File Nos. 2-95595
811-4216
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 17 [X]
(Check appropriate box or boxes.)
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
X on August 1, 1996 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
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on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of its common
stock under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended March 31, 1996 was filed on May 30, 1996.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 3
4 General Description of Registrant 4
5 Management of the Fund 7
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 18
7 Purchase of Securities Being Offered 8
8 Redemption or Repurchase 13
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
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10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-25
13 Investment Objectives and Policies B-2
14 Management of the Fund B-8
15 Control Persons and Principal B-8
Holders of Securities
16 Investment Advisory and Other B-13
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-23
18 Capital Stock and Other Securities B-25
19 Purchase, Redemption and Pricing B-14; B-17;
of Securities Being Offered B-21
20 Tax Status *
21 Underwriters B-14
22 Calculations of Performance Data B-24
23 Financial Statements B-43
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
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PROSPECTUS AUGUST 1, 1996
DREYFUS CALIFORNIA TAX EXEMPT
MONEY MARKET FUND
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DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND (THE "FUND") IS AN
OPEN-END, DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MONEY MARKET
MUTUAL FUND. THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE YOU WITH AS HIGH A
LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND STATE OF CALIFORNIA INCOME
TAXES AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE
OF LIQUIDITY.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY.
THE FUND PROVIDES FREE REDEMPTION CHECKS, WHICH YOU CAN USE IN
AMOUNTS OF $500 OR MORE FOR CASH OR TO PAY BILLS. YOU CONTINUE TO EARN INCOME
ON THE AMOUNT OF THE CHECK UNTIL IT CLEARS. YOU CAN PURCHASE OR REDEEM SHARES
BY TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SINCE THE FUND MAY
INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER, AN
INVESTMENT IN THE FUND MAY INVOLVE GREATER RISK THAN INVESTMENTS IN CERTAIN
OTHER TYPES OF MONEY MARKET FUNDS.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED AUGUST 1, 1996, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATMENT OF ADDITIONAL
INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW
YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR
144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <S> <C>
Page Page
Annual Fund Operating Expenses.......... 3 Shareholder Services.................... 10
Condensed Financial Information......... 3 How to Redeem Shares.................... 13
Yield Information....................... 4 Shareholder Services Plan............... 16
Description of the Fund................. 4 Dividends, Distributions and Taxes...... 16
Management of the Fund.................. 7 General Information..................... 18
How to Buy Shares....................... 8 Appendix................................ 19
</TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C>
Management Fees ............................................................................. .50%
Other Expenses............................................................................... .14%
Total Fund Operating Expenses................................................................ .64%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $7 $20 $36 $80
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. You can purchase Fund shares without charge
directly from the Fund's distributor; you may be charged a nominal fee if you
effect transactions in Fund shares through a securities dealer, bank or other
financial institution. See "Management of the Fund" and "Shareholder Services
Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
----- ----- ------ ------ ----- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- ------ ------ ------ ------ ------ -----
INVESTMENT OPERATIONS:
Investment income--net... .039 .042 .049 .055 .049 .035 .024 .019 .026 .030
------ ------ ------ ----- ------ ------ ------ ------ ------ -----
DISTRIBUTIONS:
Dividends from investment
income--net....... (.039) (.042) (.049) (.055) (.049) (.035) (.024) (.019) (.026) (.030)
------ ------ ------ ----- ------ ------ ------ ------ ------ -----
Net asset value, end of year.. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
TOTAL INVESTMENT
RETURN............ 3.93% 4.27% 5.04% 5.65% 5.04% 3.58% 2.38% 1.94% 2.60% 3.07%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets..... .53% .60% .61% .60% .61% .66% .65% .65% .64% .64%
Ratio of net investment income to
average net assets.... 3.77% 4.20% 4.94% 5.50% 4.93% 3.53% 2.34% 1.92% 2.56% 3.03%
Decrease reflected in above
ratios due to undertakings by
The Dreyfus Corporation..... .14% - - - - - - - - -
Net assets, end of year
(000's omitted)... $214,730 $352,396 $369,832 $407,438 $351,643 $322,255 $316,344 $319,627 $281,764 $252,985
</TABLE>
Page 3
YIELD INFORMATION
From time to time, the Fund advertises its yield and effective yield.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. It can be expected that these yields will
fluctuate substantially. The yield of the Fund refers to the income generated
by an investment in the Fund over a seven-day period (which period will be
stated in the advertisement). This income is then annualized. That is, the
amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. The effective yield is calculated similarly, but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. The Fund's
yield and effective yield may reflect absorbed expenses pursuant to any
undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated
yield or effective yield calculated as described above.
Yield information is useful in reviewing the Fund's performance, but
because yields will fluctuate, such information under certain conditions may
not provide a basis for comparison with domestic bank deposits, other
investments which pay a fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Bank Rate Monitortrademark, N. Palm Beach, Fla.
33408, IBC's Money Fund Reporttrademark, Morningstar, Inc. and other industry
publications.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide you with as high a
level of current income exempt from Federal and State of California income
taxes as is consistent with the preservation of capital and the maintenance
of liquidity. To accomplish its investment objective, the Fund invests
primarily in the debt securities of the State of California, its political
subdivisions, authorities and corporations, the interest from which is, in
the opinion of bond counsel to the issuer, exempt from Federal and State of
California personal income taxes (collectively, "California Municipal
Obligations"). To the extent acceptable California Municipal Obligations are
at any time unavailable for investment by the Fund, the Fund will invest
temporarily in other debt securities the interest from which is, in the
opinion of bond counsel to the issuer, exempt from Federal, but not State of
California, income tax. The Fund's investment objective cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of the Fund's outstanding
voting shares. There can be no assurance that the Fund's investment objective
will be achieved. Securities in which the Fund will invest may not earn as
high a level of current income as long-term or lower quality securities which
generally have less liquidity, greater market risk and more fluctuation in
market value.
MUNICIPAL OBLIGATIONS
Debt securities the interest from which is, in the opinion of bond
counsel to the issuer, exempt from Federal income tax ("Municipal
Obligations") generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds
issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power
Page 4
for the payment of principal and interest. Revenue bonds are payable from the
revenue derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue source,
but not from the general taxing power. Tax exempt industrial development
bonds, in most cases, are revenue bonds that do not carry the pledge of the
credit of the issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes are short-term
instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities. Municipal Obligations
bear fixed, floating or variable rates of interest.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least
80% of the value of its net assets in Municipal Obligations and at least 65%
of the value of it's net assets in California Municipal Obligations, except
in both instances when the Fund is maintaining a temporary defensive
position. The remainder of the Fund's net assets may be invested in
securities that are not California Municipal Obligations and therefore may be
subject to State of California income taxes. See "Investment Considerations
and Risks_Investing in California Municipal Obligations" below, and
"Dividends, Distributions and Taxes." The Fund also may invest in Taxable
Investments of the quality described under "Appendix_Certain Portfolio
Securities--Taxable Investments."
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method
of valuing its securities pursuant to Rule 2a-7 under the 1940 Act, which
Rule includes various maturity, quality and diversification requirements,
certain of which are summarized as follows. In accordance with Rule 2a-7, the
Fund is required to maintain a dollar-weighted average portfolio maturity of
90 days or less, purchase only instruments having remaining maturities of 13
months or less and invest only in U.S. dollar denominated securities
determined in accordance with procedures established by the Fund's Board to
present minimal credit risks and which are rated in one of the two highest
rating categories for debt obligations by at least two nationally recognized
statistical rating organizations (or one rating organization if the
instrument was rated only by one such organization) or, if unrated, are of
comparable quality as determined in accordance with procedures established by
the Fund's Board. Moreover, the Fund will purchase commercial paper, or other
instruments having only commercial paper ratings, only if the security is
rated in the highest rating category by at least one nationally recognized
statistical rating organization or, if unrated, of comparable quality as
determined in accordance with procedures established by the Fund's Board. The
nationally recognized statistical rating organizations currently rating
instruments of the type the Fund may purchase are Moody's Investors Service,
Inc. ("Moody's"), Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and Fitch Investors Service, L.P.
("Fitch") and their rating criteria are described in "Appendix B" to the
Statement of Additional Information. For further information regarding the
amortized cost method of valuing securities, see "Determination of Net Asset
Value" in the Statement of Additional Information. There can be no assurance
that the Fund will be able to maintain a stable net asset value of $1.00 per
share.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including
Page 5
certain industrial development bonds) which are specified private
activity bonds as defined in the Internal Revenue Code of 1986, as amended
(the "Code"), issued after August 7, 1986, while exempt from Federal income
tax, is a preference item for the purpose of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company may be
treated as such a preference item to shareholders. The Fund will invest no
more than 20% of the value of its net assets in Municipal Obligations the
interest from which gives rise to a preference item for the purpose of the
alternative minimum tax and, except for temporary defensive purposes, in
other investments subject to Federal income tax.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments which
promise a stable stream of income, the prices of such securities are
inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. The value of fixed-income
securities also may be affected by changes in the credit rating or financial
conditions of the issuing entities.
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS -- Since the Fund is
concentrated in securities issued by California or entities within
California, an investment in the Fund may involve greater risk than
investments in certain other types of money market funds. You should consider
carefully the special risks inherent in the Fund's investment in California
Municipal Obligations. These risks result from certain amendments to the
California Constitution and other statutes that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial condition of the State of California. From mid-1990 to late 1993,
the State suffered a recession with the worst economic, fiscal and budget
conditions since the 1930s. As a result, the State experienced recurring
budget deficits for four of the last five fiscal years ended June 30, 1992.
The State had operating surpluses of approximately $109 million in fiscal
1992-93 and $917 million in fiscal 1993-94. However, at June 30, 1994,
according to California'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 has been that the State depleted its available cash resources and
has had to use a series of external borrowings to meet its cash needs. To meet
its cash flow needs in the 1994-95 fiscal year, the State issued, in July and
August 1994, $4.0 billion of revenue anticipation warrants and $3.0 billion
of revenue anticipation notes. The 1994-95 Budget Act contained a plan to
retire a projected $1.025 billion deficit in the 1995-96 fiscal year. As a
result of the deterioration in the State's budget and cash situation, between
October 1991 and July 1994 the ratings on the State's general obligation bonds
were reduced by S&P from AAA to A, by Moody's from Aaa to A1 and by Fitch from
AAA to A. 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. You should obtain
and review a copy of the Statement of Additional Information which more fully
sets forth these and other risk factors.
INVESTING IN MUNICIPAL OBLIGATIONS -- The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in
such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects. As a result, the Fund may be subject to greater risk as
compared to a fund that does not follow this practice.
Page 6
Certain municipal lease/purchase obligations in which the Fund may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is unrated, The Dreyfus Corporation will
consider, on an ongoing basis, a number of factors including the likelihood
that the issuing municipality will discontinue appropriating funding for the
leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by the Fund and
thus reduce available yield. Shareholders should consult their tax advisers
concerning the effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax exemption for
interest on Municipal Obligations may be introduced in the future. If any
such proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of
Municipal Obligation as taxable, the Fund would treat such security as a
permissible Taxable Investment within the applicable limits set forth herein.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest
in, or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of June 28, 1996, The Dreyfus Corporation managed
or administered approximately $79 billion in assets for approximately 1.7
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Massachusetts
law.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest holding companies in the
United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$237 billion in assets as of March 31, 1996, including approximately $83
billion in proprietary mutual fund assets. As of March 31, 1996, Mellon,
through vari-
Page 7
ous subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $886 billion in assets,
including approximately $61 billion in mutual fund assets.
For the fiscal year ended March 31, 1996, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of .50 of 1% of the
value of the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the overall
expense ratio of the Fund and increasing yield to investors. The Fund will
not pay The Dreyfus Corporation at a later time for any amounts it may waive,
nor will the Fund reimburse The Dreyfus Corporation for any amounts it may
assume.
In allocating brokerage transactions, The Dreyfus Corporation seeks
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among
other things, the receipt of research services and/or the sale of shares of
the Fund or other funds managed, advised or administered by The Dreyfus
Corporation as factors in the selection of broker-dealers to execute
portfolio transactions for the Fund. See "Portfolio Transactions" in the
Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers, banks or other financial institutions in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston,Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a
nominal fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution. Share certificates are issued
only upon your written request. No certificates are issued for fractional
shares. It is not recommended that the Fund be used as a vehicle for Keogh,
IRA or other qualified plans. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a securities dealer, bank or other financial institution which has
made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. The initial investment must be
accompanied by the Account Application. For full-time or part-time employees
of The Dreyfus Corporation or any of its affiliates or subsidiaries,
directors of The Dreyfus Corporation, Board members of a fund advised by The
Dreyfus Corporation, including members of the Fund's Board, or the spouse or
minor child of any of the foregoing, the minimum initial investment is
$1,000. For full-time or part-time employees of The Dreyfus Corporation or
any of its affiliates or subsidiaries who elect to have a portion of their
pay directly deposited into their Fund account, the minimum initial
investment is $50. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time. Fund
Page 8
shares also are offered without regard to the minimum initial investment
requirements through Dreyfus-AUTOMATIC Asset BuilderRegistration Mark,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan
pursuant to the Dreyfus Step Program described under "Shareholder Services."
These services enable you to make regularly scheduled investments and may
provide you with a convenient way to invest for long-term financial goals.
You should be aware, however, that periodic investment plans do not guarantee
a profit and will not protect an investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor
subsequent investments should be made by third party check. Purchase orders
may be delivered in person only to a Dreyfus Financial Center. THESE ORDERS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY.
For the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900052058/Dreyfus
California Tax Exempt Money Market Fund, for purchase of Fund shares in your
name. The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about remitting
funds in this manner from your bank. All payments should be made in U.S.
dollars and, to avoid fees and delays, should be drawn only on U.S. banks. A
charge will be imposed if any check used for investment in your account does
not clear. The Fund makes available to certain large institutions the ability
to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form and Federal Funds (monies
of member banks within the Federal Reserve System which are held on deposit
at a Federal Reserve Bank) are received by the Transfer Agent. If you do not
remit Federal Funds, your payment must be converted into Federal Funds. This
usually occurs within one business day of receipt of a bank wire and within
two business days of receipt of a check drawn on a member bank of the Federal
Reserve System. Checks drawn on banks which are not members of the Federal
Reserve System may take considerably longer to convert into Federal Funds.
Prior to receipt of Federal Funds, your money will not be invested.
Page 9
The Fund's net asset value per share is determined as of 12:00 Noon,
New York time, on each day the New York Stock Exchange is open for business.
Net asset value per share is computed by dividing the value of the Fund's net
assets (i.e., the value of its assets less liabilities) by the total number
of shares outstanding. See "Determination of Net Asset Value" in the
Statement of Additional Information.
If your payments are received in or converted into Federal Funds by
12:00 Noon, New York time, by the Transfer Agent, you will receive the
dividend declared that day. If your payments are received in or converted
into Federal Funds after 12:00 Noon, New York time, by the Transfer Agent,
you will begin to accrue dividends on the following business day.
Qualified institutions may telephone orders for purchase of Fund
shares. These orders will become effective at the price determined at 12:00
Noon, New York time, and the shares purchased will receive the dividend on
Fund shares declared on that day, if the telephone order is placed by 12:00
Noon, New York time, and Federal Funds are received by 4:00 p.m., New York
time, on that day.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
PROCEDURES FOR MULTIPLE ACCOUNTS -- Special procedures have been designed for
banks and other institutions that wish to open multiple accounts. The
institution may open a single master account by filing one application with
the Transfer Agent, and may open individual sub-accounts at the same time or
at some later date. For further information, please refer to the Statement of
Additional Information.
SHAREHOLDER SERVICES
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being
Page 10
exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. The ability to
issue exchange instructions by telephone is given to all Fund shareholders
automatically, unless you check the applicable "No" box on the Account
Application, indicating that you specifically refuse this Privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request, signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-645-6561, or
by oral request from any of the authorized signatories on the account also
by calling 1-800-645-6561. If you have established the Telephone Exchange
Privilege, you may telephone exchange instructions by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452. See "How to Redeem
Shares_Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege
and the dividend/capital gain distribution option (except for Dreyfus
Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include a sales
load or which reflect a reduced sales load, if the shares you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories
of shares. To qualify, at the time of the exchange you must notify the
Transfer Agent. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services"
in the Statement of Additional Information. No fees currently are charged
shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the
Securities and Exchange Commission. The Fund reserves the right to reject any
exchange request in whole or in part. The availability of Fund Exchanges may
be modified or terminated at any time upon notice to shareholders. See
"Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of certain other funds in the Dreyfus Family of Funds of
which you are a shareholder. The amount you designate, which can be expressed
either in terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth of the month according
to the schedule you have selected. Shares will be exchanged at the
then-current net asset value; however, a sales load may be charged with
respect to exchanges into funds sold with a sales load. See "Shareholder
Services" in the Statement of Additional Information. The right to exercise
this Privilege may be modified or cancelled by the Fund or the Transfer
Agent. You may modify or cancel your exercise of this Privilege at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. The Fund may charge a service fee
for the use of this Privilege. No such fee currently is contemplated. For
more information concerning this Privilege and the funds in the Dreyfus
Family of Funds eligible to participate in this Privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
Page 11
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-Automatic Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon your employer's direct deposit program, you may have part or all of your
paycheck transferred to your existing Dreyfus account electronically through
the Automated Clearing House system at each pay period. To establish a
Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, The Dreyfus Corporation, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program account,
you must supply the necessary information on the Account Application and file
the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary
authorization form(s), please call toll free 1-800-782-6620. You may
terminate your participation in this
Page 12
Program at any time by discontinuing your participation in Dreyfus-AUTOMATIC
Asset Builder, Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll
Savings Plan, as the case may be, as provided under the terms of such
Privilege(s). The Fund may modify or terminate this Program at any time.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of the other fund will be purchased at the then-current
net asset value; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. If you
are investing in a fund that charges a contingent deferred sales charge, the
shares purchased will be subject to the contingent deferred sales charge, if
any, applicable to the purchased shares. See "Shareholder Services" in the
Statement of Additional Information. Dreyfus Dividend ACH permits you to
transfer electronically dividends or dividends and capital gain
distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund imposes no charges when shares are redeemed. Securities
dealers, banks or other financial institutions may charge their clients a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities
page 13
and Exchange Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK,
BY DREYFUS TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER
AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT,
YOUR REDEMPTION WILL BE EFFECTIVE AND THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT
HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE
OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Check
Redemption Privilege, the Wire Redemption Privilege, the Telephone Redemption
Privilege or the Dreyfus TELETRANSFER Privilege. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to refuse
any request made by wire or telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares for which certificates have been issued are
not eligible for the Check Redemption, Wire Redemption, Telephone Redemption
or Dreyfus TELETRANSFER Privilege.
You may redeem shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, and
reasonably believed by the Transfer Agent to be genuine. The Fund will require
the Transfer Agent to employ reasonable procedures, such as requiring a form
of personal identification, to confirm that instructions are genuine and, if
it does not follow such procedures, the Fund or Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the
Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
Page 14
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agent Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
If you have any questions with respect to signature-guarantees, please call
the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE -- You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $500 or more. Redemption Checks should not be used to
close your account. Redemption Checks are free, but the Transfer Agent will
impose a fee for stopping payment of a Redemption Check upon your request or
if the Transfer Agent cannot honor the Redemption Check because of
insufficient funds or other valid reason. You should date your Redemption
Checks with the current date when you write them. Please do not postdate your
Redemption Checks. If you do, the Transfer Agent will honor, upon
presentment, even if presented before the date of the check, all postdated
Redemption Checks which are dated within six months of presentment for
payment, if they are otherwise in good order.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day)made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
Page 15
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of l%
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends usually are paid on the last calendar day
of each month, and are automatically reinvested in additional Fund shares at
net asset value or, at your option, are paid in cash. If you redeem all
shares in your account at any time during the month, all dividends to which
you are entitled will be paid to you along with the proceeds of the
redemption. If you are an omnibus accountholder and indicate in a partial
redemption request that a portion of any accrued dividends to which such
account is entitled belongs to an underlying accountholder who has redeemed
all shares in his or her account, such portion of the accrued dividends will
be paid to you along with the proceeds of the redemption. Distributions from
net realized securities gains, if any, generally are declared and paid once a
year, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose whether
to receive distributions in cash or to reinvest in additional shares at net
asset value. All expenses are accrued daily and deducted before declaration of
dividends to investors.
Except for dividends from Taxable Investments, the Fund anticipates
that substantially all dividends paid by the Fund will not be subject to
Federal or State of California personal income taxes. To the extent that you
are obligated to pay state or local taxes outside of the State of California,
dividends earned by an investment in the Fund may represent taxable income.
Dividends derived from Taxable Investments, together with distributions from
any net realized short-term securities gains and all or a portion of any
gains realized from the sale or other disposition of certain market discount
bonds, paid by the Fund are subject to Federal income tax as ordinary income
whether received in cash or reinvested. Distributions from net realized
long-term securities gains of the Fund generally are taxable as long-term
capital gains for Federal income tax purposes if you are a citizen or
resident of the United States. The Code provides that the net capital gain of
an individual generally will not be subject to Federal income tax at a rate
in excess of 28%. Under the Code, interest on indebtedness incurred or
continued to purchase or carry Fund shares which is deemed to relate to
exempt-interest dividends is not deductible. No dividend paid by the Fund
will qualify for the dividends received deduction allowable to certain U.S.
corporations.
Page 16
Although all or a substantial portion of the dividends paid by the
Fund may be excluded by Fund shareholders from their gross income for Federal
income tax purposes, the Fund may purchase specified private activity bonds,
the interest from which may be (i) a preference item for purposes of the
alternative minimum tax, (ii) a component of the "adjusted current earnings"
preference item for purposes of the corporate alternative minimum tax as well
as a component in computing the corporate environmental tax or (iii) a factor
in determining the extent to which a shareholder's Social Security benefits
are taxable. If the Fund purchases such securities, the portion of the Fund's
dividends related thereto will not necessarily be tax exempt to an investor
who is subject to the alternative minimum tax and/or the tax on Social
Security benefits and may cause an investor to be subject to such taxes.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in the Fund. If the Fund pays
dividends derived from taxable income, it intends to designate as taxable the
same percentage of the day's dividend as the actual taxable income earned on
that day bears to total income earned on that day. Thus, the percentage of
the dividend designated as taxable, if any, may vary from day to day.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends and
distributions from net realized securities gains of the Fund paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended March 31, 1996 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. The Fund is
subject to a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
Page 17
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated October 8, 1985, and
commenced operations on January 17, 1986. The Fund is authorized to issue an
unlimited number of shares of beneficial interest, par value $.01 per share.
Each share has one vote.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Fund or a Trustee. The Trust Agreement provides for indemnification from the
Fund's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Fund, the shareholder paying such liability
will be entitled to reimbursement from the general assets of the Fund. The
Fund intends to conduct its operations in such a way so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the
Fund. As discussed under "Management of the Fund" in the Statement of
Additional Information, the Fund ordinarily will not hold shareholder
meetings; however, shareholders under certain circumstances may have the
right to call a meeting of shareholders for the purpose of voting to remove
Trustees.
The Transfer Agent maintains a record of your ownership and sends
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
Page 18
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund may borrow money from banks, but only for
temporary or emergency (not leveraging) purposes in an amount up to 15% of
the value of the Fund's total assets (including the amount borrowed) valued
at the lesser of cost or market, less liabilities (not including the amount
borrowed) at the time the borrowing is made. While borrowings exceed 5% of
the Fund's total assets, the Fund will not make any additional investments.
FORWARD COMMITMENTS -- The Fund may purchase Municipal Obligations and other
securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed when the
Fund enters into the commitment, but the Fund does not make payment until it
receives delivery from the counterparty. The Fund will commit to purchase
such securities only with the intention of actually acquiring the securities,
but the Fund may sell these securities before the settlement date if it is
deemed advisable. A segregated account of the Fund consisting of cash, cash
equivalents or U.S. Government securities or other high quality liquid debt
securities at least equal at all times to the amount of the commitments will
be established and maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- The Fund may purchase floating and variable
rate demand notes and bonds, which are tax exempt obligations ordinarily
having stated maturities in excess of 13 months, but which permit the holder
to demand payment of principal at any time or at specified intervals not
exceeding 13 months, in each case upon not more than 30 days' notice.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amount borrowed.
Frequently, such obligations are secured by letters of credit or other credit
support arrangements provided by banks. Changes in the credit quality of
banks and other financial institutions that provide such credit or liquidity
enhancements to the Fund's portfolio securities could cause losses to the
Fund and affect its share price. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that
such instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are
redeemable at face value plus accrued interest. Accordingly, where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Each obligation purchased
by the Fund will meet the quality criteria established for the purchase of
Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS -- The Fund may purchase from financial
institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to
the total principal amount of the Municipal Obligation. These instruments may
have fixed, floating or variable rates of interest, with remaining maturities
of 13 months or less. If the participation interest is unrated or has been
given a rating below that which otherwise is permissible for purchase by the
Fund, it will be backed by an irrevocable letter of credit or guarantee of a
bank that the Fund's Board has determined meets the prescribed
Page 19
quality standards for banks set forth below, or the payment obligation
otherwise will be collateralized by U.S. Government securities. For certain
participation interests, the Fund will have the right to demand payment, on
not more than seven days' notice, for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest. As
to these instruments, the Fund intends to exercise its right to demand payment
only upon a default under the terms of the Municipal Obligation, as needed to
provide liquidity to meet redemptions, or to maintain or improve the quality
of its investment portfolio.
TENDER OPTION BONDS -- The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a
fixed rate substantially higher than prevailing short-term tax exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing
or similar agent at or near the commencement of such period, that would cause
the securities, coupled with the tender option, to trade at par on the date
of such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax exempt rate. The Dreyfus Corporation, on behalf of the Fund,
will consider on an ongoing basis the creditworthiness of the issuer of the
underlying Municipal Obligation, of any custodian and of the third party
provider of the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal Obligations and
for other reasons.
STAND-BY COMMITMENTS -- The Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, the Fund obligates a broker, dealer or bank to repurchase, at the
Fund's option, specified securities at a specified price and, in this
respect, stand-by commitments are comparable to put options. The exercise of
a stand-by commitment, therefore, is subject to the ability of the seller to
make payment on demand. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Fund may pay for stand-by commitments if
such action is deemed necessary, thus increasing to a degree the cost of the
underlying Municipal Obligation and similarly decreasing such security's
yield to investors. Gains realized in connection with stand-by commitments
will be taxable.
ILLIQUID SECURITIES -- The Fund may invest up to 10% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
Fund is subject to a risk that should the Fund desire to sell them when a
ready buyer is not available at a price the Fund deems representative of
their value, the value of the Fund's net assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest
in taxable short-term investments ("Taxable Investments") consisting of:
notes of issuers having, at the time of purchase, a quality rating within the
two highest grades of
Page 20
Moody's, S&P or Fitch; obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper rated not lower than P-1 by Moody's, A-1
by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic banks,
including foreign branches of domestic banks, with assets of one billion
dollars or more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the foregoing.
Dividends paid by the Fund that are attributable to income earned by the Fund
from Taxable Investments will be taxable to investors. See "Dividends,
Distributions and Taxes." Except for temporary defensive purposes, at no time
will more than 20% of the value of the Fund's net assets be invested in
Taxable Investments and Municipal Obligations the interest from which gives
rise to a preference item for the purpose of the alternative minimum tax. If
the Fund purchases Taxable Investments, it will value them using the
amortized cost method and comply with the provisions of Rule 2a-7 relating to
purchases of taxable instruments. When the Fund has adopted a temporary
defensive position, including when acceptable California Municipal Obligations
are unavailable for investment by the Fund, in excess of 35% of the Fund's net
assets may be invested in securities that are not exempt from California
income taxes. Under normal market conditions, the Fund anticipates that not
more than 5% of the value of its total assets will be invested in any one
category of Taxable Investments. Taxable Investments are more fully described
in the Statement of Additional Information, to which reference hereby is made.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 21
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Page 23
DREYFUS
CALIFORNIA
TAX EXEMPT
MONEY MARKET FUND
PROSPECTUS
(LION LOGO)
Registration Mark
Copy Rights 1996 Dreyfus Service Corporation 357p080196
__________________________________________________________________________
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 1, 1996
__________________________________________________________________________
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 Money Market Fund (the "Fund"), dated
August 1, 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 toll free 1-800-
645-6561.
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-8
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . B-13
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . B-14
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . . B-16
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . . B-17
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . . B-19
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . B-21
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . B-22
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . B-23
Yield Information . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . B-25
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors . . . . . . . . . . . . . . . B-25
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-39
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . B-43
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . B-53
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 Obli-
gations by ratings for the fiscal year ended March 31, 1996, computed on a
monthly basis, was as follows:
Fitch Investors Moody's Investors Standard & Poor's
Service, L.P. Service, Inc. Ratings Group Percentage
("Fitch") or ("Moody's") or ("S&P") of Value
F-1+\F-1 VMIG1\MIG1, SP-1+\SP-1,
P-1 A1+\A1 97.2%
AAA\AA Aaa\Aa AAA\AA 1.4
Not Rated Not Rated Not Rated 1.4 (*)
------
100.0%
======
______________________________________
* Included in the Not Rated category are securities comprising 1.4% 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
VMIG1/MIG1 rating category.
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses
and lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or
on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
housing facilities, sports facilities, convention or trade show
facilities, airport, mass transit, industrial, port or parking facilities,
air or water pollution control facilities and certain local facilities for
water supply, gas, electricity, or sewage or solid waste disposal; the
interest paid on such obligations may be exempt from Federal income tax,
although current tax laws place substantial limitations on the size of
such issues. Such obligations are considered to be Municipal Obligations
if the interest paid thereon qualifies as exempt from Federal income tax
in the opinion of bond counsel to the issuer. There are, of course,
variations in the security of Municipal Obligations, both within a
particular classification and between classifications.
Floating and variable rate demand notes are tax exempt obligations
ordinarily having stated maturities in excess of 13 months, but which
permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case upon not more
than 30 days' notice. The issuer of such notes ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the note plus accrued interest upon a
specified number of days' notice to the holders thereof. The interest
rate on a floating rate demand note 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 demand note is adjusted
automatically at specified intervals.
For the purpose of diversification under the Investment Company Act
of 1940, as amended (the "1940 Act"), the identification of the issuer of
Municipal Obligations depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond, if
that bond is backed only by the assets and revenues of the
non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. If, however, in either case, the creating government
or some other entity guarantees a security, such a guaranty would be
considered a separate security and will be treated as an issue of such
government or other entity.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation, and rating of the issue.
The imposition of the Fund's management fee, as well as other operating
expenses, 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 Fund will
seek to minimize these risks by investing only in those lease obligations
that (1) are rated in one of the two highest rating categories for debt
obligations by at least two nationally recognized statistical rating
organizations (or one rating organization if the lease obligation was
rated by only one such organization), or (2) if unrated, are purchased
principally from the issuer or domestic banks or other responsible third
parties, in each case only if the seller shall have entered into an
agreement with the Fund providing that the seller or other responsible
third party will either remarket or repurchase the lease obligation within
a short period after demand by the Fund. The staff of the Securities and
Exchange Commission currently considers certain lease obligations to be
illiquid. Accordingly, not more than 10% of the value of the Fund's net
assets will be invested in lease obligations that are illiquid and in
other illiquid securities. See "Investment Restriction No. 12" below.
The Fund will not purchase tender option bonds unless (a) the demand
feature applicable thereto is exercisable by the Fund within 13 months of
the date of such purchase upon no more than 30 days' notice and thereafter
is exercisable by the Fund no less frequently than annually upon no more
than 30 days' notice and (b) at the time of such purchase, the Manager
reasonably expects (i) based upon its assessment of current and historical
interest rate trends, that prevailing short-term tax exempt rates will not
exceed the stated interest rate on the underlying Municipal Obligations at
the time of the next tender fee adjustment and (ii) that the circumstances
which might entitle the grantor of a tender option to terminate the tender
option would not occur prior to the time of the next tender opportunity.
At the time of each tender opportunity, the Fund will exercise the tender
option with respect to any tender option bonds unless the Manager
reasonably expects, (x) based upon its assessment of current and
historical interest rate trends, that prevailing short-term tax exempt
rates will not exceed the stated interest rate on the underlying Municipal
Obligations at the time of the next tender fee adjustment, and (y) that
the circumstances which might entitle the grantor of a tender option to
terminate the tender option would not occur prior to the time of the next
tender opportunity. The Fund will exercise the tender feature with
respect to tender option bonds, or otherwise dispose of its tender option
bonds, prior to the time the tender option is scheduled to expire pursuant
to the terms of the agreement under which the tender option is granted.
The Fund otherwise will comply with the provisions of Rule 2a-7 in
connection with the purchase of tender option bonds, including, without
limitation, the requisite determination by the Fund's Board that the
tender option bonds in question meet the quality standards described in
Rule 2a-7, which, in the case of a tender option bond subject to a
conditional demand feature, would include a determination that the
security has received both the required short-term and long-term quality
rating or is determined to be of comparable quality. In the event of a
default of the Municipal Obligation underlying a tender option bond, or
the termination of the tender option agreement, the Fund would look to the
maturity date of the underlying security for purposes of compliance with
Rule 2a-7 and, if its remaining maturity was greater than 13 months, the
Fund would sell the security as soon as would be practicable. The Fund
will purchase tender option bonds only when it is satisfied that the
custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the
underlying Municipal Obligations and that payment of any tender fees will
not have the effect of creating taxable income for the Fund. Based on the
tender option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument will be
monitored to assure that it is valued at fair value.
Ratings of Municipal Obligations. If, subsequent to its purchase by
the Fund, (a) an issue of rated Municipal Obligations ceases to be rated
in the highest rating category by at least two rating organizations (or
one rating organization if the instrument was rated by only one such
organization) or the Fund's Board determines that it is no longer of
comparable quality or (b) the Manager becomes aware that any portfolio
security not so highly rated or any unrated security has been given a
rating by any rating organization below the rating organization's second
highest rating category, the Fund's Board will reassess promptly whether
such security presents minimal credit risk and will cause the Fund to take
such action as it determines is in the best interest of the Fund and its
shareholders; provided that the reassessment required by clause (b) is not
required if the portfolio security is disposed of or matures within five
business days of the Manager becoming aware of the new rating and the
Fund's Board is subsequently notified of the Manager's actions.
To the extent that the ratings given by Moody's, S&P or Fitch for
Municipal Obligations may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use
comparable ratings as standards for its investments in accordance with the
investment policies contained in the Fund's Prospectus and this Statement
of Additional Information. The ratings of Moody's, S&P and Fitch
represent their opinions as to the quality of the Municipal Obligations
which they undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute standards of
quality. Although these ratings may be an initial criterion for selection
of portfolio investments, the Manager also will evaluate these securities
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 illiqudity in the Fund's 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; other, 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
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally
are limited to London branches of domestic banks that have total assets in
excess of one billion dollars. Time deposits which may be held by the
Fund will not benefit from insurance from the Bank Insurance Fund or the
Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating 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. 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
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to
changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise)
based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may
expose the Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued
basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of
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 statutes that limit
the taxing and spending authority of California governmental entities, as
well as from the general financial condition of the State of California.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State has experienced recurring budget deficits for four of the five
fiscal years ended June 30, 1992. The State had operating surpluses of
approximately $109 million in fiscal 1992-93 and $917 million in 1993-94.
However, at June 30, 1994, according to California's Department of
Finance, the State's Special Fund for Economic Uncertainties had an
accumulated deficit, on a budget basis, of approximately $1.8 billion. A
further consequence of the large budget imbalances over the last three
fiscal years has been that the State depleted its available cash resources
and has had to use a series of external borrowings to meet its cash needs.
To meet its cash flow needs in the 1994-95 fiscal year, the State issued,
in July and August 1994, $4.0 billion of revenue anticipation warrants and
$3.0 billion of revenue anticipation notes. The 1994-95 Budget Act
contained a plan to retire a projected $1.025 billion deficit in the 1995-
96 fiscal year. As a result of the deterioration of the State's budget
and cash situation between October 1991 and July 1994, the ratings on the
State's general obligation bonds were reduced by S&P from AAA to A, by
Moody's from Aaa to A1 and by Fitch from AAA to A. 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.
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 10 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting shares. Investment restrictions numbered 11 and 12 are
not fundamental policies and may be changed by a vote of a majority of the
Fund's Board members at any time. The Fund may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Fund's Prospectus.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Fund's
total assets (including the amount borrowed) based on the lesser of cost
or market, less liabilities (not including the amount borrowed) at the
time the borrowing is made. While borrowings exceed 5% of the value of
the Fund's total assets, the Fund will not make any additional
investments.
3. Sell securities short or purchase securities on margin.
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.
5. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas interests,
but this shall not prevent the Fund from investing in Municipal
Obligations secured by real estate or interests therein.
6. Make loans to others, except through the purchase of qualified
debt obligations and the entry into repurchase agreements referred to
above and in the Fund's Prospectus.
7. Invest more than 15% of its assets in the obligations of any one
bank for temporary defensive purposes, or invest more than 5% of its
assets in the obligations of any other issuer, except that up to 25% of
the value of the Fund's total assets may be invested, and securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities may be purchased, without regard to any such
limitations. Notwithstanding the foregoing, to the extent required by the
rules of the Securities and Exchange Commission, the Fund will not invest
more than 5% of its assets in the obligations of any one bank, except that
up to 25% of the value of the Fund's total assets may be invested without
regard to such limitation.
8. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, securities issued by banks and obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or acquisition of
assets.
11. Pledge, mortgage, hypothecate or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings.
12. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are
illiquid if, in the aggregate, more than 10% of the value of the Fund's
net assets would be so invested.
For purposes of Investment Restriction No. 8, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together
as an "industry." If a percentage restriction is adhered to at the time
of investment, a later increase or decrease 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 an "interested person"
of the Fund, as defined in the 1940 Act, is indicated by an asterisk.
Board Members of the Fund
*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 February 1995, 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.
HODDING CARTER, III, Board Member. Chairman of MainStreet, a television
production company. Since 1995, Knight Professor of public affairs
journalism at the University of Maryland. From 1985 to 1986, he was
editor and chief correspondent of "Capitol Journal," a weekly Public
Broadcasting System ("PBS") series on Congress. From 1981 to 1984,
he was anchorman and chief correspondent for the PBS' "Inside Story,"
a regularly scheduled half-hour critique of press performance. From
1977 to July 1980, Mr. Carter served as Assistant Secretary of State
for Public Affairs and as Department of State spokesman. He is 61
years old and his address is c/o MainStreet, 918 Sixteenth Street,
N.W., Washington, D.C. 20006.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. He
is Chairman of the Board of Directors of The Noel Group, Inc.; a
trustee of Bucknell University; and a director of the Muscular
Dystrophy Association, HealthPlan Services Corporation, Belding
Heminway, Inc., Curtis Industries. Inc., and Staffing Resources, Inc.
He is 52 years old and his address is 200 Park Avenue, New York, New
York 10166.
EHUD HOUMINER, Board Member. Since July 1991, Professor and Executive-in-
Residence at the Columbia Business School, Columbia University. From
1991 to 1995, he was a Consultant to Bear, Stearns & Co. Inc.,
investment bankers. He was President and Chief Executive Officer of
Philip Morris USA, manufacturers of consumer products, from December
1988 until September 1990. He also is a Director of Avnet Inc. He
is 55 years old and his address is c/o Columbia Business School,
Columbia University, Uris Hall, Room 526, New York, New York 10027.
RICHARD C. LEONE, Board Member. President of The Twentieth Century Fund,
Inc., a tax exempt research foundation engaged in the study of
economic, foreign policy and domestic issues. From April 1990 to
March 1994, he was Chairman and, from April 1988 to March 1994, a
Commissioner of The Port Authority of New York and New Jersey. A
member in 1985, and from January 1986 to January 1989, Managing
Director of Dillon, Read & Co. Inc. Mr. Leone is also a director of
Resource Mortgage Capital, Inc. He is 56 years old and his address
is 41 East 70th Street, New York, New York 10021.
HANS C. MAUTNER, Board Member. Chairman, Trustee and Chief Executive
Officer of Corporate Property Investors, a real estate investment
company. Since January 1986, a Director of Julius Baer Investment
Management, Inc., a wholly-owned subsidiary of Julius Baer,
Securities Inc. He is 58 years old and his address is 305 East 47th
Street, New York, New York 10017.
ROBIN A, SMITH, Board Member. Since 1993, Vice President, and from March
1992 to October 1993, Executive Director, of One to One Partnership,
Inc., a national non-profit organization that seeks to promote
mentoring and economic empowerment for at-risk youths. From June
1986 to February 1992, she was an investment banker with Goldman,
Sachs, & Co. She is also a Trustee of Westover School and a Board
member of the Jacobs A. Riis Settlement House. She is 32 years old
and her address is 375 Park Avenue, Suite 1705, New York, New York
10152.
JOHN E. ZUCCOTTI, Board Member. President and Chief Executive Officer of
Olympia & York Companies (U.S.A.) and a member of its Board of
Directors since the inception of a Board on July 27, 1993. From 1986
to 1990, he was a partner in the law firm of Brown & Wood, and from
1978 to 1986, a partner in the law firm of Tufo & Zuccotti. First
Deputy Mayor of the City of New York from December 1975 to June 1977,
and Chairman of the City Planning Commission for the City of New York
from 1973 to 1975. Mr. Zuccotti is also a Director of Starret
Housing Corporation, a construction, development and real estate
properties corporation, and Capstone Pharmacy Services, Inc. He is
59 years old and his address is 237 Park Avenue, New York, New York
10017.
For so long as the plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the
Fund who are not "interested persons' (as defined in the 1940 Act) will be
selected and nominated by the Board members who are not "interested
persons" of the Fund.
Ordinarily, no meetings of shareholders will be held for the purpose
of electing Trustees unless and until such time as less than a majority of
the Trustees holding office have been elected by shareholders, at which
time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the 1940 Act, shareholders of record of not
less than two-thirds of the outstanding shares of the Fund may remove a
Trustee through a declaration in writing or by vote cast in person or by
proxy at a meeting called for that purpose. The Trustees are required to
call a meeting of shareholders for the purpose of voting upon the question
of removal of any such Trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the Fund's outstanding
shares.
The Fund typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of
the Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee
of one-half the amount paid to them as Board members. The aggregate
amount of compensation paid to each Board member by the Fund for the
fiscal year ended March 31, 1996, and by other funds in The Dreyfus Family
of Funds for which such person is a Board member (the number of which is
set forth in parenthesis next to each Board member's total compensation)
for the year ended December 31, 1995, were as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Members
David W. Burke $3,750 $253,654 (49)
Hodding Carter, III $3,750 $49,500 (7)
Joseph S. DiMartino $4,688 $448,618 (94)
Ehud Houminer $3,750 $55,405 (8)
Richard C. Leone $3,750 $49,000 (7)
Hans C. Mautner $3,750 $47,000 (7)
Robin A. Smith $3,500 $27,526 (7)
John E. Zuccotti $3,750 $49,500 (7)
_____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $2,392 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 31 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. He is 40 years old.
JOSEPH S. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor
and an officer of other investment companies advised or administered
by the Manager. From July 1988 to August 1994, he was employed by
The Boston Company, Inc. where he held various management positions
in the Corporate Finance and Treasury areas. He is 33 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. She is 32 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years
old.
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. He is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The following entities are known by the Fund to own, of record or
beneficially, 5% or more of the Fund's outstanding voting securities as
of July 22, 1996: First Interstate Bank of California was the record
owner of 20.0778% and Sanwa Bank of California was the record owner of
8.1915% of the Fund's outstanding shares. Each named entity is deemed to
be a "control person" as defined in the 1940 Act.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's voting securities outstanding on July 22, 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 shareholders on August 4, 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 October 30, 1995. 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 shares,
or, on not less than 90 days' notice, by the Manager. The Agreement will
terminate automatically in the event of its assignment (as defined in the
1940 Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President,
Chief Operating Officer and a director; Stephen E. Canter, Vice Chairman,
Chief Investment Officer and a director; Lawrence S. Kash, Vice Chairman--
Distribution and a director; Philip L. Toia, Vice Chairman--Operations and
Administration and a director; William T. Sandalls, Jr., Senior Vice
President and Chief Financial Officer; Elie M. Genadry, Vice President--
Institutional Sales; William F. Glavin, Jr., Vice President--Corporate
Development; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President--Corporate Communications;
Mary Beth Leibig, Vice President--Human Resources; Jeffrey N. Nachman,
Vice President--Mutual Fund Accounting; Andrew S. Wasser, Vice President--
Information Systems; Elvira Oslapas, Assistant Secretary; and Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian
M. Smerling, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the
Fund's Board. The Manager is responsible for investment decisions, and
provides the Fund with portfolio managers who are authorized by the Board
to execute purchases and sales of securities. The Fund's portfolio
managers are A. Paul Disdier, Karen M. Hand, Stephen C. Kris, Richard J.
Moynihan, Jill C. Shaffro, L. Lawrence Troutman, Samuel J. Weinstock and
Monica S. Wieboldt. The Manager also maintains a research department with
a professional staff of portfolio managers and securities analysts who
provide research services for the Fund as well as for other funds advised
by the Manager. All purchases and sales are reported for the Board's
review at the meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: taxes, interest, brokerage fees and
commissions, if any, fees of Board members who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Manager, Securities and Exchange Commission fees, state
Blue Sky qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
maintaining the Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
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.
As compensation for the Manager's services, the Fund has agreed to
pay the Manager a monthly management fee at the annual rate of .50 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. For the fiscal years ended March 31, 1994, 1995 and 1996, the
management fees paid to the Manager amounted to $1,527,915, $1,488,567 and
$1,336,414, respectively.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage, 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.
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.
Using Federal Funds. Dreyfus Transfer, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund may attempt
to notify the investor upon receipt of checks drawn on banks that are not
members of the Federal Reserve System as to the possible delay in
conversion into Federal Funds and may attempt to arrange for a better
means of transmitting the money. If the investor is a customer of a
securities dealer, bank or other financial institution and his order to
purchase Fund shares is paid for other than in Federal Funds, the
securities dealer, bank or other financial institution, acting on behalf
of its customer, will complete the conversion into, or itself advance,
Federal Funds generally on the business day following receipt of the
customer order. The order is effective only when so converted and
received by the Transfer Agent. An order for the purchase of Fund shares
placed by an investor with sufficient Federal Funds or a cash balance in
his brokerage account with a securities dealer, bank or other financial
institution will become effective on the day that the order, including
Federal Funds, is received by the Transfer Agent.
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 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."
Procedures for Multiple Accounts. The Transfer Agent will provide
each institution with a written confirmation for each transaction in a
sub-account at no additional charge. Upon receipt of funds for investment
by interbank wire, the Transfer Agent promptly will confirm the receipt of
the investment by telephone or return wire to the transmitting bank, if
the investor so requests.
The Transfer Agent also will provide each institution with a monthly
statement setting forth, for each sub-account, the share balance, income
earned for the month, income earned for the year to date and the total
current value of the account.
Service Charges. There are no sales or service charges by the Fund
or the Distributor, although investment dealers, banks and other financial
institutions may make reasonable charges to investors for their services.
The services provided and fees therefor are established by each
institution acting independently of the Fund. The Fund has been given to
understand that 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 positions; other services
available from the dealer, bank or financial institution; and assistance
with inquiries related to their investment. Any such fees will be
deducted monthly from dividends, 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 an investor. In addition, some securities dealers also
may require an investor to invest more than the minimum stated investment;
not take physical delivery of share certificates; not require that
redemption checks be issued in his name; not purchase fractional shares;
take monthly income distributions in cash; or other conditions. 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.
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 as 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
Board for its review. In addition, the Plan provides that material
amendments must be approved by the Fund's Board, and by the Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund
or the Manager 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 29, 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 March 31, 1996, $77,175 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."
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 and 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 same business day if the Transfer Agent receives the
redemption request in proper form prior to 12:00 Noon, New York time, on
such day; otherwise, the Fund will initiate payment on the next business
day. 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 and 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 transmissions:
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 "Share Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they also 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."
Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each 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 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 prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Fund's Board reserves the right to make payments in whole or
in part in securities (which may include non-marketable securities) or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemption. 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. 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 from any
person representing himself or herself to be the investor, 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 distributions, the investor's shares will be reduced and
eventually may be depleted. Automatic Withdrawal may be terminated at any
time by the investor, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, paid by 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."
Amortized Cost Pricing. The valuation of the Fund's portfolio
securities is based upon their amortized cost, which does not take into
account unrealized capital gains or losses. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While
this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument.
The Fund's Board has established, as a particular responsibility
within the overall duty of care owed to the Fund's investors, procedures
reasonably designed to stabilize the Fund's price per share as computed
for the purpose of purchases and redemptions at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Board, at such
intervals as it deems appropriate, to determine whether the Fund's net
asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market
quotations and market equivalents used in such review are obtained from an
independent pricing service (the "Service") approved by the Board. The
service values the Fund's investments based on methods which include
consideration of: yields or prices of municipal bonds of comparable
quality, coupon, maturity and type; indications of values from dealers;
and general market conditions. The Service also may employ electronic
data processing techniques and/or a matrix system to determine valuations.
The extent of any deviation between the Fund's net asset value based
upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board. If such deviation
exceeds 1/2 of 1%, the Board promptly will consider what action, if any,
will be initiated. In the event the Board determines that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, it has agreed to take such corrective
action as it regards as necessary and appropriate, including: selling
portfolio instruments prior to maturity to realize capital gains or losses
or to shorten average portfolio maturity; withholding dividends or paying
distributions from capital or capital gains; redeeming shares in kind; or
establishing a net asset value per share by using available market
quotations or market equivalents.
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."
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain or loss. However, all or a portion of any
gains realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income under Section 1276 of
the Internal Revenue Code of 1986, as amended (the "Code").
If, at the close of each quarter of its taxable year, at least 50% of
the value of the Fund's total assets consists of Federal tax exempt
obligations, then the Fund may designate and pay Federal exempt-interest
dividends from interest earned on all such tax exempt obligations. Such
exempt-interest dividends may be excluded by shareholders of the Fund from
their gross income for Federal income tax purposes. 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 the California personal income tax,
exempt-interest dividends derived from California Municipal Obligations
will not be subject to the California personal income tax. Distributions
from net realized short-term capital gains to California resident
shareholders will be subject to the California personal income tax
distributed by the Fund 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 purpose of computing the California alternative minimum
tax.
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 whom
it appears that the best price or execution will be obtained. Usually no
brokerage commissions, as such, are paid by the Fund for such purchases
and sales, although the price paid usually includes an undisclosed
compensation to the dealer acting as agent. The prices paid to
underwriters of newly-issued securities usually include a concession paid
by the issuer to the underwriter, and purchases of after-market securities
from dealers ordinarily are executed at a price between the bid and asked
price. No brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to
that primary consideration, dealers may be selected for research,
statistical or other services to enable the Manager to supplement its own
research and analysis with the views and information of other securities
firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising the Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses
of its research department.
YIELD INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Yield
Information."
For the seven-day period ended March 31, 1996, the Fund's yield was
2.56% and effective yield was 2.59%. Yield is computed in accordance with
a standardized method which involves determining the net change in the
value of a hypothetical pre-existing Fund account having a balance of one
share at the beginning of a seven calendar day period for which yield is
to be quoted, dividing the net change by the value of the account at the
beginning of the period to obtain the base period return, and annualizing
the results (i.e., multiplying the base period return by 365/7). The net
change in the value of the account reflects the value of additional shares
purchased with dividends declared on the original share and any such
additional shares and fees that may be charged to shareholder accounts, in
proportion to the length of the base period and the Fund's average account
size, but does not include realized gains and losses or unrealized
appreciation and depreciation. Effective yield is computed by adding 1 to
the base period return (calculated as described above), raising that sum
to a power equal to 365 divided by 7, and subtracting 1 from the result.
Based upon a combined 1995 Federal and California effective tax rate
of 46.24%, which reflects the Federal deduction for the California tax,
the Fund's tax equivalent yield for the seven-day period ended March 31,
1996 was 4.76%. Tax equivalent yield is computed by dividing that portion
of the yield or effective yield (calculated as described above) which is
tax exempt by 1 minus a stated tax rate and adding the quotient to that
portion, if any, of the yield of the Fund that is not tax exempt.
The tax equivalent yield noted above represents the application of
the highest Federal and State of California marginal personal income tax
rates presently in effect. For Federal income tax purposes, a 39.6% tax
rate has been used. For California income tax purposes, a 11.0% tax rate
for individuals, trust and estates 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 yields. Each investor should
consult its tax adviser, and consider its own factual circumstances and
applicable tax laws, in order to ascertain the relevant tax equivalent
yield.
Yields will fluctuate and are not necessarily representative of
future results. Each investor should remember that yield is a function of
the type and quality of the instruments in the portfolio, portfolio
maturity and operating expenses. An investor's principal in the Fund is
not guaranteed. See "Determination of Net Asset Value" for a discussion
of the manner in which the Fund's price per share is determined.
The Fund may use hypothetical tax equivalent yields or charts in its
advertising. These hypothetical yields or charts will be used for
illustrative purposes only and are not indicative of the Fund's past or
future performance.
Advertising materials for the Fund also may refer to or discuss then-
current or past economic conditions, developments and/or events, including
those relating to actual or proposed tax legislation. From time to time,
advertising materials for the Fund may also refer to statistical or other
information concerning trends relating to investment companies, as
compiled by industry associations such as the Investment Company
Institute.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio managers and may refer
to, or include commentary by a portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. 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 March 31, 1996, the
Fund paid the Transfer Agent $22,320. The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's custodian. Neither the
Transfer Agent nor The Bank of New York has any part in determining the
investment policies of the Fund or which securities are to be purchased or
sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance
of the shares being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives, as well as the general financial condition of the State,
could adversely affect the ability of issuers of California Municipal
Obligations to pay interest and principal on such obligations. The
following information constitutes only a brief summary, does not purport
to be a complete description, and is based on information drawn from
official statements relating to securities offerings of the State of
California and various local agencies, available as of the date of this
Statement of Additional Information. While the Fund has not independently
verified such information, it has no reason to believe that such
information is not correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered
a recession with the worst economic, fiscal and budget conditions since
the 1930s. Construction, manufacturing (especially aerospace), exports
and financial services, among others, were all severely affected. Job
losses were 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 caused increased expenditures for
health and welfare programs. The State has also 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 $18.4 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget
was introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter
703, Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a
drafting error in Chapter 703, he could not implement the $1.083 billion
reduction of the 1991-92 school funding appropriation, which was part of
the inter-year adjustment. The Legislature untimely enacted corrective
legislation as part of the 1993-94 Budget package to implement the $1.083
billion inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-
12 schools in order to maintain per-average daily attendance ("ADA")
funding at the same level as 1991-92, at $4,187. An additional loan of
$241 million was made to community college districts. These loans are to
be repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit discussed above also seeks to declare invalid the
provision making the $732 million a loan "repayable" from the 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 and
community colleges. Chapter 66 also adjusted the "Test 1" percentage to
35% to reflect the property tax shift among local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K14 schools based on Test 2. This exceeded the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil
at $4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as
well as an anticipated deficiency in special education fundings. These
and other minor appropriation adjustments increased the 1993-94
Proposition 98 guarantee to $13.8 billion, which exceeds the minimum
guarantee in that year by $272 million and provided per pupil funding of
$4,225.
The 1995-96 Governor's Budget adjusts 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 now exceed the minimum guarantee by $32 million.
This appropriation level still provides 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.
After 1995, the maximum personal income tax rate is scheduled to return to
9.3%, and the AMT rate is scheduled to drop from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher
tax brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases
are subject to the tax. However, exemptions have been provided for
certain essentials such as food for home consumption, prescription drugs,
gas, electricity and water. Sales tax accounted for about 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 proposed a two-year
solution to pass the accumulated deficit. The budget proposal set forth
revenue and expenditure forecasts and revenue and expenditure proposals
which estimated operating surpluses for the budget for both 1994-95 and
1995-96, and lead to the elimination of the accumulated budget deficit,
estimated at about $1.8 billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher
than revenues in 1993-94. This reflected the Administration's forecast of
an improving economy. Also included in this figure was the projected
receipt of about $360 million from the Federal government to reimburse the
State's cost of incarcerating undocumented immigrants, most of which
eventually was not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently
restore the renters' tax credit after 1995 failed at the June 1994
election. The Legislature enacted a further one-year suspension of the
renters' tax credit, for 1995, saving about $390 million in the 1995-96
fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State
to defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that
General Fund revenues for March 1995 were $28 million, or 1.1%, below
forecast, and that year-to-date General Fund revenues were $110 million,
or 0.4%, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated
for California to offset costs of incarceration of undocumented and
refugee immigrants, less than the $356 million which was assumed in the
State's 1994-95 Budget Act.
For the first time in four years, the State 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 costs 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 school 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 certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will
include: (1) likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of 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. The AA rating may be modified by the addition of a plus or minus
sign to show relative standing within the category.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+)
designation.
Commercial Paper Ratings
The rating A is the highest rating and is assigned by S&P to issues
that 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. Paper rated A-1 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.
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. Bonds in the Aa category which
Moody's believes possess the strongest investment attributes are
designated by the symbol Aa1.
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 Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins
in earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a wide range of financial
markets and assured sources of alternate liquidity.
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 issuer, 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 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.
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 satisfactory
degree of assurance for timely payments, but the margin of safety is not
as great as the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS MARCH 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS-100.0% AMOUNT VALUE
------------- ------------
<S> <C> <C>
CALIFORNIA-89.2%
Burbank Redevelopment Agency, MFHR, VRDN
3.15%, Series A (LOC; Coast Savings and Loan Association) (a,b)..................... $ 10,400,000 $ 10,400,000
California Health Facilities Financing Authority, Revenue, VRDN:
(Pooled Loan Program) 3.10%, Series A (LOC; Rabobank Nederland) (a,b)............... 6,100,000 6,100,000
(Pooled Program) 3.10% (LOC; Swiss Bank Corp.) (a,b)................................ 1,100,000 1,100,000
(Scripps Memorial Hospital)
3.10%, Series A (Insured; MBIA and LOC; Morgan Guaranty Trust Co.) (a,b).......... 4,700,000 4,700,000
California Pollution Control Financing Authority:
PCR:
CP:
Refunding (Pacific Gas and Electric):
3.10%, Series F, 4/16/96 (LOC; Banque Nationale de Paris) (b)............... 10,000,000 10,000,000
3.05%, Series A, 4/3/96 (LOC; Swiss Bank Corp.) (b)......................... 8,000,000 8,000,000
(San Diego Gas and Electric)
4%, Series A, 9/1/96 (Corporate Guaranty; San Diego Gas and Electric)....... 4,000,000 4,000,000
(Southern California Edison)
3%, 5/16/96 (Corporate Guaranty; Southern California Edison)................ 3,000,000 3,000,000
VRDN (Wadham Energy) 3.35%, Series C (LOC; Banque Paribas) (a,b).............. 1,500,000 1,500,000
RRR, VRDN:
(Delano Project) 3.50% (LOC; ABN-Amro Bank) (a,b)................................. 8,400,000 8,400,000
Refunding (Ultrapower-Rocklin) 3.55%, Series A (LOC; Bank of America) (a,b)....... 7,000,000 7,000,000
California Statewide Communities Development Authority,
Apartment Development Revenue, Refunding, VRDN (Subseries A-1)
2.85% (Corporate Guaranty; FNMA) (a)................................................ 7,000,000 7,000,000
Contra Costa County, TRAN 4.50%, 7/3/96................................................. 11,000,000 11,025,223
City of Fontana, MFMR, VRDN (Oakcrest Apartments Project)
3.15%, Series A (Corporate Guaranty; FNMA) (a)...................................... 7,800,000 7,800,000
Garden Grove Housing Authority, MFHR, VRDN (Valley View-Senior Villas Project)
3.45%, Series A (LOC; Wells Fargo Bank) (a,b)....................................... 1,200,000 1,200,000
Golden Empire Schools Financing Authority, VRDN, Refunding:
(Golden Empire Project) 3.15%, Series B (LOC: Canadian Imperial Bank
of Commerce and National Westminster Bank) (a,b).................................. 5,400,000 5,400,000
(Kern High School District) 3.15%, Series A (LOC; National Westminster Bank) (a,b).. 7,400,000 7,400,000
Kern County, COP, VRDN (Kern Public Facilities Project)
3.05%, Series B (LOC; Union Bank of Switzerland) (a,b).............................. 7,955,000 7,955,000
Kings County Housing Authority, MFHR, Refunding, VRDN
(Edgewater Isle Apartments)
2.95%, Series A (LOC; First Interstate Bank of California) (a,b).................... 3,250,000 3,250,000
City of Los Angeles, Multi-Family Revenue, VRDN (Loans To Lender Program)
3.55%, Series A (LOC; Federal Home Loan Banks) (a,b)................................ 1,500,000 1,500,000
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- ------------
CALIFORNIA (CONTINUED)
Los Angeles County, TRAN
4.50%, Series A, 7/1/96 (LOC: Credit Suisse, Morgan Guaranty Trust Co.,
Union Bank of Switzerland and West Deutsche Landesbank) (b)......................... $11,800,000 $ 11,822,529
Los Angeles County Industrial Development Authority, IDR, Refunding, VRDN
(Kransco Project) 3.45% (LOC; Harris Trust and Savings Bank) (a,b).................. 1,650,000 1,650,000
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue, CP
(Prop C-Second Series) 3.45%, 4/8/96................................................ 3,100,000 3,100,000
Los Angeles Unified School District, TRAN 4.50%, 7/3/96................................. 11,000,000 11,025,586
City of Pleasant Hill, MFMR, VRDN (Brookside Apartments Project)
3.15%, Series A (Corporate Guaranty; FNMA) (a)...................................... 2,600,000 2,600,000
Riverside County Housing Authority, MFHR, VRDN
(Victoria Springs Apartments Project)
3.40% (LOC; Bank of America) (a,b).................................................. 6,300,000 6,300,000
Sacramento County, MFHR, VRDN
3.45%, Series C (LOC; Dai-Ichi Kangyo Bank) (a,b)................................... 8,000,000 8,000,000
Sacramento County Housing Authority, MFHR, VRDN
(Stone Creek Apartments Project)
3.45%, Series L (LOC; First Interstate Bank of California) (a,b).................... 2,400,000 2,400,000
Sacramento County Sanitation District Finance Authority, Revenue 5%, 12/1/96............ 2,875,000 2,901,122
San Bernardino County, Multi-Family Revenue, VRDN (Woodview Apartments Project)
3.15%, Series I (LOC; Bank of America) (a,b)........................................ 5,300,000 5,300,000
San Diego Housing Authority, MFHR, VRDN (Nobel Court)
3.05% (LOC; Citibank) (a,b)......................................................... 4,000,000 4,000,000
San Diego Regional Transportation Commission, Revenue
4%, Series A, 4/1/97 (Insured; FGIC)................................................ 2,700,000 2,713,070
San Diego Water Authority, CP:
2.90%, Series 1, 4/8/96 (LOC; Bayerishe Landesbank) (b)............................. 4,000,000 4,000,000
3.10%, Series 1, 5/10/96 (LOC; Bayerishe Landesbank) (b)............................ 3,600,000 3,600,000
City of San Jose, MFHR, VRDN (Fox Chase) 3.25%, Series B (Insured; FGIC) (a)............ 7,600,000 7,600,000
San Jose-Santa Clara Water Financing Authority, Sewer Revenue, VRDN
2.95%, Series B (Insured; FGIC) (a)................................................. 3,800,000 3,800,000
City of Santa Clara, Electric Revenue, VRDN
3.10%, Series B (LOC; National Westminster Bank) (a,b).............................. 3,105,000 3,105,000
Simi Valley, MFHR, Refunding, VRDN (Creekside Village)
3%, Series A (LOC; Bank of America) (a,b)........................................... 4,900,000 4,900,000
South Coast Local Educational Agency, Pooled Transportation Notes 5%, 8/14/96........... 7,000,000 7,012,350
Turlock Irrigation District, COP, VRDN (Transmission Project)
2.80%, Series A (LOC; Societe Generale) (a,b)....................................... 3,000,000 3,000,000
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- ------------
CALIFORNIA (CONTINUED)
Tustin Improvement Bond Act of 1915, Reassessment District No. 95-2, VRDN
3.55%, Series A (LOC; Kredietbank) (a,b)............................................ $ 1,000,000 $ 1,000,000
Vista, MFHR, Refunding, VRDN 3.45%, Series A (LOC; Swiss Bank Corp.) (a,b).............. 2,600,000 2,600,000
Western Riverside County Regional Wastewater Authority, VRDN
2.80% (LOC; National Westminster Bank) (a,b)........................................ 2,100,000 2,100,000
U.S. RELATED-10.8%
Commonwealth of Puerto Rico Government Development Bank, CP:
3.20%, 4/8/96....................................................................... 7,250,000 7,250,000
3.05%, 5/10/96...................................................................... 6,500,000 6,500,000
3.10%, 5/14/96...................................................................... 5,000,000 5,000,000
3.05%, 5/22/96...................................................................... 8,000,000 8,000,000
------------
TOTAL INVESTMENTS (cost $248,009,880)................................................... $248,009,880
============
</TABLE>
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
COP Certificate of Participation MFHR Multi-Family Housing Revenue
CP Commercial Paper MFMR Multi-Family Mortgage Revenue
FGIC Financial Guaranty Insurance Company PCR Pollution Control Revenue
FNMA Federal National Mortgage Association RRR Resources Recovery Revenue
IDR Industrial Development Revenue TRAN Tax and Revenue Anticipation Notes
LOC Letter of Credit VRDN Variable Rate Demand Notes
MBIA Municipal Bond Investors Assurance
Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
<S> <C> <S> <C>
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 94.4%
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 5.6
--------
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) 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.
(b) Secured by letters of credit. At March 31, 1996, 58.4% of the Fund's
net assets are backed by letters of credit issued by domestic banks,
foreign banks and government agencies.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) P1 and A1 are the highest ratings assigned tax-exempt commercial paper by
Moody's and Standard & Poor's, respectively.
(e) Notes which are not F, MIG or SP rated are represented by bond ratings of
the issuers.
(f) At March 31, 1996, the Fund had $74,850,000 (29.6% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from housing projects.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value-Note 1(a)....................................... $248,009,880
Cash................................................................................ 3,161,865
Interest receivable................................................................. 1 ,994,621
Prepaid expenses.................................................................... 17,446
------------
253,183,812
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries..................................... $104,129
Accrued expenses and other liabilities.............................................. 94,870 198,999
-------- ------------
NET ASSETS ............................................................................ $252,984,813
============
REPRESENTED BY:
Paid-in capital..................................................................... $253,160,435
Accumulated net realized (loss) on investments...................................... (175,622)
------------
NET ASSETS at value applicable to 253,160,435 shares outstanding
(unlimited number of $.01 par value shares of Beneficial
Interest authorized)................................................................ $252,984,813
============
NET ASSET VALUE, offering and redemption price per share
($252,984,813 / 253,160,435 shares)................................................. $1.00
=====
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF OPERATIONS YEAR ENDED MARCH 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME..................................................................... $9,798,479
EXPENSES:
Management fee-Note 2(a).......................................................... $1,336,414
Shareholder servicing costs-Note 2(b)............................................. 199,644
Professional fees................................................................. 53,655
Trustees' fees and expenses-Note 2(c)............................................. 32,370
Custodian fees.................................................................... 29,720
Registration fees................................................................. 26,449
Prospectus and shareholders' reports.............................................. 13,793
Miscellaneous..................................................................... 9,392
---------
TOTAL EXPENSES................................................................ 1,701,437
----------
INVESTMENT INCOME-NET................................................................... 8,097,042
NET REALIZED (LOSS) ON INVESTMENTS-Note 1(b)............................................ (9,381)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... $8,087,661
==========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED MARCH 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................................... $ 7,621,893 $ 8,097,042
Net realized gain (loss) on investments............................................. 23,305 (9,381)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............................. 7,645,198 8,087,661
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net............................................................... (7,621,893) (8,097,042)
------------- -------------
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold....................................................... 594,800,158 503,720,818
Dividends reinvested................................................................ 4,899,842 4,960,945
Cost of shares redeemed............................................................. (637,586,541) (537,451,138)
------------- -------------
(DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS.............................................. (37,886,541) (28,769,375)
------------- -------------
TOTAL (DECREASE) IN NET ASSETS.............................................. (37,863,236) (28,778,756)
NET ASSETS:
Beginning of year................................................................... 319,626,805 281,763,569
------------- -------------
End of year......................................................................... $ 281,763,569 $ 252,984,813
============= =============
See notes to financial statements.
</TABLE>
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Reference is made to Page 3 of the Fund's Prospectus dated August 1, 1996.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus California Tax Exempt Money Market Fund (the "Fund") is
registered under the Investment Company Act of 1940 ("Act") as a diversified
open-end management investment company. The Fund's investment objective is to
provide investors with as high a level of current income exempt from Federal
and State of California income taxes as is consistent with the preservation
of capital and the maintenance of liquidity. 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.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00; the Fund has adopted certain investment, portfolio valuation
and dividend and distribution policies to enable it to do so. There is no
assurance, however, that the Fund will be able to maintain a stable net asset
value of $1.00.
(A) PORTFOLIO VALUATION: Investments are valued at amortized cost, which
has been determined by the Fund's Board of Trustees to represent the fair
value of the Fund's investments.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date 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. Realized
gain and loss from securities transactions are recorded on the identified
cost basis.
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 MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund has an unused capital loss carryover of approximately $174,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to March 31, 1996. If not
applied, $44,000 of the carryover expires in fiscal 1998, $7,000 expires
in fiscal 1999, $65,000 expires in fiscal 2000, $21,000 expires in fiscal
2002, $27,000 expires in fiscal 2003 and $10,000 expires in fiscal 2004.
At March 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).
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 .50 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 March 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 March 31, 1996, the Fund was charged an aggregate of
$77,175 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 $22,320 for the period from
December 1, 1995 through March 31, 1996.
(C) Each trustee who is not an "affiliated person" as defines in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation and the Director Emeritus receives 50% of such compensation.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
We have audited the accompanying statement of assets and liabilities of
Dreyfus California Tax Exempt Money Market Fund, including the statement of
investments, as of March 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 March 31, 1996 by correspondence with the custodian.
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 Money Market Fund at March 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
April 30, 1996
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
PART C. OTHER INFORMATION
__________________________
Item 24. Financial Statements and Exhibits
________ _________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for each of the ten years
ended March 31, 1996.
Included in Part B of the Registration Statement:
Statement of Investments--March 31, 1996.
Statement of Assets and Liabilities--March 31, 1996.
Statement of Operations--year ended March
31, 1996.
Statement of Changes in Net Assets--for each of the
two years ended March 31, 1996.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors,
dated April 30, 1996.
All schedules and other financial statement information, for which
provision is made in the applicable accounting regulations of the
Securities and Exchange Commission, are either included herein or omitted
because they are not required under the related instructions, they are
inapplicable, or the required information is presented in the financial
statements or notes thereto which are included in Part B of the
Registration Statement.
Item 24. Financial Statements and Exhibits - List (continued)
________ ____________________________________________________
(b) Exhibits:
(1) Registrant's Declaration of Trust is incorporated by
reference to Exhibit (1) of Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A, filed on July
15, 1994.
(2) Registrant's By-Laws are incorporated by reference to
Exhibit (2) of Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A, filed on July 15,
1994.
(5) Management Agreement is incorporated by reference to
Exhibit (5) of Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A, filed on July 14,
1995.
(6)(a) Distribution Agreement is incorporated by reference to
Exhibit (6)(a) of Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A, filed on July 14,
1995.
(8)(a) Amended and Restated Custody Agreement.
(8)(b) Form of Subcustodian Agreements are incorporated by
reference to Exhibit (8) of Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A, filed on July
15, 1994.
(9) Shareholder Services Plan is incorporated by reference to
Exhibit (9) of Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A, filed on July 14,
1995.
(10) Opinion and consent of Registrant's Counsel is incorporated
by reference to Exhibit (10) of Post-Effective Amendment
No. 15 to the Registration Statement on Form N-1A, filed on
July 14, 1995.
(11) Consent of Independent Auditors.
(16) Schedules of Computation of Performance Data are
incorporated by reference to Exhibit (16) of Post-Effective
Amendment No. 13 to the Registration Statement on Form
N-1A, filed on July 15, 1994.
Item 24. Financial Statements and Exhibits - List
________ ________________________________________
Other Exhibits
______________
(a) Powers of Attorney.
(b) Registrant's Certificate of Corporate Secretary.
Item 25. Persons Controlled by or Under Common Control with Registrant.
________ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities
________ _______________________________
(1) (2)
Number of Record
Title of Class Holders as of July 22, 1996
Shares of beneficial interest, 3,642
par value $.01
Item 27. Indemnification
________ _______________
Reference is made to Article EIGHTH of the Registrant's
Declaration of Trust filed as Exhibit (1) hereto. The application of
these provisions is limited by Article 10 of the Registrant's By-Laws
filed as Exhibit (2) hereto and by the following undertaking set forth in
the rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may
be permitted to trustees, officers and
controlling persons of the registrant
pursuant to the foregoing provisions, or
otherwise, the registrant has been advised
that in the opinion of the Securities and
Exchange Commission such indemnification is
against public policy as expressed in such
Act and is, therefore, unenforceable. In
the event that a claim for indemnification
against such liabilities (other than the
payment by the registrant of expenses
incurred or paid by a trustee, officer or
controlling person of the registrant in the
successful defense of any action, suit or
proceeding) is asserted by such trustee,
officer or controlling person in connection
with the securities being registered, the
registrant will, unless in the opinion of
its counsel the matter has been settled by
controlling precedent, submit to a court of
appropriate jurisdiction the question
whether such indemnification by it is
against public policy as expressed in such
Act and will be governed by the final
adjudication of such issue.
Reference also is made to the Distribution Agreement filed as
Exhibit 6(a) hereto.
Item 28. Business and Other Connections of Investment Adviser
________ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial services organization whose business consists
primarily of providing investment management services as the
investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus,
serves primarily as distributor of shares of investment companies
sponsored by Dreyfus and of other investment company for which
Dreyfus acts as investment advisor, sub-investment adviser and
administrator. Dreyfus Management, Inc., another wholly-owned
subsidiary, provides investment management services to various
pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****;
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and Member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE None
Director
JULIAN M. SMERLING None
Director
HOWARD STEIN Chairman of the Board:
Chairman of the Board and Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company*****;
Vice Chairman of the Board:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****;
Operating Officer The Boston Company*****;
and a Director Deputy Director:
Mellon Trust****;
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****;
President:
Boston Safe Deposit and Trust Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
Dreyfus America Fund++++
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****;
Laurel Capital Advisors****;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.****;
Boston Safe Deposit and Trust
Company*****;
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Dreyfus America Fund++++
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
ELIE M. GENADRY President:
Vice President- Institutional Services Division of Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*;
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President- Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Capital Value Fund, Inc.
14) Dreyfus Cash Management
15) Dreyfus Cash Management Plus, Inc.
16) Dreyfus Connecticut Intermediate Municipal Bond Fund
17) Dreyfus Connecticut Municipal Money Market Fund, Inc.
18) Dreyfus Florida Intermediate Municipal Bond Fund
19) Dreyfus Florida Municipal Money Market Fund
20) The Dreyfus Fund Incorporated
21) Dreyfus Global Bond Fund, Inc.
22) Dreyfus Global Growth Fund
23) Dreyfus GNMA Fund, Inc.
24) Dreyfus Government Cash Management
25) Dreyfus Growth and Income Fund, Inc.
26) Dreyfus Growth and Value Funds, Inc.
27) Dreyfus Growth Opportunity Fund, Inc.
28) Dreyfus Income Funds
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus Stock Index Fund, Inc.
38) Dreyfus LifeTime Portfolios, Inc.
39) Dreyfus Liquid Assets, Inc.
40) Dreyfus Massachusetts Intermediate Municipal Bond Fund
41) Dreyfus Massachusetts Municipal Money Market Fund
42) Dreyfus Massachusetts Tax Exempt Bond Fund
43) Dreyfus Michigan Municipal Money Market Fund, Inc.
44) Dreyfus MidCap Index Fund
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus Ohio Municipal Money Market Fund, Inc.
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus S&P 500 Index Fund
66) Dreyfus Short-Intermediate Government Fund
67) Dreyfus Short-Intermediate Municipal Bond Fund
68) Dreyfus Investment Grade Bond Funds, Inc.
69) The Dreyfus Socially Responsible Growth Fund, Inc.
70) Dreyfus Tax Exempt Cash Management
71) The Dreyfus Third Century Fund, Inc.
72) Dreyfus Treasury Cash Management
73) Dreyfus Treasury Prime Cash Management
74) Dreyfus Variable Investment Fund
75) Dreyfus Worldwide Dollar Money Market Fund, Inc.
76) General California Municipal Bond Fund, Inc.
77) General California Municipal Money Market Fund
78) General Government Securities Money Market Fund, Inc.
79) General Money Market Fund, Inc.
80) General Municipal Bond Fund, Inc.
81) General Municipal Money Market Fund, Inc.
82) General New York Municipal Bond Fund, Inc.
83) General New York Municipal Money Market Fund
84) Premier Insured Municipal Bond Fund
85) Premier California Municipal Bond Fund
86) Premier Equity Funds, Inc.
87) Premier Global Investing, Inc.
88) Premier GNMA Fund
89) Premier Growth Fund, Inc.
90) Premier Municipal Bond Fund
91) Premier New York Municipal Bond Fund
92) Premier State Municipal Bond Fund
93) Premier Strategic Growth Fund
94) Premier Strategic Investing
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph S. Tower, III+ Senior Vice President, Treasurer Vice President
and Chief Financial Officer and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President None
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Mary Nelson+ Assistant Treasurer Vice President
and Assistant
Secretary
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
Richard W. Ingram++ Senior Vice President Vice President
and Assistant
Treasurer
Douglas C. Conroy++ Assistant Treasurer Vice President
and Assistant
Secretary
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York
10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of one or more Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
SIGNATURES
-------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York on the 29th day of July, 1996.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
BY: /s/Marie E. Connolly*
-----------------------------------------------
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
__________________________ _______________________________ ________
/s/Marie E. Connolly* President and Treasurer 7/29/96
- ------------------------------ (Principal Executive Officer and
Marie E. Connolly Principal Financial Officer)
/s/Joseph F. Tower, III* Vice President and Assistant 7/29/96
- ------------------------------ Treasurer (Principal Accounting
Joseph F. Tower, III Officer)
/s/Joseph S. DiMartino* Chairman of the Board 7/29/96
- ------------------------------
Joseph S. DiMartino
/s/David W. Burke* Board Member 7/29/96
- ------------------------------
David W. Burke
/s/Hodding Carter, III* Board Member 7/29/96
- ------------------------------
Hodding Carter, III
/s/Ehud Houminer* Board Member 7/29/96
- ------------------------------
Ehud Houminer
/s/Richard C. Leone* Board Member 7/29/96
- ------------------------------
Richard C. Leone
/s/Hans C. Mautner* Board Member 7/29/96
- ------------------------------
Hans C. Mautner
/s/Robin A. Smith* Board Member 7/29/96
- ------------------------------
Robin A. Smith
/s/John E. Zuccotti* Board Member 7/29/96
- ------------------------------
John E. Zuccotti
*BY: /s/Elizabeth Bachman
------------------------------
Elizabeth Bachman,
Attorney-in-Fact
INDEX OF EXHIBITS
(8)(a) Amended and Restated Custody Agreement.
(11) Consent of Independent Auditors.
Other Exhibits
(a) Powers of Attorney.
(b) Certificate of Corporate Secretary.
AMENDED AND RESTATED CUSTODY AGREEMENT
Amended and Restated Custody Agreement made
as of August 18, 1989 between DREYFUS CALIFORNIA TAX
EXEMPT MONEY MARKET FUND, a business trust organized
and existing under the laws of the Commonwealth of
Massachusetts, having its principal office and place
of business at 666 Old Country Road, Garden City, New
York 11530 (hereinafter called the "Fund"), and THE
BANK OF NEW YORK, a New York corporation authorized to
do a banking business, having its principal office and
place of business at 48 Wall Street, New York, New
York 10015 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises
hereinafter set forth the Fund and the Custodian agree
as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the
following words and phrases, unless the context
otherwise requires, shall have the following meanings:
1. "Authorized Person" shall be deemed to
include the Treasurer, the Controller or any other
person, whether or not any such person is an Officer
or employee of the Fund, duly authorized by the
Trustees of the Fund to give Oral Instructions and
Written Instructions on behalf of the Fund and listed
in the Certificate annexed hereto as Appendix A or
such other Certificate as may be received by the
Custodian from time to time.
2. "Available Balance" shall mean for any
given day during a calendar year the aggregate amount
of Federal Funds held in the Fund's custody account(s)
at The Bank of New York, or its successors, as of the
close of such day or, if such day is not a business
day, the close of the preceding business day.
3. "Bankruptcy" shall mean with respect to
a party such party's making a general assignment,
arrangement or composition with or for the benefit of
its creditors, or instituting or having instituted
against it a proceeding seeking a judgment of
insolvency or bankruptcy or the entry of an order for
relief under the Federal bankruptcy law or any other
relief under any bankruptcy or insolvency law or other
similar law affecting creditors' rights, or if a
petition is presented for the winding up or
liquidation of the party or a resolution is passed for
its winding up or liquidation, or it seeks, or becomes
subject to, the appointment of an administrator,
receiver, trustee, custodian or other similar official
for it or for all or substantially all of its assets
or its taking any action in furtherance of, or
indicating its consent to approval of, or acquiescence
in, any of the foregoing.
4. "Book-Entry System" shall mean the
Federal Reserve/Treasury book-entry system for United
States and Federal agency securities, its successor or
successors and its nominee or nominees.
5. "Call Option" shall mean an exchange
traded option with respect to Securities other than
Stock Index Options, Futures Contracts and Futures
Contract Options entitling the holder, upon timely
exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof
the specified underlying Securities.
6. "Certificate" shall mean any notice,
instruction, or other instrument in writing,
authorized or required by this Agreement to be given
to the Custodian, which is actually received by the
Custodian and signed on behalf of the Fund by any two
Officers of the Fund.
7. "Clearing Member" shall mean a
registered broker-dealer which is a clearing member
under the rules of O.C.C. and a member of a national
securities exchange qualified to act as a custodian
for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a
clearing member.
8. "Collateral Account" shall mean a
segregated account so denominated and pledged to the
Custodian as security for, and in consideration of,
the Custodian's issuance of (a) any Put Option
guarantee letter or similar document described in
paragraph 8 of Article V herein, or (b) any receipt
described in Article V or VIII herein.
9. "Consumer Price Index" shall mean the
U.S. Consumer Price Index, all items and all urban
consumers, U.S. city average 1982-84 equals 100, as
first published without seasonal adjustment by the
Bureau of Labor Statistics, the Department of Labor,
without regard to subsequent revisions or corrections
by such Bureau.
10. "Covered Call Option" shall mean an
exchange traded option entitling the holder, upon
timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof
the specified Securities (excluding Futures Contracts)
which are owned by the writer thereof and subject to
appropriate restrictions.
11. "Depository" shall mean The Depository
Trust Company ("DTC"), a clearing agency registered
with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees,
provided the Custodian has received a certified copy
of a resolution of the Fund's Trustees specifically
approving deposits in DTC. The term "Depository"
shall further mean and include any other person
authorized to act as a depository under the Investment
Company Act of 1940, its successor or successors and
its nominee or nominees, specifically identified in a
certified copy of a resolution of the Fund's Trustees
specifically approving deposits therein by the
Custodian.
12. "Earnings Credit" shall mean for any
given day during a calendar year the product of (a)
the Federal Funds Rate for such date minus .25%, and
(b) 82% of the Available Balance.
13. "Federal Funds" shall mean immediately
available same day funds.
14. "Federal Funds Rate" shall mean, for
any day, the Federal Funds (Effective) interest rate
so denominated as published in Federal Reserve
Statistical Release H.I5 (519) and applicable to such
day and each succeeding day which is not a business
day.
15. "Financial Futures Contract" shall mean
the firm commitment to buy or sell fixed income
securities, including, without limitation, U.S.
Treasury Bills, U.S. Treasury Notes, U.S. Treasury
Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified
month at an agreed upon price.
16. "Futures Contract" shall mean a
Financial Futures Contract and/or Stock Index Futures
Contracts.
17. "Futures Contract Option" shall mean an
option with respect to a Futures Contract.
18. "Margin Account" shall mean a
segregated account in the name of a broker, dealer,
futures commission merchant or Clearing Member, or in
the name of the Fund for the benefit of a broker,
dealer, futures commission merchant or Clearing
Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer,
futures commission merchant or Clearing Member (a
"Margin Account Agreement"), separate and distinct
from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and
withdrawn from time to time in connection with such
transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System
or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon
the Custodian's effecting an appropriate entry on its
books and records.
19. "Merger" shall mean (a) with respect to
the Fund, the consolidation or amalgamation with,
merger into, or transfer of all or substantially all
of its assets to, another entity, where the Fund is
not the surviving entity, and (b) with respect to the
Custodian, any consolidation or amalgamation with,
merger into, or transfer of all or substantially all
of its assets to, another entity, except for any such
consolidation, amalgamation, merger or transfer of
assets between the Custodian and The Bank of New York
Company, Inc. or any subsidiary thereof, or the Irving
Bank Corporation or any subsidiary thereof, provided
that the surviving entity agrees to be bound by the
terms of this Agreement.
20. "Money Market Security" shall be deemed
to include, without limitation, debt obligations
issued or guaranteed as to principal and interest by
the government of the United States or agencies or
instrumentalities thereof, commercial paper,
certificates of deposit and bankers' acceptances,
repurchase and reverse repurchase agreements with
respect to the same and bank time deposits, where the
purchase and sale of such securities normally requires
settlement in Federal funds on the same date as such
purchase or sale.
21. "O.C.C." shall mean Options Clearing
Corporation, a clearing agency registered under
Section 17A of the Securities Exchange Act of 1934,
its successor or successors, and its nominee or
nominees.
22. "Officers" shall be deemed to include
the President, any Vice President, the Secretary, the
Treasurer, the Controller, any Assistant Secretary,
any Assistant Treasurer or any other person or persons
duly authorized by the Trustees of the Fund to execute
any Certificate, instruction, notice or other
instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix B or such other
Certificate as may be received by the Custodian from
time to time.
23. "Option" shall mean a Call Option,
Covered Call Option, Stock Index Option and/or a Put
Option.
24. "Oral Instructions" shall mean verbal
instructions actually received by the Custodian from
an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
25. "Put Option" shall mean an exchange
traded option with respect to Securities other than
Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely
exercise and tender of the specified underlying
Securities, to sell such Securities to the writer
thereof for the exercise price.
26. "Reverse Repurchase Agreement" shall
mean an agreement pursuant to which the Fund sells
Securities and agrees to repurchase such Securities at
a described or specified date and price.
27. "Security" shall be deemed to include,
without limitation, Money Market Securities, Call
Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract
Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase
Agreements, common stock and other instruments or
rights having characteristics similar to common
stocks, preferred stocks, debt obligations issued by
state or municipal governments and by public
authorities (including, without limitation, general
obligation bonds, revenue bonds and industrial bonds
and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or
subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property
or assets.
28. "Segregated Security Account" shall
mean an account maintained under the terms of this
Agreement as a segregated account, by recordation or
otherwise, within the custody account in which certain
Securities and/or other assets of the Fund shall be
deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian
in connection with such transactions as the Fund may
from time to time determine.
29. "Shares" shall mean the shares of
beneficial interest of the Fund, each of which, in the
case of a Fund having Series, is allocated to a
particular Series.
30. "Stock Index Futures Contract" shall
mean a bilateral agreement pursuant to which the
parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the
difference between the value of a particular stock
index at the close of the last business day of the
contract and the price at which the futures contract
is originally struck.
31. "Stock Index Option" shall mean an
exchange traded option entitling the holder, upon
timely exercise, to receive an amount of cash
determined by reference to the difference between the
exercise price and the value of the index on the date
of exercise.
32. "Written Instructions" shall mean
written communications actually received by the
Custodian from an Authorized Person or from a person
reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system
whereby the receiver of such communications is able to
verify by codes or otherwise with a reasonable degree
of certainty the authenticity of the sender of such
communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints
the Custodian as custodian of all the Securities and
moneys at any time owned by the Fund during the period
of this Agreement, except that (a) if the Custodian
fails to provide for the custody of any of the Fund's
Securities and moneys located or to be located outside
the United States in a manner satisfactory to the
Fund, the Fund shall be permitted to arrange for the
custody of such Securities and moneys located or to be
located outside the United States other than through
the Custodian at rates to be negotiated and borne by
the Fund and (b) if the Custodian fails to continue
any existing sub-custodial or similar arrangements on
substantially the same terms as exist on the date of
this Agreement, the Fund shall be permitted to arrange
for such or similar services other than through the
Custodian at rates to be negotiated and borne by the
Fund. The Custodian shall not charge the Fund for any
such terminated services after the date of such
termination.
2. The Custodian hereby accepts appointment
as such custodian and agrees to perform the duties
thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in
paragraph 7 of this Article and in Article VIII, the
Fund will deliver or cause to be delivered to the
Custodian all Securities and all moneys owned by it,
including cash received for the issuance of its
shares, at any time during the period of this
Agreement. The Custodian will not be responsible for
such Securities and such moneys until actually
received by it. The Custodian will be entitled to
reverse any credits made on the Fund's behalf where
such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the
Custodian a certified resolution of the Trustees of
the Fund approving, authorizing and instructing the
Custodian on a continuous and on-going basis to
deposit in the Book-Entry System all Securities
eligible for deposit therein and to utilize the
Book-Entry System to the extent possible in connection
with its performance hereunder, including, without
limitation, in connection with settlements of
purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities
collateral. Prior to a deposit of Securities of the
Fund in the Depository the Fund shall deliver to the
Custodian a certified resolution of the Trustees of
the Fund approving, authorizing and instructing the
Custodian on a continuous and ongoing basis until
instructed to the contrary by a Certificate actually
received by the Custodian to deposit in the Depository
all Securities eligible for deposit therein and to
utilize the Depository to the extent possible in
connection with it's performance hereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities
collateral. Securities and moneys of the Fund
deposited in either the Book-Entry System or the
Depository will be represented in accounts which
include only assets held by the Custodian for
customers, including, but not limited to, accounts in
which the Custodian acts in a fiduciary or
representative capacity. Prior to the Custodian's
accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and
transactions in Options as provided in this Agreement,
the Custodian shall have received a certified
resolution of the Fund's Board of Trustees approving,
authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the
contrary by a Certificate actually received by the
Custodian, to accept, utilize and act in accordance
with such confirmations as provided in this Agreement.
2. The Custodian shall credit to a separate
account in the name of the Fund all moneys received by
it for the account of the Fund, and shall disburse the
same only:
(a) In payment for Securities purchased, as
provided in Article IV hereof;
(b) In payment of dividends or
distributions, as provided in Article XI hereof;
(c) In payment of original issue or other
taxes, as provided in Article XII hereof;
(d) In payment for Shares redeemed by it,
as provided in Article XII hereof;
(e) Pursuant to Certificates setting forth
the name and address of the person to whom the payment
is to be made, and the purpose for which payment is to
be made; or
(f) In payment of the fees and in
reimbursement of the expenses and liabilities of the
Custodian, as provided in Article XV hereof.
3. Promptly after the close of business on
each day, the Custodian shall furnish the Fund with
confirmations and a summary of all transfers to or
from the account of the Fund during said day. Where
Securities are transferred to the account of the Fund,
the Custodian shall also by book-entry or otherwise
identify as belonging to the Fund a quantity of
Securities in a fungible bulk of Securities registered
in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the
Book-Entry System or the Depository. At least monthly
and from time to time, the Custodian shall furnish the
Fund with a detailed statement of the Securities and
moneys held for the Fund under this Agreement.
4. Except as otherwise provided in
paragraph 7 of this Article and in Article VIII, all
Securities held for the Fund, which are issued or
issuable only in bearer form, except such Securities
as are held in the Book-Entry System, shall be held by
the Custodian in that form; all other Securities held
for the Fund may be registered in the name of the
Fund, in the name of any duly appointed registered
nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the
Book-Entry System or the Depository or their successor
or successors, or their nominee or nominees. The Fund
agrees to furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver
in proper form for transfer, or to register in the
name of its registered nominee or in the name of the
Book-Entry System or the Depository, any Securities
which it may hold for the account of the Fund and
which may from time to time be registered in the name
of the Fund. The Custodian shall hold all such
Securities which are not held in the Book-Entry System
or in the Depository in a separate account in the name
of the Fund physically segregated at all times from
those of any other person or persons.
5. Except as otherwise provided in this
Agreement and unless otherwise instructed to the
contrary by a Certificate, the Custodian by itself, or
through the use of the Book-Entry System or the
Depository with respect to Securities therein
deposited, shall with respect to all Securities held
for the Fund in accordance with this Agreement:
(a) Collect all income due or payable and,
in any event, if the Custodian receives a written
notice from the Fund specifying that an amount of
income should have been received by the Custodian
within the last 90 days, the Custodian will provide a
conditional payment of income within 60 days from the
date the Custodian received such notice, unless the
Custodian reasonably concludes that such income was
not due or payable to the Fund, provided that the
Custodian may reverse any such conditional payment
upon its reasonably concluding that all or any portion
of such income was not due or payable, and provided
further that the Custodian shall not be liable for
failing to collect on a timely basis the full amount
of income due or payable in respect of a "floating
rate instrument" or "variable rate instrument" (as
such terms are defined under Rule 2a-7 under the
Investment Company Act of 1940, as amended) if it has
acted in good faith, without negligence or willful
misconduct.
(b) Present for payment and collect the
amount payable upon such Securities which are called,
but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed
in Appendix C annexed hereto, which may be amended at
any time by the Custodian upon five business days'
prior notification to the Fund;
(c) Present for payment and collect the
amount payable upon all Securities which may mature;
(d) Surrender Securities in temporary form
for definitive Securities;
(e) Execute, as Custodian, any necessary
declarations or certificates of ownership under the
Federal Income Tax Laws or the laws or regulations of
any other taxing authority now or hereafter in effect;
and
(f) Hold directly, or through the
Book-Entry System or the Depository with respect to
Securities therein deposited, for the account of the
Fund all rights and similar securities issued with
respect to any Securities held by the Custodian
hereunder.
6. Upon receipt of a Certificate and not
otherwise, the Custodian, directly or through the use
of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as
may be designated in such Certificate proxies,
consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any
Securities may be exercised;
(b) Deliver any Securities held for the
Fund in exchange for other Securities or cash issued
or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise
of any conversion privilege;
(c) Deliver any Securities held for the
Fund to any protective committee, reorganization
committee or other person in connection with the
reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation,
and receive and hold under the terms of this Agreement
such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it
to evidence such delivery;
(d) Make such transfers or exchanges of the
assets of the Fund and take such other steps as shall
be stated in said order to be for the purpose of
effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the
amount payable upon Securities not described in
preceding paragraph 5(b) of this Article which may be
called as specified in the Certificate.
7. Notwithstanding any provision elsewhere
contained herein, the Custodian shall not be required
to obtain possession of any instrument or certificate
representing any Futures Contract, Option or Futures
Contract Option until after it shall have determined,
or shall have received a Certificate from the Fund
stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian
such a Certificate no later than the business day
preceding the availability of any such instrument or
certificate. Prior to such availability, the
Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in
connection with the purchase, sale, settlement,
closing out or writing of Futures Contracts, Options
or Futures Contract Options by making payments or
deliveries specified in Certificates received by the
Custodian in connection with any such purchase, sale,
writing, settlement or closing out upon its receipt
from a broker, dealer or futures commission merchant
of a statement or confirmation reasonably believed by
the Custodian to be in the form customarily used by
brokers, dealers, or futures commission merchants with
respect to such Futures Contracts, Options or Futures
Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or
futures commission merchant, in book-entry form or
otherwise, in the name of the Custodian (or any
nominee of the Custodian) as custodian for the Fund,
provided, however, that payments to or deliveries from
the Margin Account shall be made in accordance with
the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or
certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract,
Option or Futures Contract Option for which such
instruments or such certificates are available only
against the delivery to the Custodian of such
instrument or such certificate, and deliver any
Futures Contract, Option or Futures Contract Option
for which such instruments or such certificates are
available only against receipt by the Custodian of
payment therefor. Any such instrument or certificate
delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject
to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN
OPTIONS, FUTURES CONTRACTS, FUTURES CONTRACT OPTIONS AND
REVERSE
REPURCHASE AGREEMENTS
1. Promptly after each purchase of
Securities by the Fund, other than a purchase of any
Option, Futures Contract, Futures Contract Option or
Reverse Repurchase Agreement, the Fund shall deliver
to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of
Money Market Securities, a Certificate, Oral
Instructions or Written Instructions, specifying with
respect to each such purchase: (a) the name of the
issuer and the title of the Securities; (b) the number
of shares or the principal amount purchased and
accrued interest, if any; (c) the date of purchase and
settlement; (d) the purchase price per unit; (e) the
total amount payable upon such purchase; (f) the name
of the person from whom or the broker through whom the
purchase was made, and the name of the clearing
broker, if any; and (g) the name of the broker to
which payment is to be made. The Custodian shall,
upon receipt of Securities purchased by or for the
Fund, pay out of the moneys held for the account of
the Fund the total amount payable to the person from
whom, or the broker through whom, the purchase was
made, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral
Instructions or Written Instructions.
2. Promptly after each sale of Securities
by the Fund, other than a sale of any Option, Futures
Contract, Futures Contract Option or Reverse
Repurchase Agreement, the Fund shall deliver to the
Custodian (i) with respect to each sale of Securities
which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market
Securities, a Certificate, Oral Instructions or
Written Instructions, specifying with respect to each
such sale: (a) the name of the issuer and the title
of the Security; (b) the number of shares or principal
amount sold, and accrued interest, if any; (c) the
date of sale; (d) the sale price per unit; (e) the
total amount payable to the Fund upon such sale; (f)
the name of the broker through whom or the person to
whom the sale was made, and the name of the clearing
broker, if any; and (g) the name of the broker to whom
the Securities are to be delivered. The Custodian
shall deliver the Securities upon receipt of the total
amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as
set forth in such Certificate, Oral Instructions or
Written Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs
prevailing among dealers in Securities.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any
Option by the Fund, the Fund shall deliver to the
Custodian a Certificate specifying with respect to
each Option purchased: (a) the type of Option (put or
call); (b) the name of the issuer and the title and
number of shares subject to such Option or, in the
case of a Stock Index Option, the stock index to which
such Option relates and the number of Stock Index
Options purchased; (c) the expiration date; (d) the
exercise price; (e) the dates of purchase and
settlement; (f) the total amount payable by the Fund
in connection with such purchase; (g) the name of the
Clearing Member through which such Option was
purchased; and (h) the name of the broker to whom
payment is to be made. The Custodian shall pay, upon
receipt of a Clearing Member's statement confirming
the purchase of such Option held by such Clearing
Member for the account of the Custodian (or any duly
appointed and registered nominee of the Custodian) as
custodian for the Fund, out of moneys held for the
account of the Fund, the total amount payable upon
such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to
the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option
purchased by the Fund pursuant to paragraph l hereof,
the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the
type of Option (put or call); (b) the name of the
issuer and the title and number of shares subject to
such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the
number of Stock Index Options sold; (c) the date of
sale; (d) the sale price; (e) the date of settlement;
(f) the total amount payable to the Fund upon such
sale; and (g) the name of the Clearing Member through
which the sale was made. The Custodian shall consent
to the delivery of the Option sold by the Clearing
Member which previously supplied the confirmation
described in preceding paragraph 1 of this Article
with respect to such Option against payment to the
Custodian of the total amount payable to the Fund,
provided that the same conforms to the total amount
payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund
of any Call Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to
such Call Option: (a) the name of the issuer and the
title and number of shares subject to the Call Option;
(b) the expiration date; (c) the date of exercise and
settlement; (d) the exercise price per share; (e) the
total amount to be paid by the Fund upon such
exercise; and (f) the name of the Clearing Member
through which such Call Option was exercised. The
Custodian shall, upon receipt of the Securities
underlying the Call Option which was exercised, pay
out of the moneys held for the account of the Fund the
total amount payable to the Clearing Member through
whom the Call Option was exercised, provided that the
same conforms to the total amount payable as set forth
in such Certificate.
4. Promptly after the exercise by the Fund
of any Put Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to
such Put Option: (a) the name of the issuer and the
title and number of shares subject to the Put Option;
(b) the expiration date; (c) the date of exercise and
settlement; (d) the exercise price per share; (e) the
total amount to be paid to the Fund upon such
exercise; and (f) the name of the Clearing Member
through which such Put Option was exercised. The
Custodian shall, upon receipt of the amount payable
upon the exercise of the Put Option, deliver or direct
the Depository to deliver the Securities, provided the
same conforms to the amount payable to the Fund as set
forth in such Certificate.
5. Promptly after the exercise by the Fund
of any Stock Index Option purchased by the Fund
pursuant to paragraph 1 hereof, the Fund shall deliver
to the Custodian a Certificate specifying with respect
to such Stock Index Option: (a) the type of Stock
Index Option (put or call); (b) the number of Options
being exercised; (c) the stock index to which such
Option relates; (d) the expiration date; (e) the
exercise price; (f) the total amount to be received by
the Fund in connection with such exercise; and (g) the
Clearing Member from which such payment is to be
received.
6. Whenever the Fund writes a Covered Call
Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to
such Covered Call Option: (a) the name of the issuer
and the title and number of shares for which the
Covered Call Option was written and which underlie the
same; (b) the expiration date; (c) the exercise price;
(d) the premium to be received by the Fund; (e) the
date such Covered Call Option was written; and (f) the
name of the Clearing Member through which the premium
is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the
premium specified in the Certificate with respect to
such Covered Call Option, such receipts as are
required in accordance with the customs prevailing
among Clearing Members dealing in Covered Call Options
and shall impose, or direct the Depository to impose,
upon the underlying Securities specified in the
Certificate such restrictions as may be required by
such receipts. Notwithstanding the foregoing, the
Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of
the Custodian and not deposited with the Depository
underlying a Covered Call Option.
7. Whenever a Covered Call Option written
by the Fund and described in the preceding paragraph
of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the
Custodian to deliver, or to direct the Depository to
deliver, the Securities subject to such Covered Call
Option and specifying: (a) the name of the issuer and
the title and number of shares subject to the Covered
Call Option; (b) the Clearing Member to whom the
underlying Securities are to be delivered; and (c) the
total amount payable to the Fund upon such delivery.
Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the
Custodian shall deliver, or direct the Depository to
deliver, the underlying Securities as specified in the
Certificate for the amount to be received as set forth
in such Certificate.
8. Whenever the Fund writes a Put Option,
the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Put
Option: (a) the name of the issuer and the title and
number of shares for which the Put Option is written
and which underlie the same; (b) the expiration date;
(c) the exercise price; (d) the premium to be received
by the Fund; (e) the date such Put Option is written;
(f ) the name of the Clearing Member through which the
premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (g) the amount of
cash, and/or the amount and kind of Securities, if
any, to be deposited in the Segregated Security
Account; and (h) the amount of cash and/or the amount
and kind of Securities to be deposited into the
Collateral Account. The Custodian shall, after making
the deposits into the Collateral Account specified in
the Certificate, issue a Put Option guarantee letter
substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing
Member specified in the Certificate against receipt of
the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be
under no obligation to issue any Put Option guarantee
letter or similar document if it is unable to make any
of the representations contained therein.
9. Whenever a Put Option written by the
Fund and described in the preceding paragraph is
exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the name of
the issuer and title and number of shares subject to
the Put Option; (b) the Clearing Member from which the
underlying Securities are to be received; (c) the
total amount payable by the Fund upon such delivery;
(d) the amount of cash and/or the amount and kind of
Securities to be withdrawn from the Collateral
Account; and (e) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from
the Segregated Security Account. Upon the return
and/or cancellation of any Put Option guarantee letter
or similar document issued by the Custodian in
connection with such Put Option, the Custodian shall
pay out of the moneys held for the account of the Fund
the total amount payable to the Clearing Member
specified in the Certificate as set forth in such
Certificate, and shall make the withdrawals specified
in such Certificate.
10. Whenever the Fund writes a Stock Index
Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to
such Stock Index Option: (a) whether such Stock Index
Option is a put or a call; (b) the number of Options
written; (c) the stock index to which such Option
relates; (d) the expiration date; (e) the exercise
price; (f) the Clearing Member through which such
Option was written; (g) the premium to be received by
the Fund; (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the
Segregated Security Account; (i) the amount of cash
and/or the amount and kind of Securities, if any, to
be deposited in the Collateral Account; and (j) the
amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Margin
Account, and the name in which such account is to be
or has been established. The Custodian shall, upon
receipt of the premium specified in the Certificate,
make the deposits, if any, into the Segregated
Security Account specified in the Certificate, and
either (1) deliver such receipts, if any, which the
Custodian has specifically agreed to issue, which are
in accordance with the customs prevailing among
Clearing Members in Stock Index Options and make the
deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin
Account specified in the Certificate.
11. Whenever a Stock Index Option written
by the Fund and described in the preceding paragraph
of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with
respect to such Stock Index Option: (a) such
information as may be necessary to identify the Stock
Index Option being exercised; (b) the Clearing Member
through which such Stock Index Option is being
exercised; (c) the total amount payable upon such
exercise, and whether such amount is to be paid by or
to the Fund; (d) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the
Margin Account; and (e) the amount of cash and/or
amount and kind of Securities, if any, to be withdrawn
from the Segregated Security Account and the amount of
cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account. Upon the
return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this
Article, the Custodian shall pay to the Clearing
Member specified in the Certificate the total amount
payable, if any, as specified therein.
12. Whenever the Fund purchases any Option
identical to a previously written Option described in
paragraphs 6, 8 or 10 of this Article in a transaction
expressly designated as a
"Closing Purchase Transaction" in order to liquidate
its position as a writer of an Option, the Fund shall
promptly deliver to the Custodian a Certificate
specifying with respect to the Option being purchased:
(a) that the transaction is a Closing Purchase
Transaction; (b) the name of the issuer and the title
and number of shares subject to the Option, or, in the
case of a Stock Index Option, the stock index to which
such Option relates and the number of Options held;
(c) the exercise price; (d) the premium to be paid by
the Fund; (e) the expiration date; (f) the type of
Option (put or call); (g) the date of such purchase;
(h) the name of the Clearing Member to which the
premium is to be paid; and (i) the amount of cash
and/or the amount and kind of Securities, if any, to
be withdrawn from the Collateral Account, a specified
Margin Account or the Segregated Security Account.
Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued
pursuant to paragraphs 6, 8 or 10 of this Article with
respect to the Option being liquidated through the
Closing Purchase Transaction, the Custodian shall
remove, or direct the Depository to remove, the
previously imposed restrictions on the Securities
underlying the Call Option.
13. Upon the expiration or exercise of, or
consummation of a Closing Purchase Transaction with
respect to, any Option purchased or written by the
Fund and described in this Article, the Custodian
shall delete such Option from the statements delivered
to the Fund pursuant to paragraph 3 of Article III
herein, and upon the return and/or cancellation of any
receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, the Margin
Account and/or the Segregated Security Account as may
be specified in a Certificate received in connection
with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a
Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying with respect to
such Futures Contract (or with respect to any number
of identical Futures Contract(s)): (a) the category
of Futures Contract (the name of the underlying stock
index or financial instrument); (b) the number of
identical Futures Contracts entered into; (c) the
delivery or settlement date of the Futures
Contract(s); (d) the date the Futures Contract(s) was
(were) entered into and the maturity date; (e) whether
the Fund is buying (going long) or selling (going
short) on such Futures Contract(s); (f) the amount of
cash and/or the amount and kind of Securities, if any,
to be deposited in the Segregated Security Account;
(g) the name of the broker, dealer or futures
commission merchant through which the Futures Contract
was entered into; and (h) the amount of fee or
commission, if any, to be paid and the name of the
broker, dealer or futures commission merchant to whom
such amount is to be paid. The Custodian shall make
the deposits, if any, to the Margin Account in
accordance with the terms and conditions of the Margin
Account Agreement. The Custodian shall make payment
of the fee or commission, if any, specified in the
Certificate and deposit in the Segregated Security
Account the amount of cash and/or the amount and kind
of Securities specified in said Certificate.
2. (a) Any variation margin payment or
similar payment required to be made by the Fund to a
broker, dealer or futures commission merchant with
respect to an outstanding Futures Contract shall be
made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
(b) Any variation margin payment or
similar payment from a broker, dealer or futures
commission merchant to the Fund with respect to an
outstanding Futures Contract shall be received and
dealt with by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the
custodian hereunder is retained by the Fund until
delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the Futures Contract; (b)
with respect to a Stock Index Futures Contract, the
total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the
Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer or futures commission
merchant to or from which payment or delivery is to be
made or received; and (d) the amount of cash and/or
Securities to be withdrawn from the Segregated
Security Account. The Custodian shall make the
payment or delivery specified in the Certificate and
delete such Futures Contract from the statements
delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a
Futures Contract to offset a Futures Contract held by
the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of
information required in a Certificate described in
paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make
payment of the fee or commission, if any, specified in
the Certificate and delete the Futures Contract being
offset from the statements delivered to the Fund
pursuant to paragraph 3 of Article III herein, and
make such withdrawals from the Segregated security
Account as may be specified in such Certificate. The
withdrawals, if any, to be made from the Margin
Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any
Futures Contract Option by the Fund, the Fund shall
deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the type
of Futures Contract Option (put or call); (b) the type
of Futures Contract and such other information as may
be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (c)
the expiration date; (d) the exercise price; (e) the
dates of purchase and settlement; (f) the amount of
premium to be paid by the Fund upon such purchase; (g)
the name of the broker or futures commission merchant
through which such option was purchased; and (h) the
name of the broker or futures commission merchant to
whom payment is to be made. The Custodian shall pay
the total amount to be paid upon such purchase to the
broker or futures commission merchant through whom the
purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the sale of any Futures
Contract Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to
each such sale: (a) the type of Futures Contract
Option (put or call); (b) the type of Futures Contract
and such other information as may be necessary to
identify the Futures Contract underlying the Futures
Contract Option; (c) the date of sale; (d) the sale
price; (e) the date of settlement; (f) the total
amount payable to the Fund upon such sale; and (g) the
name of the broker or futures commission merchant
through which the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract
Option being closed against payment to the Custodian
of the total amount payable to the Fund, provided the
same conforms to the total amount payable as set forth
in such Certificate.
3. Whenever a Futures Contract Option
purchased by the Fund pursuant to paragraph 1 is
exercised by the Fund, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the
particular Futures Contract Option (put or call) being
exercised; (b) the type of Futures Contract underlying
the Futures Contract Option; (c) the date of exercise;
(d) the name of the broker or futures commission
merchant through which the Futures Contract Option is
exercised; (e) the net total amount, if any, payable
by the Fund; (f) the amount, if any, to be received by
the Fund; and (g) the amount of cash and/or the amount
and kind of Securities to be deposited in the
Segregated Security Account. The Custodian shall make
the payments, if any, and the deposits, if any, into
the Segregated Security Account as specified in the
Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures
Contract Option, the Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to
such Futures Contract Option: (a) the type of Futures
Contract Option (put or call); (b) the type of Futures
Contract and such other information as may be
necessary to identify the Futures Contract underlying
the Futures Contract Option; (c) the expiration date;
(d) the exercise price; (e) the premium to be received
by the Fund; (f) the name of the broker or futures
commission merchant through which the premium is to be
received; and (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the
Segregated Security Account. The Custodian shall,
upon receipt of the premium specified in the
Certificate, make the deposits into the Segregated
Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option
written by the Fund which is a call is exercised, the
Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the particular Futures
Contract Option exercised; (b) the type of Futures
Contract underlying the Futures Contract Option; (c)
the name of the broker or futures commission merchant
through which such Futures Contract Option was
exercised; (d) the net total amount, if any, payable
to the Fund upon such exercise; (e) the net total
amount, if any, payable by the Fund upon such
exercise; and (f) the amount of cash and/or the amount
and kind of Securities to be deposited in the
Segregated Security Account. The Custodian shall,
upon its receipt of the net total amount payable to
the Fund, if any, specified in such Certificate make
the payments, if any, and the deposits, if any, into
the Segregated Security Account as specified in the
Certificate. The deposits, if any, to be made to the
Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which
is written by the Fund and which is a Put Option is
exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the
particular Futures Contract Option exercised; (b) the
type of Futures Contract underlying such Futures
Contract Option; (c) the name of the broker or futures
commission merchant through which such Futures
Contract Option is exercised; (d) the net total
amount, if any, payable to the Fund upon such
exercise; (e) the net total amount, if any, payable by
the Fund upon such exercise; and (f) the amount and
kind of Securities and/or cash to be withdrawn from or
deposited in the Segregated Security Account, if any.
The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in the
Certificate, make the payments, if any, and the
deposits, if any, into the Segregated Security Account
as specified in the Certificate. The deposits to
and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures
Contract Option identical to a previously written
Futures Contract Option described in this Article in
order to liquidate its position as a writer of such
Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with
respect to the Futures Contract Option being
purchased: (a) that the transaction is a closing
transaction; (b) the type of Futures Contract and such
other information as may be necessary to identify the
Futures Contract underlying the Futures Contract
Option; (c) the exercise price; (d) the premium to be
paid by the Fund; (e) the expiration date; (f) the
name of the broker or futures commission merchant to
which the premium is to be paid; and (g) the amount of
cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Segregated Security Account.
The Custodian shall effect the withdrawals from the
Segregated Security Account specified in the
Certificate. The withdrawals, if any, to be made from
the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin
Account Agreement.
8. Upon the expiration or exercise of, or
consummation of a closing transaction with respect to,
any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian
shall (a) delete such Futures Contract Option from the
statements delivered to the Fund pursuant to paragraph
3 of Article III herein, and (b) make such withdrawals
from, and/or, in the case of an exercise, such
deposits into, the Segregated Security Account as may
be specified in a Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be
made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund
through the exercise of a Futures Contract Option
described in this Article shall be subject to Article
VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sale, the Fund
shall deliver to the Custodian a Certificate
specifying: (a) the name of the issuer and the title
of the Security; (b) the number of shares or principal
amount sold, and accrued interest or dividends, if
any; (c) the dates of the sale and settlement; (d)
the sale price per unit; (e) the total amount credited
to the Fund upon such sales, if any; (f) the amount of
cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the
name in which such Margin Account has been or is to be
established; (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in a
Segregated Security Account; and (h) the name of the
broker through which such short sale was made. The
Custodian shall upon its receipt of a statement from
such broker confirming such sale and that the total
amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker
for the account of the Custodian (or any nominee of
the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account
and the Segregated Security Account specified in the
Certificate.
2. In connection with the closing-out of
any short sale, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to
each such closing-out: (a) the name of the issuer and
the title of the Security; (b) the number of shares or
the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out
to be delivered to the broker; (c) the dates of the
closing-out and settlement; (d) the purchase price per
unit; (e) the net total amount payable to the Fund
upon such closing-out; (f) the net total amount
payable to the broker upon such closing-out; (g) the
amount of cash and the amount and kind of Securities
to be withdrawn, if any, from the Margin Account; (h)
the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the
Segregated Security Account; and (i) the name of the
broker through which the Fund is effecting such
closing-out. The Custodian shall, upon receipt of the
net total amount payable to the Fund upon such
closing-out and the return and/or cancellation of the
receipts, if any, issued by the custodian with respect
to the short sale being closed-out, pay out of the
moneys held for the account of the Fund to the broker
the net total amount payable to the broker, and make
the withdrawals from the Margin Account and the
Segregated Security Account, as the same are specified
in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a
Reverse Repurchase Agreement with respect to
Securities and money held by the Custodian hereunder,
the Fund shall deliver to the Custodian a Certificate
or in the event such Reverse Repurchase Agreement is a
Money Market Security, a Certificate, Oral
Instructions or Written Instructions specifying: (a)
the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement; (b) the broker
or dealer through or with which the Reverse Repurchase
Agreement is entered; (c) the amount and kind of
Securities to be delivered by the Fund to such broker
or dealer; (d) the date of such Reverse Repurchase
Agreement; and (e) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited
in a Segregated Security Account in connection with
such Reverse Repurchase Agreement. The Custodian
shall, upon receipt of the total amount payable to the
Fund specified in the Certificate, Oral Instructions
or Written Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the
Segregated Security Account, specified in such
Certificate, Oral Instructions or Written
Instructions.
2. Upon the termination of a Reverse
Repurchase Agreement described in paragraph 1 of this
Article, the Fund shall promptly deliver a Certificate
or, in the event such Reverse Repurchase Agreement is
a Money Market Security, a Certificate, Oral
Instructions or Written Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement
being terminated; (b) the total amount payable by the
Fund in connection with such termination; (c) the
amount and kind of Securities to be received by the
Fund in connection with such termination; (d) the date
of termination; (e) the name of the broker or dealer
with or through which the Reverse Repurchase Agreement
is to be terminated; and (f) the amount of cash and/or
the amount and kind of Securities to be withdrawn from
the Segregated Security Account. The Custodian shall,
upon receipt of the amount and kind of Securities to
be received by the Fund specified in the Certificate,
Oral Instructions or Written Instructions, make the
payment to the broker or dealer, and the withdrawals,
if any, from the Segregated Security Account,
specified in such Certificate, Oral Instructions or
Written Instructions.
ARTICLE X
CONCERNING MARGIN ACCOUNTS, SEGREGATED SECURITY
ACCOUNTS AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time,
make such deposits to, or withdrawals from, a
Segregated Security Account as specified in a
Certificate received by the Custodian. Such
Certificate shall specify the amount of cash and/or
the amount and kind of Securities to be deposited in,
or withdrawn from, the Segregated Security Account.
In the event that the Fund fails to specify in a
Certificate the name of the issuer, the title and the
number of shares or the principal amount of any
particular Securities to be deposited by the Custodian
into, or withdrawn from, a Segregated Securities
Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall no
notify the Fund.
2. The custodian shall make deliveries or
payments from a Margin Account to the broker, dealer,
futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was
established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as
payments or distributions with respect to Securities
deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin
Account Agreement.
4. The Custodian shall have a continuing
lien and security interest in and to any property at
any time held by the Custodian in any Collateral
Account described herein. In accordance with
applicable law, the Custodian may enforce its lien and
realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put
Option guarantee letter or similar document or any
receipt issued hereunder by the Custodian. In the
event the Custodian should realize on any such
property net proceeds which are less than the
Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such
deficiency shall be a debt owed the Custodian by the
Fund within the scope of Article XIII herein.
5. On each business day, the Custodian
shall furnish the Fund with a statement with respect
to each Margin Account in which money or Securities
are held specifying as of the close of business on the
previous business day: (a) the name of the Margin
Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein.
The Custodian shall make available upon request to any
broker, dealer or futures commission merchant
specified in the name of a Margin Account a copy of
the statement furnished the Fund with respect to such
Margin Account.
6. Promptly after the close of business on
each business day in which cash and/or Securities are
maintained in a Collateral Account, the Custodian
shall furnish the Fund with a Statement with respect
to such Collateral Account specifying the amount of
cash and/or the amount and kind of Securities held
therein. No later than the close of business next
succeeding the delivery to the Fund of such statement,
the Fund shall furnish to the Custodian a Certificate
or Written Instructions specifying the then market
value of the securities described in such statement.
In the event such then market value is indicated to be
less than the Custodian's obligation with respect to
any outstanding Put Option, guarantee letter or
similar document, the Fund shall promptly specify in a
Certificate the additional cash and/or Securities to
be deposited in such Collateral Account to eliminate
such deficiency.
ARTICLE XI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian
a copy of the resolution of the Trustees, certified by
the Secretary or any Assistant Secretary, either (i)
setting forth the date of the declaration of a
dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to
payment shall be determined, the amount payable per
share to the shareholders of record as of that date
and the total amount payable to the Dividend Agent of
the Fund on the payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily
basis and authorizing the Custodian to rely on Oral
Instructions, Written Instructions or a Certificate
setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof,
the record date as of which shareholders entitled to
payment shall be determined, the amount payable per
share to the shareholders of record as of that date
and the total amount payable to the Dividend Agent on
the payment date.
2. Upon the payment date specified in such
resolution, Oral Instructions, Written Instructions or
Certificate, as the case may be, the Custodian shall
pay out of the moneys held for the account of the Fund
the total amount payable to the Dividend Agent of the
Fund.
ARTICLE XII
SALE AND REDEMPTION OF SHARES OF BENEFICIAL INTEREST
1. Whenever the Fund shall sell any of its
Shares, it shall deliver to the Custodian a
Certificate duly specifying:
(a) The number of Shares sold, trade date,
and price; and
(b) The amount of money to be received by
the Custodian for the sale of such Shares.
2. Upon receipt of such money from the
Transfer Agent, the Custodian shall credit such money
to the account of the Fund.
3. Upon issuance of any of the Fund's
Shares in accordance with the foregoing provisions of
this Article, the Custodian shall pay, out of the
money held for the account of the Fund, all original
issue or other taxes required to be paid by the Fund
in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever
the Fund
shall hereafter redeem any of its Shares, it shall
furnish to the Custodian a Certificate specifying:
(a) The number of Shares redeemed; and
(b) The amount to be paid for the Shares
redeemed.
5. Upon receipt from the Transfer Agent of
an advice setting forth the number of Shares received
by the Transfer Agent for redemption and that such
Shares are valid and in good form for redemption, the
Custodian shall make payment to the Transfer Agent out
of the moneys held for the account of the Fund of the
total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions
regarding the redemption of any of the Fund's Shares,
whenever its Shares are redeemed pursuant to any check
redemption privilege which may from time to time be
offered by the Fund, the Custodian, unless otherwise
instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that
the redemption is in good form for redemption in
accordance with the check redemption procedure, honor
the check presented as part of such check redemption
privilege out of the money held in the account of the
Fund for such purposes.
ARTICLE XIII
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole
discretion advance funds on behalf of the Fund which
results in an overdraft because the moneys held by the
Custodian for the account of the Fund shall be
insufficient to pay the total amount payable upon a
purchase of Securities as set forth in a Certificate
or Oral Instructions issued pursuant to Article IV, or
which results in an overdraft for some other reason,
or if the Fund is for any other reason indebted to the
Custodian (except a borrowing for investment or for
temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and
subject to the provisions of paragraph 2 of this
Article XIII), such overdraft or indebtedness shall be
deemed to be a loan made by the Custodian to the Fund
payable on demand and shall bear interest from the
date incurred at a rate per annum (based on a 360-day
year for the actual number of days involved) equal to
the Federal Funds Rate plus 1/2%, such rate to be
adjusted on the effective date of any change in such
Federal Funds Rate but in no event to be less than 6%
per annum, except that any overdraft resulting from an
error by the Custodian shall bear no interest. Any
such overdraft or indebtedness shall be reduced by an
amount equal to the total of all amounts due the Fund
which have not been collected by the Custodian on
behalf of the Fund when due because of the failure of
the Custodian to make timely demand or presentment for
payment. In addition, the Fund hereby agrees that the
Custodian shall have a continuing lien and security
interest in and to any property at any time held by it
for the benefit of the Fund or in which the Fund may
have an interest which is then in the Custodian's
possession or control or in possession or control of
any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion,
at any time to charge any such overdraft or
indebtedness together with interest due thereon
against any balance of account standing to the Fund's
credit on the Custodian's books. For purposes of this
Section 1 of Article XIII, "overdraft" shall mean a
negative Available Balance.
2. The Fund will cause to be delivered to
the
Custodian by any bank (including, if the borrowing is
pursuant to a separate agreement, the Custodian) from
which it borrows money for investment or for temporary
or emergency purposes using Securities as collateral
for such borrowings, a notice or undertaking in the
form currently employed by any such bank setting forth
the amount which such bank will loan to the Fund
against delivery of a stated amount of collateral.
The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such
borrowing: (a) the name of the bank; (b) the amount
and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory
note, duly endorsed by the Fund, or other loan
agreement; (c) the time and date, if known, on which
the loan is to be entered into; (d) the date on which
the loan becomes due and payable; (e) the total amount
payable to the Fund on the borrowing date; (f) the
market value of Securities to be delivered as
collateral for such loan, including the name of the
issuer, the title and the number of shares or the
principal amount of any particular Securities; and (g)
a statement specifying whether such loan is for
investment purposes or for temporary or emergency
purposes and that such loan is in conformance with the
Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the
specified collateral and the executed promissory note,
if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth
in the Certificate. The Custodian may, at the option
of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to
all rights therein given the lending bank by virtue of
any promissory note or loan agreement. The Custodian
shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize
further any transaction described in this paragraph.
The Fund shall cause all Securities released from
collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time
to time such return of collateral as may be tendered
to it. In the event that the Fund fails to specify in
a Certificate the name of the issuer, the title and
number of shares or the principal amount of any
particular Securities to be delivered as collateral by
the Custodian, the Custodian shall not be under any
obligation to deliver any Securities.
ARTICLE XIV
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. If the Fund is permitted by the terms of
its Articles of Incorporation and as disclosed in its
most recent and currently effective prospectus to lend
its portfolio Securities, within 24 hours after each
loan of portfolio Securities the Fund shall deliver or
cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan: (a) the
name of the issuer and the title of the Securities;
(b) the number of shares or the principal amount
loaned; (c) the date of loan and delivery; (d) the
total amount to be delivered to the Custodian against
the loan of the Securities, including the amount of
cash collateral and the premium, if any, separately
identified; and (e) the name of the broker, dealer or
financial institution to which the loan was made. The
Custodian shall deliver the Securities thus designated
to the broker, dealer or financial institution to
which the loan was made upon receipt of the total
amount designated as to be delivered against the loan
of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the
Book-Entry System or Depository only in the form of a
certified or bank cashier's check payable to the order
of the Fund or the Custodian drawn on New York
Clearing House funds and may deliver Securities in
accordance with the customs prevailing among dealers
in securities.
2. Promptly after each termination of the
loan of Securities by the Fund, the Fund shall deliver
or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan
termination and return of Securities: (a) the name of
the issuer and the title of the Securities to be
returned; (b) the number of shares or the principal
amount to be returned; (c) the date of termination;
(d) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities
minus any offsetting credits as described in said
Certificate); and (e) the name of the broker, dealer
or financial institution from which the Securities
will be returned. The Custodian shall receive all
Securities returned from the broker, dealer, or
financial institution to which such Securities were
loaned and upon receipt thereof shall pay, out of the
moneys held for the account of the Fund, the total
amount payable upon such return of Securities as set
forth in the Certificate.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither
the Custodian nor its nominee shall be liable for any
loss or damage, including counsel fees, resulting from
its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement,
except for any such loss or damage arising out of its
own negligence or willful misconduct. The Custodian
may, with respect to questions of law arising
hereunder or under any Margin Account Agreement, apply
for and obtain the advice and opinion of counsel to
the Fund or of its own counsel, at the expense of the
Fund, and shall be fully protected with respect to
anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage
resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence,
misfeasance or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Without limiting the generality of the
foregoing, the Custodian shall be under no obligation
to inquire into, and shall not be liable for:
(a) The validity of the issue of any
Securities purchased, sold or written by or for the
Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or
received therefor;
(b) The legality of the issue or sale of
any of the Fund's Shares, or the sufficiency of the
amount to be received therefor;
(c) The legality of the redemption of any
of the Fund's Shares, or the propriety of the amount
to be paid therefor;
(d) The legality of the declaration or
payment of any dividend by the Fund;
(e) The legality of any borrowing by the
Fund using Securities as collateral;
(f) The legality of any loan of portfolio
Securities pursuant to Article XIV of this Agreement,
nor shall the Custodian be under any duty or
obligation to see to it that any cash collateral
delivered to it by a broker, dealer or financial
institution or held by it at any time as a result of
such loan of portfolio Securities of the Fund is
adequate collateral for the Fund against any loss it
might sustain as a result of such loan. The Custodian
specifically, but not by way of limitation, shall not
be under any duty or obligation periodically to check
or notify the Fund that the amount of such cash
collateral held by it for the Fund is sufficient
collateral for the Fund, but such duty or obligation
shall be the sole responsibility of the Fund. In
addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer or financial
institution to which portfolio Securities of the Fund
are lent pursuant to Article XIV of this Agreement
makes payment to it of any dividends or interest which
are payable to or for the account of the Fund during
the period of such loan or at the termination of such
loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such
dividends or interest are not paid and received when
due; or
(g) The sufficiency or value of any amounts
of money and/or Securities held in any Margin Account,
Segregated Security Account or Collateral Account in
connection with transactions by the Fund. In
addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment
to the Fund of any variation margin payment or similar
payment which the Fund may be entitled to receive from
such broker, dealer, futures commission merchant or
Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures
commission merchant or Clearing Member is the amount
the Fund is entitled to receive, or to notify the Fund
of the Custodian's receipt or non-receipt of any such
payment; provided however that the Custodian, upon the
Fund's written request, shall, as Custodian, demand
from any broker, dealer, futures commission merchant
or Clearing Member identified by the Fund the payment
of any variation margin payment or similar payment
that the Fund asserts it is entitled to receive
pursuant to the terms of a Margin Account Agreement or
otherwise from such broker, dealer, futures commission
merchant or Clearing Member.
3. The Custodian shall not be liable for,
or considered to be the Custodian of, any money,
whether or not represented by any check, draft or
other instrument for the payment of money, received by
it on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the
final crediting of the account representing the Fund's
interest at the Book-Entry System or the Depository.
4. The Custodian shall have no
responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions,
exchange, offers, tenders, interest rate changes or
similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually
received timely notice from the Depository. In no
event shall the Custodian have any responsibility or
liability for the failure of the Depository to
collect, or for the late collection or late crediting
by the Depository of any amount payable upon
Securities deposited in the Depository which may
mature or be redeemed, retired, called or otherwise
become payable. However, upon receipt of a
Certificate from the Fund of an overdue amount on
Securities held in the Depository, the Custodian shall
make a claim against the Depository on behalf of the
Fund, except that the Custodian shall not be under any
obligation to appear in, prosecute or defend any
action, suit or proceeding in respect to any
Securities held by the Depository which in its opinion
may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and
liability be furnished as often as may be required.
5. The Custodian shall not be under any
duty or obligation to take action to effect collection
of any amount due to the Fund from the Transfer Agent
of the Fund nor to take any action to effect payment
or distribution by the Transfer Agent of the Fund of
any amount paid by the Custodian to the Transfer Agent
of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any
duty or obligation to take action to effect collection
of any amount, if the Securities upon which such
amount is payable are in default, or if payment is
refused after due demand or presentation, unless and
until (i) it shall be directed to take such action by
a Certificate and (ii) it shall be assured to its
satisfaction of reimbursement of its costs and
expenses in connection with any such action.
7. The Custodian may appoint one or more
banking institutions as Depository or Depositories or
as Sub-Custodian or Sub-Custodians, including, but not
limited to, banking institutions located in foreign
countries, of Securities and moneys at any time owned
by the Fund, upon terms and conditions approved in a
Certificate, which shall, if requested by the
Custodian, be accompanied by an approving resolution
of the Fund's Board of Trustees adopted in accordance
with Rule 17f-5 under the Investment Company Act of
1940, as amended.
8. The Custodian shall not be under any
duty or obligation to ascertain whether any Securities
at any time delivered to or held by it for the account
of the Fund are such as properly may be held by the
Fund under the provisions of its Articles of
Incorporation.
9. (a) The Custodian shall be entitled to
receive and the Fund agrees to pay to the Custodian
all reasonable out-of-pocket expenses and such
compensation and fees as are specified on Schedule A
hereto. The Custodian shall not deem amounts payable
in respect of foreign custodial services to be
out-of-pocket expenses, it being the parties'
intention that all fees for such services shall be as
set forth on Schedule B hereto and shall be provided
for the term of this Agreement without any automatic
or unilateral increase. The Custodian shall have the
right to unilaterally increase the figures on Schedule
A on or after March 1, 1991 and on or after each
succeeding March 1 thereafter by an amount equal to
50% of the increase in the Consumer Price Index for
the calendar year ending on the December 31
immediately preceding the calendar year in which such
March 1 occurs, provided, however, that during each
such annual period commencing on a March 1, the
aggregate increase during such period shall not be in
excess of 10%. Any increase by the Custodian shall be
specified in a written notice delivered to the Fund at
least thirty days prior to the effective date of the
increase. The Custodian may charge such compensation
and any expenses incurred by the Custodian in the
performance of its duties pursuant to such agreement
against any money held by it for the account of the
Fund. The Custodian shall also be entitled to change
against any money held by it for the account of the
Fund the amount of any loss, damage, liability or
expense, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this
Agreement. The expenses which the Custodian may
charge against the account of the Fund include, but
are not limited to, the expenses of Sub-Custodians and
foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the
purchase and sale of Securities of the Fund.
(b) The Fund shall receive a credit
for each calendar month against such compensation and
fees of the Custodian as may be payable by the Fund
with respect to such calendar month in an amount equal
to the aggregate of its Earnings Credit for such
calendar month. In no event may any Earnings Credits
be carried forward to any fiscal year other than the
fiscal year in which it was earned, or, unless
permitted by applicable law, transferred to, or
utilized by, any other person or entity, provided that
any such transferred Earnings Credit can be used only
to offset compensation and fees of the Custodian for
services rendered to such transferee and cannot be
used to pay the Custodian's out-of-pocket expenses.
For purposes of this subsection (b), the Fund is
permitted to transfer Earnings Credits only to The
Dreyfus Corporation, its affiliates and/or any
investment company now or in the future sponsored by
The Dreyfus Corporation or any of its affiliates or
for which The Dreyfus Corporation or any of its
affiliates acts as the sole investment adviser or as
the principal distributor, and Daiwa Money Fund Inc.
For purposes of this sub-section (b), a fiscal year
shall mean the twelve-month period commencing on the
effective date of this Agreement and on each
anniversary thereof.
10. The Custodian shall be entitled to rely
upon any Certificate, notice or other instrument in
writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The
Custodian shall be entitled to rely upon any Oral
Instructions and any Written Instructions actually
received by the Custodian pursuant to Article IV or XI
hereof. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof, confirming such Oral
Instructions or Written Instructions in such manner so
that such Certificate or facsimile thereof is received
by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business of the same day
that such Oral Instructions or Written Instructions
are given to the Custodian. The Fund agrees that the
fact that such confirming instructions are not
received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to
the Fund in acting upon Oral Instructions given to the
Custodian hereunder concerning such transactions,
provided such instructions reasonably appear to have
been received from an Authorized Person.
11. The Custodian shall be entitled to rely
upon any instrument, instruction or notice received by
the Custodian and reasonably believed by the Custodian
to be given in accordance with the terms and
conditions of any Margin Account Agreement. Without
limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any
statements or representations contained in any such
instrument or other notice including, without
limitation, any specification of any amount to be paid
to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the
Fund which are in the possession of the Custodian
shall be the property of the Fund. Such books and
records shall be prepared and maintained as required
by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and
records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the
Custodian to the Fund or the Fund's authorized
representative at the Fund's expense.
13. The Custodian shall provide the Fund
with any report obtained by the Custodian on the
system of internal accounting control of the
Book-Entry System or the Depository, or O.C.C., and
with such reports on its own systems of internal
accounting control as the Fund may reasonably request
from time to time.
14. The Fund agrees to indemnify the
Custodian against and save the Custodian harmless from
all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or
incurred because of or in connection with the
Custodian's payment or non-payment of checks pursuant
to paragraph 6 of Article XII as part of any check
redemption privilege program of the Fund, except for
any such liability, claim, loss and demand arising out
of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of
this Agreement, the Custodian may deliver and receive
Securities, and receipts with respect to such
Securities, and arrange for payments to be made and
received by the Custodian in accordance with the
customs prevailing from time to time among brokers or
dealers in such Securities.
16. The Custodian shall have no duties or
responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be
implied in this Agreement against the Custodian.
ARTICLE XVI
TERMINATION
1. (a) Except as provided in subparagraphs
(b), (c) and (d) herein, neither party may terminate
this Agreement until the earlier of the following:
(i) August 31, 1993, and (ii) the third anniversary of
the earliest date on which none of the companies
listed on Schedule C hereto is a transfer agency
customer of the Custodian. Any such termination may
be effected only by the terminating party giving to
the other party a notice in writing specifying the
date of such termination, which shall be not less than
two hundred seventy (270) days after the date of
giving of such notice.
(b) The Fund may at any time terminate
this Agreement if the Custodian has materially
breached its obligations under this Agreement and such
breach has remained uncured for a period of thirty
days after the Custodian's receipt from the Fund of
written notice specifying such breach.
(c) Either party, immediately upon
written notice to the other party, may terminate this
Agreement upon the Merger or Bankruptcy of the other
party.
(d) The Fund may at any time terminate
this Agreement if the Custodian has materially
breached its obligations under the "Amendment to
Transfer Agency Agreements" dated August 18, 1989 and
has not cured such breach as promptly as practicable
and in any event within seven days of its receipt of
written notice of such breach, provided that the
Custodian shall not be permitted to cure any such
material breach arising from the willful misconduct of
the Custodian.
In the event notice of termination is given
by the Fund, it shall be accompanied by a copy of a
resolution of the Trustees of the Fund, certified by
the Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In
the event notice of termination is given by the
Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a
resolution of its Trustees, certified by the Secretary
or any Assistant Secretary, designating a successor
custodian or custodians. In the absence of such
designation by the Fund, the Custodian may designate a
successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date
set forth in such notice, this Agreement shall
terminate and the Custodian shall, upon receipt of a
notice of acceptance by the successor custodian, on
that date deliver directly to the successor custodian
all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees,
expenses and other amounts for the payment or
reimbursement of which it shall then be entitled.
2. If a successor custodian is not
designated by the Fund or the Custodian in accordance
with the preceding paragraph, the Fund shall, upon the
date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of
all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the
Fund) and moneys then owned by the Fund, be deemed to
be its own custodian, and the Custodian shall thereby
be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with
respect to Securities held in the Book-Entry System,
in any Depository or by a Clearing Member which cannot
be delivered to the Fund, to hold such Securities
hereunder in accordance with this Agreement.
ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a
Certificate signed by two of the present Officers of
the Fund under its seal, setting forth the names and
the signatures of the present Authorized Persons. The
Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized
Person or in the event that other or additional
Authorized Persons are elected or appointed. Until
such new Certificate shall be received, the Custodian
shall be fully protected in acting under the
provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set
forth in the last delivered Certificate.
2. Annexed hereto as Appendix B is a
Certificate signed by two of the present Officers of
the Fund under its seal, setting forth the names and
the signatures of the present Officers of the Fund.
The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event any such
present Officer ceases to be an Officer of the Fund,
or in the event that other or additional Officers are
elected or appointed. Until such new Certificate
shall be received, the Custodian shall be fully
protected in acting under the provisions of this
Agreement upon the signatures of the Officers as set
forth in the last delivered Certificate.
3. Any notice or other instrument in
writing, authorized or required by this Agreement to
be given to the Custodian, shall be sufficiently given
if addressed to the Custodian and mailed or delivered
to it at its offices at 90 Washington Street, New
York, New York 10015, or at such other place as the
Custodian may from time to time designate in writing.
4. Any notice or other instrument in
writing, authorized or required by this Agreement to
be given to the Fund, shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at
its office at 666 Old Country Road, Garden City, New
York 11530, or at such other place as the Fund may
from time to time designate in writing.
5. This Agreement may not be amended or
modified in any manner except by a written agreement
executed by both parties with the same formality as
this Agreement and approved by a resolution of the
Trustees of the Fund.
6. This Agreement shall extend to and shall
be binding upon the parties hereto, and their
respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the
Fund without the written consent of the Custodian, or
by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of its
Trustees.
7. This Agreement shall be construed in
accordance with the laws of the State of New York.
8. This Agreement may be executed in any
number of counterparts, each of which shall be deemed
to be an original, but such counterparts shall,
together, constitute only one instrument.
9. This Agreement shall not be effective on
the date hereof and instead shall become effective on
January l, 1990. When effective, this Agreement shall
supercede the then-existing Custody Agreement between
the parties hereto.
10. This Agreement has been executed on
behalf of the Fund by the undersigned Officer of the
Fund in his capacity as an Officer of the Fund. The
obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not
be binding upon any Trustee, Officer or shareholder of
the Fund individually.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed by their
respective Officers, thereunto duly authorized, and
their respective corporate seals to be hereunto
affixed, as of the day and year first above written.
Dreyfus California Tax Exempt Money Market Fund
By:
__________________________
John Pyburn,
Treasurer
Attest:
______________________
THE BANK OF NEW YORK
By:
__________________________
Attest:
______________________
Appendix A
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
AUTHORIZED SIGNATORIES:
CASH ACCOUNT AND/OR CUSTODIAN
ACCOUNT FOR PORTFOLIO SECURITIES
TRANSACTIONS
Group I Group II
All current Fund officers, Paul Casti, Jr. Alan Eisner
Frank Greene, John Bale, Jeffey Nachman Lawrence Greene
Michael Condon, Steven John Pyburn Julian Smerling
Powanda and Richard Cassaro Joseph DiMartino Thomas Durante
Robert Dubuss James Windels
Joseph Connolly Paul Molloy
Gregory Gruber
Cash Account
1. Fees payable to The Bank of New York pursuant to written
agreement with the Fund for services rendered in its
capacity as Custodian or agent of the Fund, or to The
Shareholder Services Group, Inc. in its capacity as Transfer
Agent or agent of the Fund:
Two (2) signatures required, one of which must be
from Group II, except that an officer of the Fund
who also is listed in Group II shall sign only
once.
2. Other expenses of the Fund, $5,000 and under:
Any combination of two (2) signatures from either
Group I or Group II, or both such Groups, except
that an officer of the Fund who also is listed in
Group II shall sign only once.
3. Other expenses of the Fund, over $5,000 but not over
$25,000:
Two (2) signatures required, one of which must be
from Group II, except that an officer of the Fund
who also is listed in Group II shall sign only
once.
4. Other expenses of the Fund, over $25,000:
Two (2) signatures required, one from Group I or
Group II, including any one of the following:
Paul Casti, Jr., James Windels, Jeffrey Nachman,
John Pyburn or Alan Eisner, except that no
individual shall be authorized to sign more than
once.
Custodian Account for Portfolio Securities Transactions
Two (2) signatures required from any of the following:
All current Fund officers, and Joseph DiMartino,
Robert Dubuss, Alan Eisner, Lawrence Greene,
Julian Smerling, Alan Brown, Richard Cassaro, Paul
Disdier, Alfonso Fulgieri, Gregory Gruber, Michael
Condon, Steven Powanda, Linda Raffinello, Ann
Weintraub, Michael Charash, Theresa Viviano and
Paul Casti, Jr.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
AMENDED AND RESTATED CUSTODY AGREEMENT
APPENDIX B
The undersigned Officers of the Fund do hereby certify
that the following individuals, whose specimen signatures are on
file with The Bank of New York, have been duly elected or
appointed by the Fund's Board to the position set forth opposite
their names and have qualified therefor:
Name Position
Richard J. Moynihan President and Investment Officer
Howard Stein Investment Officer
Joseph S. DiMartino Investment Officer
A. Paul Disdier Vice President and Investment Officer
Karen M. Hand Vice President and Investment Officer
Stephen C. Kris Vice President and Investment Officer
L. Lawrence Troutman Vice President and Investment Officer
Samuel J. Weinstock Vice President and Investment Officer
Monica S. Wieboldt Vice President and Investment Officer
Daniel C. Maclean Vice President
John J. Pyburn Treasurer
Mark N. Jacobs Secretary
Steven F. Newman Assistant Secretary
Christine Pavalos Assistant Secretary
Jeffrey N. Nachman Controller
Title: Title:
AMENDED AND RESTATED CUSTODY AGREEMENT
APPENDIX C
The following, are designated publications for purposes
of paragraph 5(b) of Article III:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
Schedule A
The fees payable to the Custodian with respect to
securities held in domestic custody are annexed hereto.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
Domestic Custody Fees
Basic Fee: 1/100th of 1% of the first $500,000,000, and
1/200th of 1% of the excess over $500,000,000 per
annum of the total market value of domestic
securities held.
Custodial Transactions:
$13.00 for each receipt and delivery of Treasuries
(excluding Euro Dollar CDs).
$40.00 for any receipt, delivery or redemption of a
Euro Dollar CD for which BNY's London branch is
utilized for settlement and safekeeping.
$200.00 for the collection of interest on securities
held in "street name."
Schedule B
The fees payable to the Custodian with respect to securities
held in foreign custody are as set forth in a letter dated August
10, 1989 from Masao Yamaguchi of The Bank of New York to Kevin
Flood of Dreyfus Service Corporation, a copy of which is annexed
hereto.
The above foreign custody fees apply to the following Global
Custody Network countries:
1. Australia 12. Japan
2. Austria 13. Luxembourg
3. Belgium 14. Malasia
4. Canada 15. Netherlands
5. Denmark 16. New Zealand
6. Finland 17. Norway
7. France 18. Singapore
8. Germany 19. Spain
9. Hong Kong 20. Sweden
10. Ireland 21. Switzerland
11. Italy 22. United Kingdom
[LETTERHEAD OF BANK OF NEW YORK]
August 10, 1989
Mr. Kevin Flood
Senior Vice President
The Dreyfus Corporation
222 Broadway, 7th Floor
New York, NY
Re: Global Custodian Fees
Dear Kevin:
This letter is to confirm our discussion regarding our
Global Custody fee schedule. The fees will be calculated on a
relationship basis with no annual minimum.
- Safekeeping/Income Collection/Capital Changes/Tax
Reclamation/Daily Reporting/Monthly Summary
16 basis points per annum on the market value of
securities held for all of your funds in our sub-
custodian network, up to $250 MM.
15 basis points on the next $250 MM.
14 basis points on the next $250 MM.
12 basis points on the excess.
- Securities Settlements
$35 per transaction - includes our processing and the
sub-custodians.
- Out-of-Pocket Expense
Telex, swift, telephone, securities registration, etc.,
are in addition to the above.
- We can provide centralized foreign exchange services.
THE BANK OF NEW YORK
Mr. Kevin Flood
August 10, 1989
Page 2
The above fee schedule is applicable to the 22 countries
listed on Attachment I. Please note that expansion into other
more emerging markets/countries is possible, but would be covered
under a separate agreement.
If you are in agreement with this fee schedule, please sign
and return the enclosed copy of this letter.
Sincerely,
/s/ Masao Yamaguchi
Approved by: ____________________
Kevin Flood
Date : ____________________
MY:to
cc: The Bank of New York Dreyfus
F. Ricciardi J. Nachman
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors" and to the use of our report dated April 30,
1996, in this Registration Statement (Form N-1A 2-95595) of Dreyfus California
Tax Exempt Money Market Fund.
ERNST & YOUNG LLP
New York, New York
July 24, 1996
Item 24.(b)
Other Exhibits (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Elizabeth Bachman, Marie
E. Connolly, Richard W. Ingram and John E. Pelletier and each of them, with
full power to act without the other, his or her true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all capacities
(until revoked in writing) to sign any and all amendments to the Registration
Statement of Dreyfus California Tax Exempt Money Market Fund (including post-
effective amendments and amendments thereto), and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
/s/David W. Burke July 29, 1996
- --------------------------------
David W. Burke
/s/Hodding Carter, III July 29, 1996
- --------------------------------
Hodding Carter, III
/s/Joseph S. DiMartino July 29, 1996
- --------------------------------
Joseph S. DiMartino
/s/Ehud Houminer July 29, 1996
- --------------------------------
Ehud Houminer
/s/Richard C. Leone July 29, 1996
- --------------------------------
Richard C. Leone
/s/Hans C. Mautner July 29, 1996
- --------------------------------
Hans C. Mautner
/s/Robin A. Smith July 29, 1996
- --------------------------------
Robin A. Smith
/s/John E. Zuccotti July 29, 1996
- --------------------------------
John E. Zuccotti
ITEM 24.(b)
OTHER EXHIBIT (b)
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND, INC.
Certificate of Assistant Secretary
The undersigned, Elizabeth Bachman, Vice President and Assistant
Secretary of Dreyfus California Tax Exempt Money Market Fund, Inc. (the
"Fund"), hereby certifies that set forth below is a copy of the resolution
adopted by the Fund's Board authorizing the signing by Elizabeth Bachman,
Marie E. Connolly, Richard W. Ingram and John Pelletier on behalf of the
proper officers of the Fund pursuant to a power of attorney:
RESOLVED, that the Registration Statement and any and all
amendments and supplements thereto, may be signed by any
one of Elizabeth Bachman, Marie E. Connolly, Richard W.
Ingram and John Pelletier as the attorney-in-fact for the
proper officers of the Fund, with full power of
substitution and resubstituion; and that the appointment
of each of such persons as such attorney-in-fact hereby
is authorized and approved; and that such attorneys-in-
fact, and each of them, shall have full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in connection with
such Registration Statement and any and all amendments
and supplements thereto, as fully to all intents and
purposes as the officer, for whom he or she is acting as
attorney-in-fact, might or could do in person.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Fund on July 29, 1996.
/s/ Elizabeth Bachman
-----------------------
Elizabeth Bachman
Vice President and
Assistant Secretary
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