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. 19 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 19 [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, 1997 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed 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, 1997 was filed on May 28, 1997.
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 17
7 Purchase of Securities Being Offered 8
8 Redemption or Repurchase 13
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A Caption Page
__________ _______ ____
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-1, B-26
13 Investment Objectives and Policies B-2
14 Management of the Fund B-9
15 Control Persons and Principal B-9
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-24
18 Capital Stock and Other Securities B-26
19 Purchase, Redemption and Pricing B-15; B-17;
of Securities Being Offered B-22
20 Tax Status *
21 Underwriters B-15
22 Calculations of Performance Data B-24
23 Financial Statements B-44
Items in
Part C of
Form N-1A Caption Page
__________ _______ ____
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-9
30 Location of Accounts and Records C-12
31 Management Services C-12
32 Undertakings C-12
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
FOR USE BY BANKS ONLY
August 1, 1997
DREYFUS CALIFORNIA TAX EXEMPT
MONEY MARKET FUND
Supplement to Prospectus
Dated August 1, 1997
All mutual fund shares involve certain investment risks, including the
possible loss of principal.
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PROSPECTUS AUGUST 1, 1997
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, 1997, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. 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.
TABLE OF CONTENTS
Page
Annual Fund Operating Expenses.......... 3
Condensed Financial Information......... 3
Yield Information....................... 4
Description of the Fund................. 4
Management of the Fund.................. 7
How to Buy Shares....................... 8
Page
Shareholder Services.................... 10
How to Redeem Shares.................... 13
Shareholder Services Plan............... 15
Dividends, Distributions and Taxes...... 16
General Information..................... 17
Appendix................................ 19
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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............................................................................... .16%
Total Fund Operating Expenses................................................................ .66%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- ---------- -----------
<S> <C> <C> <C> <C>
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 $21 $37 $82
</TABLE>
- -----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY
AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
- -----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, 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 fee if you effect
transactions in Fund shares through a securities dealer, bank or other
financial institution. See "Management of the Fund," "How to Buy Shares" 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,
_________________________________________________________________________________________________
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERSHAREDATA:
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 .042 .049 .055 .049 .035 .024 .019 .026 .030 .028
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income_net...... (.042) (.049) (.055) (.049) (.035) (.024) (.019) (.026) (.030) (.028)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
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
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTALINVESTMENT
RETURN........... 4.27% 5.04% 5.65% 5.04% 3.58% 2.38% 1.94% 2.60% 3.07% 2.80%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets .60% .61% .60% .61% .66% .65% .65% .64% .64% .66%
Ratio of net investment
income to
average net assets 4.20% 4.94% 5.50% 4.93% 3.53% 2.34% 1.92% 2.56% 3.03% 2.77%
Net assets, end of year
(000's omitted).. $352,396 $369,832 $407,438 $351,643 $322,255 $316,344 $319,627 $281,764 $252,985 $226,548
</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 for the
[Page 4]
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 tax. 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 ("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 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
[Page 5]
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. A severe recession from 1990
through fiscal 1994 reduced revenues and increased expenditures for social
welfare programs, resulting in a period of budget imbalance. During this perio
d, expenditures exceeded revenues in four out of six years, and the State
accumulated and sustained a budget deficit in its budget reserve, the Special
Fund for Economic Uncertainties, approaching $2.8 billion at its peak at June
30, 1993. By the 1993-94 fiscal year, the accumulated budget deficit was so
large that it was impractical to budget to retire it in one year, so a
two-year program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal year.
When the economy failed to recover sufficiently, a second two-year plan was
implemented in 1994-95, again using cross-fiscal year revenue anticipation
warrants to partly finance the deficit into the 1995-96 fiscal year. As a
consequence of the accumulated budget deficits, the State's cash resources
available to pay its ongoing obligations were significantly reduced causing
the State to rely increasingly on external debt markets to meet its cash
needs. Future budget problems or a deterioration in California's general
financial condition may have the effect of impairing the ability of the
issuers of California Municipal Obligations to pay interest on, or repay the
principal of, such California Municipal Obligations. You should obtain and
review a copy of the Statement of Additional Information which more fully
sets forth these and other risk factors.
INVESTING IN MUNICIPAL OBLIGATIONS _ The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in
such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects. As a result, the Fund may be subject to greater risk as
compared to a fund that does not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is
[Page 6]
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 30, 1997, The Dreyfus Corporation managed
or administered approximately $87 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, Mel
lon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a number
of companies known as Mellon Financial Services Corporations. Through its
subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$259 billion in assets as of March 31, 1997, including approximately $88
billion in mutual fund assets. As of March 31, 1997, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.061 trillion in assets, including
approximately $58 billion in mutual fund assets.
For the fiscal year ended March 31, 1997, 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 expense
ratio of the Fund and increasing
[Page 7]
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 State
ment 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 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
maintains an omnibus account in the Fund and 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 accounts, 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 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
[Page 8]
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.
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.
[Page 9]
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 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 by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 516-794-5452.
[Page 10]
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 administrative fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
Fund Exchanges may be modified or terminated at any time upon notice to
shareholders. See "Dividends, Distributions and Taxes."
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."
DREYFUS-AUTOMATIC ASSET BUILDER Registration 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
[Page 11]
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-A
UTOMATIC 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 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
[Page 12]
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 fee
for effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending upon the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark 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
[Page 13]
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 through the Telephone Redemption Privilege,
which is granted automatically unless you specifically refuse it by checking
the applicable "No" box on the Account Application. The Telephone Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You also may redeem
shares through the Check Redemption Privilege, the Wire Redemption Privilege,
or the Dreyfus TELETRANSFER Privilege, 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 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.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you, 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.
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
[Page 14]
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. 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. The
Telephone Redemption Privilege is granted automatically unless you refuse it.
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. 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.
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
[Page 15]
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 distrib
utions 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.
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, or (ii) a factor in determining the extent to which
a shareholder's Social Security benefits are taxable. If the Fund purchases
such securities, the portion of the Fund's dividends related thereto will not
necessarily be tax exempt to an investor who is subject to the alternative
minimum tax and/or 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
[Page 16]
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 in
terest 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, 1997 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income 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.
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
[Page 17]
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 permissible
liquid assets at least equal at all times to the amount of the commitments
will be established and maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS _ The Fund may purchase floating and variable
rate demand notes and bonds, which are tax exempt obligations ordinarily
having stated maturities in excess of 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 prescribed quality standards
for banks, or the payment obligation otherwise will be collateralized by U.S.
Government securities. For certain participation interests, the Fund will
have the right to demand payment, on not more
[Page 19]
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 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;
[Page 20]
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 tax. Under
normal market conditions, the Fund anticipates that not more than 5% of the
value of its total assets will be invested in any one category of Taxable
Investments. Taxable Investments are more fully described in the Statement of
Additional Information, to which reference hereby is made.
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 22]
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[Page 23]
California
Tax Exempt
Money Market Fund
Prospectus
Registration Mark
Copy Rights 1997 Dreyfus Service Corporation 357p080197
[Page 24]
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 1, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus California Tax Exempt Money Market Fund (the "Fund"), dated August
1, 1997, as it may be revised from time to time. To obtain a copy of the
Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, 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-9
Management Agreement B-13
Purchase of Shares B-15
Shareholder Services Plan B-16
Redemption of Shares B-17
Shareholder Services B-19
Determination of Net Asset Value B-22
Dividends, Distributions and Taxes B-23
Portfolio Transactions B-24
Yield Information B-24
Information About the Fund B-26
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-26
Appendix A B-27
Appendix B B-40
Financial Statements B-44
Report of Independent Auditors B-52
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the
Fund" and "Appendix."
Portfolio Securities
Municipal Obligations. The average distribution of investments (at
value) in Municipal Obligations by ratings for the fiscal year ended March
31, 1997, 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 96.5%
AAA\AA Aaa\Aa AAA\AA 3.5
------
100.0%
======
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 illiquidity 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. Govern
ment-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. 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 statues that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial condition of the State of California. A severe recession from
1990 through fiscal 1994 reduced revenues and increased expenditures for
social welfare programs, resulting in a period of budget imbalance. During
this period, expenditures exceeded revenues in four out of six years, and
the State accumulated and sustained a budget deficit in its budget reserve,
the Special Fund for Economic Uncertainties, approaching $2.8 billion at its
peak at June 30, 1993. By the 1993-94 fiscal year, the accumulated budget
deficit was so large that it was impractical to budget to retire it in one
year, so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit over the end of the
fiscal year. When the economy failed to recover sufficiently, a second two-
year plan was implemented in 1994-95, again using cross-fiscal year revenue
anticipation warrants to partly finance the deficit into the 1995-96 fiscal
year. As a consequence of the accumulated budget deficits, the State's cash
resources available to pay its ongoing obligations were significantly
reduced causing the State to rely increasingly on external debt markets to
meet its cash needs. Future budget problems or a deterioration in
California's general financial condition may have the effect of impairing
the ability of the issuers of California Municipal Obligations to pay
interest on, or repay the principal of, such California Municipal
Obligations.
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.
Board Members of the Fund
DAVID W. BURKE, Board Member. Chairman of the Board of Governors, an
independent board within the United States Information Agency, since
August 1995. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager and, from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From
1977 to 1990, Mr. Burke was involved in the management of national
television news, as Vice-President and Executive Vice- President of ABC
News, and subsequently as President of CBS News. He is 61 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 62 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. He is also
Chairman of the Board of Directors of The Noel Group, Inc., a venture
capital company, and Staffing Resources, Inc., a temporary placement
agency. Mr. DiMartino also serves as a director of The Muscular
Dystrophy Association; HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health and
other benefit programs; Carlyle Industries, Inc. (formerly, Belding
Heminway Company, Inc.), a button packager and distributor; and Curtis
Industries, Inc., a national distributor of security products,
chemicals, automotive and other hardware. For more than five years
prior to January 1995, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 24, 1994, the Fund's
distributor. From August 1994 to December 31, 1994, he was a director
of Mellon Bank Corporation. He is 53 years old and his address is 200
Park Avenue, New York, New York 10166.
EHUD HOUMINER, Board Member. Professor and Executive-in-Residence at the
Columbia Business School, Columbia University. Since January 1996,
principal of Lear, Yavitz and Associates, a management consultant firm.
He also is a Director of Avnet Inc. and Five Star Food Service Inc. He
is 56 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
Dynex, Inc. He is 57 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 59 years old and his address is 305 East 47th Street, New
York, New York 10017.
ROBIN A, SMITH, Board Member. Since June 1997, Administration Director of
The Beacon Group, LLC, a private equity firm and advisory partnership.
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 33 years
old and her address is 399 Park Avenue, 17th Floor, New York, New York
10022.
JOHN E. ZUCCOTTI, Board Member. Since November 1996, Chairman and Chief
Executive Officer of World Financial Properties, Inc. From 1990 to
November 1996, he was President and Chief Executive Officer of Olympia
& York Companies (U.S.A.). 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 Olympia & York Companies (U.S.A.), Starret Housing
Corporation, a construction, development and real estate properties
corporation, and Capstone Pharmacy Services, Inc. He is 60 years old
and his address is 1 Liberty Plaza, 6th Floor, New York, New York
10006.
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, 1997, and by all other funds in The Dreyfus Family of Funds for
which such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for the year
ended December 31, 1996, were as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Members
David W. Burke $3,750 $232,699 (51)
Hodding Carter, III $3,750 $39,325 (7)
Joseph S. DiMartino $4,688 $517,075 (93)
Ehud Houminer $3,750 $48,769 (11)
Richard C. Leone $3,500 $38,825 (7)
Hans C. Mautner $3,500 $36,325 (7)
Robin A. Smith $3,750 $39,325 (7)
John E. Zuccotti $3,500 $39,325 (7)
_____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $7,496 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. She is 40 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. He is 33 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 41 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by the Manager. From September 1989 to July 1994, she was
an Assistant Vice President and Client Manager for The Boston Company,
Inc. She is 33 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Director of
Strategic Client Initiatives for Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From December 1989 through November 1996, he was employed by
GE Investments where he held various financial, business development
and compliance positions. He also served as Treasurer of the GE Funds
and as Director of GE Investment Services. He is 35 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor and
an officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 34 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From April 1993 to January 1995, he was a Senior Fund
Accountant for Investors Bank & Trust Company. From December 1991 to
March 1993, he was employed as a Fund Accountant at The Boston Company,
Inc. He is 28 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised or
administered by the Manager. Prior to August 1993, he was employed as
an Associate Examiner at the National Association of Securities
Dealers, Inc. He is 28 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor since 1995, and an officer of other
investment companies advised or administered by the Manager. She is 27
years old.
The address of all officers of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's voting securities outstanding on July 21, 1997.
The following entities are known by the Fund to own 5% or more of the
Fund's outstanding voting securities as of July 21, 1997: Wells Fargo Bank,
Attn: ACM Desk, 22610 West Agoura Road, Calabasas, California 91372-0800,
was the record owner of 16.1058% of the Fund's outstanding shares; and Sanua
Bank California, Acting as Fiduciary, P.O. Box 60078, Los Angeles,
California 90060-0078, was the record owner of 10.6726% of the Fund's
outstanding shares.
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 28, 1996. The Agreement is terminable without penalty, on
not more than 60 days' notice, by the Fund's Board or by vote of the holders
of a majority of the Fund's shares, or, on not less than 90 days' notice, by
the Manager. The Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet,
directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions, and provides
the Fund with portfolio managers who are authorized by the 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,
W. Michael Petty, 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.
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, 1995, 1996 and 1997, the management
fees paid to the Manager amounted to $1,488,567, $1,336,414 and $1,139,823,
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.
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, 1997, $155,629 was chargeable to
the Fund under the Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Check Redemption Privilege. 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 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 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 (including
over The Dreyfus Touch automated telephone system) 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, 1997, the Fund's yield was
2.76% and effective yield was 2.80%. 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 1997 Federal and California effective tax rate of
45.22%, which reflects the Federal deduction for the California tax, the
Fund's tax equivalent yield for the seven-day period ended March 31, 1997
was 5.04%. 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, an 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 fiscal year ended March 31, 1997, the Fund paid
the Transfer Agent $63,511.
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as 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. However, at June 30, 1996, according to
the Department of Finance, the State's Special Fund for Economic
Uncertainties ("SFEU") had a small negative balance of approximately $87
million, all but eliminating the accumulated budget deficit from the early
1990's.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal year
the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which matured on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995. The State issued
$3.0 billion of revenue anticipation notes for the 1996-97 fiscal year on
August 7, 1996, which matured on June 30, 1997.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
The 1996-97 Fiscal Year Budget projects $47.6 billion of General Fund
revenues and transfers and $47.3 billion of budgeted expenditures.
The 1997-98 Fiscal Year Budget was released by the Governor on January
9, 1997. It projects $50.7 billion of General Fund revenues and transfers
and $50.3 billion of budgeted expenditures, and projects a balance in the
SFEU of $553 million on June 30, 1998.
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "County Funds") filed for protection
under Chapter 9 of the Federal Bankruptcy Code, after reports that the
County Funds had suffered significant market losses in their investments,
causing a liquidity crisis for the County Funds and the County. More than
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,
are facing cash flow difficulties because of the bankruptcy filing and may
be required to reduce programs or capital projects. This also may effect
their ability to meet their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur.
State Finances. State moneys are segregated into the General Fund and
approximately 800 Special Funds including Bond, Trust and Pension Funds.
The General Fund consists of the revenues received into the State Treasury
and earnings from State investments, which are not required by law to be
credited to any other fund. The General Fund is the principal operating
fund for the majority of governmental activities and is the depository of
most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be transferred
by the Controller as necessary to meet cash needs of the General Fund. The
Controller is required to return moneys so transferred without payment of
interest as soon as there are sufficient moneys in the General Fund. For
budgeting and accounting purposes, any appropriation made from the SFEU is
deemed an appropriation from the General Fund. For year-end reporting
purposes, the Controller is required to add the balance in the SFEU to the
balance in the General Fund so as to show the total monies then available
for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1996, the General Fund had outstanding loans from the SFEU and Special
Funds in the amount of $1.5 billion.
Articles XIIIA, XIIIB, XIIIC and XIIID to the State Constitution and
Other Revenue Law Changes. Prior to 1977, revenues of the State government
experienced significant growth primarily as a result of inflation and
continuous expansion of the tax base of the State. In 1978, State voters
approved an amendment to the State Constitution known as Proposition 13,
which added Article XIIIA to the State Constitution, reducing ad valorem
local property taxes by more than 50%. In addition, Article XIIIA provides
that additional taxes may be levied by cities, counties and special
districts only upon approval of not less than a two-thirds vote of the
"qualified electors" of such district, and requires not less than a two-
thirds vote of each of the two houses of the State Legislature to enact any
changes in State taxes for the purpose of increasing revenues, whether by
increased rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that purpose
beginning in the 1978-79 fiscal year. In recent years, in addition to such
increased expenditures, the indexing of personal income tax rates (to adjust
such rates for the effects of inflation), the elimination of certain
inheritance and gift taxes and the increase of exemption levels for certain
other such taxes had a moderating impact on the growth in State revenues.
In addition, the State has increased expenditures by providing a variety of
tax credits, including renters' and senior citizens' credits and energy
credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from regulatory
licenses, user charges or other fees to the extent that such proceeds exceed
"the cost reasonably borne by such entity in providing the regulation,
product or service." One of the exclusions from these limitations is "debt
service" (defined as "appropriations required to pay the cost of interest
and redemption charges, including the funding of any reserve or sinking fund
required in connection therewith, on indebtedness existing or legally
authorized as of January 1, 1979 or on bonded indebtedness thereafter
approved" by the voters). In addition, appropriations required to comply
with mandates of courts or the Federal government and, pursuant to
Proposition 111 enacted in June 1990, appropriations for qualified capital
outlay projects and appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels
are not included as appropriations subject to limitation. In addition, a
number of recent initiatives were structured or proposed to create new tax
revenues dedicated to certain specific uses, with such new taxes expressly
exempted from the Article XIIIB limits (e.g., increased cigarette and
tobacco taxes enacted by Proposition 99 in 1988). The appropriations limit
also may be exceeded in cases of emergency. However, unless the emergency
arises from civil disturbance or natural disaster declared by the Governor,
and the appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population is
a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined appropriations
limits for those two years is divided equally between transfers to
K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
The limit for the 1993-94 fiscal year was $36.60 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The limit for the 1994-95 fiscal year was $37.55 billion, and the
appropriations subject to limitations were $5.93 billion under the limit.
The limit for the 1995-96 fiscal year was $39.31 billion, and the
appropriations subject to limitations were estimated to be $5.12 billion
under the limit. The estimated limit for the 1996-97 fiscal year was $42
billion, and the appropriations subject to limitations were estimated to be
$7.12 billion under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-
14 schools a minimum share of General Fund revenues. Under Proposition 98
(as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB by
reference to California per capita personal income) and enrollment ("Test
2"), or (c) a third test, which would replace the second test in any year
when the percentage growth in per capita General Fund revenues from the
prior year plus .5% is less than the percentage growth in California per
capita personal income ("Test 3"). Under "Test 3," schools would receive
the amount appropriated in the prior year adjusted for changes in enrollment
and per capita General Fund revenues, plus an additional small adjustment
factor. If "Test 3" is used in any year, the difference between "Test 3"
and "Test 2" would become a "credit" to schools which would be the basis of
payments in future years when per capita General Fund revenue growth exceeds
per capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.4 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. Chapter 66 also reduced
the "Test 1" percentage to 35% to reflect the property tax shift among local
government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K14 schools based on Test 2. This exceeded the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil at
$4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as well
as an anticipated deficiency in special education fundings. These and other
minor appropriation adjustments increased the 1993-94 Proposition 98
guarantee to $13.8 billion, which exceeds the minimum guarantee in that year
by $272 million and provided per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusted the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect changes
in the statutory continuous appropriation for apportionments. The revised
appropriations exceeded the minimum guarantee by $32 million. This
appropriation level still provided per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted for
changes in factors described above, and was calculated to be $14.9 billion.
Within the minimum guarantee, the dollars per pupil were maintained at the
prior year's level; consequently, the 1994-95 minimum guarantee included a
loan repayment of $135 million, and the per-pupil funding increased to
$4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within
the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
In November 1996, State voters approved Proposition 218, which added
Articles XIIIC and XIIID to the State Constitution generally requiring voter
approval of most tax or fee increases by local governments and curtailing
local governments' use of benefit assessments to fund certain property-
related services to finance infrastructure. The amendments extend to all
local government entities the requirement that all taxes for general
purposes be approved by a majority vote and that all taxes for special
purposes be approved by a two-thirds majority vote (including the
ratification of those taxes that have been imposed since January 1, 1995 up
to the effective date of the amendments). Proposition 218 also limits the
use of special assessments or "property-related" fees to services or
infrastructure that confer a "special benefit" to specific property; police,
fire and other services are now deemed to benefit the public at large and,
therefore, could not be funded by special assessments. Finally, the
amendments enable the voters to use their initiative power to repeal
previously-authorized taxes, assessments, fees and charges. It remains to
be seen what impact these Articles will have on existing and future
California debt obligations.
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 returned to 9.3%, and the AMT rate dropped from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 34% of General Fund
revenue in 1995-96. Bank and corporation tax revenues comprised about 13%
of General Fund revenue in 1995-96. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict,
and the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit in
the SFEU approaching $2.8 billion at its peak. The State's budget problems
in recent years also have been caused by a structural imbalance which has
been identified by the current and previous Administrations. The largest
General Fund programs -- K-14 education, health, welfare and corrections --
were increasing faster than the revenue base, driven by the State's rapid
population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance and
to close large "budget gaps" which were identified. The Legislature and
Governor eventually agreed on significant cuts in program expenditures, some
transfers of program responsibilities and funding from the State to local
governments, revenue increases (particularly in the 1991-92 fiscal year
budget), and various one-time adjustments and accounting changes. However,
as the recession took hold and deepened after the summer of 1990, revenues
dropped sharply and expenditures for health and welfare programs increased
as job losses mounted, so that the State ended each of the 1990-91 and 1991-
92 fiscal years with an unanticipated deficit in the budget reserve, the
SFEU, as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous two
fiscal years, the Controller in April 1992 indicated that cash resources
(including borrowing from Special Funds) would not be sufficient to meet all
General Fund obligations due on June 30 and July 1, 1992. On June 25, 1992,
the Controller issued $475 million of 1992 Revenue Anticipation Warrants
(the "1992 Warrants") in order to provide funds to cover all necessary
payments from the General Fund at the end of the 1991-92 fiscal year and on
July 1, 1992. The 1992 Warrants were paid on July 24, 1992. In addition to
the 1992 Warrants, the Controller reported that as of June 30, 1992, the
General Fund had borrowed $1.336 billion from the SFEU and $4.699 billion
from other Special Funds, using all but about $183 million of borrowable
cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated budget
deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the budget
was passed. Starting on July 1, 1992, the Controller was required to issue
"registered warrants" in lieu of normal warrants backed by cash to pay many
State obligations. Available cash was used to pay constitutionally mandated
and priority obligations, such as debt service on bonds and revenue
anticipation warrants. Between July 1 and September 4, 1992, the Controller
issued an aggregate of approximately $3.8 billion of registered warrants
payable from the General Fund, all of which were called for redemption by
September 4, 1992 following enactment of the 1992-93 Budget Act and issuance
by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992, and
it was signed by the Governor on September 2, 1992. The 1992-93 Budget Act
provided for expenditures of $57.4 billion and consisted of General Fund
expenditures of $40.8 billion and Special Fund and Bond Fund expenditures of
$16.6 billion. The Department of Finance estimated a balance in the SFEU of
$28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of $39.9
billion. It also proposed Special Fund expenditures of $12.4 billion and
Special Fund revenues of $12.1 billion. The 1993-94 fiscal year represented
the third consecutive year the Governor and the Legislature were faced with
a very difficult budget environment, requiring revenue actions and
expenditure cuts totaling billions of dollars to produce a balanced budget.
To balance the budget in the face of declining revenues, the Governor
proposed a series of revenue shifts from local government, reliance on
increased Federal aid and reductions in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. Unlike previous years, the Governor's
Budget and May Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals designed to
produce a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991 -- a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted. Overall,
revenues for the 1993-94 fiscal year were about $800 million lower than
original projections, and expenditures were about $780 million higher,
primarily because of higher health and welfare caseloads, lower property
taxes which require greater State support for K-14 education to make up to
shortfall, and lower than anticipated Federal government payments for
immigration-related costs. The reports in May and June 1994, indicated that
revenues in the second half of the 1993-94 fiscal year were very close to
the projections made in the Governor's Budget of January 10, 1994, which was
consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-
year adjustments and reconciliations. Personal income tax and sales tax
continued to track projections. The largest factor in the higher than
anticipated revenues was from bank and corporation taxes, which were $140
million (18.4%) above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of the
1993-94 fiscal year. Nevertheless, because of the $1.5 billion variance
from the original 1993-94 Budget Act assumptions, the General Fund ended the
fiscal year at June 30, 1994 carrying forward an accumulated deficit of
approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget environment
to produce a balanced budget. Many program cost and budgetary adjustments
had already been made in the last three years. The Governor's Budget
Proposal, as updated in May and June 1994 proposed a two-year solution to
pass the accumulated deficit. The budget proposal set forth revenue and
expenditure forecasts and revenue and expenditure proposals which estimated
operating surpluses for the budget for both 1994-95 and 1995-96, and lead to
the elimination of the accumulated budget deficit, estimated at about $1.8
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt
of about $360 million from the Federal government to reimburse the State's
cost of incarcerating undocumented immigrants, most of which eventually was
not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The 1994-
95 Budget Act also projected Special Fund expenditures of $13.7 billion, a
5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General
Fund revenues and transfers of $44.1 billion, a 3.5% increase from the prior
year. Expenditures were budgeted at $43.4 billion, a 4% increase. The
Budget Act also projected Special Fund revenues of $12.7 billion and
appropriated Special Fund expenditures of $13.0 billion.
Final data for the 1995-96 Fiscal Year showed revenues and transfers of
$46.1 billion, some $2 billion over the original fiscal year estimate, which
was attributed to the strong economic recovery. Expenditures also
increased, to an estimated $45.4 billion, as a result of the requirement to
expend revenues for schools under Proposition 98, and among other things,
failure of the federal government to enact welfare reform during the fiscal
year and to budget new aid for illegal immigrant costs, both of which had
been counted on to allow reductions in State costs. Available internal
borrowable resources (available cash, after payment of all obligations due)
on June 30, 1996 was approximately $3.8 billion, representing a significant
improvement in the State's cash position, and ending the need for deficit
borrowing over the end of the fiscal year. The State's improved cash
position allowed it to repay the $4.0 billion Revenue Anticipation Warrant
issue on April 25, 1996, and to issue only $2.0 billion in revenue
anticipation notes during the fiscal year, which matured on June 28, 1996.
The 1996-97 Budget Act was signed by the Governor on July 15, 1996,
along with various implementing bills. The Governor vetoed about $82
million of appropriations (both General Fund and Special Fund). With the
signing of the Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest
budget reserve in the SFEU of $305 million, as of June 30, 1997. The
Department of Finance projected that, on June 30, 1997, the State's
available internal borrowable (cash) resources will be $2.9 billion, and
after payment of all obligations due by that date, so that no cross-fiscal
year borrowing will be needed.
The Legislature rejected the Governor's proposed 15% cut in personal
income taxes (to be phased in over three years), and did not approve a 5%
cut in bank and corporation taxes, which was to be effective for income
years starting on January 1, 1997. As a result, revenues for the fiscal
year were estimated to total $47.64 billion, a 3.3% increase over the final
estimated 1995-96 revenues. Special Fund revenues were estimated to be
$13.3 billion.
The Budget Act contained General Fund appropriations totaling $47.25
billion, a 4.0% increase over the final estimated 1995-96 expenditures.
Special Fund expenditures were budgeted at $12.6 billion.
With the continued strong economic recovery in the State, the
Department of Finance has estimated, in connection with the release of the
Governor's 1997-98 Budget Proposal, that revenues for the 1996-97 fiscal
year will exceed initial projections by about $760 million. This increase
will be offset by higher expenditures for K-14 school aid (pursuant to
Proposition 98) and for health and welfare costs, because Federal law
changes and other Federal actions did not provide as much assistance to the
State as was initially planned in the Budget Act. The Department's updated
projections show a balance in the SFEU of $197 million, slightly lower than
projected in July 1996. The Department also projects the State's cash
position will be stronger than originally estimated, with unused internal
borrowable resources at June 30, 1997 of approximately $4.3 billion.
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. Generally, Moody's provides either a generic
rating or a rating with a numerical modifier of 1 for bonds in the generic
rating category Aa. Moody's also provides numerical modifiers of 2 and 3 in
this category for bond issues in the health care, higher education and other
not-for-profit sectors; the modifier 1 indicates that the issue ranks in the
higher end of that generic rating category; the modifier 2 indicates that
the issue is in the mid-range of that generic category; and the modifier 3
indicates that the issue is in the low end of that generic category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings recognize
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Commercial Paper 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, 1997
Principal
Tax Exempt Investments_100.0% Amount Value
_______ _______
<S> <C> <C>
California_92.3%
Alameda County, TRAN 4.50%, 6/30/97......................................... $ 4,000,000 $ 4,005,217
Burbank Redevelopment Agency, Multi-Family Revenue, VRDN (Issue A)
3.10%, Series A (LOC; Coast Savings and Loan Association) (a,b)........... 10,400,000 10,400,000
State of California:
Housing Finance Agency, Mortgage Revenue 4%, Series J, 7/24/97 (Insured; FGIC) 8,000,000 8,000,000
RAN 4.50%, Series A, 6/30/97.............................................. 5,000,000 5,011,468
VRDN 3.40%, Series C-5 (LOC: Bank of America, Bank of Nova Scotia,
Commerzbank
and National Westminster Bank) (a,b).................................... 3,200,000 3,200,000
California Health Facilities Financing Authority, Revenue, VRDN:
(Catholic Health Care)
3.20%, Series C (Insured; MBIA and Liquidity; Morgan Guaranty Trust Co.) (a) 5,500,000 5,500,000
(Pooled Loan Program) 3.30%, Series A (LOC; Rabobank Nederland) (a,b)..... 5,600,000 5,600,000
California Housing Finance Agency, Single-Family Mortgage Purchase Revenue
3.70%, 4/1/98 (LOC; Morgan Stanley and Co.) (b)........................... 5,500,000 5,500,000
California Pollution Control Financing Authority:
PCR, Refunding:
CP (Pacific Gas and Electric)
3.15%, Series A, 5/13/97 (LOC; Morgan Guaranty Trust Co.) (b)......... 5,000,000 5,000,000
VRDN:
(Pacific Gas and Electric) 3.55%, Series C (LOC; Bank of America) (a,b) 1,800,000 1,800,000
(Wadham Energy) 3.45%, Series C (LOC; Banque Paribas) (a,b)........... 1,500,000 1,500,000
RRR, VRDN:
(Delano Project) 3.70% (LOC; ABN-Amro Bank) (a,b)....................... 1,700,000 1,700,000
(Honey Lake Power Project) 3.70% (LOC; Banque Nationale de Paribas) (a,b) 3,600,000 3,600,000
Refunding (Ultrapower-Rocklin) 3.70%, Series A (LOC; Bank of America) (a,b) 4,000,000 4,000,000
California Public Capital Improvements Financing Authority, Revenue (Pooled
Project)
3.55%, Series C, 6/16/97 (LOC; National Westminster Bank) (b)............. 3,000,000 3,000,000
California School Cash Reserve Program Authority, Revenue:
4.75%, Series A, 7/2/97 (Insured; MBIA)................................... 8,000,000 8,016,218
(Pooled Bonds) 4.50%, Series B, 12/19/97 (Insured; MBIA).................. 5,000,000 5,031,171
California Statewide Communities Development Authority, Revenue, COP, VRDN:
(Northern California Retired Officers) 3.55% (LOC; Dresdner Bank) (a,b)... 6,200,000 6,200,000
(Sutter Health Obligation Group)
3.55% (BPA; Industrial Bank of Japan and Insured; AMBAC) (a)............ 3,500,000 3,500,000
Garden Grove Housing Authority, MFHR, VRDN (Valley View-Senior Villas
Project)
3.40%, Series A (LOC; Wells Fargo Bank) (a,b)............................. 1,200,000 1,200,000
Golden Empire Schools Financing Authority, Refunding, VRDN (Golden Empire
Project)
3.35%, Series B (LOC: Canadian Imperial Bank of Commerce and
National Westminster Bank) (a,b).......................................... 5,400,000 5,400,000
Irvine Ranch Water District, COP, VRDN (Capital Improvement Project)
3.45% (LOC; Toronto-Dominion Bank) (a,b).................................. 7,000,000 7,000,000
Kern County, COP, VRDN (Kern Public Facilities Project)
3.20%, Series B (LOC; Union Bank of Switzerland) (a,b).................... 4,555,000 4,555,000
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1997
Principal
Tax Exempt Investments (continued) Amount Value
_______ _______
California (continued)
Kings County Housing Authority, MFHR, Refunding, VRDN (Edgewater Isle Apartments)
3.25%, Series A (LOC; First Interstate Bank of California) (a,b).......... 3,250,000 $ 3,250,000
City of Los Angeles:
TRAN 4.50%, 6/19/97....................................................... 4,000,000 4,004,332
Multi-Family Revenue, VRDN (Loans To Lender Program)
3.70%, Series A (LOC; Federal Home Loan Banks) (a,b).................... 3,500,000 3,500,000
Metropolitan Water District of Southern California, CP
3.15%, Series B, 5/16/97 (LOC; Westdeutsche Landesbank) (b)............... 5,000,000 5,000,000
City of Ontario Redevelopment Agency, Revenue, VRDN (Mission Oaks)
3.50%, Series A (LOC; Union Bank of Switzerland) (a,b).................... 2,000,000 2,000,000
Orange County, Sanitation District Numbers 1-3, 5-7 and 11, VRDN
3.20% (BPA; Barclays Bank and Insured; AMBAC) (a)......................... 8,000,000 8,000,000
Petaluma Community Development Commission, Multi-Family Revenue, VRDN
(Oakmont of Petaluma) 3.70%, Series A (LOC; Banque Nationale de Paribas) (a)(b) 2,750,000 2,750,000
Riverside County Housing Authority, MFHR, VRDN (Victoria Springs Apartments
Project)
3.45% (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)
3.40%, Series L (LOC; First Interstate Bank of California) (a,b).......... 2,400,000 2,400,000
San Diego County, TRAN 4.375%, 9/30/97 (LOC: Canadian Imperial Bank of
Commerce,
Commerzbank and Nova Scotia Trust Co.) (b)................................ 5,000,000 5,017,510
San Diego Housing Authority, MFHR, VRDN (Nobel Court)
3.25% (LOC; Citibank) (a,b)............................................... 3,785,000 3,785,000
San Diego Regional Transportation Commission, Sales Tax Revenue
(Second Seniors Sales Tax)
4%, Series A, 4/1/97 (Insured; FGIC)...................................... 2,700,000 2,700,000
San Diego Water Authority, CP
3.35%, Series 1, 5/20/97 (LOC; Bayerishe Landesbank) (b).................. 4,000,000 4,000,000
City and County of San Francisco Redevelopment Agency, Multi-Family Revenue,
VRDN
(Bayside Village Project)
3.40%, Series D (LOC; Industrial Bank of Japan) (a,b)..................... 8,600,000 8,600,000
City of San Jose, MFHR, VRDN (Fox Chase) 3.20%, Series B (Insured; FGIC) (a) 7,600,000 7,600,000
Santa Clara County Transit District, Refunding, VRDN
3.60%, Series A (LOC; Sumitomo Bank) (a,b)................................ 4,000,000 4,000,000
Simi Valley, MFHR, Refunding, VRDN (Creekside Village)
3.20%, Series A (LOC; Bank of America) (a,b).............................. 4,675,000 4,675,000
South Coast Local Educational Agency, TRAN 4.75%, 6/30/97................... 3,000,000 3,004,827
Southern California Public Power Authority, Transmission Project Revenue,
Refunding
VRDN (Southern Transmission) 3.20% (Insured; AMBAC and Liquidity; Swiss
Bank Corp.) (a)............................................................. 9,800,000 9,800,000
Vista, MFHR, Refunding, VRDN 3.35%, Series A (LOC; Swiss Bank Corp.) (a,b).. 2,600,000 2,600,000
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1997
Principal
Tax Exempt Investments (continued) Amount Value
_______ _______
U.S. Related_7.7%
Commonwealth of Puerto Rico:
Government Development Bank, CP:
3.25%, 5/21/97.......................................................... $ 4,600,000 $ 4,600,000
3.25%, 6/12/97.......................................................... 5,000,000 5,000,000
TRAN 4%, Series A, 7/30/97................................................ 8,000,000 8,014,343
_______
TOTAL INVESTMENTS (cost $227,320,086)....................................... $227,320,086
=======
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MFHR Multi-Family Housing Revenue
BPA Bond Purchase Agreement PCR Pollution Control Revenue
COP Certificate of Participation RAN Revenue Anticipation Notes
CP Commercial Paper RRR Resources Recovery Revenue
FGIC Financial Guaranty Insurance Company 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)
<S> <C> <C> <C>
Fitch (c) or Moody's or Standard & Poor's Percentage of Value
____ ________ __________________ ____________________
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 96.5%
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 3.5
____
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, 1997, 59.8% of the Fund's
net assets are backed by letters of credit issued by domestic banks,
foreign banks, government agencies and brokerage firms.
(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, 1997, the Fund had $80,560,000 (35.6% 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, 1997
Cost Value
_______ _______
<S> <C> <C> <C>
ASSETS: Investments in securities_See Statement of Investments $227,320,086 $227,320,086
Cash....................................... 3,099,817
Interest receivable........................ 1,754,328
Prepaid expenses........................... 21,358
_______
232,195,589
_______
LIABILITIES: Due to The Dreyfus Corporation and affiliates 96,755
Payable for investment securities purchased 5,500,000
Accrued expenses........................... 51,065
_______
5,647,820
_______
NET ASSETS.................................................................. $226,547,769
=======
REPRESENTED BY: Paid-in capital............................ $226,727,505
Accumulated net realized gain (loss) on investments (179,736)
_______
NET ASSETS.................................................................. $226,547,769
=======
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.01 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) 226,727,505
NET ASSET VALUE, offering and redemption price per share.................... $1.00
===
STATEMENT OF OPERATIONS YEAR ENDED MARCH 31, 1997
INVESTMENT INCOME
INCOME Interest Income............................ $ 7,806,176
EXPENSES: Management fee_Note 2(a)................... $ 1,139,823
Shareholder servicing costs_Note 2(b)...... 246,592
Trustees' fees and expenses_Note 2(c)...... 32,350
Professional fees.......................... 25,670
Custodian fees............................. 24,356
Registration fees.......................... 11,519
Prospectus and shareholders' reports....... 6,883
Miscellaneous.............................. 12,469
_______
Total Expenses......................... 1,499,662
_______
INVESTMENT INCOME_NET....................................................... 6,306,514
NET REALIZED GAIN (LOSS) ON INVESTMENTS_Note 1(b)........................... (4,114)
_______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 6,302,400
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
March 31, 1997 March 31, 1996
_________________ ________________
<S> <C> <C>
OPERATIONS:
Investment income_net................................................. $ 6,306,514 $ 8,097,042
Net realized gain (loss) on investments............................... (4,114) (9,381)
________ _______
Net Increase (Decrease) in Net Assets Resulting from Operations..... 6,302,400 8,087,661
________ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net................................................. (6,306,514) (8,097,042)
________ _______
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold......................................... 428,205,882 503,720,818
Dividends reinvested.................................................. 3,924,208 4,960,945
Cost of shares redeemed............................................... (458,563,020) (537,451,138)
________ _______
Increase (Decrease) in Net Assets from Beneficial Interest Transactions (26,432,930) (28,769,375)
________ _______
Total Increase (Decrease) in Net Assets........................... (26,437,044) (28,778,756)
NET ASSETS:
Beginning of Period................................................... 252,984,813 281,763,569
________ _______
End of Period......................................................... $ 226,547,769 $ 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, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
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. is 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 per share of $1.00.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(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. Cost of investments represents amortized cost.
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, if any, are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $179,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to March 31, 1997. 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, $10,000 expires in fiscal 2004 and $5,000
expires in fiscal 2005.
At March 31, 1997, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 2_MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management 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.
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) Under the Shareholder Services Plan, the Fund reimburses Dreyfus
Service Corporation, a wholly-owned subsidiary of the
Manager, an amount not to exceed an annual rate of .25 of 1% of the value of
the Fund's average daily net assets for certain allocated expenses of
providing personal services and/or maintaining shareholder accounts. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts. During the period ended March 31, 1997,
the Fund was charged an aggregate of $155,629 pursuant to the Shareholder
Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $63,511 during the period ended March 31, 1997.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $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, 1997 and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 1997 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus California Tax Exempt Money Market Fund at March 31, 1997
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[ERNST & YOUNG LLP signature logo]
New York, New York
April 24, 1997
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, 1997.
Included in Part B of the Registration Statement:
Statement of Investments--March 31, 1997.
Statement of Assets and Liabilities--March 31,
1997.
Statement of Operations--year ended March
31, 1997.
Statement of Changes in Net Assets--for
each of the two years ended March 31, 1997.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent
Auditors, dated April 24, 1997.
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 is
incorporated by reference to Exhibit (8)(a) of Post-Effective
Amendment No. 17 to the Registration Statement on Form N-1A,
filed on July 29, 1996.
(8)(b) Form of Subcustodian Agreements are incorporated by
reference to Exhibit (8)(b) 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.
Item 24. Financial Statements and Exhibits - List (continued)
________ ________________________________________
(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.
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 21, 1997
Shares of beneficial interest, 3,291
par value $.01
Item 27. Indemnification
________ _______________
The statement as to the general effect of any contract, arrangements or
statute under which a trustee, officer, underwriter or affiliated person of the
Registrant is indemnified is incorporated by reference to Item 27 of Part C of
Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A,
filed on July 29, 1996.
Reference also is made to the Distribution Agreement filed as Exhibit
6(a) of the Post-Effective Amendment No. 15 to the Registration Statement on
Form N-1A, filed on July 14, 1995.
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.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.****;
President:
Boston Safe Deposit and Trust Company****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
World Balanced Fund++++;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus America Fund+++;
World Balanced Fund++++;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Secretary:
General Counsel The Dreyfus Consumer Credit Corporation*;
and Secretary 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
WILLIAM V. HEALEY
Assistant Secretary
President:
The Truepenny Corporation
Vice President and Director:
The Dreyfus Consumer Credit Corporation
Secretary and Director:
Dreyfus Partnership Management Inc.
Director:
The Dreyfus Trust Company
Assistant Secretary:
Dreyfus Service Corporation
Dreyfus Investment Advisors, Inc.
Assistant Clerk:
Dreyfus Insurance Agency of Massachusetts,
Inc.
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is 69, Route 'd'Esch,
L-1470 Luxembourg.
++++ The address of the business so indicated is 69, Route 'd'Esch,
L-2953 Luxembourg.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier Global Investing, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Worldwide Growth Fund, Inc.
67) Dreyfus Premier Insured Municipal Bond Fund
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Fund
72) Dreyfus S&P 500 Index Fund
73) Dreyfus Short-Intermediate Government Fund
74) Dreyfus Short-Intermediate Municipal Bond Fund
75) The Dreyfus Socially Responsible Growth Fund, Inc.
76) Dreyfus Stock Index Fund, Inc.
77) Dreyfus Tax Exempt Cash Management
78) The Dreyfus Third Century Fund, Inc.
79) Dreyfus Treasury Cash Management
80) Dreyfus Treasury Prime Cash Management
81) Dreyfus Variable Investment Fund
82) Dreyfus Worldwide Dollar Money Market Fund, Inc.
83) General California Municipal Bond Fund, Inc.
84) General California Municipal Money Market Fund
85) General Government Securities Money Market Fund, Inc.
86) General Money Market Fund, Inc.
87) General Municipal Bond Fund, Inc.
88) General Municipal Money Market Fund, Inc.
89) General New York Municipal Bond Fund, Inc.
90) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Vice President
and Chief Financial Officer and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Richard W. Ingram Senior Vice President Vice President
and Assistant
Treasurer
Roy M. Moura+ First Vice President None
Elizabeth A. Keeley++ Vice President Vice President
and Assistant
Secretary
Dale F. Lampe+ Vice President None
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York
10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
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 24th day of July, 1997.
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 7/24/97
- ------------------------------ (Principal Executive Officer and
Marie E. Connolly Principal Financial Officer)
/s/Joseph F. Tower, III* Vice President and Assistant 7/24/97
- ------------------------------ Treasurer (Principal Accounting
Joseph F. Tower, III Officer)
/s/Joseph S. DiMartino* Chairman of the Board 7/24/97
- ------------------------------
Joseph S. DiMartino
/s/David W. Burke* Board Member 7/24/97
- ------------------------------
David W. Burke
/s/Hodding Carter, III* Board Member 7/24/97
- ------------------------------
Hodding Carter, III
/s/Ehud Houminer* Board Member 7/24/97
- ------------------------------
Ehud Houminer
/s/Richard C. Leone* Board Member 7/24/97
- ------------------------------
Richard C. Leone
/s/Hans C. Mautner* Board Member 7/24/97
- ------------------------------
Hans C. Mautner
/s/Robin A. Smith* Board Member 7/24/97
- ------------------------------
Robin A. Smith
/s/John E. Zuccotti* Board Member 7/24/97
- ------------------------------
John E. Zuccotti
*BY: /s/Mark A. Karpe
------------------------------
Mark A. Karpe,
Attorney-in-Fact
INDEX OF EXHIBITS
(11) Consent of Independent Auditors
Other Exhibits
(a) Powers of Attorney
(b) Certificate of Corporate Secretary
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 24,
1997, in this Registration Statement (Form N-1A 2-95595) of Dreyfus California
Tax Exempt Money Market Fund.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
July 22, 1997
Item 24.(b)
Other Exhibits (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Elizabeth Keeley, Marie
E. Connolly, Richard W. Ingram, Mark A. Karpe and John E. Pelletier and each
of them, with full power to act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all
amendments to the Registration Statement of Dreyfus 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 October 28, 1996
- --------------------------------
David W. Burke
/s/Hodding Carter, III October 28, 1996
- --------------------------------
Hodding Carter, III
/s/Joseph S. DiMartino October 28, 1996
- --------------------------------
Joseph S. DiMartino
/s/Ehud Houminer October 28, 1996
- --------------------------------
Ehud Houminer
/s/Richard C. Leone October 28, 1996
- --------------------------------
Richard C. Leone
/s/Hans C. Mautner October 28, 1996
- --------------------------------
Hans C. Mautner
/s/Robin A. Smith October 28, 1996
- --------------------------------
Robin A. Smith
/s/John E. Zuccotti October 28, 1996
- --------------------------------
John E. Zuccotti
ITEM 24.(b)
OTHER EXHIBIT (b)
DREYFUS CALIFORNIA TAX EXEMPT MONEY MARKET FUND
Certificate of Assistant Secretary
The undersigned, Mark A. Karpe, Vice President and Assistant Secretary
of Dreyfus California Tax Exempt Money Market Fund (the "Fund"), hereby
certifies that set forth below is a copy of the resolution adopted by the
Fund's Board authorizing the signing by Elizabeth Keeley, Marie E. Connolly,
Richard W. Ingram, Mark A. Karpe and John Pelletier on behalf of the proper
officers of the Fund pursuant to a power of attorney:
RESOLVED, that the Registration Statement and any
and all amendments and supplements thereto, may be
signed by any one of Elizabeth Keeley, Marie E.
Connolly, Richard W. Ingram, Mark A. Karpe and John
Pelletier as the attorney-in-fact for the proper
officers of the Fund, with full power of substitution
and 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 24, 1997.
/s/ Mark A. Karpe
-----------------------
Mark A. Karpe,
Vice President and
Assistant Secretary
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