GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
CLASS A AND CLASS B
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 8, 1995
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus of General California Municipal Money
Market Fund (the "Fund"), dated November 8, 1995, as it may be
revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144, or call toll free 1-
800-645-6561.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is
the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . . .B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . . .B-8
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . .B-11
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . .B-13
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . .B-14
Shareholder Services Plans. . . . . . . . . . . . . . . . . . . . . . .B-15
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . .B-16
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . . .B-18
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . .B-20
Yield Information . . . . . . . . . . . . . . . . . . . . . . . . . . .B-21
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . .B-22
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-23
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . .B-24
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . .B-24
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-25
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-37
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . .B-41
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . .B-51
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
The average distribution of investments (at value) in
Municipal Obligations by ratings for the fiscal year ended July
31, 1995*, computed on a monthly basis, was as follows:
Moody's Investors Standard & Poor's
Service, Inc. Ratings Group Percentage
("Moody's") or ("S&P") of Value
________________ ________________ ________
MIG 1/VMIG 1, P-1 SP-1+/SP-1, A-1+/A-1 90.7%
MIG 2/VMIG 2, P-2 SP-2, A-2 .5%
Aaa/Aa AAA/AA 5.4%
Not Rated Not Rated 3.4%
______
100.0%
======
_______________________________
* The Fund also uses Fitch Investors Service, L.P. ("Fitch")
as an additional nationally recognized statistical rating
organization. As of July 31, 1995, none of the Fund's
investments were rated by Fitch.
Municipal Obligations. The term "Municipal Obligations"
generally includes debt obligations issued to obtain funds for
various public purposes, including the construction of a wide
range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and
water and sewer works. Other public purposes for which Municipal
Obligations may be issued include refunding outstanding obli-
gations, obtaining funds for general operating expenses and lend-
ing such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are is-
sued 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, con-
vention or trade show facilities, airport, mass transit, indus-
trial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. The interest
paid on such obligations may be exempt from Federal income tax,
although current tax laws place substantial limitations on the
size of such issues. Such obligations are considered to be Muni-
cipal Obligations if the interest paid thereon qualifies as
exempt from Federal income tax in the opinion of bond counsel to
the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification
and between classifications.
Floating and variable rate demand obligations are tax exempt
obligations ordinarily having stated maturities in excess of 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 obligations ordinarily has a corresponding right,
after a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders thereof. The
interest rate on a floating rate demand obligation is based on a
known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate
on a variable rate demand obligation is adjusted automatically at
specified intervals.
The yields on Municipal Obligations are dependent on a
variety of factors, including general economic and monetary
conditions, money market factors, conditions in the Municipal
Obligations market, size of a particular offering, maturity of
the obligation and rating of the issue. The imposition of the
Fund's management fee, as well as other operating expenses,
including fees paid under the Fund's Distribution Plan with
respect to Class B only, 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 categories for debt obligations
by at least two nationally recognized statistical rating
organizations (or one rating organization if the lease obligation
was rated only by 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. 11" 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 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 Board of Trustees 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
thirteen 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 may be 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. If a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the
Securities Act of 1933, as amended, for certain restricted
securities held by the Fund, the Fund intends to treat such
securities as liquid securities in accordance with procedures
approved by the Fund's Board of Trustees. 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
of Trustees 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, for
example, Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the U.S.
Treasury; others, such as those issued by the Federal National
Mortgage Association, by discretionary authority of the U.S.
Government to purchase certain obligations of the agency or
instrumentality; and others, such as those issued by the Student
Loan Marketing Association, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or
variable rates of interest. Interest may fluctuate based on
generally recognized reference rates or the relationship of
rates. While the U.S. Government provides financial support to
such U.S. Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it is not
so obligated by law. The Fund will invest in such securities
only when it is satisfied that the credit risk with respect to
the issuer is minimal.
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 one billion dollars 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.
Risk Factors--Investing in California Municipal Obligations.
Investors should consider carefully the special risks inherent in
the Fund's investment in California Municipal Obligations. These
risks result from certain amendments to the California
Constitution and other statues that limit the taxing and spending
authority of California governmental entities, as well as from
the general financial condition of the State of California. From
mid-1990 to late 1933, the State suffered a recession with the
worst economic, fiscal and budget conditions since the 1930's.
As a result, the State has experienced recurring budget deficits
for four of the last five fiscal years ending with 1991-92. The
State had an operating surplus of approximately $109 million in
1992-1993 and $836 million in 1993-1994. However at June 30,
1994, according to California's Department of Finance, the
State's Special Fund for Economic Uncertainties had an
accumulated deficit, on a budget basis, of approximately $1.8
billion. A further consequence of the large budget imbalances
over the last three fiscal years has been that the State depleted
its available cash resources and has had to use a series of
external borrowings to meet its cash needs. To meet its cash
flow needs in the 1994-95 fiscal year, the State issued, in July
and August 1994, $4.0 billion of revenue anticipation warrants
and $3.0 billion of revenue anticipation notes. As a result of
the deterioration in the State's budget and cash situation
between October 1991 and July 1994, the rating on the State's
general obligation bonds was reduced by S&P from AAA to A, by
Moody's from Aaa to A1 and by Fitch from AAA to A. These and
other factors may have the effect of impairing the ability of the
issuers of California Municipal Obligations to pay interest on,
or repay principal of, such California Municipal Obligations.
Investors should review Appendix A which sets forth additional
information relating to investing in California Municipal
Obligations.
Investment Restrictions. The Fund has adopted the following
investment restrictions numbered 1 through 9 as fundamental
policies, which cannot be changed without approval by the holders
of a majority (as defined in the Investment Company Act of 1940,
as amended (the "Act")) of the Fund's outstanding voting shares.
Investment restrictions numbered 10 and 11 are not fundamental
policies and may be changed by vote of a majority of the Fund's
Trustees at any time. The Fund may not:
1. Purchase securities other than Municipal Obligations
and Taxable Investments as those terms are defined above and in
the Prospectus.
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 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 domestic banks and obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
8. Invest in companies for the purpose of exercising
control.
9. Invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation
or acquisition of assets.
10. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except to the extent necessary to secure permitted
borrowings.
11. 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. 7, 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
Trustees and officers of the Fund, together with information
as to their principal business occupations during at least the
last five years, are shown below. Each Trustee who is deemed to
be an "interested person" of the Fund (as defined in the Act) is
indicated by an asterisk.
Trustees of the Fund
CLIFFORD L. ALEXANDER, JR., Trustee. President of Alexander &
Associates, Inc., a management consulting firm. From 1977
to 1981, Mr. Alexander served as Secretary of the Army and
Chairman of the Board of the Panama Canal Company, and from
1975 to 1977, he was a member of the Washington, D.C. law
firm of Verner, Liipfert, Bernhard, McPherson and Alexander.
He is a director of American Home Products Corp., The Dun &
Bradstreet Corporation, MCI Communications Corporation,
Mutual of America Life Insurance Company and Equitable
Resources, Inc., a producer and distributor of natural gas
and crude petroleum. He is 62 years old and his address is
400 C Street, N.E., Washington, D.C. 20002.
PEGGY C. DAVIS, Trustee. Shad Professor of Law, New York University School
of Law. Professor Davis has been a member of the New York University
law faculty since 1983. Prior to that time, she served for three
years as a judge in the courts of New York State; was engaged for
eight years in the practice of law, working in both corporate and non-
profit sectors; and served for two years as a criminal justice
administrator in the government of the City of New York. She writes
and teaches in the fields of evidence, constitutional theory, family
law, social sciences and the law, legal process and professional
methodology and training. She is 52 years old and her address is c/o
New York University School of Law, 249 Sullivan Street, New York,
New York 10011.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995,
Chairman of the Board of various funds in the Dreyfus Family
of Funds. For more than five years prior thereto, he was
President, a director and, until August 24, 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 24, 1994 to
December 31, 1994, he was a director of Mellon Bank
Corporation. He is Chairman of the Board of The Noel Group,
Inc., a venture capital company; a trustee of Bucknell
University; and a director of The Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding
Heminway, Inc., a manufacturer and marketer of industrial
threads, specialty yarns, home furnishings and fabrics,
Curtis Industries, Inc., a national distributor of security
products, chemicals and automotive and other hardware,
Simmons Outdoor Corporation, and Staffing Resources, Inc.
He is 52 years old and his address is 200 Park Avenue, New
York, New York 10166.
ERNEST KAFKA, Trustee. A physician engaged in private practice
specializing in the psychoanalysis of adults and
adolescents. Since 1981, he has served as an Instructor at
the New York Psychoanalytic Institute and, prior thereto,
held other teaching positions. He is Associate Clinical
Professor of Psychiatry at Cornell Medical School. For more
than the past five years, Dr. Kafka has held numerous
administrative positions including President of The New York
Psychoanalytic Society, and has published many articles on
subjects in the field of psychoanalysis. He is 62 years old
and his address is 23 East 92nd Street, New York, New York
10028.
SAUL B. KLAMAN, Trustee. Chairman and Chief Executive Officer of
SBK Associates, which provides research and consulting
services to financial institutions. Dr. Klaman was
President of the National Association of Mutual Savings
Banks until November 1983, President of the National Council
of Savings Institutions until June 1985, Vice Chairman of
Golembe Associates and BEI Golembe, Inc. until 1989 and
Chairman Emeritus of BEI Golembe, Inc. until November 1992.
He also served as an Economist to the Board of Governors of
the Federal Reserve System and on several Presidential
Commissions, and has held numerous consulting and advisory
positions in the fields of economics and housing finance.
He is 75 years old and his address is 431-B Dedham Street,
The Gables, Newton Center, Massachusetts 02159.
NATHAN LEVENTHAL, Trustee. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for
Operations of New York City from September 1979 until March
1984 and Commissioner of the Department of Housing
Preservation and Development of New York City from February
1978 to September 1979. Mr. Leventhal was an associate and
then a member of the New York law firm of Poletti Freidin
Prashker Feldman and Gartner from 1974 to 1978. He was
Commissioner of Rent and Housing Maintenance for New York
City from 1972 to 1973. Mr. Leventhal serves as Chairman of
Citizens Union, which strives to reform and modernize City
and State government. He is 52 years old and his address is
70 Lincoln Center Plaza, New York, New York 10023-6583.
For so long as the Fund's plans described in the sections captioned
"Distribution Plan" and "Shareholder Services Plans" remain in effect, the
Trustees of the Fund who are not "interested persons" of the Fund, as
defined in the Act, will be selected and nominated by the Trustees 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 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 Trustees an annual retainer and a per
meeting fee and reimburses them for their expenses. 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 Chairman of the Board
receives an additional 25% of such compensation. The aggregate amount of
compensation paid to each Trustee by the Fund for the fiscal year ended
July 31, 1995, 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, 1994 were as follows:
<TABLE>
<CAPTION>
(5) Total
(3) Pension or Compensation from
(2) Aggregate Retirement Benefits (4) Estimated Annual Fund and Fund
(1) Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund* Fund's Expenses Retirement Board Member
<S> <C> <C> <C> <C>
Clifford L. Alexander $4,000 none none $ 73,210 (17)
Peggy C. Davis $3,750 none none $ 61,751 (15)
Joseph S. DiMartino $4,375** none none $445,000*** (93)
Ernest Kafka $4,000 none none $ 61,001 (15)
Saul B. Klaman $3,750 none none $ 61,751 (15)
Nathan Leventhal $3,750 none none $ 61,751 (15)
________________________
* Amount does not include reimbursed expenses for attending Board meetings, which amounted to $227 for all Trustees as
a group.
** Estimated amount for the fiscal year ending July 31, 1996.
*** Estimated amount for the year ending December 31, 1995.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer 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 company of which is Boston
Institutional Group, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The
Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. From August 1990 to February 1992, he was employed as an
Associate at Ropes & Gray. He is 31 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to August
1994, he was manager of the High Performance Fabric Division of
Springs Industries Inc. He is 34 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. He is 30 years old.
JOSEPH F. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From 1984 to July 1994, he was Assistant
Vice President in the Mutual Fund Accounting Department of the
Manager. He is 60 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Trustees and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of beneficial interest outstanding on October 11, 1995.
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 of Trustees or (ii) vote
of a majority (as defined in the Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Trustees who are not "interested persons" (as defined
in the Act) of the Fund or the Manager, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Agreement was
approved by shareholders on August 3, 1994, and was last approved by the
Board of Trustees, including a majority of the Trustees who are not
"interested persons" of any party to the Agreement, at a meeting held on
September 28, 1994. The Agreement is terminable without penalty, on 60
days' notice, by the Fund's Board of Trustees 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 Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; Barbara E. Casey, Vice President-Dreyfus
Retirement Services; Diane M. Coffey, Vice President-Corporate
Communications; Elie M. Genadry, Vice President-Institutional Sales;
William F. Glavin, Jr., Vice President-Corporate Development; Henry D.
Gottmann, Vice President-Retail Sales and Service; Mark, N. Jacobs, Vice
President-Legal and Secretary; Daniel C. Maclean, Vice President and
General Counsel; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Andrew S. Wasser, Vice President-Information Services; Katherine C.
Wickham, Vice President-Human Resources; Maurice Bendrihem, Controller;
Elvira Oslapas, Assistant Secretary; and Mandell L. Berman, Frank V.
Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M. Smerling and
David B. Truman, 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 of Trustees. The Manager is responsible for investment decisions,
and provides the Fund with portfolio managers who are authorized by the
Board of Trustees to execute purchases and sales of securities. The Fund's
portfolio managers are: Joseph P. Darcy, A. Paul Disdier, Karen M. Hand,
Stephen C. Kris, Richard J. Moynihan, Jill C. Shaffro, L. Lawrence
Troutman, Samuel J. Weinstock and Monica S. Wieboldt. The Manager also
maintains a research department with a professional staff of portfolio
managers and securities analysts who provide research services for the Fund
as well as for other funds advised by the Manager. All purchases and sales
are reported for the Trustees' review at the meeting subsequent to such
transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include, without limitation: taxes, interest,
loan commitment fees, interest and distributions paid on securities sold
short, brokerage fees and commissions, if any, fees of Trustees 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 and disbursing agents' fees, certain insurance
premiums, industry association fees, outside auditing and legal expenses,
costs of independent pricing services, costs of maintaining the Fund's
existence, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, costs of
shareholder reports and meetings, and any extraordinary expenses. Class B
also bears certain distribution expenses in accordance with a written plan
and also bears certain costs associated with implementing and operating
such plan. See "Distribution Plan."
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services, the Fund 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. For the fiscal years ended
July 31, 1993, 1994 and 1995, the management fees payable amounted to
$3,057,145, $3,474,588 and $2,730,063, respectively, which amounts were
reduced by $1,834,287, $1,968,729 and $624,410, respectively, pursuant to
undertakings in effect, resulting in net fees paid to the Manager of
$1,222,858 in fiscal 1993, $1,505,859 in fiscal 1994 and $2,105,653 in
fiscal 1995.
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 FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement dated August 24, 1994. The Distributor also acts
as distributor for the other funds in the Dreyfus Family of Funds and for
certain other investment companies. In some states, certain financial
institutions effecting transactions in Fund shares may be required to
register as dealers pursuant to state law.
Using Federal Funds. The Shareholder Services Group, 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 ("Selected Dealer") and his order to purchase Fund shares
is paid for other than in Federal Funds, the Selected Dealer, 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 Selected Dealer will become effective on the
day that the order, including Federal Funds, is received by the Transfer
Agent.
TeleTransfer Privilege. TeleTransfer purchase orders may be made
between the hours of 8:00 A.M. and 4:00 P.M., New York time, on any
business day that the Transfer Agent and the New York Stock Exchange are
open. Such purchases will be credited to the shareholder's Fund account on
the next bank business day. To qualify to use the Tele- Transfer
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 Fund Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
DISTRIBUTION PLAN
(CLASS B ONLY)
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan."
Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the Act provides, among other things, that an investment
company may bear expenses of distributing its shares only pursuant to a
plan adopted in accordance with the Rule. The Fund's Board of Trustees has
adopted such a plan (the "Plan") with respect to Class B pursuant to which
the Fund reimburses the Distributor for payments made to third parties for
distributing Class B shares. The Fund's Board of Trustees believes that
there is a reasonable likelihood that the Plan will benefit the Fund and
holders of Class B shares.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Trustees for their review. In addition, the Plan provides that it may not
be amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Plan without approval by the holders of Class
B shares and that other material amendments of the Plan must be approved by
the Board of Trustees, and by the Trustees who are not "interested persons"
(as defined in the Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan or in any agreements
entered into in connection with 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 Trustees cast in person at a
meeting called for the purpose of voting on the Plan. The Plan was so
approved at a meeting held on July 19, 1995. The Plan is terminable at any
time by vote of a majority of the Trustees who are not "interested persons"
and have no direct or indirect financial interest in the operation of the
Plan or in any of the related agreements or by vote of a majority of the
holders of Class B shares.
SHAREHOLDER SERVICES PLANS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plans."
The Fund has adopted a Shareholder Services Plan with respect to Class
A pursuant to which the Fund reimburses Dreyfus Service Corporation for
certain allocated expenses of providing personal services and/or
maintaining Class A shareholder accounts. The Fund also has adopted a
Shareholder Services Plan with respect to Class B pursuant to which the
Fund pays the Distributor for the provision of certain services to the
holders of Class B shares. Under the Plans, 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. Under the Shareholder Services Plan for Class B, the
Distributor may make payments to certain financial institutions, Selected
Dealers and other industry professionals (collectively, "Service Agents")
in respect of these services.
A quarterly report of the amounts expended under each Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Trustees for their review. In addition, each
Shareholder Services Plan provides that material amendments of the
Shareholder Services Plan must be approved by the Board of Trustees, and by
the Trustees who are not "interested persons" (as defined in the Act) of
the Fund and have no direct or indirect financial interest in the operation
of the Shareholder Services Plan or in any agreements entered into in
connection with such Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. Each Shareholder Services Plan
is subject to annual approval by such vote of the Trustees cast in person
at a meeting called for the purpose of voting on the Shareholder Services
Plan. Each Shareholder Services Plan is terminable at any time by vote of
a majority of the Trustees who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Shareholder
Services Plan or in any related agreements.
During the fiscal year ended July 31, 1995, the Fund was charged an
aggregate $246,384 pursuant to the Shareholder Services Plan with respect
to Class A. The Shareholder Services Plan with respect to Class B had not
been implemented as of such date.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Account Application 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 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 or a representative of the investor's Service Agent and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, the Fund will
initiate payment for shares redeemed pursuant to this Privilege on the same
business day if the Transfer Agent receives the redemption request in
proper form prior to 12:00 Noon, New York time, on such day; otherwise, the
Fund will initiate payment on the next business day. Redemption proceeds
($1,000 minimum) will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account
Application or Shareholder Services Form, or to a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
_______________ ________________
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Share Certificates; Signatures."
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a TeleTransfer
transaction will be effected 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 Fund Shares--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 Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor, and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call the telephone numbers 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 Board of Trustees 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 would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services."
Fund Exchanges. 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 numbers.
To request an exchange, an investor, or an investor's Service Agent
acting on the investor's behalf, must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, or a
representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for
telephone exchange.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value
of at least $100.
Auto-Exchange Privilege. 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.
The Fund Exchanges service and the 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
the Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Dividend Sweep. Dividend Sweep allows investors to invest on the
payment date their dividends or dividends and capital gain distributions,
if any, from the Fund in shares of another fund in the Dreyfus Family of
Funds of which the investor is a shareholder. Shares of other funds
purchased pursuant to this privilege will be purchased on the basis of
relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
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. There is a service charge of $.50 for each withdrawal check.
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.
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
Fund 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 Board of Trustees 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 of Trustees, 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 of
Trustees. 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 of Trustees. If such
deviation exceeds 1/2 of 1%, the Board of Trustees promptly will consider
what action, if any, will be initiated. In the event the Board of Trustees
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.
YIELD INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Yield
Information."
Class B shares had not been offered as of the date of the financials
and, therefore, no yield figures are provided for Class B.
For the seven-day period ended July 31, 1995, the Fund's yield was
3.10% and its effective yield was 3.15%. Yield is computed in accordance
with a standardized method which involves determining the net change in the
value of a hypothetical pre-existing Fund account having a balance of one
share at the beginning of a seven calendar day period for which yield is to
be quoted, dividing the net change by the value of the account at the
beginning of the period to obtain the base period return, and annualizing
the results (i.e., multiplying the base period return by 365/7). The net
change in the value of the account reflects the value of additional shares
purchased with dividends declared on the original share and any such
additional shares and fees that may be charged to shareholder accounts, in
proportion to the length of the base period and the Fund's average account
size, but does not include realized gains and losses or unrealized
appreciation and depreciation. Effective yield is computed by adding 1 to
the base period return (calculated as described above), raising that sum to
a power equal to 365 divided by 7, and subtracting 1 from the result.
Based upon a combined 1995 Federal and California effective tax rate
of 46.24%, and a yield of 3.10% for the seven-day period ended July 31,
1995, the Fund's tax equivalent yield for this period was 5.77%. 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 personal income tax purposes, a 39.60%
tax rate has been used. For California personal income tax purposes an
11.00% tax rate has been used. The tax equivalent figure, however, does
not include the potential effect of local (including, but not limited to,
county, district or city) taxes, if any, 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.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and are not indicative of the Fund's
past or future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or
events, including those relating to or arising from 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.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily
are purchased directly from the issuer or from an underwriter; other
purchases and sales usually are placed with those dealers from which it
appears that the best price or execution will be obtained. Usually no
brokerage commissions, as such, are paid by the Fund for such purchases and
sales, although the price paid usually includes an undisclosed compensation
to the dealer acting as agent. The prices paid to underwriters of
newly-issued securities usually include a concession paid by the issuer to
the underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price between the bid and asked price. No
brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising the Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses
of its research department.
The amount of transactions during the last fiscal year in newly
issued debt instruments in fixed price public offerings directed to an
underwriter in consideration of, among other things, research services
provided was $5,791,920.
TAX MATTERS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management believes that the Fund has qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code"), for the fiscal year ended July 31, 1994 and the Fund intends
to continue to so qualify, if such qualification is in the best interests
of its shareholders. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency.
If, at the close of each quarter of its taxable year, at least 50% of
the value of the Fund's total assets consists of Federal tax exempt
obligations, then the Fund may designate and pay Federal exempt-interest
dividends from interest earned on all such tax exempt obligations. Such
exempt-interest dividends may be excluded by shareholders of the Fund from
their gross income for Federal income tax purposes. 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.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gain
realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
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 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 statements to all its
shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's transfer and dividend disbursing agent.
Neither The Bank of New York nor The Shareholder Services Group, Inc. has
any part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares of beneficial interest 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
RISK FACTORS - INVESTING
IN CALIFORNIA MUNICIPAL OBLIGATIONS
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives, as well as the general financial condition of the State, could
adversely affect the ability of issuers of California Municipal Obligations
to pay interest and principal on such obligations. The following
information constitutes only a brief summary, does not purport to be a
complete description, and is based on information drawn from official
statements relating to securities offerings of the State of California (the
"State") 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 State General Fund. As a result, the
State experienced recurring budget deficits in the late 1980s and early
1990s. The State Controller reported that expenditures exceeded revenues
for four of the five fiscal years ending with 1991-92. The State had an
operating surplus of approximately $109 million in 1992-93 and $836 million
in 1993-94. However, at June 30, 1994, according to the Department of
Finance, the State's Special Fund for Economic Uncertainties ("SFEU") still
had a deficit, on a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal
year the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which mature on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) is projected to have $42.4 billion of General Fund
revenues and transfers and $41.7 billion of budgeted expenditures. In
addition, the 1994-95 Budget Act anticipates deferring retirement of about
$1 billion of the accumulated budget deficit to the 1995-96 fiscal year
when it is intended to be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which would
leave a balance of approximately $92 million in the budget reserve, the
SFEU, at June 30, 1996 after repayment of the accumulated budget deficits.
The Budget proposal is based on a number of assumptions, including receipt
of $830 million from the Federal government to offset costs of undocumented
and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"),
together with its pooled investment funds (the "Funds") filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the Funds had suffered significant market losses in their investments,
causing a liquidity crisis for the Funds and the County. More than 180
other public entities, most of which, but not all, are located in the
County, were also depositors in the Funds. As of mid-January 1995,
following a restructuring of most of the Funds' assets to increase their
liquidity and reduce their exposure to interest rate increases, the County
estimated the 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 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.
On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles causing significant damage to
public and private structures and facilities. Although some individuals
and businesses suffered losses totaling in the billions of dollars, the
overall effect of the earthquake on the regional and State economy is not
expected to be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be
transferred by the Controller as necessary to meet cash needs of the
General Fund. The Controller is required to return moneys so transferred
without payment of interest as soon as there are sufficient moneys in the
General Fund. For budgeting and accounting purposes, any appropriation
made from the SFEU is deemed an appropriation from the General Fund. For
year-end reporting purposes, the Controller is required to add the balance
in the SFEU to the balance in the General Fund so as to show the total
monies then available for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1994, the General Fund had outstanding loans in the aggregate principal
amount of $5.2 billion, which consisted of $4.0 billion of internal loans
to the General Fund from the SFEU and other Special Funds and $1.2 billion
of external loans represented by the 1994 revenue anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue
Law Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that
additional taxes may be levied by cities, counties and special districts
only upon approval of not less than a two-thirds vote of the "qualified
electors" of such district, and requires not less than a two-thirds vote of
each of the two houses of the State Legislature to enact any changes in
State taxes for the purpose of increasing revenues, whether by increased
rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that
purpose beginning in the 1978-79 fiscal year. In recent years, in addition
to such increased expenditures, the indexing of personal income tax rates
(to adjust such rates for the effects of inflation), the elimination of
certain inheritance and gift taxes and the increase of exemption levels for
certain other such taxes had a moderating impact on the growth in State
revenues. In addition, the State has increased expenditures by providing a
variety of tax credits, including renters' and senior citizens' credits and
energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service." One of the exclusions from these
limitations is "debt service" (defined as "appropriations required to pay
the cost of interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on indebtedness
existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition,
appropriations required to comply with mandates of courts or the Federal
government and, pursuant to Proposition 111 enacted in June 1990,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels are not included as appropriations
subject to limitation. In addition, a number of recent initiatives were
structured or proposed to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article
XIIIB limits (e.g., increased cigarette and tobacco taxes enacted by
Proposition 99 in 1988). The appropriations limit also may be exceeded in
cases of emergency. However, unless the emergency arises from civil
disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit
for the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined
appropriations limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit.
The limit for the 1992-93 fiscal year was $35.01 billion, and the
appropriations subject to limitation were $7.53 billion under the limit.
The limit for the 1993-94 fiscal year was $36.60 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year is $37.55 billion, and the
appropriations subject to limitations are estimated to be $6.05 billion
under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-
14 schools a minimum share of General Fund revenues. Under Proposition 98
(as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB by
reference to California per capita personal income) and enrollment ("Test
2"), or (c) a third test, which would replace the second test in any year
when the percentage growth in per capita General Fund revenues from the
prior year plus .5% is less than the percentage growth in California per
capita personal income ("Test 3"). Under "Test 3," schools would receive
the amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an additional small
adjustment factor. If "Test 3" is used in any year, the difference between
"Test 3" and "Test 2" would become a "credit" to schools which would be the
basis of payments in future years when per capita General Fund revenue
growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.4 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget was
introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter 703,
Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a
drafting error in Chapter 703, he could not implement the $1.083 billion
reduction of the 1991-92 school funding appropriation, which was part of
the inter-year adjustment. The Legislature untimely enacted corrective
legislation as part of the 1993-94 Budget package to implement the $1.083
billion inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-12
schools in order to maintain per-average daily attendance ("ADA") funding
at the same level as 1991-92, at $4,187. An additional loan of $241
million was made to community college districts. These loans are to be
repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit discussed above also seeks to declare invalid the
provision making the $732 million a loan "repayable" from the future years'
Proposition 98 funds). Including both State and local funds, and adjusting
for the loans and repayments, on a cash basis, total Proposition 98 K-12
funding in 1992-93 increased to $21.5 billion, 2.4% more than the amount in
1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported
pupil enrollment, the 1993-94 Budget Act projected that the 1992-93
Proposition 98 Budget Act appropriations of $16.6 billion exceeded a
revised minimum guarantee by $313 million. As a result, the 1993-94 Budget
Act reverted $25 million in 1992-93 appropriations to the General Fund.
Limiting the reversion to this amount ensures that per ADA funding for
general purposes will remain at the prior year level of $4,217 per pupil.
The 1993-94 Governor's Budget subsequently proposed deficiency funding of
$121 million for school apportionments and special education, increasing
funding per pupil in 1992-93 to $4,244. The 1993-94 Budget Act also
designated $98 million in 1992-93 appropriations toward satisfying prior
years' guarantee levels, an obligation that resulted primarily from
updating State tax revenues for 1991-92, and designates $190 million as a
loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding
level at $13.5 billion based on the "Test 3" calculation where the
guarantee is determined by the change in per capita growth in General Fund
revenues, which are projected to decrease on a year-over-year basis. This
amount also takes into account increased property taxes transferred to
school districts from other local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93)
provided a new loan of $609 million to K-12 schools in order to maintain
per ADA funding at $4,217 and a loan of $178 million to community colleges.
These loans have been combined with the K-14 1992-93 loans into one loan
totalling $1.760 billion. Repayment of this loan would be from future
years' Proposition 98 entitlements, and would be conditioned on maintaining
current funding levels per pupil for K-12 schools and community colleges.
Chapter 66 also adjusted the "Test 1" percentage to 35% to reflect the
property tax shift among local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K-14 schools based on Test 2. This exceeds 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 increase the 1993-94 Proposition 98
guarantee to $13.8 billion, which exceeds the minimum guarantee in that
year by $272 million and provides per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusts the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect
changes in the statutory continuous appropriation for apportionments. The
revised appropriations now exceed the minimum guarantee by $32 million.
This appropriation level still provides per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted
for changes in factors described above, and is now calculated to be $14.9
billion. Within the minimum guarantee, the dollars per pupil have been
maintained at the prior year's level; consequently, the 1994-95 minimum
guarantee now includes a loan repayment of $135 million, and the per-pupil
funding increases to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within
the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1993-94 contributed about 44% 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 11%. Personal, dependent, and other credits are
allowed against the gross tax liability. In addition, taxpayers may be
subject to an alternative minimum tax ("AMT") which is much like the
Federal AMT. This is designed to ensure that excessive use of tax
preferences does not reduce taxpayers' liabilities below some minimum
level. Legislation enacted in July 1991 added two new marginal tax rates,
at 10% and 11%, effective for tax years 1991 through 1995. After 1995, the
maximum personal income tax rate is scheduled to return to 9.3%, and the
AMT rate is scheduled to drop from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 35% of General Fund
revenue in 1993-94. Bank and corporation tax revenues comprised about 12%
of General Fund revenue in 1993-94. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict,
and the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit
in the SFEU approaching $2.8 billion at its peak. The State's budget
problems in recent years also have been caused by a structural imbalance
which has been identified by the current and previous Administrations. The
largest General Fund programs -- K-14 education, health, welfare and
corrections -- were increasing faster than the revenue base, driven by the
State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on significant cuts in program expenditures,
some transfers of program responsibilities and funding from the State to
local governments, revenue increases (particularly in the 1991-92 fiscal
year budget), and various one-time adjustments and accounting changes.
However, as the recession took hold and deepened after the summer of 1990,
revenues dropped sharply and expenditures for health and welfare programs
increased as job losses mounted, so that the State ended each of the 1990-
91 and 1991-92 fiscal years with an unanticipated deficit in the budget
reserve, the SFEU, as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous
two fiscal years, the Controller in April 1992 indicated that cash
resources (including borrowing from Special Funds) would not be sufficient
to meet all General Fund obligations due on June 30 and July 1, 1992. On
June 25, 1992, the Controller issued $475 million of 1992 Revenue
Anticipation Warrants (the "1992 Warrants") in order to provide funds to
cover all necessary payments from the General Fund at the end of the 1991-
92 fiscal year and on July 1, 1992. The 1992 Warrants were paid on July 24,
1992. In addition to the 1992 Warrants, the Controller reported that as of
June 30, 1992, the General Fund had borrowed $1.336 billion from the SFEU
and $4.699 billion from other Special Funds, using all but about $183
million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated
budget deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the
budget was passed. Starting on July 1, 1992, the Controller was required
to issue "registered warrants" in lieu of normal warrants backed by cash to
pay many State obligations. Available cash was used to pay
constitutionally mandated and priority obligations, such as debt service on
bonds and revenue anticipation warrants. Between July 1 and September 4,
1992, the Controller issued an aggregate of approximately $3.8 billion of
registered warrants payable from the General Fund, all of which were called
for redemption by September 4, 1992 following enactment of the 1992-93
Budget Act and issuance by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992,
and it was signed by the Governor on September 2, 1992. The 1992-93 Budget
Act provided for expenditures of $57.4 billion and consisted of General
Fund expenditures of $40.8 billion and Special Fund and Bond Fund
expenditures of $16.6 billion. The Department of Finance estimated a
balance in the SFEU of $28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of
$39.9 billion. It also proposed Special Fund expenditures of $12.4 billion
and Special Fund revenues of $12.1 billion. The 1993-94 fiscal year
represented the third consecutive year the Governor and the Legislature
were faced with a very difficult budget environment, requiring revenue
actions and expenditure cuts totaling billions of dollars to produce a
balanced budget. To balance the budget in the face of declining revenues,
the Governor proposed a series of revenue shifts from local government,
reliance on increased Federal aid and reductions in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. Unlike previous years, the Governor's
Budget and May Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals designed to
produce a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991 -- a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 fiscal year were about $800 million lower
than original projections, and expenditures were about $780 million higher,
primarily because of higher health and welfare caseloads, lower property
taxes which require greater State support for K-14 education to make up to
shortfall, and lower than anticipated Federal government payments for
immigration-related costs. The reports in May and June 1994, indicated that
revenues in the second half of the 1993-94 fiscal year were very close to
the projections made in the Governor's Budget of January 10, 1994, which
was consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-
year adjustments and reconciliations. Personal income tax and sales tax
continued to track projections. The largest factor in the higher than
anticipated revenues was from bank and corporation taxes, which were $140
million (18.4%) above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of
the 1993-94 fiscal year. Nevertheless, because of the $1.5 billion
variance from the original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget
environment to produce a balanced budget. Many program cost and budgetary
adjustments had already been made in the last three years. The Governor's
Budget Proposal, as updated in May and June 1994, recognized that the
accumulated deficit could not be repaid in one year, and proposed a two-
year solution. The budget proposal set forth revenue and expenditure
forecasts and revenue and expenditure proposals which estimated operating
surpluses for the budget for both 1994-95 and 1995-96, and lead to the
elimination of the accumulated budget deficit, estimated at about $1.8
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt
of about $360 million from the Federal government to reimburse the State's
cost of incarcerating undocumented immigrants, most of which eventually was
not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that
General Fund revenues for March 1995 were $28 million, or 1.1%, below
forecast, and that year-to-date General Fund revenues were $110 million, or
0.4%, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's
1994-95 Budget Act.
For the first time in four years, the State enters the upcoming 1995-
96 fiscal year with strengthening revenues based on an improving economy.
On January 10, 1995, the Governor presented his 1995-96 Fiscal Year Budget
Proposal (the "Proposed Budget"). The Proposed Budget estimates General
Fund revenues and transfers of $42.5 billion (an increase of 0.2% over
1994-95). This nominal increase from 1994-95 fiscal year reflects the
Governor's realignment proposal and the first year of his tax cut proposal.
Without these two proposals, General Fund revenues would be projected at
approximately $43.8 billion, or an increase of 3.3% over 1994-95.
Expenditures are estimated at $41.7 billion (essentially unchanged from
1994-95). Special Fund revenues are estimated at $13.5 billion (10.7%
higher than 1994-95) and Special Fund expenditures are estimated at $13.8
billion (12.2% higher than 1994-95). The Proposed Budget projects that the
General Fund will end the fiscal year at June 30, 1996 with a budget
surplus in SFEU of about $92 million, or less than 1% of General Fund
expenditures, and will have repaid all of the accumulated budget deficits.
Recent Economic Trends. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability,
a solid recovery is now underway. The State's unemployment rate fell
sharply last year, from 10.1% in January to 7.7% in October and November
1994. The gap between the national and California jobless rates narrowed
from 3.4 percentage points at the beginning of 1994 to an average of 2
percentage points in October and November 1994. The number of unemployed
Californians fell by nearly 400,000 during the year, while civilian
employment increased more than 300,000 in 1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's
recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual
rate, reflecting the uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of 1994 was about
4.2%. However, excluding the Northridge effects, growth would have been in
excess of 5%. Personal income is expected to grow 6.6% for 1995.
APPENDIX B
Description of S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will
include: (1) likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of and provisions
of the obligation; and (3) protection afforded by, and relative position
of, the obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
The AA rating may be modified by the addition of a plus or minus sign to
show relative standing within the category.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
Commercial Paper Ratings
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and 3 to
indicate the relative degree of safety. Paper rated A-1 indicates that the
degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities. Bonds in the Aa category which Moody's
believes possess the strongest investment attributes are designated by the
symbol Aa1.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings
recognize the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower and short-term
cyclical elements are critical in short-term ratings, while other factors
of major importance in bond risk, long-term secular trends for example, may
be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than fixed maturity
dates and payment relying on external liquidity. Additionally, investors
should be alert to the fact that the source of payment may be limited to
the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a wide range of financial
markets and assured sources of alternate liquidity.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issuer, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings
on the existence of liquidity necessary to meet the issuer's obligations in
a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS JULY 31, 1995
PRINCIPAL
TAX EXEMPT INVESTMENTS-100.0% AMOUNT VALUE
_______ _______
<S> <C> <C>
CALIFORNIA-99.3%
Anaheim, COP, VRDN, Refunding 3.60% (Insured; AMBAC) (a).................... $ 12,900,000 $ 12,900,000
Anaheim Housing Authority, MFHR, VRDN, Refunding (Villas at Anaheim Hill)
3.95% (LOC; National Bank of Canada) (a,b).............................. 8,850,000 8,850,000
California Department of Water Resource, Water Systems Revenue, VRDN
(Central Valley Project):
3.65%, Series, N-V2 (LOC; Canadian Imperial Bank of Commerce) (a,b)... 14,000,000 14,000,000
3.70%, Series, N-V1 (LOC; Canadian Imperial Bank of Commerce) (a,b)... 14,000,000 14,000,000
California Health Facilities Financing Authority, Revenue, VRDN:
(Catholic Health Care) 3.65%, Series C
(Insured; MBIA and LOC; Morgan Guaranty Trust Co.) (a,b).............. 5,500,000 5,500,000
(Saint Francis Medical Center)
3.65%, Series E (Insured; MBIA and LOC; Rabobank) (a,b)............... 5,000,000 5,000,000
(Scirpps Memorial Hospital):
3.65%, Series A (Insured; MBIA and LOC; Morgan Guaranty Trust Co.) (a,b) 5,400,000 5,400,000
3.65%, Series B (Insured; MBIA and LOC; Morgan Guaranty Trust Co.) (a,b) 17,700,000 17,700,000
California Housing Finance Agency:
Home Mortgage Revenue 4.60%, Series E, 2/1/96 (Insured; FGIC)........... 5,740,000 5,740,000
Multi-Family Revenue, Refunding, VRDN:
3.70%, Series B (Corp. Guaranty; Federal National Mortgage Association) (a) 5,600,000 5,600,000
3.70%, Series C (Corp. Guaranty; Federal National Mortgage Association) (a) 5,400,000 5,400,000
California Pollution Control Financing Authority:
PCR:
CP, Refunding (Pacific Gas and Electric):
2.85%, Series E, 8/10/95 (LOC; Morgan Guaranty Trust Co.) (b)..... 3,000,000 3,000,000
3.65%, Series A, 10/25/95 (LOC; Swiss Bank Corp.) (b)............. 14,630,000 14,630,000
VRDN (Southern California Edison)
4.15%, Series A (Corp. Guaranty; Southern California Edison) (a).. 3,500,000 3,500,000
VRDN:
RRR:
(Delano Project) 3.90% (LOC; ABN-Amro Bank) (a,b)................. 5,700,000 5,700,000
(Honey Lake Power Co. Project) 3.90% (LOC; Banque Nationale de Paris) (a,b) 4,000,000 4,000,000
Refunding:
(Ultra Power Rocklin Project) 3.95%, Series A (LOC; Bank of America) (a,b) 16,400,000 16,400,000
(Ultra Power Rocklin Project) 3.95%, Series B (LOC; Bank of America) (a,b) 6,100,000 6,100,000
SWDR:
(Colmac Energy Project) 3.70%, Series A (LOC; Swiss Bank Corp.) (a,b) 6,500,000 6,500,000
(Shell Oil Co. Martinez Project) 4% (Corp. Guaranty; Shell Oil Co.) (a) 8,100,000 8,100,000
California School Cash Reserve Program Authority, Notes 4.75%, Series A, 7/3/96 10,000,000 10,088,694
California Statewide Community Development Authority, VRDN:
Apartment Development Revenue, Refunding
4.35%, Series A-7 (Corp. Guaranty; Federal National Mortgage Association) (a) 6,500,000 6,500,000
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31, 1995
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
California Statewide Community Development Authority, VRDN (continued):
Multi-Family Revenue (Canyon Creek Apartments)
4.30%, Series C (Corp. Guaranty; Federal National Mortgage Association) (a) $ 11,800,000 $ 11,800,000
Solid Waste Facilities Revenue
(Chevron USA Inc. Project) 4% (Corp. Guaranty; Chevron USA Inc.) (a).. 3,700,000 3,700,000
City of Camarillo, MFHR, VRDN (Heritage Park)
3.80%, Series A (Corp. Guaranty; Federal National Mortgage Association) (a) 7,000,000 7,000,000
Golden Empire Schools Financing Authority, VRDN
(Kern High School District) 3.70%, Series A (LOC: Canadian Imperial Bank of
Commerce and National Westminster Bank) (a,b)........................... 7,500,000 7,500,000
City of Hayward Housing Authority, Multi-Family Revenue, Refunding, VRDN
(Barrington Hills) 4.20%, Series A (Corp. Guaranty; Federal National
Mortgage Association) (a)............................................... 13,550,000 13,550,000
Huntington Beach, MFHR, VRDN:
(Five Points Seniors Project) 3.85%, Series A (LOC; Wells Fargo Bank) (a,b) 3,100,000 3,100,000
(Mercury Savings and Loan Village)
4.25%, Series A (LOC; Resolution Funding Corp.) (a,b)................. 6,000,000 6,000,000
Irwindale, IDR, VRDN (Toys "R" Us Inc. Project) 3.875% (LOC; Bankers Trust) (a,b) 3,000,000 3,000,000
Kern County, TAN 4.50%, 7/2/96.............................................. 5,000,000 5,027,801
Los Angeles, MFHR, VRDN:
(Beverly Park Apartments) 3.85%, Series A (LOC; Barclays Bank) (a,b).... 9,600,000 9,600,000
(Loans To Lender Program):
4.05%, Series A (LOC; Federal Home Loan Banks) (a,b).................. 4,500,000 4,500,000
4.05%, Series B (LOC; Federal Home Loan Banks) (a,b).................. 7,500,000 7,500,000
(Lucas Studios Project) 3.95%, Series D (LOC; Bank of America) (a,b).... 3,655,000 3,655,000
(Oakwood Apartments) 3.80%, Series B (LOC; Sumitomo Bank) (a,b)......... 9,655,000 9,655,000
(Studio Colony) 3.75%, Series C (LOC; Industrial Bank of Japan) (a,b)... 9,650,000 9,650,000
Los Angeles County, TRAN 4.50%, 7/1/96 (LOC: Bank of America, Credit Suisse,
Morgan Guaranty Trust Co., Swiss Bank Corp., Union Bank of Switzerland
and
West Deutsche Landesbank) (b)........................................... 15,000,000 15,100,370
Los Angeles County Metropolitan Transportation Authority, VRDN:
Revenue (General Union Station Gateway)
3.75%, Series A (LOC: FSA and Societe Generale) (a,b)................. 7,000,000 7,000,000
Sales Tax Revenue, Refunding, VRDN (Property C)
3.70%, Series A (Insured; MBIA and SBPA; Industrial Bank of Japan) (a) 25,200,000 25,200,000
Los Angeles Unified School District, TRAN 4.50%, 7/3/96..................... 19,625,000 19,762,259
Paramount, MFHR, VRDN (Mercury Savings and Loan Triangle Project)
4.25%, Series A (LOC; Resolution Funding Corp.) (a,b)................... 9,000,000 9,000,000
Sacramento County, MFHR, VRDN
3.90%, Series C (LOC; Dai-Ichi Kangyo Bank) (a,b)....................... 2,400,000 2,400,000
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31, 1995
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
Sacramento County Housing Authority, MFHR, VRDN (Stone Creek Apartments
Project)
3.95%, Series L (LOC; First Interstate Bank of California) (a,b)........ $ 5,450,000 $ 5,450,000
San Bernardino:
COP, 3.90% (LOC; Sumitomo Trust and Banking Co.) (a,b).................. 12,000,000 12,000,000
TRAN 4.50%, 7/5/96
(LOC: Banque Nationale de Paris and Toronto Dominion) (b)............. 10,000,000 10,048,987
San Diego, IDR, CP (San Diego Gas & Electric)
3.05%, 9/11/95 (Corp. Guaranty; San Diego Gas & Electric)............... 8,750,000 8,750,000
San Diego County, MFHR, VRDN (Country Hills Apartments)
3.70%, Series A (Corp. Guaranty; Federal National Mortgage Association) (a) 5,400,000 5,400,000
San Diego Housing Authority, MFHR, VRDN (Nobel Court Apartments)
3.80% (LOC; Citibank) (a,b)............................................. 4,000,000 4,000,000
San Dimas Redevelopment Agency Industrial Development Authority, IDR, VRDN
(French Co. Project) 4.15% (LOC; Credit Commercial de France) (a,b)..... 4,200,000 4,200,000
San Francisco City and County Redevelopment Agency, Multi-Family Revenue,
VRDN
(Bayside Village Project):
3.65%, Series A (LOC; Industrial Bank of Japan) (a,b)................. 6,000,000 6,000,000
3.65%, Series B (LOC; Industrial Bank of Japan) (a,b)................. 8,400,000 8,400,000
San Francisco City and County Redevelopment Financing Authority, Revenue,
Refunding VRDN (Yerba-Buena Gardens) 3.80% (LOC; Bank of Tokyo) (a,b)... 5,000,000 5,000,000
Simi Valley, MFHR, Refunding, VRDN 3.65%, Series A (LOC; Bank of America) (a,b) 5,900,000 5,900,000
Vacaville, MFMR, VRDN (Quail Run)
3.70%, Series A (Corp. Guaranty; Federal National Mortgage Association) (a) 3,000,000 3,000,000
U.S. RELATED-.7%
Commonwealth of Puerto Rico Government Development Bank, Refunding, VRDN
3.45% (LOC; Credit Suisse) (a,b)........................................ 3,000,000 3,000,000
----------
TOTAL INVESTMENTS (cost $449,458,111)....................................... $449,458,111
===========
</TABLE>
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MFHR Multi-Family Housing Revenue
COP Certificate of Participation MFMR Multi-Family Mortgage Revenue
CP Commercial Paper PCR Pollution Control Revenue
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
FSA Financial Security Assurance SBPA Standby Bond Purchase Agreement
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit TAN Tax Anticipation Notes
MBIA Municipal Bond Investors Assurance TRAN Tax and Revenue Anticipation Notes
Insurance Corporation VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ------- --------------- -------------------
<S> <C> <C>
VMIG1/MIG1, P1 (c) SP1+/SP1, A1+/A1 (c) 92.5%
Aaa/Aa (d) AAA/AA (d) 4.5
Not Rated (e) Not Rated (e) 3.0
-----
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 July 31, 1995, 62.2% of the Fund's
net assets are backed by letters of credit issued by domestic banks,
foreign banks and government agencies.
(c) P1 and A1 are the highest ratings assigned tax-exempt commercial
paper by Moody's and Standard & Poor's, respectively.
(d) Notes which are not MIG or SP rated are represented by bond ratings
of the issuers.
(e) Securities which, while not rated by Moody's and Standard & Poor's,
respectively, have been determined by the Fund's Board of Trustees to be
of comparable quality to those rated securities in which the Fund may
invest.
(f) At July 31, 1995, the Fund had $172,650,000 (37.3% 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>
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value-Note 1(a)........................... $449,458,111
Cash.................................................................... 12,606,172
Interest receivable..................................................... 1,689,243
Prepaid expenses........................................................ 70,276
---------
463,823,802
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $200,359
Accrued expenses and other liabilities.................................. 219,690 420,049
------- --------
NET ASSETS.................................................................. $463,403,753
===========
REPRESENTED BY:
Paid-in capital......................................................... $463,552,152
Accumulated net realized (loss) on investments.......................... (148,399)
----------
NET ASSETS at value applicable to 463,552,152 shares outstanding
(unlimited number of $.001 par value shares of Beneficial Interest authorized) $463,403,753
============
NET ASSET VALUE, offering and redemption price per share
($463,403,753 / 463,552,152 shares)..................................... $1.00
=====
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $19,589,688
EXPENSES:
Management fee-Note 2(a).............................................. $2,730,063
Shareholder servicing costs-Note 2(b)................................. 556,440
Custodian fees........................................................ 52,302
Professional fees..................................................... 46,246
Prospectus and shareholders' reports.................................. 23,869
Trustees' fees and expenses-Note 2(c)................................. 22,778
Registration fees..................................................... 10,340
Miscellaneous......................................................... 19,997
-------
3,462,035
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 624,410
--------
TOTAL EXPENSES.................................................. 2,837,625
---------
INVESTMENT INCOME-NET....................................................... 16,752,063
NET REALIZED (LOSS) ON INVESTMENTS-Note 1(b)................................ (28,743)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $16,723,320
=========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
-------------------
1994 1995
------ -----
<S> <C> <C>
OPERATIONS:
Investment income-net............................................... $ 15,589,793 $ 16,752,063
Net realized (loss) on investments.................................. (111,389) (28,743)
--------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 15,478,404 16,723,320
--------- ---------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net............................................... (15,589,793) (16,752,063)
--------- ---------
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold....................................... 2,518,641,419 1,802,148,457
Dividends reinvested................................................ 14,582,815 15,289,984
Cost of shares redeemed............................................. (2,442,541,575) (2,053,110,924)
--------- ----------
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS.............................. 90,682,659 (235,672,483)
--------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS....................... 90,571,270 (235,701,226)
NET ASSETS:
Beginning of year................................................... 608,533,709 699,104,979
--------- ----------
End of year......................................................... $ 699,104,979 $ 463,403,753
============ ============
See notes to financial statements.
</TABLE>
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated November 8, 1995.
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified open-end management investment company. Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of the Fund's
shares, which are sold to the public without a sales charge. Dreyfus Service
Corporation is a wholly-owned subsidiary of The Dreyfus Corporation
("Manager"). Effective August 24, 1994, the Manager became a direct
subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of FDI
Holdings, Inc., the parent company of which is Boston Institutional Group,
Inc.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00; the Fund has adopted certain investment, portfolio valuation
and dividend and distribution policies to enable it to do so. There is no
assurance, however, that the Fund will be able to maintain a stable net asset
value of $1.00.
(A) PORTFOLIO VALUATION: Investments are valued at amortized cost, which
has been determined by the Fund's Board of Trustees to represent the fair
value of the Fund's investments.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and original issue discounts on investments, is
earned from settlement date and recognized on the accrual basis. Realized
gain and loss from securities transactions are recorded on the identified
cost basis.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations
held by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, 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 $122,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to July 31, 1995. The
carryover does not include net realized securities losses from November 1,
1994 through July 31, 1995 which are treated for Federal income tax purposes,
as arising in fiscal 1995. If not applied, $8,200 of the carryover expires in
fiscal 2002 and $113,800 expires in fiscal 2003.
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At July 31, 1995, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .50 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed 1 1/2% of the average value of the Fund's net
assets for any full fiscal year. However, during the year ended July 31,
1995, the Manager had undertaken to reduce the management fee paid by the
Fund, to the extent that the Fund's aggregate expenses exceeded specified
annual percentages of the Fund's average daily net assets. The reduction in
management fee, pursuant to the undertakings, amounted to $624,410 for the
year ended July 31, 1995.
The Manager may modify the expense limitation percentages from time to
time, provided that the resulting expense reimbursement would not be less
than the amount required pursuant to the Agreement.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation an amount not to exceed an annual rate of .25 of
1% of the value of the Fund's average daily net assets for servicing
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. During the year ended
July 31, 1995, the Fund was charged an aggregate of $246,384 pursuant to the
Shareholder Services Plan.
(C) Prior to August 24, 1994, certain officers and trustees of the Fund
were "affiliated persons" as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each trustee who is not an "affiliated person"
receives 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.
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
GENERAL CALIFORNIA MUNICIPAL MONEY MARKET FUND
We have audited the accompanying statement of assets and liabilities of
General California Municipal Money Market Fund, including the statement of
investments, as of July 31, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1995 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of General California Municipal Money Market Fund at July 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
September 1, 1995
