Dreyfus California Tax Exempt Bond Fund, Inc.
ANNUAL REPORT
May 31, 1999
[LION GRAPHIC]
[Dreyfus Logo]
<PAGE>
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE>
Contents
THE FUND
- --------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
15 Statement of Assets and Liabilities
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Financial Highlights
19 Notes to Financial Statements
23 Report of Independent Auditors
24 Important Tax Information
FOR MORE INFORMATION
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Back Cover
<PAGE>
Dreyfus California Tax Exempt The Fund
Bond Fund, Inc.
LETTER FROM THE PRESIDENT
- -------------------------
Dear Shareholder:
We are pleased to present this annual report for Dreyfus California Tax Exempt
Bond Fund, Inc. covering the 12-month period from June 1, 1998 through May 31,
1999. Inside, you'll find valuable information about how the fund was managed
during the reporting period, including a discussion with the fund's portfolio
manager, Joseph Darcy.
Lower short-term interest rates adopted by the Federal Reserve Board and other
central banks in the fall of 1998 appear to have helped many U.S. businesses
withstand the effects of economic weakness in Japan, Asia and Latin America. At
the same time, the U.S. economy has entered its eighth year of expansion in an
environment characterized by low inflation and high levels of consumer spending.
Tax-exempt fixed-income securities generally provided good results relative to
taxable U.S. Treasury securities over the past year. This was especially true
during much of the second half of the reporting period. While prices of U.S.
Treasury securities declined significantly over the first five months of 1999, a
lack of new issuance relative to robust investor demand supported most municipal
bond prices.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus California Tax Exempt Bond Fund, Inc.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
June 14, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
- ------------------------------
Joseph Darcy, Portfolio Manager
How did Dreyfus California Tax Exempt Bond Fund, Inc.
perform during the period?
The fund produced a 3.81% total return over the 12-month period ended May 31,
1999,1 the same return for the average of the Lipper California Municipal Debt
Funds category for the same period.2
We attribute the fund's performance to the effects of higher intermediate- and
long-term interest rates over the second half of the reporting period, which
caused a modest decline in the fund's share price. In addition, because of
changes in supply-and-demand influences during the last six months of 1999,
returns of the intermediate-term municipal bonds in which the fund primarily
invested during the period generally lagged those of long-term municipal bonds.
What is the fund's investment approach?
The fund's goal is to seek a high level of double tax-exempt income from a
diversified portfolio of municipal bonds from California issuers. We also seek
to provide a competitive total return.
In pursuit of these objectives, we employ two primary strategies. First, we
attempt to add value by evaluating interest rate trends and supply-and-demand
factors. Based on that assessment, we select the individual tax-exempt bonds
that we believe are most likely to provide the highest returns with the least
risk. We look at such criteria as the bond's yield, price, age, the
creditworthiness of its issuer, and any provisions for early redemption.
Second, we actively manage the portfolio's average duration -- a measure of
sensitivity to changes in interest rates -- in anticipation of temporary
supply-and-demand changes. If we expect the supply of newly issued bonds to
increase temporarily, we may reduce the portfolio's average duration to make
cash available for the purchase of higher yielding securities. Conversely,
if we expect demand for municipal
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
bonds to surge at a time when we anticipate little issuance, we may increase
the portfolio's average duration to maintain current yields for as long as
practical. At other times, we try to maintain a "neutral" average duration of
about seven years.
What other factors influenced the fund's performance?
When the Asian currency and credit crisis spread to Russia and threatened Latin
America last summer and fall, investors flocked to U.S. Treasury securities. As
a result, yields on taxable U.S. Treasury bonds fell briefly in October to
levels that were roughly equivalent to yields on comparable tax-exempt bonds.
However, the Federal Reserve Board and other central banks moved quickly to
stimulate global economic growth. They did so last fall by reducing key
short-term interest rates. Because lower short-term interest rates were expected
to stimulate economic growth and potentially reignite inflationary pressures,
yields on longer-term bonds rose. However, the extent of that rise was much
greater for taxable U.S. Treasury securities than for municipal bonds.
In addition, because of strong economic conditions, California and its
municipalities have had less need to borrow. As a result, 27% fewer tax-exempt
bonds were issued in California over the 12-month reporting period than in the
prior 12-month period. Yet, demand from California investors seeking double
tax-free investment income has remained high. This supply and demand imbalance
helped municipal bond prices decline less than U.S. Treasury bond prices, as
measured by major market indices and benchmarks.
What is the fund's current strategy?
We have continued to search for the most attractive values in California's
municipal bond market. We have found such values, in our opinion, in very
high-quality bonds. Because the differences in yields
4
<PAGE>
between the highest-quality bonds and lower-quality bonds have been narrow by
historical standards, we see little reason to assume the added credit risk
lower-rated bonds entail. In addition, we have continued to monitor our
existing holdings with an eye toward identifying potential credit problems as
early as possible.
After maintaining the fund's average duration toward the short end of neutral
in a rising interest-rate environment -- a position designed to capture higher
yields as they became available -- we recently extended the fund's average
duration toward the long end of its range. In our view, this position should
help us lock in prevailing yields if the economy begins to slow and interest
rates begin to decline from current levels. We have also remained vigilant in
our efforts to identify tactical opportunities in anticipation of any
supply-and-demand imbalances.
June 14, 1999
1 Total return includes reinvestment of dividends and any capital gains paid.
Past performance is no guarantee of future results. Share price and investment
return fluctuate such that upon redemption fund shares may be worth more or
less than their original cost. Income may be subject to state and local taxes
for non-California residents, and some income may be subject to the Federal
Alternative Minimum Tax (AMT) for certain shareholders. Capital gains, if
any, are fully taxable.
2 Source: Lipper Analytical Services, Inc.
The Fund 5
<PAGE>
FUND PERFORMANCE
$21,054
Lehman Brothers
Municipal Bond Index*
$18,356
Dreyfus California
Tax Exempt Bond Fund, Inc.
[INSERT PLOT POINTS]
Comparison of change in value of $10,000 investment in the fund and the
Lehman Brothers Municipal Bond Index
- -----------------------------------------------------------------------
Average Annual Total Returns as of 5/31/99
1 Year 5 Years Ten Years
- -----------------------------------------------------------------------
Fund 3.81% 5.53% 6.26%
*Source: Lehman Brothers
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus California Tax
Exempt Bond Fund, Inc. on 5/31/89 to a $10,000 investment made in the Lehman
Brothers Municipal Bond Index on that date. All dividends and capital gain
distributions are reinvested.
The fund invests primarily in California municipal securities and its
performance shown in the line graph takes into account fees and expenses. The
Lehman Brothers Municipal Bond Index is not limited to investments principally
in California municipal obligations and does not take into account charges,
fees and other expenses. The Lehman Brothers Municipal Bond Index, unlike the
fund, is an unmanaged total return performance benchmark for the long-term,
investment-grade, geographically unrestricted tax exempt bond market,
calculated by using municipal bonds selected to be representative of the
municipal market overall. These factors can contribute to the Index potentially
outperforming or underperforming the fund. Further information relating to fund
performance, including expense reimbursements, if applicable, is contained in
the Financial Highlights section of the Prospectus and elsewhere in this
report.
6
<PAGE>
STATEMENT OF INVESTMENTS
May 31, 1999
<TABLE>
<CAPTION>
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Principal
Long-Term Municipal Investments--97.4% Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
California--96.7%
Alameda Corridor Transportation Authority, Revenue
5%, 10/1/2012 (Insured; MBIA) 10,385,000 10,610,043
Alameda County, COP:
7.25%, 12/1/2014 (Insured; BIGI)
(Prerefunded 12/1/2000) a 5,980,000 6,435,437
7.25%, 12/1/2015 (Insured; BIGI)
(Prerefunded 12/1/2000) a 4,045,000 4,353,067
Anaheim Public Finance Authority, Tax Allocation Revenue,
6.45%, 12/28/2018 (Insured; MBIA) 20,000,000 22,623,000
Berkeley, Health Facilities Revenue
(Alta Bates Medical Center) 6.55%, 12/1/2022
(Prerefunded 12/1/2002) a 17,000,000 18,852,490
Brea Public Finance Authority, Revenue, Tax Allocation
(Redevelopment Project):
6.75%, 8/1/2022 (Insured; MBIA)
(Prerefunded 8/1/2001) a 4,625,000 5,018,033
6.75%, 8/1/2022 (Insured; MBIA) 1,775,000 1,911,870
California:
5.5%, 4/1/2010 (Insured; MBIA) 17,580,000 19,019,099
5.25%, 6/1/2016 10,000,000 10,132,400
4.75%, 4/1/2022 10,000,000 9,344,800
4.25%, 10/1/2026 (Insured; MBIA) 17,000,000 14,535,000
California Department of Transportation, COP
5.25%, 3/1/2016 (Insured; MBIA) 13,320,000 13,506,746
California Department of Water Resources, Water
System Revenue
(Central Valley Project) 5.125%, 12/1/2012 10,000,000 10,294,900
California Educational Facilities Authority, Revenue:
(California Institute of Technology) 4.25%, 10/1/2028 50,565,000 43,069,244
(Claremont Colleges Pooled Facilities) 6.375%, 5/1/2022
(Prerefunded 5/1/2002) a 3,655,000 3,979,089
(Stanford University) 5.25%, 12/1/2013 11,250,000 11,901,600
California Health Facilities Financing Authority, Revenue:
(Adventist Health System-West):
6.40%, 3/1/2002 (Insured; MBIA) 1,955,000 2,076,054
6.50%, 3/1/2003 (Insured; MBIA) 2,140,000 2,271,417
(Kaiser Permanente) 5.25%, 6/1/2012 (Insured; FSA) 10,105,000 10,416,133
(Saint Joseph's Health System) 6.75%, 7/1/2021
(Prerefunded 7/1/2001) a 8,500,000 9,194,960
(San Diego Hospital Association) 6.125%, 8/1/2022
(Insured; MBIA) 4,250,000 4,574,913
(Stanford University):
6.50%, 11/1/2020 (Prerefunded 11/1/2000) a 8,975,000 9,543,656
6.50%, 11/1/2020 (Prerefunded 11/1/2002) a 1,025,000 1,114,944
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Long-Term Municipal Investments (continued) Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
California (continued)
California Housing Finance Agency:
Home Mortage Revenue:
6.30%, 2/1/2008 2,445,000 2,600,649
6.35%, 2/1/2009 2,600,000 2,765,230
6.40%, 2/1/2010 2,740,000 2,913,853
8.30%, 8/1/2019 60,000 61,283
6.70%, 8/1/2025 7,915,000 8,452,191
7.125%, 2/1/2026 2,050,000 2,163,017
6.55%, 8/1/2026 11,225,000 11,991,443
6.15%, 8/1/2027 (Insured; MBIA) 10,000,000 10,644,800
6.40%, 8/1/2027 (Insured; MBIA) 19,785,000 21,170,346
7.65%, 8/1/2029 6,420,000 6,572,026
MFHR 6.30%, 8/1/2026 (Insured; AMBAC) 7,150,000 7,590,369
Multi-Unit Rental Housing Revenue 6.85%, 8/1/2015 3,140,000 3,336,250
Single Family Mortgage:
6.25%, 8/1/2014 (Insured; AMBAC) 3,285,000 3,435,026
6.30%, 8/1/2024 8,000,000 8,446,960
6.45%, 8/1/2025 15,355,000 16,311,463
California Pollution Control Financing Authority:
PCR (Pacific Gas & Electric Co.)
6.35%, 6/1/2009 (Insured; MBIA) 5,000,000 5,447,400
(San Diego Gas and Electric) 5.90%, 6/1/2014
(Insured; MBIA) 48,330,000 53,998,142
(Southern California Edison Co.):
6.40%, 12/1/2024 12,600,000 13,637,988
6.40%, 12/1/2024 (Insured; AMBAC) 4,125,000 4,485,938
SWDR (Browning Ferris Industry, Inc.):
5.80%, 12/1/2016 16,060,000 16,188,319
6.75%, 9/1/2019 3,400,000 3,665,030
California Public Works Board, LR:
(Department of Corrections, California State Prison,
Susanville) 5.25%, 6/1/2015 (Insured; FSA) 5,455,000 5,680,510
(Department of Corrections, Calipatria State Prison,
Imperial County) 6.50%, 9/1/2017 (Insured; MBIA) 13,000,000 15,307,110
(Various University of California Projects)
5.50%, 6/1/2014 5,000,000 5,363,000
6.375%, 10/1/2019 (Prerefunded 10/1/2004) a 12,775,000 14,463,600
California Statewide Community Development Authority, Revenue:
COP (Saint Joseph Health System)
6.50%, 7/1/2015 (Prerefunded 7/1/2004) a 7,000,000 7,932,190
(Sherman Oaks Project):
5.50%, 8/1/2013 (Insured; AMBAC) 5,805,000 6,213,730
5%, 8/1/2018 (Insured; AMBAC) 12,000,000 11,817,360
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Long-Term Municipal Investments (continued) Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
California (continued)
Central Coast Water Authority, Revenue (State Water Project)
5%, 10/1/2016 (Insured; AMBAC) 10,200,000 10,146,654
Chico Public Financing Authority, Revenue
(Southeast Chico Redevelopment Project)
6.625%, 4/1/2021 (Insured; FGIC) 2,000,000 2,088,620
Contra Costa County, COP (Merrithew Memorial Hospital)
6.60%, 11/1/2012 (Prerefunded 11/1/2002) a 10,000,000 11,099,200
Corona Community Facilities District, Special Tax:
7.60%, 9/1/2013 5,755,000 5,895,767
7.60%, 9/1/2017 3,000,000 3,071,730
7.70%, 9/1/2019 2,000,000 2,047,960
Delano, COP (Delano Regional Medical Center)
5.25%, 1/1/2018 10,000,000 9,531,700
East Bay Municipal Utility District,
Water System Revenue (Insured; MBIA) 4.75%, 6/1/2034 5,000,000 4,590,200
Emeryville Public Financing Authority, Revenue
(Shellmound Park Redevelopment Project)
6.80%, 5/1/2024 (Prerefunded 5/1/2004) a 2,365,000 2,703,479
Folsom Community Facilities District Number 3, Special Tax
7.80%, 12/1/2015 (Prerefunded 12/1/1999) a 1,900,000 1,999,389
Fontana, Special Tax
5.25%, 9/1/2017 14,000,000 14,171,080
Foothill Eastern Transportation Corridor Agency,
Toll Road Revenue
6%, 1/1/2016 9,250,000 10,030,700
Fresno, Sewer Revenue 5.25%, 9/1/2019 (Insured; AMBAC) 9,400,000 9,629,924
Hesperia Water District, COP
(Water Facilities Improvement Project) 7.15%, 6/1/2026
(Insured; FGIC) (Prerefunded 6/1/2001) a 4,500,000 4,937,130
Inglewood, HR (Daniel Freeman Hospital, Inc.)
6.75%, 5/1/2013 (Prerefunded 5/1/2001) a 6,300,000 6,786,738
Lake Elsinore Public Financing Authority, Tax Allocation Revenue
(Lake Elsinore Redevelopment Project)
6.25%, 2/1/2019 (Insured; FGIC) 4,220,000 4,378,461
Loma Linda, HR (Loma Linda University Medical Center Project)
7%, 12/1/2015 (Insured; AMBAC) 12,355,000 12,815,100
Los Angeles Community Redevelopment Agency, Tax Allocation
(Hollywood Redevelopment Project) 6.10%, 7/1/2022
(Insured; MBIA) (Prerefunded 7/1/2002) a 4,900,000 5,327,133
Los Angeles County, COP
(Disney Parking Project) 6.50%, 3/1/2023
(Prerefunded 3/1/2003) a 7,440,000 8,250,737
</TABLE>
The Fund 9
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Long-Term Municipal Investments (continued) Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
California (continued)
Los Angeles County Metropolitan Transportation Authority,
Sales Tax Revenue:
5%, 7/1/2013 (Insured; AMBAC) 12,800,000 12,976,768
5.25%, 7/1/2013 (Insured; MBIA) 9,700,000 10,000,118
6%, 7/1/2020 (Insured; MBIA) (Prerefunded 7/1/2006) a 15,000,000 16,845,450
Los Angeles Department Water and Power,
Waterworks Revenue:
4.50%, 10/15/2024 23,300,000 20,788,726
6.40%, 5/15/2028 2,435,000 2,592,301
6.375%, 7/1/2034 (Insured; MBIA) 10,000,000 11,242,400
Los Angeles Harbor Department, Revenue:
6%, 8/1/2012 8,900,000 9,624,104
6.625%, 8/1/2019 (Insured; AMBAC) 6,000,000 6,528,300
6.625%, 8/1/2025 18,280,000 19,861,037
Los Angeles Municipal Improvement Corporation, LR
(Central Library Project):
6.30%, 6/1/2016 3,500,000 3,722,845
6.30%, 6/1/2018 4,250,000 4,523,105
6.35%, 6/1/2020 7,700,000 8,198,729
Los Angeles Unified School District:
5.375%, 7/1/2012 (Insured; FGIC) 2,500,000 2,631,425
5.375%, 7/1/2016 (Insured; FGIC) 4,845,000 4,995,922
Metropolitan Water District of Southern California,
Waterworks Revenue
6.75%, 7/1/2018 (Prerefunded 7/1/2001) a 9,250,000 10,006,280
Modesto, Multi-Family Housing Mortage Revenue,
6.40%, 6/1/2029 7,723,000 8,044,200
Moulton Niguel Water District, Improvement District Number 6
7.25%, 4/1/2016 (Insured; AMBAC)
(Prerefunded 4/1/2000) a 5,000,000 5,267,600
Mount Diablo Hospital District, Revenue
6.125%, 12/1/2020 (Insured; AMBAC)
(Prerefunded 12/1/2000) a 5,000,000 5,300,250
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 3,721,795
M-S-R Public Power Agency, Revenue (San Juan Project)
5.90%, 7/1/2020 19,860,000 19,883,038
Northern California Power Agency, Revenue:
Multiple Capital Facility
5.25%, 8/1/2012 (Insured; AMBAC) 2,500,000 2,602,900
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Long-Term Municipal Investments (continued) Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
California (continued)
Northern California Power Agency, Revenue (continued):
Power:
(Hydroelectric Project) 7%, 7/1/2016 (Insured; AMBAC)
(Prerefunded 1/1/2016) a 670,000 826,318
7.50%, 7/1/2023 (Insured; AMBAC)
(Prerefunded 7/1/2021) a 375,000 486,105
Pasadena Community Development Commission,
MFHR (Civic Center)
6.45%, 12/1/2021 (Insured; FSA) 13,185,000 13,773,315
Port of Oakland, Special Facilities Revenue
(Mitsui O.S.K. Lines Ltd.)
6.80%, 1/1/2019 (LOC; Industrial Bank of Japan) b 2,000,000 2,108,440
Rancho Cucamonga Redevelopment Agency, Tax Allocation
(Rancho Cucamonga Redevelopment Project)
7.125%, 9/1/2019 (Insured; MBIA) 2,455,000 2,526,784
Riverside County Asset Leasing Corp., Leasehold Revenue
(Riverside County Hospital Project)
6.25%, 6/1/2019 (Prerefunded 6/1/1999) a 7,500,000 7,501,800
Sacramento City Financing Authority, LR (E.P.A. Building):
5%, 5/1/2012 (Insured; AMBAC) 6,260,000 6,371,678
5%, 5/1/2013 (Insured; AMBAC) 7,210,000 7,300,558
5%, 5/1/2014 (Insured; AMBAC) 7,390,000 7,444,095
Sacramento County, Airport System Revenue
6%, 7/1/2017 (Insured; MBIA) 5,850,000 6,275,120
Sacramento Municipal Utility District, Electric Revenue:
6.50%, 9/1/2013 (Insured; MBIA) 6,930,000 8,179,133
5.125%, 7/1/2015 (Insured; MBIA) 15,270,000 15,449,270
5.20%, 7/1/2017 (Insured; MBIA) 5,000,000 5,047,050
Saddleback Community College District, COP
7%, 8/1/2019 (Insured; BIGI) 2,875,000 2,949,405
San Bernardino County, COP:
(Capital Facilities Project)
6.875%, 8/1/2024 5,000,000 6,238,350
(West Valley Detention Center) 5.90%, 11/1/2001
(Insured; MBIA) 1,565,000 1,648,681
San Diego, (Undivided Interest Water Utility Fund)
5.375%, 8/1/2015 (Insured; FGIC) 6,085,000 6,312,457
San Diego County Water Authority, Water Revenue, COP:
5%, 5/1/2012 (Insured; FGIC) 12,425,000 12,653,372
5%, 5/1/2013 (Insured; FGIC) 12,430,000 12,599,545
</TABLE>
The Fund 11
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Long-Term Municipal Investments (continued) Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
California (continued)
San Diego Unified School District:
Zero Coupon, 7/1/2020 (Insured; FGIC) 10,000,000 3,300,700
Zero Coupon, 7/1/2022 (Insured; FGIC) 10,000,000 2,950,100
Zero Coupon, 7/1/2023 (Insured; FGIC) 10,000,000 2,793,000
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 5,767,300
San Francisco City and County, SFMR
(FNMA/GNMA Mortgage Backed Securities Program)
7.45%, 1/1/2024 255,000 264,188
San Francisco City and County Airports Commission,
International Airport Revenue:
6.10%, 5/1/2003 (Insured; AMBAC) 3,000,000 3,239,910
4.50%, 5/1/2012 (Insured; MBIA) 2,000,000 1,951,100
4.50%, 5/1/2013 (Insured; MBIA) 10,000,000 9,672,900
5%, 5/1/2016 (Insured; FGIC) 3,365,000 3,347,771
4.50%, Issue 20 5/1/2026 (Insured; MBIA) 6,250,000 5,574,000
4.50%, Issue 21 5/1/2026 (Insured; MBIA) 10,670,000 9,515,933
4.50%, 5/1/2028 (Insured; MBIA) 10,000,000 8,883,400
4.50%, 5/1/2029 (Insured: MBIA) 15,410,000 13,664,355
San Francisco City and County Public Utilities
Commission, Water Revenue
6.50%, 11/1/2017 (Prerefunded 11/1/2001) a 3,500,000 3,802,470
San Francisco State Building Authority, LR
(San Francisco Civic Center Complex)
5.25%, 12/1/2016 (Insured; AMBAC) 30,375,000 30,863,430
San Joaquin Hills Transportation Corridor Agency, Toll
Road Revenue:
Zero Coupon, 1/15/2031 (Insured; MBIA) 115,240,000 21,198,398
Zero Coupon, 1/15/2034 (Insured; MBIA) 46,535,000 7,290,173
Zero Coupon, 1/15/2035 (Insured; MBIA) 37,445,000 5,560,208
San Marcos Public Facilities Authority, Tax Allocation Revenue
6%, 1/1/2006 (Insured; FSA) (Prerefunded 1/1/2002) a 10,500,000 11,280,780
San Mateo County, COP (Capital Projects Program)
6.50%, 7/1/2017 (Insured; MBIA) (Prerefunded 7/1/2001) a 6,000,000 6,465,660
San Jose Redevelopment Agency, Tax Allocation
(Merged Area Redevelopment Project)
4.75%, 8/1/2029 (Insured; AMBAC) 21,750,000 20,157,248
Santa Barbara, COP (Water System Improvement Project)
6.70%, 4/1/2027 (Insured; AMBAC) 4,000,000 4,332,120
Santa Cruz County, COP (Capital Facilities Project)
6.70%, 9/1/2020 (Insured; MBIA) (Prerefunded 9/1/2001) a 5,000,000 5,431,500
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Long-Term Municipal Investments (continued) Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
California (continued)
Santa Cruz County Public Financing Authority, Revenue
7.10%, 9/1/2021 (Insured; MBIA) 6,500,000 6,721,910
Stockton, Revenue, COP (Wastewater System Project)
5.125%, 9/1/2016 (Insured; MBIA) 4,900,000 4,920,433
Southern California Rapid Transportation District, COP
(Workers Compensation Fund)
6.50%, 7/1/2007 (Insured; MBIA) 22,900,000 24,425,140
University of California:
COP (UCLA Central Chiller/Cogeneration)
6.25%, 11/1/2009 (Prerefunded 11/1/1999) a 3,000,000 3,098,100
West Basin Municipal Water District, COP
6.85%, 8/1/2016 (Insured; AMBAC)
(Prerefunded 8/1/2000) a 6,000,000 6,366,773
U.S. Related--.7%
Puerto Rico Infrastructure Financing Authority, Special
Tax Revenue
5%, 7/1/2016 (Insured; AMBAC) 8,500,000 8,494,730
Total Long-Term Municipal Investments
(cost $1,159,258,603) 1,203,318,319
- --------------------------------------------------------------------------------------------
Short-Term Municipal Investments--1.6%
- --------------------------------------------------------------------------------------------
California
California Economic Development Financing Authority,
Revenue, VRDN
(California Independent System Project)
3.20% (LOC; Bank for American National Trust & Saving
Association ) b 5,000,000 5,000,000
California Pollution Control Financing Authority
PCR, VRDN (Pacific Gas & Electric Co.):
3.35% (LOC; Kredietbank N.V.) b 4,000,000 4,000,000
3.40% (LOC; Morgan Guaranty Trust Company) b 2,500,000 2,500,000
California Statewide Community Development Authority,
SWFR, VRDN (Chevron U.S.A. Income Project) 3.35% b 1,400,000 1,400,000
Irvine Improvement Bond Act 1915 Limited Obligation
VRDN (Assessment District 87-8)
3.25% (LOC; Kredietbank N.V.) b 6,700,000 6,700,000
Total Short-Term Municipal Investments
(cost $19,600,000) 19,600,000
- --------------------------------------------------------------------------------------------
Total Investments (cost $1,178,858,603) 99.0% 1,222,918,319
Cash and Receivables (Net) 1.0% 11,937,567
Net Assets 100.0% 1,234,855,886
</TABLE>
The Fund 13
<PAGE>
STATEMENT OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Summary of Abbreviations
<S> <C> <C> <C>
AMBAC American Municipal Bond LR Lease Revenue
Assurance Corporation MBIA Municipal Bond Investors
BIGI Bond Investors Guaranty Insurance Assurance Insurance Corporation
COP Certificate of Participation MFHR Multi-Family Housing
FGIC Financial Guaranty Insurance Company Revenue
FSA Financial Security Assurance PCR Pollution Control Revenue
FNMA Federal National Mortgage Association SFMR Single Family Mortgage
GNMA Government National Mortgage Revenue
Association SWDR Solid Waste Disposal Revenue
HR Hospital Revenue SWFR Solid Waste Facilities Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
- -------------------------------------------------------------------------------
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
- -------------------------------------------------------------------------------
AAA Aaa AAA 71.7
AA Aa AA 13.0
A A A 10.6
BBB Baa BBB 2.0
F1 MIG1/P1 SP1/A1 1.6
Not Ratedc Not Ratedc Not Ratedc 1.1
100.0
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 Securities payable on demand. Variable interest rate--subject to periodic
change.
c 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.
d At May 31, 1999, 34.8% of the fund's net assets are insured by MBIA.
See notes to financial statements.
14
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--See Statement of Investments 1,178,858,603 1,222,918,319
Receivable for shares of Common Stock subscribed 22,167
Interest receivable 20,996,651
Prepaid expenses 99,465
1,244,036,602
- --------------------------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation and affiliates 693,002
Cash overdraft due to Custodian 973,730
Payable for investment securities purchased 7,351,523
Payable for shares of Common Stock redeemed 74,746
Accrued expenses 87,715
9,180,716
- --------------------------------------------------------------------------------------------------
Net Assets ($) 1,234,855,886
- --------------------------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 1,186,445,849
Accumulated undistribued investment income--net 476,039
Accumulated net realized gain (loss) on investments 3,874,282
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4(b) 44,059,716
- --------------------------------------------------------------------------------------------------
Net Assets ($) 1,234,855,886
- --------------------------------------------------------------------------------------------------
Shares Outstanding
(300 million shares of $.01 par value Common Stock authorized) 83,899,001
Net Asset Value, offering and redemption price per share--Note 3(d) ($) 14.72
</TABLE>
See notes to financial statements.
The Fund 15
<PAGE>
STATEMENT OF OPERATIONS
Year Ended May 31, 1999
- --------------------------------------------------------------------------------
Investment Income ($)
- --------------------------------------------------------------------------------
Interest Income 67,949,904
Expenses:
Management fee--Note 3(a) 7,728,575
Shareholder servicing costs--Note 3(b) 1,235,516
Custodian fees 90,115
Directors' fees and expenses-Note 3(c) 55,262
Professional fees 41,372
Prospectus and shareholders' reports 34,585
Registration fees 29,733
Loan commitment fees--Note 2 6,282
Miscellaneous 33,197
Total Expenses 9,254,637
Investment Income--Net 58,695,267
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4($):
Net realized gain (loss) on investments and options transactions 16,110,687
Net unrealized appreciation (depreciation) on investments (25,520,707)
Net Realized and Unrealized Gain (Loss) on Investments (9,410,020)
Net Increase in Net Assets Resulting from Operations 49,285,247
See notes to financial statements.
16
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Year Ended May 31,
------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income--net 58,695,267 63,463,904
Net realized gain (loss) on investments 16,110,687 23,754,940
Net unrealized appreciation (depreciation)
on investments (25,520,707) 27,616,214
Net Increase (Decrease) in Net Assets
Resulting from Operations 49,285,247 114,835,058
- ------------------------------------------------------------------------------------------------
Dividends to Shareholders from ($):
Investment income--net (58,553,571) (63,314,051)
Net realized gain on investments (3,795,431) (81,940)
Total Dividends (62,349,002) (63,395,991)
- ------------------------------------------------------------------------------------------------
Capital Stock Transactions ($):
Net proceeds from shares sold 123,029,082 342,706,207
Dividends reinvested 40,028,943 39,899,176
Cost of shares redeemed (225,277,667) (492,963,526)
Increase (Decrease) in Net Assets from
Capital Stock Transactions (62,219,642) (110,358,143)
Total Increase (Decrease) in Net Assets (75,283,397) (58,919,076)
- ------------------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 1,310,139,283 1,369,058,359
End of Period 1,234,855,886 1,310,139,283
Undistributed investment income--net 476,039 334,343
- ------------------------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 8,226,298 23,402,066
Shares issued for dividends reinvested 2,673,961 2,710,842
Shares redeemed (15,071,208) (33,650,961)
Net Increase (Decrease) in Shares Outstanding (4,170,949) (7,538,053)
</TABLE>
See notes to financial statements.
The Fund 17
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year Ended May 31,
--------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning of period 14.88 14.32 14.00 14.54 14.59
Investment Operations:
Investment income--net .68 .70 .73 .77 .82
Net realized and unrealized gain (loss)
on investments (.12) .56 .32 (.54) --
Total from Investment Operations .56 1.26 1.05 .23 .82
Distributions:
Dividends from investment income--net (.68) (.70) (.73) (.77) (.82)
Dividends from net realized gain
on investments (.04) -- -- -- (.05)
Total Distributions (.72) (.70) (.73) (.77) (.87)
Net asset value, end of period 14.72 14.88 14.32 14.00 14.54
- ----------------------------------------------------------------------------------------------
Total Return (%) 3.81 8.89 7.61 1.58 5.93
- ----------------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets .72 .71 .73 .69 .71
Ratio of net investment income
to average net assets 4.56 4.77 5.11 5.37 5.77
Portfolio Turnover Rate 58.49 64.67 60.56 56.12 39.85
- ----------------------------------------------------------------------------------------------
Net Assets, end of period ($ X 1,000) 1,234,856 1,310,139 1,369,058 1,371,274 1,557,754
</TABLE>
See notes to financial statements
18
<PAGE>
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, as amended (the "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 (the "Manager") serves as the fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. Premier Mutual
Fund Services, Inc. is 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: Investments in securities 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
The Fund 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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.
Under the terms of the custody agreement, the fund received net earnings credits
of $36,935 during the period May 31, 1999 based on available cash balances left
on deposit. Income earned under this arrangement is included in interest income.
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 of 1986, as amended (the
"Code"). To the extent that net realized capital gain can be offset by capital
loss carryovers, if any, it is the policy of the fund not to distribute such
gain.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Code, and to make distributions
of income and net realized capital gain sufficient to relieve it from
substantially all Federal income and excise taxes.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (the "Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the fund at rates
20
<PAGE>
based on prevailing market rates in effect at the time of borrowings. During the
period ended May 31, 1999, the fund did not borrow under the Facility.
NOTE 3--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, commitment fees 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. During the period ended May 31, 1999, there were no expense
reimbursement pursuant to the Agreement.
(b) Under the 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 May
31, 1999, the fund was charged $647,766 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. During the period
ended May 31, 1999, the fund was charged $291,948 pursuant to the transfer
agency agreement.
The Fund 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
(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.
(d) A .10% redemption fee is charged and retained by the fund on shares redeemed
within fifteen days following the date of issuance, including redemptions made
through the use of the fund's exchange privilege. During the period ended May
31, 1999, redemption fees retained by the fund amounted to $12,091.
NOTE 4--Securities Transactions:
(a) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended May 31, 1999, amounted
to $735,560,085 and $708,181,668, respectively.
The fund may purchase and write (sell) put and call options in order to gain
exposure to or protect against changes in the market. As a writer of options,
the fund receives a premium at the outset then bears the market risk of
unfavorable changes in the price of the financial instrument underlying the
option. Generally, the fund would incur a gain, to the extent of the premium, if
the price of the underlying financial instrument decreases between the date the
option is written and the date on which the option is terminated. Generally, the
fund would realize a loss, if the price of the financial instrument increases
between those dates. At May 31, 1999, there were no options written outstanding.
(b) At May 31, 1999, accumulated net unrealized appreciation on investments was
$44,059,716, consisting of $51,301,412 gross unrealized appreciation and
$7,241,696 gross unrealized depreciation.
At May 31, 1999, 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).
22
<PAGE>
REPORT OF 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, 1999, 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 and financial highlights. Our procedures included confirmation of
securities owned as of May 31, 1999 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, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the indicated years, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New York, NY
July 2, 1999
The Fund 23
<PAGE>
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby makes the following
designations regarding its fiscal year ended May 31, 1999:
--all the dividends paid from investment income-net are "exempt-interest
dividends" (not subject to regular Federal and, for individuals who are
California residents, California personal income taxes).
--the fund hereby designates $.0415 per share as a long-term capital gain
distribution of the $.0440 per share paid on December 9, 1998.
As required by Federal tax law rules, shareholders will receive notification of
their portion of the fund's taxable ordinary dividends (if any) and capital
gains distributions (if any) paid for the 1999 calendar year on Form 1099-DIV
which will be mailed by January 31, 2000.
24
<PAGE>
For More Information
Dreyfus
California Tax Exempt
Bond Fund, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request
to [email protected]
On the Internet Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
(C) 1999 Dreyfus Service Corporation 928AR995
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS CALIFORNIA TAX EXEMPT BOND FUND, INC.
AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
EXHIBIT A:
DREYFUS
LEHMAN BROTHERS CALIFORNIA
PERIOD MUNICIPAL TAX EXEMPT
BOND INDEX * BOND FUND, INC.
5/31/89 10,000 10,000
5/31/90 10,732 10,610
5/31/91 11,813 11,537
5/31/92 12,974 12,449
5/31/93 14,526 13,805
5/31/94 14,884 14,023
5/31/95 16,240 14,854
5/31/96 16,982 15,089
5/31/97 18,389 16,238
5/31/98 20,114 17,681
5/31/99 21,054 18,356
*Source: Lehman Brothers
