5.625%, 5/15/2008....................................................... 2,500,000 2,534,350
5.75%, 5/15/2015........................................................ 5,750,000 5,714,293
(Episcopal Homes Foundation) 7.75%, 7/1/2018.............................. 4,270,000 4,347,842
(Mills-Peninsula Hospital) 7.50%, 1/15/2000 (Prerefunded 1/15/1997) (a)... 800,000 819,864
(Refunding, Children's Hospital) 5.375%, 7/1/2020 (Insured; MBIA)......... 17,205,000 16,910,622
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
California Health Facilities Financing Authority, Revenue (continued):
(Saint Joseph's Health System) 6.75%, 7/1/2021 (Prerefunded 7/1/2001) (a). $ 8,500,000 $ 9,511,585
(San Diego Hospital Association) 6.125%, 8/1/2022 (Insured; MBIA)......... 4,250,000 4,431,603
(Stanford University):
6.50%, 11/1/2020 (Prerefunded 11/1/2000) (a)............................ 8,975,000 9,881,924
6.50%, 11/1/2020........................................................ 1,025,000 1,093,521
(Unihealth America) 7.625%, 10/1/2015 (Insured; AMBAC).................... 55,000 59,340
California Housing Finance Agency:
Home Mortage Revenue:
6.30%, 2/1/2008......................................................... 2,760,000 2,877,383
6.35%, 2/1/2009......................................................... 2,935,000 3,048,526
6.40%, 2/1/2010......................................................... 3,100,000 3,233,579
8.20%, 8/1/2017......................................................... 115,000 119,306
8.30%, 8/1/2019......................................................... 140,000 146,020
6.70%, 8/1/2025......................................................... 8,405,000 8,808,104
7.125%, 2/1/2026........................................................ 3,690,000 3,929,924
6.55%, 8/1/2026......................................................... 11,225,000 11,730,462
6.40%, 8/1/2027 (Insured; MBIA)......................................... 20,000,000 20,594,800
7.65%, 8/1/2029......................................................... 11,150,000 11,679,625
MFHR 6.30%, 8/1/2026 (Insured; AMBAC)..................................... 7,150,000 7,345,481
Multi-Unit Rental Housing Revenue 6.85%, 8/1/2015......................... 3,140,000 3,280,264
Single Family Mortgage:
6.25%, 8/1/2014 (Insured; AMBAC)........................................ 3,640,000 3,714,292
6.30%, 8/1/2024......................................................... 8,000,000 8,182,000
6.45%, 8/1/2025......................................................... 15,355,000 15,805,823
California Pollution Control Financing Authority:
PCR:
(Pacific Gas & Electric Co.)
6.35%, 6/1/2009 (Insured; MBIA)....................................... 5,000,000 5,377,550
(Refunding, Atlantic Richfield Project)
5%, 4/1/2008 (LOC; Wachovia Bank of Georgia N.A.) (c)................. 10,000,000 9,905,500
(Refunding, San Diego Gas and Electric) 5.90%, 6/1/2014 (Insured; MBIA)... 41,830,000 45,173,472
(Southern California Edison Co.):
6.40%, 12/1/2024........................................................ 12,600,000 13,193,586
6.40%, 12/1/2024 (Insured; AMBAC)....................................... 4,125,000 4,399,890
SWDR (Browning Ferris Industry) 6.75%, 9/1/2019........................... 3,400,000 3,648,030
California Public Works Board, LR:
(Department of Corrections, California State Prison, Susanville)
5.25%, 6/1/2015 (Insured; FSA).......................................... 5,455,000 5,445,399
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
California Public Works Board, LR (continued):
(Department of Corrections, Calipatria State Prison, Imperial County)
6.50%, 9/1/2017 (Insured; MBIA)......................................... $ 10,000,000 $ 11,560,800
(Department of Corrections, Corcoran II)
5.25%, 1/1/2021 (Insured; AMBAC)........................................ 27,405,000 26,763,175
(Department of Corrections, Madera State Prison)
5.50%, 6/1/2015 (Insured; MBIA)......................................... 4,500,000 4,629,465
(Refunding, Various Community College Projects)
5.625%, 3/1/2016 (Insured; AMBAC)....................................... 10,650,000 10,710,705
(Various University of California Projects
6.70%, 10/1/2017 (Prerefunded 10/1/2002) (a,b).......................... 8,000,000 9,100,560
6.375%, 10/1/2019....................................................... 12,775,000 13,619,428
California State University and Colleges, Student Union Revenue, Refunding (Sacramento)
5.625%, 3/1/2021 (Insured; MBIA).......................................... 2,250,000 2,254,995
California State University Foundation, Revenue (Sacramento Auxiliary)
5.375%, 10/1/2027 (Insured; MBIA)......................................... 2,530,000 2,496,047
California Statewide Community Development Authority, Revenue,
COP (Saint Joseph Health System):
Refunding 5.50%, 7/1/2009 (Insured; MBIA)............................... 8,645,000 8,804,414
Refunding 5.50%, 7/1/2010 (Insured; MBIA)............................... 9,115,000 9,220,187
6.50%, 7/1/2015......................................................... 7,000,000 7,583,240
Central California Joint Powers Health Financing Authority, COP, Refunding
(Community Hospitals of Central California Project) 5.25%, 2/1/2013....... 5,750,000 5,414,775
Central Coast Water Authority, Revenue
(State Water Project Regional Facilities):
5%, 10/1/2016 (Insured; AMBAC).......................................... 6,420,000 6,165,832
6.60%, 10/1/2022 (Insured; AMBAC)....................................... 3,800,000 4,318,966
Chico Public Financing Authority, Revenue
(Southeast Chico Redevelopment Project) 6.625%, 4/1/2021 (Insured; FGIC).. 2,000,000 2,164,400
Contra Costa County, COP (Merrithew Memorial Hospital) 6.60%, 11/1/2012...... 10,000,000 10,681,000
Contra Costa Water District, Water Revenue:
5.50%, 10/1/2019 (Insured; MBIA).......................................... 5,000,000 4,951,500
5%, 10/1/2024 (Insured; MBIA)............................................. 14,000,000 13,168,400
Corona Community Facilities District, Special Tax, Refunding:
7.60%, 9/1/2013........................................................... 5,755,000 6,071,410
7.60%, 9/1/2017........................................................... 3,000,000 3,121,470
7.70%, 9/1/2019........................................................... 2,000,000 2,119,140
Dos Palos Public Financing Authority, Local Agency Revenue 7.90%, 10/1/2020.. 1,000,000 846,830
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
East Bay Municipal Utilities District, Revenue:
Wastewater Treatment System:
Refunding 5.50%, 6/1/2013 (Insured; AMBAC).............................. $16,900,000 $ 16,683,680
Refunding 5.55%, 6/1/2020 (Insured; AMBAC).............................. 26,500,000 25,821,335
7.20%, 6/1/2020 (Insured; AMBAC) (Prerefunded 6/1/2000) (a)............. 3,325,000 3,716,652
Water System, Refunding:
6%, 6/1/2012 (Insured; MBIA) (b)........................................ 12,100,000 12,722,061
4.75%, 6/1/2021 (Insured; FGIC)......................................... 43,435,000 39,541,052
5%, 6/1/2026 (Insured; FGIC)............................................ 6,000,000 5,635,200
Eldorado County Public Financing Authority, Revenue, Refunding:
5.50%, 2/15/2016 (Insured; FGIC).......................................... 9,000,000 9,002,880
5.50%, 2/15/2021 (Insured; FGIC).......................................... 10,000,000 9,939,500
Emeryville Public Financing Authority, Revenue
(Shellmound Park Redevelopment Project) 6.80%, 5/1/2024................... 2,365,000 2,519,671
Escondido Union High School District:
Zero Coupon, 11/1/2015 (Insured; MBIA).................................... 6,250,000 2,201,938
Zero Coupon, 11/1/2017 (Insured; MBIA).................................... 4,000,000 1,246,800
Fairfield, Water Revenue, Refunding:
5.25%, 4/1/2012 (Insured; AMBAC).......................................... 4,310,000 4,314,784
5.25%, 4/1/2013 (Insured; AMBAC).......................................... 4,535,000 4,517,450
Folsom, Special Tax (Community Facilities District Number 3) 7.80%, 12/1/2015 1,900,000 2,023,956
Folsom Public Financing Authority, Local Agency Revenue
7.90%, 10/1/2019.......................................................... 18,120,000 18,743,872
Fremont Unified School District, Alameda County
5.875%, 8/1/2020 (Insured; MBIA).......................................... 12,750,000 13,140,023
Fresno, Sewer Revenue 5.25%, 9/1/2019 (Insured; AMBAC)....................... 3,850,000 3,831,944
Hesperia Water District, COP, Refunding
(Water Facilities Improvement Project) 7.15%, 6/1/2026 (Insured; FGIC).... 4,500,000 5,086,980
Industry Urban Development Agency, Refunding (Civic Recreational Project):
7.375%, 5/1/2015 (Prerefunded 5/1/1997) (a)............................... 765,000 792,502
7.375%, 5/1/2015.......................................................... 235,000 241,636
Inglewood, HR (Daniel Freeman Hospital, Inc.) 6.75%, 5/1/2013................ 6,300,000 6,764,625
La Verne Community Facilities District, Special Tax
(Koll Business Center) 7.875%, 3/1/2014................................... 3,625,000 3,862,981
Lake Elsinore Public Financing Authority, Revenue:
Local Agency 8%, 10/1/2020................................................ 7,670,000 5,624,411
Tax Allocation (Lake Elsinore Redevelopment Project)
6.25%, 2/1/2019 (Insured; FGIC)......................................... 4,220,000 4,407,621
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
Lincoln Unified School Distict, Special Tax, Refunding (Community Facilities
District Number 1) 5.625%, 9/1/2021 (Insured; AMBAC)...................... $ 8,785,000 $ 8,806,611
Loma Linda, HR, Refunding (Loma Linda University Medical Center Project)
7%, 12/1/2015 (Insured; AMBAC)............................................ 12,355,000 13,461,390
Los Angeles Community Redevelopment Agency, Tax Allocation
(Hollywood Redevelopment Project) 6.10%, 7/1/2022 (Insured; MBIA)......... 4,900,000 5,124,910
Los Angeles County, COP:
(Disney Parking Project)
6.50%, 3/1/2023......................................................... 7,440,000 7,637,160
(Edmund D. Edelman Childrens' Court) 6%, 4/1/2012 (Insured; AMBAC)........ 9,000,000 9,414,360
Los Angeles Department of Water and Power,
Waterworks Revenue, Refunding:
5.90%, 5/15/2011 (Insured; FGIC)........................................ 2,190,000 2,323,502
6.40%, 5/15/2028........................................................ 2,435,000 2,570,216
6.375%, 7/1/2034 (Insured; MBIA)........................................ 12,000,000 13,056,480
Los Angeles Harbor Department, Revenue:
6%, 8/1/2012.............................................................. 8,900,000 9,371,255
6.625%, 8/1/2019 (Insured; AMBAC)......................................... 6,000,000 6,546,300
6.625%, 8/1/2025.......................................................... 17,780,000 19,061,582
Los Angeles Municipal Improvement Corp., LR, Refunding
(Central Library Project):
5.375%, 6/1/2011........................................................ 3,725,000 3,699,074
6.30%, 6/1/2016......................................................... 3,500,000 3,651,725
6.30%, 6/1/2018......................................................... 4,250,000 4,434,238
6.35%, 6/1/2020......................................................... 7,700,000 8,047,501
Los Banos Unified School District, COP
5.625%, 8/1/2016 (Insured; MBIA).......................................... 2,585,000 2,600,174
Menlo Park Community Development Agency, Tax Allocation, Refunding
(Las Puglas Community Development Project):
5.375%, 6/1/2016 (Insured; AMBAC)....................................... 6,470,000 6,446,773
5.375%, 6/1/2022 (Insured; AMBAC)....................................... 11,825,000 11,679,434
Metropolitan Water District of Southern California, Waterworks Revenue:
6.75%, 7/1/2018 (Prerefunded 7/1/2001) (a)................................ 4,750,000 5,323,753
Refunding 4.75%, 7/1/2021 (Insured; MBIA)................................. 31,000,000 28,214,960
5%, 7/1/2027 (d).......................................................... 10,000,000 9,354,300
Modesto, Multi-Family Housing Mortage Revenue, Refunding 6.40%, 6/1/2029..... 7,723,000 7,954,458
Mojave Water Agency, Refunding (Improvement District-Morongo Basin)
5.75%, 9/1/2015 (Insured; FGIC)........................................... 3,000,000 3,078,390
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
Moreno Valley Unified School District,
Community Facilities District, Special Tax
7.70%, 8/15/2014.......................................................... $ 840,000 $ 823,192
Moulton Niguel Water District (Improvement District Number 6)
7.25%, 4/1/2016 (Insured; AMBAC) (Prerefunded 4/1/2000) (a)............... 5,000,000 5,586,250
Mountain View Shoreline Regional Park Community, Tax Allocation
5.50%, 8/1/2021 (Insured; MBIA)........................................... 5,000,000 4,969,500
Mount Diablo Hospital District, Revenue
6.125%, 12/1/2020 (Insured; AMBAC) (Prerefunded 12/1/2000) (a)............ 5,000,000 5,443,850
Mount Diablo Unified School District, Community Facilities District, Special Tax
7.05%, 8/1/2020 (Insured; FGIC) (Prerefunded 8/1/2000) (a)................ 3,500,000 3,914,470
Northern California Power Agency, Power Revenue:
(Hydroelectric Project) 7%, 7/1/2016 (Insured; AMBAC)
(Prerefunded 1/1/2016) (a) 670,000 812,529
Refunding 7.50%, 7/1/2023 (Insured; AMBAC) (Prerefunded 7/1/2021) (a)..... 375,000 461,186
Northridge Water District, COP, Revenue
5.25%, 2/1/2018 (Insured; AMBAC).......................................... 2,500,000 2,451,300
Orange Cove Irrigation District, Revenue, COP, Refunding (Rehabilitation Project)
5%, 2/1/2017 (Insured; AMBAC)............................................. 7,300,000 6,990,845
Palmdale Elementary School District, Special Tax,
(Community Facilities District number 90):
5.30%, 8/1/2014 (Insured; FSA).......................................... 2,500,000 2,500,400
5.40%, 8/1/2025 (Insured; FSA).......................................... 3,500,000 3,442,075
Palo Alto Unified School District 5.375%, 8/1/2017........................... 6,940,000 6,957,350
Pasadena Community Development Commission, MFHR (Civic Center)
6.45%, 12/1/2021 (Insured; FSA)........................................... 15,000,000 15,405,000
Port of Oakland, Special Facilities Revenue, (Mitsui O.S.K. Lines Ltd.)
6.80%, 1/1/2019 (LOC; Industrial Bank of Japan) (c)....................... 2,000,000 2,121,880
Rancho Cucamonga Redevelopment Agency, Tax Allocation
(Rancho Cucamonga Redevelopment Project):
7.125%, 9/1/2019 (Insured; MBIA)........................................ 2,455,000 2,669,813
6.75%, 9/1/2020 (Insured; MBIA)......................................... 1,665,000 1,794,654
Riverside County Asset Leasing Corp., Leasehold Revenue
(Riverside County Hospital Project) 6.25%, 6/1/2019....................... 7,500,000 7,554,225
Riverside County Community Facilities District, Special Tax:
7.80%, 9/1/2015 (e)....................................................... 6,750,000 2,970,000
8.25%, 9/1/2016........................................................... 4,730,000 4,731,135
Sacramento, COP (Refunding-Public Facilities Project) 6%, 7/1/2012........... 6,000,000 6,155,280
Sacramento Area Flood Control Agency (Capital Assessment District Number 2)
5.375%, 10/1/2025 (Insured; FGIC)......................................... 6,750,000 6,661,778
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
Sacramento County, Airport System Revenue:
5.90%, 7/1/2024 (Insured; MBIA)........................................... $ 9,650,000 $ 9,840,202
5.75%, Series B, 7/1/2026 (Insured; MBIA)................................. 5,195,000 5,298,225
5.75%, Series D, 7/1/2026 (Insured; MBIA)................................. 10,000,000 10,198,700
Sacramento Municipal Utility District, Electric Revenue......................
5.50%, 8/15/2021 (Insured; AMBAC) (b)..................................... 11,045,000 10,977,515
Saddleback Community College District, COP
7%, 8/1/2019 (Insured; BIGI).............................................. 2,875,000 3,112,073
Salinas Redevelopment Agency, Tax Allocation (Central City Revitalization Project)
5.50%, 11/1/2023 (Insured; FSA)........................................... 4,510,000 4,450,513
San Bernardino County, COP:
(Capital Facilities Project)
6.875%, 8/1/2024........................................................ 5,000,000 6,148,600
(Refunding, Medical Center Financing Project):
5.50%, 8/1/2015 (Insured; MBIA)......................................... 12,790,000 12,766,722
5.50%, 8/1/2022 (Insured; MBIA)......................................... 19,780,000 19,497,344
5.50%, 8/1/2024......................................................... 3,900,000 3,731,637
(West Valley Detention Center)............................................
5.90%, 11/1/2001 (Insured; MBIA)........................................ 1,565,000 1,680,341
San Elijo Joint Powers Authority, Revenue
(San Elijo Water Pollution Control Project)
7%, 3/1/2020 (Insured; FGIC) (Prerefunded 3/1/2000) (a)................... 5,500,000 6,090,755
San Francisco Bay Area Rapid Transportation District, Sales Tax Revenue
5.50%, 7/1/2020 (Insured; FGIC)........................................... 15,330,000 15,238,940
San Francisco City and County, SFMR
(FNMA/GNMA Mortgage Backed Securities Program) 7.45%, 1/1/2024............ 255,000 268,015
San Francisco City and County Airports Commission, International Airport Revenue:
Refunding, 6.10%, 5/1/2003 (Insured; AMBAC)............................... 3,000,000 3,282,000
5.25%, 5/1/2020 (Insured; FGIC)........................................... 6,170,000 6,019,514
5.75%, 5/1/2020 (Insured; FGIC)........................................... 28,005,000 28,216,158
5.625%, 5/1/2021 (Insured; MBIA).......................................... 10,825,000 10,768,927
5.625%, 5/1/2021 (Insured; MBIA) (d)...................................... 10,000,000 9,868,800
5.65%, 5/1/2024 (Insured; FGIC)........................................... 12,900,000 12,954,825
San Francisco City and County Public Utilities Commission, Water Revenue
6.50%, 11/1/2017.......................................................... 3,500,000 3,722,040
San Francisco State Building Authority, LR
(San Francisco Civic Center Complex)
5.25%, 12/1/2021 (Insured; AMBAC) (d)..................................... 16,250,000 15,819,861
San Marcos Public Facilities Authority, Tax Allocation Revenue
6%, 1/1/2006 (Insured; FSA) (Prerefunded 1/1/2002) (a).................... 10,500,000 11,504,534
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) November 30, 1996 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ----------------------------------------------------------------------------- --------------- --------------
San Mateo County, COP (Capital Projects Program)
6.50%, 7/1/2017 (Insured; MBIA) (Prerefunded 7/1/2001) (a)................ $ 6,000,000 $ 6,684,120
Santa Barbara, COP, Refunding (Water System Improvement Project)
6.70%, 4/1/2027 (Insured; AMBAC).......................................... 4,000,000 4,430,960
Santa Clara County, COP (Capital Project)
6.25%, 10/1/2016 (Insured; AMBAC)......................................... 10,000,000 10,652,400
Santa Cruz County, COP (Capital Facilities Project)
6.70%, 9/1/2020 (Insured; MBIA)........................................... 5,000,000 5,525,150
Santa Cruz County Public Financing Authority, Revenue, Refunding
7.10%, 9/1/2021 (Insured; MBIA)........................................... 6,500,000 7,093,385
Southern California Rapid Transportation District, COP (Workers Compensation Fund)
6.50%, 7/1/2007 (Insured; MBIA)........................................... 22,900,000 25,046,645
Tracy Area Public Facilities Financing Agency, Special Tax, Refunding:
(Community Facilities District Number 87-1-H)
5.875%, 10/1/2019 (Insured; MBIA)....................................... 18,250,000 18,814,107
(Community Facilities District Number 87-1-G)
5.50%, 10/1/2021 (Insured; MBIA)........................................ 5,250,000 5,217,922
University of California, COP (UCLA Central Chiller/Cogeneration)
6.25%, 11/1/2009 (Prerefunded 11/1/1999) (a).............................. 3,000,000 3,236,459
West Basin Municipal Water District, COP
6.85%, 8/1/2016 (Insured; AMBAC) (Prerefunded 8/1/2000) (a)............... 6,000,000 6,669,959
West Sonoma County Union High School District
5.25%, 8/15/2021 (Insured; FGIC).......................................... 2,705,000 2,644,353
---------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $1,315,794,496)..................................................... $1,375,721,555
===============
Short-Term Municipal Investments--3.6%
- -----------------------------------------------------------------------------
California, RAN, VRDN 3.95% (f) $18,300,000 $ 18,300,000
California Health Facilities Financing Authority, Revenue, VRDN
(Catholic Health Care) 3.35% (f).......................................... 5,500,000 5,500,000
Irvine Ranch Water District, VRDN:
3.90% (LOC; Commerzbank) (c,f)............................................ 14,350,000 14,350,000
3.90% (LOC; Bank of America National Trust and Savings Association) (c,f). 12,600,000 12,600,000
---------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $50,750,000)........................................................ $ 50,750,000
===============
TOTAL INVESTMENTS--100.0%
(cost $1,366,544,496)..................................................... $1,426,471,555
===============
<PAGE>
</TABLE>
<TABLE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------
Summary of Abbreviations
- -------------------------------------------------------------------------
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
BIGI Bond Investors Guaranty Insurance Insurance Corporation
COP Certificate of Participation MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company PCR Pollution Control Revenue
FNMA Federal National Mortgage Association RAN Revenue Anticipation Notes
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GNMA Government National Mortgage Association SWDR Solid Waste Disposal Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
LOC Letter of Credit
LR Lease Revenue
</TABLE>
<TABLE>
Summary of Combined Ratings (Unaudited)
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fitch (g) or Moody's or Standard & Poor's Percentage of Value
- ------ -------- ---------------- ------------------
AAA Aaa AAA 69.3%
AA Aa AA 11.2
A A A 10.4
BBB Baa BBB 1.9
F1 MIG1/P1 SP1/A1 3.6
Not Rated (h) Not Rated (h) Not Rated (h) 3.6
-------
100.0%
=======
<FN>
Notes to Statement of Investments:
- -----------------------------------------------------------------------
(a) Bonds which are prerefunded are collateralized by U.S. Government securities
which are held in escrow and are used to pay principal and interest on the
municipal issue and to retire the bonds in full at the earliest refunding date.
(b) Wholly held by custodian as collateral for delayed-delivery security.
(c) Secured by letters of credit.
(d) Purchased on a delayed-delivery basis.
(e) Non-income producing security; interest payment in default.
(f) Securities payable on demand. The interest rate, which is subject to change,
is based upon bank prime rates or an index of market interest rates.
(g) Fitch
currently provides creditworthiness information for a limited number of
investments.
(h) Securities which, while not rated by Fitch, Moody's and
Standard & Poor's have been determined by the Manager to be of comparable
quality to those rated securities in which the Fund may invest.
(i) At November
30, 1996, 31.2% of the Fund's net assets are insured by MBIA.
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- ------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1996 (Unaudited)
Cost Value
--------------- ---------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $1,366,544,496 $1,426,471,555
Cash............................................. 2,112,165
Interest receivable.............................. 25,960,036
Receivable for investment securities sold........ 10,758,556
Prepaid expenses................................. 25,488
---------------
1,465,327,800
---------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 792,590
Payable for investment securities purchased...... 34,724,809
Payable for Common Stock redeemed................ 1,185,886
Accrued expenses................................. 169,835
---------------
36,873,120
---------------
NET ASSETS..................................................................... $1,428,454,680
===============
REPRESENTED BY: Paid-in capital.................................. $1,396,690,537
Accumulated undistributed investment income--net.. 193,946
Accumulated net realized gain (loss) on investments (28,356,862)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3.......................... 59,927,059
---------------
NET ASSETS..................................................................... $1,428,454,680
===============
SHARES OUTSTANDING
(300 million shares of $.01 par value Common Stock authorized)................. 98,193,299
NET ASSET VALUE, offering and redemption price per share....................... $14.55
=======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Operations Six Months Ended November 30, 1996 (Unaudited)
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME Interest Income.................................. $41,021,032
EXPENSES: Management fee--Note 2(a)........................ $ 4,195,123
Shareholder servicing costs--Note 2(b)........... 733,747
Custodian fees................................... 50,281
Professional fees................................ 38,898
Directors' fees and expenses--Note 2(c).......... 35,677
Prospectus and shareholders' reports............. 24,831
Registration fees................................ 14,752
Miscellaneous.................................... 106,228
-------------
Total Expenses.............................. 5,199,537
------------
INVESTMENT INCOME--NET.......................................................... 35,821,495
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 3:
Net realized gain (loss) on investments.......... $ 1,555,440
Net unrealized appreciation (depreciation) on investments 52,762,483
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............................ 54,317,923
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $90,139,418
============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------
Statement of Changes in Net Assets
Six Months Ended
November 30, 1996 Year Ended
(Unaudited) May 31, 1996
-------------------- ---------------
OPERATIONS:
<S> <C> <C>
Investment income--net............................................... $ 35,821,495 $ 78,376,473
Net realized gain (loss) on investments.............................. 1,555,440 5,971,617
Net unrealized appreciation (depreciation) on investments............ 52,762,483 (57,311,024)
---------------- -----------------
Net Increase (Decrease) in Net Assets Resulting from Operations.. 90,139,418 27,037,066
---------------- -----------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net................................................ (35,627,549) (78,376,473)
---------------- -----------------
CAPITALSTOCK TRANSACTIONS:
Net proceeds from shares sold........................................ 860,248,142 1,244,233,021
Dividends reinvested................................................. 22,342,524 49,530,321
Cost of shares redeemed.............................................. (879,921,659) (1,428,904,541)
---------------- -----------------
Increase (Decrease) in Net Assets from Capital Stock Transactions 2,669,007 (135,141,199)
---------------- -----------------
Total Increase (Decrease) in Net Assets........................ 57,180,876 (186,480,606)
NET ASSETS:
Beginning of Period.................................................. 1,371,273,804 1,557,754,410
---------------- -----------------
End of Period........................................................ $1,428,454,680 $ 1,371,273,804
================ =================
Undistributed investment income--net.................................... $ 193,946 --
---------------- -----------------
Shares Shares
---------------- ------------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.......................................................... 60,519,196 86,863,106
Shares issued for dividends reinvested............................... 1,566,849 3,452,140
Shares redeemed...................................................... (61,872,685) (99,479,542)
---------------- -----------------
Net Increase (Decrease) in Shares Outstanding.................... 213,360 (9,164,296)
================ =================
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- -------------------------------------------------------------------------------
Financial Highlights
Contained below is per share operating performance data for a share of Common
Stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from the Fund's financial statements.
Six Months Ended Year Ended May 31,
November 30, 1996 ------------------------------------------------------
PER SHARE DATA: (Unaudited) 1996 1995 1994 1993 1992
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period. $14.00 $14.54 $14.59 $15.34 $14.82 $14.66
------- ------- ------- ------- ------- -------
Investment Operations:
Investment income--net............... .36 .77 .82 .84 .89 .93
Net realized and unrealized gain (loss)
on investments.................... .55 (.54) -- (.57) .66 .20
------- ------- ------- ------- ------- -------
Total from Investment Operations..... .91 .23 .82 .27 1.55 1.13
------- ------- ------- ------- ------- -------
Distributions:
Dividends from investment income--net. (.36) (.77) (.82) (.85) (.88) (.93)
Dividends from net realized gain on
investments....................... -- -- (.05) (.17) (.15) (.04)
------- ------- ------- ------- ------- -------
Total Distributions.................. (.36) (.77) (.87) (1.02) (1.03) (.97)
------- ------- ------- ------- ------- -------
Net asset value, end of period....... $14.55 $14.00 $14.54 $14.59 $15.34 $14.82
======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN................. 13.16%(1) 1.58% 5.93% 1.58% 10.89% 7.90%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .74%(1) .69% .71% .70% .69% .68%
Ratio of net investment income
to average net assets............. 5.12%(1) 5.37% 5.77% 5.46% 5.88% 6.32%
Portfolio Turnover Rate.............. 35.41%(2) 56.12% 39.85% 28.14% 41.40% 45.58%
Net Assets, end of period
(000's Omitted) $1,428,455 $1,371,274 $1,557,754 $1,658,782 $1,834,956 $1,751,880
<FN>
- -------------------
(1) Annualized.
(2) Not annualized.
</TABLE>
See notes to financial statements.
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus California Tax Exempt Bond Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company. The Fund's investment objective is to provide
investors with the maximum amount of current income exempt from Federal and
State of California income taxes as is consistent with the preservation of
capital. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. Premier Mutual
Fund Services, Inc. acts as the distributor of the Fund's shares, which are sold
to the public without a sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Fund's investments are valued each business day
by an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, it is
the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Internal Revenue Code, and to
make distributions of income and net realized capital gain sufficient to relieve
it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $29,996,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to May 31, 1996. If not applied,
$2,069,000 of the carryover expires in fiscal 2003 and $27,927,000 of the
carryover expires in 2004.
<PAGE>
Dreyfus California Tax Exempt Bond Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2--Management Fee and Other Transactions With Affiliates:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .60 of 1% of the value of the
Fund's average daily net assets and is payable monthly. The Agreement provides
that if in any full fiscal year the aggregate expenses of the Fund, exclusive of
taxes, brokerage, interest on borrowings and extraordinary expenses, exceed
11/2% of the value of the Fund's average net assets, the Fund may deduct from
the payments to be made to the Manager, or the Manager will bear such excess
expense. There was no expense reimbursement during the period ended November 30,
1996.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an amount
not to exceed an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for certain allocated expenses of providing personal services
and/or maintaining shareholder accounts. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the period ended November 30, 1996, the Fund was charged an aggregate of
$419,051 pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $208,824 during the period ended November 30, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $4,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3--Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended November 30, 1996,
amounted to $500,027,854 and $467,584,914, respectively.
At November 30, 1996, accumulated net unrealized appreciation on investments
was $59,927,059, consisting of $66,782,018 gross unrealized appreciation and
$6,854,959 gross unrealized depreciation.
At November 30, 1996, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
