File No. 33-30703
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 8 [ X ]
(Check appropriate box or boxes.)
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Daniel C. Maclean III, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X on February 1, 1996 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
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on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Registrant has registered an indefinite number of shares of its common
stock under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended September 30, 1995 was filed on November 2, 1995.
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 4, 20
5 Management of the Fund 9
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 20
7 Purchase of Securities Being Offered 10
8 Redemption or Repurchase 14
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
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10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-28
13 Investment Objectives and Policies B-2
14 Management of the Fund B-11
15 Control Persons and Principal B-15
Holders of Securities
16 Investment Advisory and Other B-15
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-24
18 Capital Stock and Other Securities B-28
19 Purchase, Redemption and Pricing B-17, B-19
of Securities Being Offered B-21
20 Tax Status *
21 Underwriters B-1, B-15
22 Calculations of Performance Data B-27
23 Financial Statements B-50
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
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PROSPECTUS FEBRUARY 1, 1996
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
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GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC. (THE "FUND") IS AN
OPEN-END, NONDIVERSIFIED, MANAGEMENT INVESTMENT COMPANY. THE FUND'S
INVESTMENT OBJECTIVE IS TO MAXIMIZE CURRENT INCOME EXEMPT FROM FEDERAL AND
STATE OF CALIFORNIA PERSONAL INCOME TAXES TO THE EXTENT CONSISTENT WITH THE
PRESERVATION OF CAPITAL.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY IMPOSED BY THE FUND.
THE FUND PROVIDES FREE REDEMPTION CHECKS, WHICH YOU CAN USE IN
AMOUNTS OF $500 OR MORE FOR CASH OR TO PAY BILLS. YOU CONTINUE TO EARN INCOME
ON THE AMOUNT OF THE CHECK UNTIL IT CLEARS. YOU CAN PURCHASE OR REDEEM SHARES
BY TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED FEBRUARY 1, 1996,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO
THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR
CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
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TABLE OF CONTENTS
Page
Annual Fund Operating Expenses...................... 3
Condensed Financial Information..................... 4
Description of the Fund............................. 4
Management of the Fund.............................. 9
How to Buy Shares................................... 10
Shareholder Services................................ 12
How to Redeem Shares................................ 14
Service Plan........................................ 17
Shareholder Services Plan........................... 17
Dividends, Distributions and Taxes.................. 18
Performance Information............................. 19
General Information................................. 20
Appendix............................................ 21
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C> <C> <C> <C> <C>
Management Fees ............................................................................. .60%
12b-1 Fees................................................................................... .00%
Other Expenses............................................................................... .16%
Total Fund Operating Expenses................................................................ .76%
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $8 $24 $42 $94
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. Although the Fund's Board has adopted a plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), management of the Fund currently does not intend to
implement the plan and will only do so if prior written notice is given to
shareholders. If management of the Fund decides to implement the plan, 12b-1
Fees and Total Fund Operating Expenses would be .25% and 1.01%, respectively.
If the plan were implemented, long-term investors could pay more in 12b-1
fees than the economic equivalent of paying a front-end sales charge. Certain
Service Agents (as defined below) may charge their clients direct fees for
effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Shares," "Service
Plan" and "Shareholder Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------
PER SHARE DATA: 1990(1) 1991 1992 1993 1994 1995
---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $12.50 $12.43 $12.89 $13.33 $14.36 $12.90
-------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net.................... .90 .90 .85 .82 .78 .73
Net realized and unrealized gain
(loss) on investments................... (.08) .47 .44 1.11 (1.40) .48
-------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS........ .82 1.37 1.29 1.93 (.62) 1.21
-------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income--net..... (.89) (.91) (.85) (.82) (.78) (.73)
Dividends from net realized gain on investments -_ -_ -_ (.08) (.06) (.08)
-------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS..................... (.89) (.91) (.85) (.90) (.84) (.81)
-------- ------- ------- ------- ------- -------
Net asset value, end of year.............. $12.43 $12.89 $13.33 $14.36 $12.90 $13.30
======= ======= ======= ====== ======= =======
TOTAL INVESTMENT RETURN....................... 6.93%(2) 11.35% 10.31% 15.04% (4.43%) 9.82%
RATIOS/SUPPLEMENTAL DATA:
Ratios of expenses to average net assets..... -_ .21% .37% .64% .76% .76%
Ratios of net investment
income to average net assets............... 7.35%(2) 7.06% 6.47% 5.96% 5.72% 5.66%
Decrease reflected in the above expense ratios due to
undertakings by The Dreyfus Corporation.... 1.05%(2) .62% .39% .11% -_ -_
Portfolio Turnover Rate................... 9.94%(3) 2.81% 23.97% 30.20% 29.74% 83.31%
Net Assets, end of year (000's omitted)... $98,427 $271,656 $374,198 $456,429 $347,063 $317,835
- ------------------
(1) From October 10, 1989 (commencement of operations) to September 30, 1990.
(2) Annualized.
(3) Not annualized.
</TABLE>
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize current income exempt
from Federal and State of California personal income taxes to the extent
consistent with the preservation of capital. To accomplish its investment
objective, the Fund invests primarily in the debt securities of the State of
California, its political subdivisions, authorities and corporations, the
interest from which is, in the opinion of bond counsel to the issuer, exempt
from Federal and State of California personal income taxes (collectively,
"California Municipal Obligations"). To the extent acceptable California
Municipal Obligations are at any time unavailable for investment by the Fund,
the Fund will invest temporarily in other debt securities the interest from
which is, in the opinion of bond counsel to the issuer, exempt from Federal,
but not
Page 4
State of California, income tax. The Fund's investment objective
cannot be changed without approval by the holders of a majority (as defined
in the 1940 Act) of the Fund's outstanding voting shares. There can be no
assurance that the Fund's investment objective will be achieved.
MUNICIPAL OBLIGATIONS
Debt securities the interest from which is, in the opinion of bond
counsel to the issuer, exempt from Federal income tax ("Municipal
Obligations") generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds
issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that do not
carry the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities. Municipal Obligations
bear fixed, floating or variable rates of interest, which are determined in
some instances by formulas under which the Municipal Obligation's interest
rate will change directly or inversely to changes in interest rates or an
index, or multiples thereof, in many cases subject to a maximum and minimum.
Certain Municipal Obligations are subject to redemption at a date earlier
than their stated maturity pursuant to call options, which may be separated
from the related Municipal Obligation and purchased and sold separately.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least
80% of the value of its net assets (except when maintaining a temporary
defensive position) in Municipal Obligations. At least 65% of the value of
the Fund's net assets (except when maintaining a temporary defensive
position) will be invested in bonds, debentures and other debt instruments.
Under normal circumstances, at least 65% of the Fund's net assets will be
invested in California Municipal Obligations and the remainder may be invested
in securities that are not California Municipal Obligations and therefore
may be subject to California income taxes. See "Investment Considerations and
Risks _Investing in California Municipal Obligations" below, and "Dividends,
Distributions and Taxes."
At least 65% of the value of the Fund's net assets must consist of
Municipal Obligations which, in the case of bonds, are rated no lower than
Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard &
Poor's Ratings Group, a division of The McGraw Hill Companies, Inc. ("S&P")
or Fitch Investors Service, L.P. ("Fitch"). The Fund may invest up to 35% of
the value of its net assets in Municipal Obligations which, in the case of
bonds, are rated lower than Baa by Moody's and BBB by S&P and Fitch and as
low as the lowest rating assigned by Moody's, S&P or Fitch. The Fund may
invest in short-term Municipal Obligations which are rated in the two highest
rating categories by Moody's, S&P or Fitch. See "Appendix B" in the Statement
of Additional Information. Municipal Obligations rated BBB by S&P or Fitch or
Baa by Moody's are considered investment grade obligations; those rated BBB
by S&P and Fitch are regarded as having an adequate capacity to pay principal
and interest, while those rated Baa by Moody's are considered medium grade
obligations which lack
Page 5
outstanding investment characteristics and have speculative characteristics.
Investments rated Ba or lower by Moody's and BB or lower by S&P and Fitch
ordinarily provide higher yields but involve greater risk because of their
speculative characteristics. The Fund may invest in Municipal Obligations
rated C by Moody's or D by S&P or Fitch, which is such rating organizations'
lowest rating and indicates that the Municipal Obligation is in default and
interest and/or repayment of principal is in arrears. See "Investment
Considerations and Risks _ Lower Rated Bonds" below for a further discussion
of certain risks. The Fund also may invest in securities which, while not
rated, are determined by The Dreyfus Corporation to be of comparable quality
to the rated securities in which the Fund may invest; for purposes of the 65%
requirement described in this paragraph, such unrated securities shall be
deemed to have the rating so determined. The Fund also may invest in Taxable
Investments of the quality described under "Appendix -- Certain Portfolio
Securities -- Taxable Investments." The Fund intends to invest less than 35%
of the value of its net assets in Municipal Obligations rated Ba or lower by
Moody's and BB or lower by S&P and Fitch.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended
(the "Code"), issued after August 7, 1986, while exempt from Federal income
tax, is a preference item for the purpose of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company may be
treated as such a preference item to shareholders. The Fund may invest
without limitation in such Municipal Obligations if The Dreyfus Corporation
determines that their purchase is consistent with the Fund's investment
objective. See"Investment Considerations and Risks" below.
The annual portfolio turnover rate for the Fund is not expected to
exceed 100%. The Fund may engage in, as permitted by applicable law, various
investment techniques, such as options and futures transactions and lending
portfolio securities. Use of certain of these techniques may give rise to
taxable income. See also "Investment Considerations and Risks"and "Appendix _
Investment Techniques" below and "Dividends, Distributions and Taxes" and
"Investment Objective and Management Policies -- Management Policies"in the
Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments which
promise a stable stream of income, the prices of such securities are
inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. Certain securities that may be
purchased by the Fund, such as those with interest rates that fluctuate
directly or indirectly based on multiples of a stated index, are designed to
be highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and possibly loss of principal. The
values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities. Once the rating
of a portfolio security has been changed, the Fund will consider all
circumstances deemed relevant in determining whether to continue to hold the
security. The Fund's net asset value generally will not be stable and should
fluctuate based upon changes in the value of the Fund's portfolio securities.
Securities in which the Fund invests may earn a higher level of current
income than certain shorter-term or higher quality securities which generally
have greater liquidity, less market risk and less fluctuation in market
value.
Page 6
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS -- You should consider
carefully the special risks inherent in the Fund's investment in California
Municipal Obligations. These risks result from certain amendments to the
California Constitution and other statutes that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial condition of the State of California. From mid 1990 to late 1993,
the State suffered a recession with the worst economic, fiscal and budget
conditions since the 1930s. As a result, the State experienced recurring
budget deficits for four of its five fiscal years ended June 30, 1992. The
State had operating surpluses of approximately $109 million in fiscal
1992-1993 and $917 million in fiscal 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 has been that the State depleted its available cash resources and
has had to use a series of external borrowings to meet its cash needs. To
meet its cash flow needs in the 1994-95 fiscal year, the State issued, in
July and August 1994, $4.0 billion of revenue anticipation warrants and $3.0
billion of revenue anticipation notes. The 1994-95 Budget Act contains a plan
to retire a projected $1.025 billion deficit in the 1995-96 fiscal year. The
Department of Finance projects that, after repaying the last of the carryover
budget deficit, there will be a positive balance of $28 million in the
Special Fund for Economic Uncertainties at June 30, 1996. 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. You should obtain and
review a copy of the Statement of Additional Information which more fully
sets forth these and other risk factors.
INVESTING IN MUNICIPAL OBLIGATIONS -- The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in
such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects. As a result, the Fund may be subject to greater risk as
compared to a fund that does not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is unrated, The Dreyfus Corporation will
consider, on an ongoing basis, a number of factors including the likelihood
that the issuing municipality will discontinue appropriating funding for the
leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by the Fund and
thus reduce available yield. Shareholders should consult their tax advisers
concerning the effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax exemption for
interest on Municipal Obligations may be introduced in the future. If any
such proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a
Page 7
type of Municipal Obligation as taxable, the Fund would treat such security
as a permissible Taxable Investment within the applicable limits set forth
herein.
ZERO COUPON SECURITIES -- Federal income tax law requires the holder of a
zero coupon security or of certain pay-in-kind bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To
maintain its qualification as a regulated investment company and avoid
liability for Federal income taxes, the Fund may be required to distribute
such income accrued with respect to these securities and may have to dispose
of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
LOWER RATED BONDS _ The Fund may invest up to 35% of the value of its net
assets in higher yielding (and, therefore, higher risk) debt securities such
as those rated Ba by Moody's or BB by S&P or Fitch or as low as the lowest
rating assigned by Moody's, S&P or Fitch (commonly known as junk bonds). They
generally are not meant for short-term investing and may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed-income
securities. The retail secondary market for these bonds may be less liquid
than that of higher rated bonds; adverse market conditions could make it
difficult at times for the Fund to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value. See
"Appendix _ Certain Portfolio Securities _ Ratings."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in derivatives
("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Fund may use include options and
futures. While Derivatives can be used effectively in furtherance of the
Fund's investment objective, under certain market conditions, they can
increase the volatility of the Fund's net asset value, can decrease the
liquidity of the Fund's portfolio and make more difficult the accurate pricing
of the Fund's portfolio. See "Appendix -- Investment Techniques -- Use of
Derivatives" below, and "Investment Objective and Management Policies --
Management Policies -- Derivatives"in the Statement of Additional Information.
NON-DIVERSIFIED STATUS -- The classification of the Fund as a
"non-diversified" investment company means that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not
limited by the 1940 Act. A "diversified" investment company is required by
the 1940 Act generally, with respect to 75% of its total assets, to invest
not more than 5% of such assets in the securities of a single issuer. Since a
relatively high percentage of the Fund's assets may be invested in the
obligations of a limited number of issuers, the Fund's portfolio may be more
sensitive to changes in the market value of a single issuer. However, to meet
Federal tax requirements, at the close of each quarter the Fund may not have
more than 25% of its total assets invested in any one issuer and, with
respect to 50% of total assets, not more than 5% of its total assets invested
in any one issuer. These limitations do not apply to U.S. Government
securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. However, if such other investment companies are prepared to
invest in, or desire to dispose of, Municipal Obligations or Taxable
Investments, available investments or opportunities for sales will be
allocated equitably to each investment company. In some cases, this procedure
may adversely affect the size of the position obtained for or disposed of by
the Fund or the price paid or received by the Fund.
Page 8
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of December 31, 1995, The Dreyfus Corporation
managed or administered approximately $81 billion in assets for more than 1.7
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Board in accordance with
Maryland law. The Fund's primary portfolio manager is A. Paul Disdier. He has
held that position since the Fund's inception and has been employed by The
Dreyfus Corporation since February 1988. The Fund's other portfolio managers
are identified in the Statement of Additional Information. The Dreyfus
Corporation also provides research services for the Fund as well as for other
funds advised by The Dreyfus Corporation through a professional staff of
portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$209 billion in assets as of September 30, 1995, including approximately $80
billion in proprietary mutual fund assets. As of September 30, 1995, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $717 billion in assets,
including approximately $55 billion in mutual fund assets.
For the fiscal year ended September 30, 1995, the Fund paid The
Dreyfus Corporation a monthly management fee at the annual rate of .60 of 1%
of the value of the Fund's average daily net assets. From time to time, The
Dreyfus Corporation may waive receipt of its fees and/or voluntarily assume
certain expenses of the Fund, which would have the effect of lowering the
overall expense ratio of the Fund and increasing yield to investors. The Fund
will not pay The Dreyfus Corporation at a later time for any amounts it may
waive, nor will the Fund reimburse The Dreyfus Corporation for any amounts it
may assume.
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus Corporation
may consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds in the Dreyfus Family of Funds as
factors in the selection of broker-dealers to execute portfolio transactions
for the Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service Agents
in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor's ultimate parent is Boston Institutional Group, Inc.
Page 9
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
GENERAL -- You can purchase Fund shares through the Distributor or certain
financial institutions (which may include banks), securities dealers
("Selected Dealers") and other industry professionals, such as investment
advisers, accountants and estate planning firms (collectively, "Service
Agents") that have entered into service agreements with the Distributor.
Stock certificates are issued only upon your written request. No certificates
are issued for fractional shares. It is not recommended that the Fund be used
as a vehicle for Keogh, IRA or other qualified retirement plans. The Fund
reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which has made an aggregate minimum initial
purchase for its customers of $2,500. Subsequent investments must be at least
$100. The initial investment must be accompanied by the Fund's Account
Application. For full-time or part-time employees of The Dreyfus Corporation
or any of its affiliates or subsidiaries, directors of The Dreyfus
Corporation, Board members of a fund advised by The Dreyfus Corporation,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Fund reserves
the right to vary further the initial and subsequent investment minimum
requirements at any time.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor subseq
uent investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA#8900051736/General
California Municipal Bond Fund, Inc., for purchase of Fund shares in your
name. The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the
Account Application is received. You may obtain further information about
remitting funds in this manner from your
Page 10
bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. Other purchase
procedures may be in effect for clients of certain Service Agents. The Fund
makes available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
Builder, the Dreyfus Government Direct Deposit Privilege and the Dreyfus
Payroll Savings Plan described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority,
may charge their clients direct fees for Servicing (as defined under "Service
Plan"). These fees would be in addition to any amounts which might be
received under the Service Plan, if it were implemented. You should consult
your Service Agent in this regard.
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent. Net asset value per share is determined as of the close of
trading on the floor of the New York Stock Exchange (currently 4:00 p.m., New
York time), on each day the New York Stock Exchange is open for business. For
purposes of determining net asset value per share, options and futures
contracts will be valued 15 minutes after the close of trading on the floor
of the New York Stock Exchange. Net asset value per share is computed by
dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of shares outstanding. The Fund's
investments are valued by an independent pricing service approved by the
Fund's Board and are valued at fair value as determined by the pricing
service. The pricing service's procedures are reviewed under the general
supervision of the Fund's Board. For further information regarding the
methods employed in valuing Fund investments, see "Determination of Net Asset
Value" in the Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Fund's Account Application
or have filed a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between the bank account designated in one of
these documents and your Fund account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House member
may be so designated. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
Page 11
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call
516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Service Agent in this
regard. In addition, use of the privileges noted below may require that the
proper forms and information be filed with and processed by the Transfer
Agent.
FUND EXCHANGES -- You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by The Dreyfus
Corporation, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be of
interest to you. If you desire to use this service, please call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a current value of at least the minimum initial investment required for the
fund into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application,
indicating that you specifically refuse this Privilege. The Telephone
Exchange Privilege may be established for an existing account by written
request, signed by all shareholders on the account, or by a separate signed
Shareholder Services Form, also available by calling 1-800-645-6561. If you
previously have established the Telephone Exchange Privilege, you may
telephone exchange instructions by calling 1-800-645-6561 or, if you are
calling from overseas, call 516-794-5452. See "How to Redeem
Shares_Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege,
and the dividend/capital gain distribution option (except for Dreyfus
Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b) acquired
by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect
to the foregoing categories of shares. To qualify, at the time of your
exchange you must notify the Transfer Agent or your Service Agent must notify
the Distributor. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services"
in the Statement of Additional Information. No fees currently are charged
shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with
Page 12
rules promulgated by the Securities and Exchange Commission. The Fund reserves
the right to reject any exchange request in whole or in part. The
availability of Fund Exchanges may be modified or terminated at any time
upon notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE -- Dreyfus Auto-Exchange Privilege enables
you to invest regularly (on a semi-monthly, monthly, quarterly or annual
basis), in exchange for shares of the Fund, in shares of other funds in the
Dreyfus Family of Funds of which you are currently an investor. The amount
you designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. See "Shareholder Services" in the Statement of
Additional Information. The right to exercise this Privilege may be modified
or cancelled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by mailing written notification to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
The Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. For more information concerning this Privilege and
the funds in the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain a Dreyfus Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark -- Dreyfus-AUTOMATIC Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
At your option, the account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish a Dreyfus-AUTOMATIC Asset
Builder account, you must file an authorization form with the Transfer Agent.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may cancel this Privilege or change the amount of purchase at any time by
mailing written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671, and the notification will be effective
three business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE -- Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security, or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit as
much of such payments as you elect. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained by calling 1-800-645-6561.
Death or legal incapacity will terminate your participation in this
Privilege. You may elect at any time to terminate your participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN _ Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus
Page 13
account electronically through the Automated Clearing House system at each
pay period. To establish a Dreyfus Payroll Savings Plan account, you must
file an authorization form with your employer's payroll department. Your
employer must complete the reverse side of the form and return it to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of your
employer, not the Distributor, The Dreyfus Corporation, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.
DREYFUS DIVIDEND OPTIONS -- Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will be purchased at
the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load. If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the Statement of Additional Information. Dreyfus
Dividend ACH permits you to transfer electronically dividends or dividends
and capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a financial institution which is an
Automated Clearing House member may be so designated. Banks may charge a fee
for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may
not be used to open new accounts. Minimum subsequent investments do not apply
for Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges
at any time or charge a service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN -- The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. There is a service charge of 50cents for each withdrawal
check. The Automatic Withdrawal Plan may be ended at any time by you, the
Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
Page 14
The Fund imposes no charges when shares are redeemed. Service Agents
may charge their clients a nominal fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may
be more or less than their original cost, depending upon the Fund's
then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE
OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC
ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN
ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK
REDEMPTION PRIVILEGE AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR
TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD OF
EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET
BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES
WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU
OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem Fund shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Check
Redemption Privilege, the Wire Redemption Privilege, the Telephone Redemption
Privilege, or the Dreyfus TELETRANSFER Privilege. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to refuse
any request made by wire or telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares for which certificates have been issued are
not eligible for the Check Redemption, Wire Redemption, Telephone Redemption
or Dreyfus TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Service Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to employ
reasonable procedures, such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Fund nor the Transfer
Agent will be liable for following telephone instructions reasonably believed
to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you
Page 15
should consider using the other redemption procedures described herein. Use of
these other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. If you have any questions with respect to
signature-guarantees, please call the telephone number listed under "General
Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE -- You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $500 or more. Potential fluctuations in the net asset
value of Fund shares should be considered in determining the amount of the
check. Redemption Checks should not be used to close your account. Redemption
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Redemption Check upon your request or if the Transfer Agent
cannot honor the Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not postdate your Redemption Checks. If you do, the
Transfer Agent will honor upon presentment, even if presented before the date
of the check, all postdated Redemption Checks which are dated within six
months of presentment for payment, if they are otherwise in good order. This
Privilege will be terminated immediately, without notice, with respect to any
account which is, or becomes, subject to backup withholding on redemptions
(see "Dividends, Distributions and Taxes"). Any redemption check written on
an account which has become subject to backup withholding on redemptions will
not be honored by the Transfer Agent.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day) made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed
to your address. You may telephone
Page 16
redemption instructions by calling 1-800-645-6561 or, if you are calling from
overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank ac
counts may redeem through the Dreyfus TELETRANSFER Privilege for transfer to
their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SERVICE PLAN
Under the Service Plan, adopted pursuant to Rule 12b-1 under the 1940
Act, the Fund may (a) reimburse the Distributor for payments to certain
Service Agents for distributing the Fund's shares and servicing shareholder
accounts ("Servicing") and (b) pay The Dreyfus Corporation, Dreyfus Service
Corporation, a wholly-owned subsidiary of The Dreyfus Corporation, and any
affiliate of either of them (collectively, "Dreyfus") for advertising and
marketing relating to the Fund and for Servicing, at an aggregate annual rate
of .25 of 1% of the value of the Fund's average daily net assets. Each of the
Distributor and Dreyfus may pay one or more Service Agents a fee in respect
of Fund shares owned by shareholders with whom the Service Agent has a
Servicing relationship or for whom the Service Agent is the dealer or holder
of record. Each of the Distributor and Dreyfus determine the amount, if any,
to be paid to Service Agents under the Service Plan and the basis on which
such payments are made. The fees payable under the Service Plan are payable
without regard to actual expenses incurred.
The Fund is permitted to bear the costs of preparing and printing
prospectuses and statements of additional information used for regulatory
purposes and for distribution to existing shareholders. Under the Service
Plan, the Fund is permitted to bear (a) the costs of preparing, printing and
distributing prospectuses and statements of additional information used for
other purposes and (b) the costs associated with implementing and operating
the Service Plan (such as costs of printing and mailing service agreements),
the aggregate of such amounts not to exceed in any fiscal year of the Fund
the greater of $100,000 or .005 of 1% of the value of the Fund's average
daily net assets for such fiscal year. Each item for which a payment may be
made under the Service Plan may constitute an expense of distributing Fund
shares as the Securities and Exchange Commission construes such term under
Rule 12b-1.
Management of the Fund currently does not intend to implement the
Service Plan and will only do so if prior written notice is given to
shareholders.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
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 certain allocated expenses of providing personal services and/or
maintaining shareholder accounts. The services provided may include personal
services relating to shareholder accounts, such as
Page 17
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. Fund shares
begin earning income dividends on the day following the date of purchase.
Dividends usually are paid on the last business day of each month and are
automatically reinvested in additional Fund shares at net asset value or, at
your option, paid in cash. The Fund's earnings for Saturdays, Sundays and
holidays are declared as dividends on the next business day. If you redeem
all shares in your account at any time during the month, all dividends to
which you are entitled will be paid to you along with the proceeds of the
redemption. If you are an omnibus accountholder and indicate in a partial
redemption request that a portion of any accrued dividends to which such
account is entitled belongs to an underlying accountholder who has redeemed
all shares in his or her account, such portion of the accrued dividends will
be paid to you along with the proceeds of the redemption. Distributions from
net realized securities gains, if any, generally are declared and paid once a
year, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose
whether to receive distributions in cash or to reinvest in additional Fund
shares at net asset value. All expenses are accrued daily and deducted before
declaration of dividends to investors.
Except for dividends from Taxable Investments, the Fund anticipates
that substantially all dividends paid by the Fund will not be subject to
Federal or California personal income taxes. To the extent that you are
obligated to pay state or local taxes outside of the State of California,
dividends earned by an investment in the Fund may represent taxable income.
Dividends derived from Taxable Investments, together with distributions from
any net realized short-term securities gains and all or a portion of any
gains realized from the sale or other disposition of certain market discount
bonds, are subject to Federal income tax as ordinary income whether or not
reinvested. No dividend paid by the Fund will qualify for the dividends
received deduction allowable to certain U.S. corporations. Distributions from
net realized long-term securities gains of the Fund generally are taxable as
long-term capital gains for Federal income tax purposes if you are a citizen
or resident of the United States. Dividends and distributions attributable to
income or gain derived from securities transactions and from the use of
certain of the investment techniques described under "Appendix_Investment
Techniques" will be subject to Federal income tax. The Code provides that the
net capital gain of an individual generally will not be subject to Federal
income tax at a rate in excess of 28%. Under the Code, interest on
indebtedness incurred or continued to purchase or carry Fund shares which is
deemed to relate to exempt-interest dividends is not deductible.
Although all or a substantial portion of the dividends paid by the
Fund may be excluded by shareholders of the Fund from their gross income for
Federal income tax purposes, the Fund may purchase specified private activity
bonds, the interest from which may be (i) a preference item for purposes of
the alternative minimum tax, (ii) a component of the "adjusted current
earnings" preference item for purposes of the corporate alternative minimum
tax as well as a component in computing the corporate environmental tax or
(iii) a factor in determining the extent to which a shareholder's Social
Security benefits are taxable. If the Fund purchases such securities, the
portion of the Fund's dividends related
Page 18
thereto will not necessarily be tax exempt to an investor who is subject to
the alternative minimum tax and/or tax on Social Security benefits and may
cause an investor to be subject to such taxes.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in the Fund. If the Fund pays
dividends derived from taxable income, it intends to designate as taxable the
same percentage of the day's dividend as the actual taxable income earned on
that day bears to total income earned on that day. Thus, the percentage of
the dividend designated as taxable, if any, may vary from day to day.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized,
paid to a shareholder if such shareholder fails to certify either that the
TIN furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended September 30, 1995 as a "regulated investment company"
under the Code. The Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income tax to
the extent its earnings are distributed in accordance with applicable
provisions of the Code. The Fund is subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, tax equivalent yield, average annual total
return and/or total return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
Page 19
"annualized" yield for an entire one-year period. Calculations of the Fund's
current yield may reflect absorbed expenses pursuant to any undertaking that
may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated
current yield calculated as described above.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter time periods depending
upon the length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman Brothers
Municipal Bond Index, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on August 18, 1989, and
commenced operations on October 10, 1989. The Fund is authorized to issue 500
million shares of Common Stock, par value $.001 per share. Each share has one
vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office and for any other purpose. Fund
shareholders may remove a Board member by the affirmative vote of a majority
of the Fund's outstanding voting shares. In addition, the Fund's Board will
call a meeting of shareholders for the purpose of electing Board members if,
at any time, less than a majority of the Board members then holding office
have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
Page 20
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 331/3% of the value of such company's total assets. The Fund
currently intends to borrow money only for temporary or emergency (not
leveraging)purposes, in an amount up to 15% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time borrowing is
made. While borrowings exceed 5% of the Fund's total assets, the Fund will
not make any additional investments.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies -- Management Policies -- Derivatives" in the Statement of
Additional Information.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if its Derivatives
were poorly correlated with its other investments, or if the Fund were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredicatable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written.
When required by the Securities and Exchange Commission, the Fund will set
aside permissible liquid assets in a segregated account to cover its
obligations relating to its purchase of Derivatives. To maintain this require
d cover, the Fund may have to sell portfolio securities at disadvantageous
prices or times since it may not be possible to liquidate a Derivative
position at a reasonable price.
LENDING PORTFOLIO SECURITIES -- TheFund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 331/3% of the value
of the Fund's total assets, and the Fund will receive collateral consisting
Page 21
of cash, U.S. Government securities or irrevocable letters of credit which
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Such loans are terminable by
the Fund at any time upon specified notice. The Fund might experience risk of
loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund.
FORWARD COMMITMENTS -- The Fund may purchase Municipal Obligations and other
securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed at the
time the Fund enters into the commitment, but the Fund does not make a
payment until it receives delivery from the counter party. The Fund will
commit to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. A segregated account of the Fund
consisting of cash, cash equivalents or U.S. Government securities or other
high quality liquid debt securities at least equal at all times to the amount
of the commitments will be established and maintained at the Fund's custodian
bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- The Fund may purchase floating and variable
rate demand notes and bonds, which are tax exempt obligations ordinarily
having stated maturities in excess of one year, but which permit the holder
to demand payment of principal at any time or at specified intervals.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amounts borrowed.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus accrued
interest. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Each obligation purchased by the Fund will meet the quality criteria
established for the purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS -- The Fund may purchase from financial
institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to
the total principal amount of the Municipal Obligation. These instruments may
have fixed, floating or variable rates of interest. If the participation
interest is unrated, it will be backed by an irrevocable letter of credit or
guarantee of a bank that the Fund's Board has determined meets the prescribed
quality standards for banks set forth below, or the payment obligation
otherwise will be collateralized by U.S. Government securities. For certain
participation interests, the Fund will have the right to demand payment, on
not more than seven days' notice, for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest. As
to these instruments, the Fund intends to exercise its right to demand
payment only upon a default under the terms of the Municipal Obligation, as
needed to provide liquidity to meet redemptions, or to maintain or improve
the quality of its investment portfolio.
TENDER OPTION BONDS -- The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long
Page 22
maturity and bearing interest at a fixed rate substantially higher than
prevailing short-term tax exempt rates, that has been coupled with the
agreement of a third party, such as a bank, broker-dealer or other financial
institution, pursuant to which such institution grants the security holders
the option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the
difference between the Municipal Obligation's fixed coupon rate and the rate,
as determined by a remarketing or similar agent at or near the commencement
of such period, that would cause the securities, coupled with the tender
option, to trade at par on the date of such determination. Thus, after payment
of this fee, the security holder effectively holds a demand obligation that
bears interest at the prevailing short-term tax exempt rate. The Dreyfus
Corporation, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying Municipal Obligation, of any
custodian and of the third party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable
in the event of a default in payment of principal or interest on the
underlying Municipal Obligation and for other reasons.
CUSTODIAL RECEIPTS -- The Fund may purchase custodial receipts representing
the right to receive certain future principal and interest payments on
Municipal Obligations which underlie the custodial receipts. A number of
different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of Municipal Obligations
deposits such obligations with a custodian in exchange for two classes of
custodial receipts. The two classes have different characteristics, but, in
each case, payments on the two classes are based on payments received on the
underlying Municipal Obligations. One class has the characteristics of a
typical auction rate security, where at specified intervals its interest rate
is adjusted, and ownership changes, based on an auction mechanism. This
class's interest rate generally is expected to be below the coupon rate of
the underlying Municipal Obligations and generally is at a level comparable
to that of a Municipal Obligation of similar quality and having a maturity
equal to the period between interest rate adjustments. The second class bears
interest at a rate that exceeds the interest rate typically borne by a
security of comparable quality and maturity; this rate also is adjusted, but
in this case inversely to changes in the rate of interest of the first class.
If the interest rate on the first class exceeds the coupon rate of the
underlying Municipal Obligations, its interest rate will exceed the rate paid
on the second class. In no event will the aggregate interest paid with
respect to the two classes exceed the interest paid by the underlying
Municipal Obligations. The value of the second class and similar securities
should be expected to fluctuate more than the value of a Municipal Obligation
of comparable quality and maturity and their purchase by the Fund should
increase the volatility of its net asset value and, thus, its price per
share. These custodial receipts are sold in private placements. The Fund also
may purchase directly from issuers, and not in a private placement, Municipal
Obligations having characteristics similar to custodial receipts. These
securities may be issued as part of a multi-class offering and the interest
rate on certain classes may be subject to a cap or floor.
STAND-BY COMMITMENTS -- The Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, the Fund obligates a broker, dealer or bank to repurchase, at the
Fund's option, specified securities at a specified price and, in this
respect, stand-by commitments are comparable to put options. The exercise of
a stand-by commitment, therefore, is subject to the ability of the seller to
make payment on demand. The Fund will acquire stand-by commitments solely to
facilitate its portfolio liquidity and does not intend to exercise its rights
Page 23
thereunder for trading purposes. The Fund may pay for stand-by commitments if
such action is deemed necessary, thus increasing to a degree the cost of the
underlying Municipal Obligation and similarly decreasing such security's
yield to investors. Gains realized in connection with stand-by commitments
will be taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund generally would purchase these call options to protect
the Fund from the issuer of the related Municipal Obligation redeeming, or
other holder of the call option from calling away, the Municipal Obligation
before maturity. The sale by the Fund of a call option that it owns on a
specific Municipal Obligation could result in the receipt of taxable income
by the Fund.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon securities which
are debt securities issued or sold at a discount from their face value which
do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date). The amount of
the discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon securities also may take
the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interest in such stripped debt obligations and coupons. The
market prices of zero coupon securities generally are more volatile than the
market prices of interest-bearing securities and are likely to respond to a
greater degree to changes in interest rates than interest-bearing securities
having similar maturities and credit qualities.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
Fund is subject to a risk that should the Fund desire to sell them when a
ready buyer is not available at a price that the Fund deems representative of
their value, the value of the Fund's net assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest
in taxable short-term investments ("Taxable Investments") consisting of:
notes of issuers having, at the time of purchase, a quality rating within the
two highest grades of Moody's, S&P or Fitch; obligations of the U.S.
Government, its agencies or instrumentalities; commercial paper rated not
lower than P-2 by Moody's, A-2 by S&P or F-2 by Fitch; certificates of
deposit of U.S. domestic banks, including foreign branches of domestic banks,
with assets of one billion dollars or more; time deposits; bankers'
acceptances and other short-term bank obligations; and repurchase agreements
in respect of any of the foregoing. Dividends paid by the Fund that are
attributable to income earned by the Fund from Taxable Investments will be
taxable to investors. See "Dividends, Distributions and Taxes." Except for
temporary defensive purposes, at no time will more than 20% of the value of
the Fund's net assets be invested in Taxable Investments. When the Fund has
adopted a temporary defensive position, including when acceptable California
Municipal Obligations are unavailable for investment by the Fund, in excess
of 35% of the Fund's net assets may be invested in securities that are not
exempt from California personal income taxes. Under normal market conditions,
the Fund anticipates that not more than 5% of the value of its total assets
will be invested in any one category of Taxable Investments. Taxable
Investments are more fully described in the Statement of Additional
Information, to which reference hereby is made.
Page 24
RATINGS _ Bonds rated Ba by Moody's are judged to have speculative elements;
their future cannot be considered as well assured and often the protection of
interest and principal payments may be very moderate. Bonds rated BB by S&P
are regarded as having predominantly speculative characteristics and, while
such obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. Bonds
rated BB by Fitch are considered speculative and the payment of principal and
interest may be affected at any time by adverse economic changes. Bonds rated
C by Moody's are regarded as having extremely poor prospects of ever
attaining any real investment standing. Bonds rated D by S&P are in default
and the payment of interest and/or repayment of principal is in arrears.
Bonds rated DDD, DD or D by Fitch are in actual or imminent default, are
extremely speculative and should be valued on the basis of their ultimate
recovery value in liquidation or reorganization of the issuer; DDD represents
the highest potential for recovery of such bonds; and D represents the lowest
potential for recovery. Such bonds, though high yielding, are characterized
by great risk. See "Appendix B" in the Statement of Additional Information
for a general description of Moody's, S&P and Fitch ratings of Municipal
Obligations.
The ratings of Moody's, S&P and Fitch represent their opinions as to
the quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and,
although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
bonds. Although these ratings may be an initial criterion for selection of
portfolio investments, The Dreyfus Corporation also will evaluate these
securities and the ability of the issuers of such securities to pay interest
and principal. The Fund's ability to achieve its investment objective may be
more dependent on The Dreyfus Corporation's credit analysis than might be the
case for a fund that invested in higher rated securities.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 25
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Page 27
DREYFUS
General California Municipal Bond Fund, Inc.
Prospectus
(LION LOGO) Registration Mark
Copy Rights 1996 Dreyfus Service Corporation
131p10020196
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
FEBRUARY 1, 1996
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 Bond Fund, Inc. (the "Fund"), dated
February 1, 1996, as it may be revised from time to time. To obtain a copy
of the Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144, or call toll free 1-800-645-
6561.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . B-11
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . B-15
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . B-17
Service Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-18
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . . . B-19
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . B-19
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . . . B-21
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . B-24
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . . B-28
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . B-29
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . B-50
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . B-61
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended
September 30, 1995, computed on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Fitch Moody's Standard
Investors Investors & Poor's
Service, L.P. Service, Inc. Ratings Group Percentage
("Fitch") or ("Moody's") or ("S&P") of Value
<S> <C> <C> <C>
AAA Aaa AAA 29.6%
AA Aa AA 17.0
A A A 31.6
BBB Baa BBB 11.6
D D D .3
F-1+/F-1 VMIG1/MIG1, SP-1+/SP-1, 1.6
P-1 A-1
Not Rated Not Rated Not Rated 8.3*
______
100.0%
======
* Included in the Not Rated category are securities comprising 8.3% of the Fund's market value which,
while not rated, have been determined by the Manager to be of comparable quality to securities in the
following rating categories: Aaa/AAA (1.5%), Aa/AA (.1%) and Baa/BBB (6.7%).
</TABLE>
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, industrial, port or parking facilities, air or water
pollution control facilities and certain local facilities for water supply,
gas, electricity or sewage or solid waste disposal; the interest paid on
such obligations may be exempt from Federal income tax, although current
tax laws place substantial limitations on the size of such issues. Such
obligations are considered to be Municipal Obligations if the interest paid
thereon qualifies as exempt from Federal income tax in the opinion of bond
counsel to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand obligations are tax exempt
obligations ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any time, or at
specified intervals. 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 obligation 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 Shareholder Services Plan,
will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the
event of foreclosure might prove difficult. The staff of the Securities
and Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully
the Fund's investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
other potential buyers; (3) the willingness of dealers to undertake to make
a market in the lease obligation; (4) the nature of the marketplace trades
including the time needed to dispose of the lease obligation, the method of
soliciting offers and the mechanics of transfer; and (5) such other factors
concerning the trading market for the lease obligation as the Manager may
deem relevant. In addition, in evaluating the liquidity and credit quality
of a lease obligation that is unrated, the Fund's Board has directed the
Manager to consider (a) whether the lease can be cancelled; (b) what
assurance there is that the assets represented by the lease can be sold;
(c) the strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (d) the
likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to
the operations of the municipality (e.g., the potential for an "event of
nonappropriation"); (e) the legal recourse in the event of failure to
appropriate; and (f) such other factors concerning credit quality as the
Manager may deem relevant. The Fund will not invest more than 15% of the
value of its net assets in lease obligations that are illiquid and in other
illiquid securities.
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. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Manager will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given by Moody's, S&P or Fitch for Municipal Obligations may
change as a result of changes in such organizations or their rating
systems, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies contained in the
Fund's Prospectus and this Statement of Additional Information. The
ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and
are not absolute standards of quality. Although these ratings may be an
initial criterion for selection of portfolio investments, the Manager also
will evaluate these securities.
Illiquid Securities. If a substantial market of qualified
institutional buyers develops for certain restricted securities purchased
by the Fund pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. Because it is not
possible to predict with assurance how the market for restricted securities
pursuant to Rule 144A will develop, the Fund's Board has directed the
Manager to monitor carefully the Fund's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, the Fund's investing in such securities
may have the effect of increasing the level of illiquidity in the Fund's
portfolio during such period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities are supported by the full faith and credit
of the U.S. Treasury; others by the right of the issuer to borrow from the
U.S. Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others
only by the credit of the agency or instrumentality. These securities bear
fixed, floating or variable rates of interest. While the U.S. Government
provides financial support to such U.S. Government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so,
since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally
are limited to London branches of domestic banks that have total assets in
excess of one billion dollars. Time deposits which may be held by the Fund
will not benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
In a repurchase agreement, the Fund buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. The Fund's
custodian or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by the Fund. In an attempt
to reduce the risk of incurring a loss on a repurchase agreement, the Fund
will enter into repurchase agreements only with domestic banks with total
assets in excess of 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.
Management Policies
Derivatives. The Fund may invest in Derivatives (as defined in the
Prospectus) for a variety of reasons, including to hedge certain market
risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit the Fund to increase or
decrease the level of risk, or change the character of the risk to which
its portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
When required by the Securities and Exchange Commission, the Fund will
set aside permissible liquid assets in a segregated account to cover its
obligations relating to its purchase of Derivatives. To maintain this
required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
Derivative position at a reasonable price. Derivatives may be purchased on
established exchanges or through privately negotiated transactions referred
to as over-the-counter Derivatives. Exchange-traded Derivatives generally
are guaranteed by the clearing agency which is the issuer or counterparty
to such Derivatives. This guarantee usually is supported by a daily
payment system (i.e., margin requirements) operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing
agency defaults, there is relatively little counterparty credit risk
associated with Derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter Derivatives. Therefore, each
party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the
same manner as it would review the credit quality of a security to be
purchased by a Series. Over-the-counter Derivatives are less liquid than
exchange-traded Derivatives since the other party to the transaction may be
the only investor with sufficient understanding of the Derivative to be
interested in bidding for it.
Futures Transactions--In General. The Fund may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the
Fund intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could
move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the transaction
being hedged and the price movements of the futures contract. For example,
if the Fund uses futures to hedge against the possibility of a decline in
the market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit
of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. The Fund may have
to sell such securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, The Fund may be required to segregate cash or high
quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting
the Fund's ability otherwise to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell
interest rate futures contracts. An interest rate future obligates the
Fund to purchase or sell an amount of a specific debt security at a future
date at a specific price.
Options--In General. The Fund may purchase and write (i.e., sell)
call or put options with respect to specific securities. A call option
gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying security or securities at the exercise price
at any time during the option period, or at a specific date. Conversely, a
put option gives the purchaser of the option the right to sell, and
obligates the writer to buy, the underlying security or securities at the
exercise price at any time during the option period.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise covers
the transaction by segregating cash or other securities. A put option
written by the Fund is covered when, among other things, cash or liquid
securities having a value equal to or greater than the exercise price of
the option are placed in a segregated account with the Fund's custodian to
fulfill the obligation undertaken. The principal reason for writing
covered call and put options is to realize, through the receipt of
premiums, a greater return than would be realized on the underlying
securities alone. The Fund receives a premium from writing covered call or
put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen
events, at times have rendered certain of the clearing facilities
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts
or suspensions in one or more options. There can be no assurance that
similar events, or events that may otherwise interfere with the timely
execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If,
as a covered call option writer, the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Future Developments. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts
and any other Derivatives which are not presently contemplated for use by
the Fund or which are not currently available but which may be developed,
to the extent such opportunities are both consistent with the Fund's
investment objective and legally permissible for the Fund. Before entering
into such transactions or making any such investment, the Fund will provide
appropriate disclosure in its Prospectus or Statement of Additional
Information.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to
changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise)
based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may
expose the Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued
basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received from securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in
connection with the loan. These conditions may be subject to future
modification.
Investment Considerations and Risks
Investing in California Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statues that limit the
taxing and spending authority of California governmental entities, as well
as from the general financial condition of the State of California. From
mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State experienced recurring budget deficits for four of its five fiscal
years ended June 30, 1992. The State had operating surpluses of
approximately $109 million in fiscal 1992-93 and $917 million in 1993-94.
However, at June 30, 1994, according to California's Department of Finance,
the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further
consequence of the large budget imbalances over the last three fiscal years
has been that the State depleted its available cash resources and has had
to use a series of external borrowings to meet its cash needs. To meet its
cash flow needs in the 1994-95 fiscal year, the State issued, in July and
August 1994, $4.0 billion of revenue anticipation warrants and $3.0 billion
of revenue anticipation notes. The 1994-95 budget Act contains a plan to
retire a projected $1.025 billion deficit in the 1995-96 fiscal year. The
Department of Finance projects that, after repaying the last of the
carryover budget deficit, there will be a positive balance of $28 million
in the Special Fund for Economic Uncertainties at June 30, 1996. As a
result of the deterioration of the State's budget and cash situation
between October 1991 and July 1994, the rating on the State's general
obligation bonds was reduced by S&P from AAA to A, by Moody's from Aaa to
A1 and by Fitch AAA to A. These and other factors may have the effect of
impairing the ability of the issuers of California Municipal Obligations to
pay interest on, or repay principal of, such California Municipal
Obligations. Investors should review "Appendix A" which sets forth
additional information relating to investing in California Municipal
Obligations.
Lower Rated Bonds. The Fund is permitted to invest in securities
rated Ba or lower by Moody's or BB or lower by S&P and Fitch and as low as
the lowest rating assigned by Moody's, S&P or Fitch. Such bonds, though
higher yielding, are characterized by risk. See "Description of the Fund--
Investment Considerations and Risks--Lower Rated Bonds" in the Prospectus
for a discussion of certain risks and "Appendix B" for a general
description of Moody's, S&P and Fitch ratings of Municipal Obligations.
Although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
bonds. The Fund will rely on the Manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these
bonds tend to be more sensitive to economic conditions than are higher
rated securities. These bonds generally are considered by Moody's, S&P and
Fitch to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market
price and yield and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the
issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio and calculating its
net asset value. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may decrease the values and liquidity of
these securities. In such cases, judgment may play a greater role in
valuation because less reliable, objective data may be available.
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon bonds and pay-in-kind bonds in which the
Fund may invest up to 5% of its net assets. Such zero coupon, pay-in-kind
or delayed interest bonds carry an additional risk in that, unlike bonds
which pay interest throughout the period to maturity, the Fund will realize
no cash until the cash payment date unless a portion of such securities are
sold and, if the issuer defaults, the Fund may obtain no return at all on
its investment. See "Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 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 "1940 Act")) of the Fund's outstanding voting shares.
Investment restrictions numbered 10 and 11 are not fundamental policies and
may be changed by a vote of a majority of the Fund's Board members at any
time. The Fund may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or
as otherwise provided in the Fund's Prospectus.
2. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Fund's total assets). Transactions in futures and options do not
involve any borrowings for purposes of this restriction.
3. Sell securities short or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of transactions,
but the Fund may make margin deposits in connection with transactions in
futures, including those related to indices, and options on futures
contracts or indices.
4. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage
of the lower purchase price available.
5. Purchase, hold or deal in real estate, real estate investment
trust securities or oil and gas interests, but the Fund may invest in
Municipal Obligations secured by real estate or interests therein.
6. Invest in commodities, except that the Fund may purchase and sell
futures contracts, including those relating to indices, and options on
futures contracts or indices, as described in the Fund's Prospectus.
7. Lend any funds or other assets, except through the purchase of
qualified debt obligations and the entry into repurchase agreements
referred to above and in the Fund's Prospectus; however, the Fund may lend
its portfolio securities in an amount not to exceed 33-1/3% of the value of
its total assets. Any loans of portfolio securities will be made according
to guidelines established by the Securities and Exchange Commission and the
Fund's Board.
8. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
9. Purchase securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of
assets.
10. Pledge, mortgage, hypothecate, or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings, and except
to the extent related to the deposit of assets in escrow in connection with
the purchase of securities on a when-issued or delayed-delivery basis and
collateral and initial or variation margin arrangements with respect to
futures contracts, including those relating to indices, and options on
futures contracts or indices.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid if,
in the aggregate, more than 15% of the value of the Fund's net assets would
be so invested.
In addition, the Fund will not issue any senior security (as such term
is defined in Section 18(f) of the 1940 Act), except to the extent the
activities permitted in Investment Restriction Nos. 2, 3, 6 and 10 may be
deemed to give rise to a senior security.
For purposes of Investment Restriction No. 8, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together
as an "industry."
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values
or assets will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five
years, are shown below. Each Board member who is deemed to be an
"interested person" of the Fund, as defined in the 1940 Act, is indicated
by an asterisk.
Board Members of the Fund
CLIFFORD L. ALEXANDER, JR., Board Member. 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
Corporation, 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, Board Member. 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 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 to December
31, 1994, he was a director of Mellon Bank Corporation. He is
Chairman of the Board of Directors of 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 and home furnishings and fabrics, Curtis
Industries, Inc., a national distributor of security products,
chemicals, and automotive and other hardware; and Staffing Resources,
Inc. He is 52 years old and his address is 200 Park Avenue, New York,
New York 10166.
ERNEST KAFKA, Board Member. 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 10128.
SAUL B. KLAMAN, Board Member. 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 76 years old and his address is 431-B
Dedham Street, The Gables, Newton Center, Massachusetts 02159.
NATHAN LEVENTHAL, Board Member. 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, an
organization 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
"Service Plan" and "Shareholder Services Plan" remain in effect, the Board
members of the Fund who are not "interested persons" of the Fund, as
defined in the 1940 Act, will be selected and nominated by the Board
members who are not "interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund for the fiscal year
ended September 30, 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, 1995 is as follows:
<TABLE>
<CAPTION>
(3) (5)
(2) Pension or (4) Total Compensation
(1) Aggregate Retirement Benefits Estimated Annual from Fund and Fund
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, Jr. $3,750 none none $73,210(17)
Peggy C. Davis $3,750 none none $61,751(15)
Joseph S. DiMartino $3,814 none none $445,000**(94)
Ernest Kafka $3,750 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 $303 for all Board members
as a group.
** Estimated amount for the year ended December 31, 1995.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Executive
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 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, and prior thereto, he was employed as an
Associate at Sidley & Austin. 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 33 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.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to May 1995, she was enrolled at the Fordham University School of Law,
from which she received her J.D. Prior to September 1992, she was an
Assistant at the National Association for Public Interest Law. She
received her B.S. from Cornell University in May 1991. She is 26
years old.
JOSEPH S. 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.
MARGARET PARDO, Assistant Secretary. Legal Assistant with the Distributor
and an officer of other investment companies advised or administered
by the Manager. From June 1992 to April 1995 she was a Medical
Coordination Officer at ORBIS International. Prior to June 1992, she
worked as Program Coordinator at Physicians World Communications
Group. She is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Board members and officers of the Fund, as a group, owned less than 1%
of the Fund's Common Stock outstanding on January 19, 1996.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager, by vote cast in person
at a meeting called for the purpose of voting on such approval. The
Agreement was approved by shareholders on August 3, 1994, and was last
approved by the Fund's Board, including a majority of the Board members who
are not "interested persons" of any party to the Agreement, at a meeting
held on September 27, 1995. The Agreement is terminable without penalty,
on 60 days' notice, by the Fund's Board or by vote of the holders of a
majority of the Fund's shares, or, on not less than 90 days' notice, by the
Manager. The Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; William T. Sandalls, Jr., Vice President and
Chief Financial Officer; 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; 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;
Maurice Bendrihem, Controller; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene
and Julian M. Smerling, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions, and provides
the Fund with portfolio managers who are authorized by the Fund's Board to
execute purchases and sales of securities. The Fund's portfolio managers
are Joseph P. Darcy, A. Paul Disdier, Douglas J. Gaylor, Karen M. Hand,
Stephen C. Kris, Richard J. Moynihan, Jill C. Shaffro, L. Lawrence
Troutman, Samuel J. Weinstock and Monica S. Wieboldt. The Manager also
maintains a research department with a professional staff of portfolio
managers and securities analysts who provide research services for the Fund
as well as for other funds advised by the Manager. All purchases and sales
are reported for the Board's review at the meeting subsequent to such
transactions.
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: organizational
costs, taxes, interest, loan commitment fees, interest and distributions
paid on securities sold short, brokerage fees and commissions, if any, fees
of Board members who are not officers, directors, employees or holder of 5%
or more of the outstanding voting securities of the Manager, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees,
certain insurance premiums, industry association fees, outside auditing and
legal expenses, costs of maintaining corporate existence, costs of
independent pricing services, 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 shareholders' reports and meetings, and any
extraordinary expenses.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. All fees and expenses are
accrued daily and deducted before payment of dividends to investors. For
the fiscal years ended September 30, 1993, 1994 and 1995, the management
fees payable amounted to $2,487,070, $2,351,917 and $1,897,821,
respectively, which amounts were reduced by $457,057 in fiscal 1993
pursuant to undertakings in effect, resulting in net fees paid to the
Manager of $2,030,013 in fiscal 1993.
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 the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be
estimated daily, and reconciled and effected or paid, as the case may be,
on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis pursuant to an agreement 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.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day
the Transfer Agent and the New York Sock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on
the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
SERVICE PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Service
Plan."
Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the 1940 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
has adopted, but not implemented, such a plan (the "Service Plan") pursuant
to which the Fund may (i) reimburse the Distributor for payments to certain
financial institutions (which may include banks), securities dealers and
other financial industry professionals (collectively, "Service Agents") for
distributing the Fund's shares and servicing shareholder accounts and (ii)
pay the Manager, Dreyfus Service Corporation and any affiliate of either of
them for advertising and marketing relating to the Fund and for servicing
shareholder accounts. The Fund's Board believes that there is a reasonable
likelihood that the Plan may benefit the Fund and its shareholders.
A quarterly report of the amounts expended under the Service Plan, and
the purposes for which such expenditures were incurred, must be made to the
Board for its review. In addition, the Service Plan provides that it may
not be amended to increase materially the costs which the Fund may bear for
distribution pursuant to the Service Plan without shareholder approval and
that other material amendments of the Service Plan must be approved by the
Board, and by the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager and have no direct or
indirect financial interest in the operation of the Service Plan or in the
related service agreements, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Service Plan and the
related service agreements are subject to annual approval by such vote of
the Board members cast in person at a meeting called for the purpose of
voting on the Service Plan. The Service Plan was last so approved at a
meeting held on September 27, 1995. The Plan is terminable at any time by
vote of a majority of the Board members who are not "interested persons"
and have no direct or indirect financial interest in the operation of the
Service Plan or in any of the related service agreements or by vote of a
majority of the Fund's shares.
Management of the Fund currently does not intend to implement the
Service Plan and will only do so if prior written notice is given to
shareholders.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Service Plan pursuant to which the
Fund reimburses Dreyfus Service Corporation for certain allocated expenses
of providing personal services and/or maintaining shareholder accounts.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Board for its review. In addition, the Shareholder
Services Plan provides that material amendments of the Shareholder Services
Plan must be approved by the Board, and by the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund and have no
direct or indirect financial interest in the operation of the Shareholder
Services Plan by vote of the Board members cast in person at a meeting
called for the purpose of considering such amendments. The Shareholder
Services Plan is subject to annual approval by such vote of the Board
members cast in person at a meeting called for the purpose of voting on the
Shareholder Services Plan. The Shareholder Services Plan is terminable at
any time by vote of a majority of the Board members who are not "interested
persons" and have no direct or indirect financial interest in the operation
of the Shareholder Services Plan.
During the fiscal year ended September 30, 1995, the Fund was charged
an aggregate $143,052 pursuant to the Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks ("Checks") drawn on the investor's Fund
account. Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Account Application,
Shareholder Services Form or later written request must be manually signed
by the registered owner(s). Checks may be made payable to the order of any
person in an amount of $500 or more. When a Check is presented to the
Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of full and fractional
shares in the investor's account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a copy of
the Check will be returned to the investor. Investors generally will be
subject to the same rules and regulations that apply to checking accounts,
although election of this Privilege creates only a shareholder-transfer
agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient
funds. Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, 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 next business day after receipt by the Transfer Agent of the
redemption request in proper form. Redemption proceeds ($1,000 minimum)
will be transferred by Federal Reserve wire only to the commercial bank
account specified by the investor on the Account Application or Shareholder
Services Form, or to a correspondent bank if the investor's bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such
bank 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 transmission:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York
Stock Exchange Medallion Program, the Securities Transfer Agents Medallion
Program ("STAMP"), and the Stock Exchanges Medallion Program. Guarantees
must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call the telephone number listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of
the Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Board reserves the right to make payments in whole or in part
in securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In such event, the securities would be valued in
the same manner as the portfolio of the Fund 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 number.
To request an exchange, an investor, or the 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 ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value
of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if his account falls below the
amount designated to be exchanged under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are made
in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under IRA and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to the IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. 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.
Dreyfus Dividend Sweep. Dreyfus 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. Dividend and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
by an independent pricing service (the "Service") approved by the Board.
When, in the judgment of the Service, quoted bid prices for investments are
readily available and are representative of the bid side of the market,
these investments are valued at the mean between the quoted bid prices (as
obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices
of municipal bonds of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. The
Service may employ electronic data processing techniques and/or a matrix
system to determine valuations. The Service's procedures are reviewed by
the Fund's officers under the general supervision of the Board. Expenses
and fees, including the management fee (reduced by the expense limitation,
if any) and fees pursuant to the Shareholder Services Plan, are accrued
daily and are taken into account for the purpose of determining the net
asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
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 Fund's portfolio turnover rate for the fiscal years ended
September 30, 1994 and 1995 was 29.74% and 83.31% respectively. The Fund
anticipates that its annual portfolio turnover rate generally will not
exceed 100%, but the turnover rate will not be a limiting factor when the
Fund deems it desirable to sell or purchase securities. Therefore,
depending upon market conditions, the Fund's annual portfolio turnover rate
may exceed 100% in particular years.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management believes that the Fund has qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code"), for the fiscal year ended September 30, 1995 and the Fund
intends to continue to so qualify, if such qualification is in the best
interests of its shareholders. As a regulated investment company, the Fund
will pay no Federal income tax on net investment income and net realized
capital gains to the extent that such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. 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, 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 as
ordinary income. Distributions from net realized long-term capital gains
may constitute long-term capital gains for individual California resident
shareholders. Unlike under Federal tax law, the Fund's shareholders will
not be subject to California personal income tax, or receive a credit for
California taxes paid by the Fund, on undistributed capital gains. In
addition, California tax law does not consider any portion of the
exempt-interest dividends paid an item of tax preference for the purposes
of computing the California alternative minimum tax.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of his shares below the
cost of his investment. Such a distribution would be a return on the
investment in an economic sense although taxable as stated in "Dividends,
Distributions and Taxes" in the Prospectus. In addition, the Code provides
that if a shareholder has not held his Fund shares for more than six months
(or such shorter period as the Internal Revenue Service may prescribe by
regulation) and has received an exempt-interest dividend with respect to
such shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
In addition, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258 of the Code. "Conversion transactions" are defined to include certain
forward, futures, option and "straddle" transactions, transactions marketed
or sold to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss the Fund realizes from
certain futures and options transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss
will arise upon exercise or lapse of such futures and options as well as
from closing transactions. In addition, such futures or options remaining
unexercised at the end of the Fund's taxable year will be treated as sold
for their then fair market value, resulting in additional gain or loss to
the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain futures and
options transactions may constitute "straddles." "Straddles" are defined
to include "offsetting positions" in actively traded personal property.
The tax treatment of "straddles" is governed by Sections 1092 and 1258 of
the Code, which, in certain circumstances, overrides or modifies the
provisions of Section 1256 of the Code. As such, all or a portion of any
short or long-term capital gain from certain "straddle" transactions may be
recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain futures or options transactions, such "straddles" would
be characterized as "mixed straddles" if the futures or options
transactions comprising a part of such "straddles" were governed by Section
1256 of the Code. The Fund may make one or more elections with respect to
"mixed straddles." Depending on which election is made, if any, the
results to the Fund may differ. If no election is made to the extent the
"straddle" rules apply to positions established by the Fund, losses
realized by the Fund will be deferred to the extent of unrealized gain in
the offsetting position. Moreover, as a result of the "straddle" and
conversion transaction rules, short-term capital losses on "straddle"
positions may be recharacterized as long-term capital losses, and long-term
capital gains may be treated as short-term capital gains.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such
portion in order to maintain its qualification as a regulated investment
company. In such case, the Fund may have to dispose of securities which it
might otherwise have continued to hold in order to generate cash to satisfy
these distribution requirements.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
The Fund's current yield for the 30-day period ended September 30,
1995 was 5.17%. Current yield is computed pursuant to a formula which
operates as follows: the amount of the Fund's expenses accrued for the
30-day period (net of reimbursements) is subtracted from the amount of the
dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund during the period. That result is then divided
by the product of: (a) the average daily number of shares outstanding
during the period that were entitled to receive dividends, and (b) the net
asset value per share on the last day of the period less any undistributed
earned income per share reasonably expected to be declared as a dividend
shortly thereafter. The quotient is then added to 1, and that sum is
raised to the 6th power, after which 1 is subtracted. The current yield is
then arrived at by multiplying the result by 2.
Based upon a combined 1995 Federal and State of California effective
tax rate of 46.24%, the Fund's tax equivalent yield for the 30-day period
ended September 30, 1995 was 9.62%. Tax equivalent yield is computed by
dividing that portion of the current yield (calculated as described above)
which is tax exempt by 1 minus a stated tax rate and adding the quotient to
that portion, if any, of the yield of the Fund that is not tax exempt.
The tax equivalent yield 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 any local (including, but not limited
to, county, district or city) taxes, including applicable surcharges. In
addition, there may be pending legislation which could affect such stated
tax rates or yields. Each investor should consult its tax adviser, and
consider its own factual circumstances and applicable tax laws, in order to
ascertain the relevant tax equivalent yield.
The Fund's average annual total return for the 1, 5 and 5.975 year
periods ended September 30, 1995 was 9.82%, 8.18% and 8.00%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
The Fund's total return for the period October 10, 1989 (commencement
of operations) to September 30, 1995 was 58.34%. Total return is
calculated by subtracting the amount of the Fund's net asset value per
share at the beginning of a stated period from the net asset value per
share at the end of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing the result by
the net asset value per share at the beginning of the period.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and not as representative of the Fund's
past or future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or
events, including those relating to or arising from actual or proposed tax
legislation, statistical or other information relating to investment
companies, as compiled by industry associations such as the Investment
Company Institute, and Morningstar ratings and related analysis supporting
the rating.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares are of one class and have equal rights as to
dividends and liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL,
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island, 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Fund, the Transfer Agent arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications
between shareholders and the Fund and the payment of dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's custodian. Neither the
Transfer Agent nor The Bank of New York has any part in determining the
investment policies of the Fund or which securities are to be purchased or
sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives, as well as the general financial condition of the State, could
adversely affect the ability of issuers of California Municipal Obligations
to pay interest and principal on such obligations. The following
information constitutes only a brief summary, does not purport to be a
complete description, and is based on information drawn from official
statements relating to securities offerings of the State of California and
various local agencies, available as of the date of this Statement of
Additional Information. While the Fund has not independently verified such
information, it has no reason to believe that such information is not
correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, were all severely affected. Job losses
have been the worst of any post-war recession. Unemployment reached 10.1%
in January 1994, but fell sharply to 7.7% in October and November 1994.
According to the State's Department of Finance, recovery from the recession
in California began in 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also has caused increased expenditures for
health and welfare programs. The State also has been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health and welfare, and
corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. As a result, the State
experienced recurring budget deficits in the late 1980s and early 1990s.
The State Controller reported that expenditures exceeded revenues for four
of the five fiscal years ending with 1991-92. The State had an operating
surplus of approximately $109 million in 1992-93 and $836 million in 1993-
94. However, at June 30, 1994, according to the Department of Finance, the
State's Special Fund for Economic Uncertainties ("SFEU") still had a
deficit, on a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal
year the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which mature on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) projected $42.4 billion of General Fund revenues and
transfers and $41.7 billion of budgeted expenditures. In addition, the
1994-95 Budget Act anticipated deferring retirement of about $1 billion of
the accumulated budget deficit to the 1995-96 fiscal year when it is
intended to be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposed General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which 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 was based on a number of assumptions, including receipt
of $830 million from the Federal government to offset costs of undocumented
and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"),
together with its pooled investment funds (the "County Funds") filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the County Funds had suffered significant market losses in their
investments, causing a liquidity crisis for the County Funds and the
County. More than 180 other public entities, most of which, but not all,
are located in the County, were also depositors in the County Funds. As of
mid-January 1995, following a restructuring of most of the County Funds'
assets to increase their liquidity and reduce their exposure to interest
rate increases, the County estimated the County Funds' loss at about $1.69
billion, or about 23% of their initial deposits of approximately $7.5
billion. Many of the entities which deposited monies in the County Funds,
including the County, are facing cash flow difficulties because of the
bankruptcy filing and may be required to reduce programs or capital
projects. This also may effect their ability to meet their outstanding
obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently
predict what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles causing significant damage to
public and private structures and facilities. Although some individuals
and businesses suffered losses totaling in the billions of dollars, the
overall effect of the earthquake on the regional and State economy is not
expected to be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be
transferred by the Controller as necessary to meet cash needs of the
General Fund. The Controller is required to return moneys so transferred
without payment of interest as soon as there are sufficient moneys in the
General Fund. For budgeting and accounting purposes, any appropriation
made from the SFEU is deemed an appropriation from the General Fund. For
year-end reporting purposes, the Controller is required to add the balance
in the SFEU to the balance in the General Fund so as to show the total
monies then available for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1994, the General Fund had outstanding loans in the aggregate principal
amount of $43 million to the General Fund from the SFEU and outstanding
loans in the aggregate principal amount of $5.2 billion, which consisted of
$4.0 billion of internal loans to the General Fund from the SFEU and other
Special Funds and $1.2 billion of external loans represented by the 1994
revenue anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue
Law Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that
additional taxes may be levied by cities, counties and special districts
only upon approval of not less than a two-thirds vote of the "qualified
electors" of such district, and requires not less than a two-thirds vote of
each of the two houses of the State Legislature to enact any changes in
State taxes for the purpose of increasing revenues, whether by increased
rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that
purpose beginning in the 1978-79 fiscal year. In recent years, in addition
to such increased expenditures, the indexing of personal income tax rates
(to adjust such rates for the effects of inflation), the elimination of
certain inheritance and gift taxes and the increase of exemption levels for
certain other such taxes had a moderating impact on the growth in State
revenues. In addition, the State has increased expenditures by providing a
variety of tax credits, including renters' and senior citizens' credits and
energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service." One of the exclusions from these
limitations is "debt service" (defined as "appropriations required to pay
the cost of interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on indebtedness
existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition,
appropriations required to comply with mandates of courts or the Federal
government and, pursuant to Proposition 111 enacted in June 1990,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels are not included as appropriations
subject to limitation. In addition, a number of recent initiatives were
structured or proposed to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article
XIIIB limits (e.g., increased cigarette and tobacco taxes enacted by
Proposition 99 in 1988). The appropriations limit also may be exceeded in
cases of emergency. However, unless the emergency arises from civil
disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit
for the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined
appropriations limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit.
The limit for the 1992-93 fiscal year was $35.01 billion, and the
appropriations subject to limitation were $7.53 billion under the limit.
The limit for the 1993-94 fiscal year was $36.060 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year was $37.55 billion, and the
appropriations subject to limitations were 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 $18.5 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget was
introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter 703,
Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a
drafting error in Chapter 703, he could not implement the $1.083 billion
reduction of the 1991-92 school funding appropriation, which was part of
the inter-year adjustment. The Legislature untimely enacted corrective
legislation as part of the 1993-94 Budget package to implement the $1.083
billion inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-12
schools in order to maintain per-average daily attendance ("ADA") funding
at the same level as 1991-92, at $4,187. An additional loan of $241
million was made to community college districts. These loans are to be
repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit discussed above also seeks to declare invalid the
provision making the $732 million a loan "repayable" from future years'
Proposition 98 funds. Including both State and local funds, and adjusting
for the loans and repayments, on a cash basis, total Proposition 98 K-12
funding in 1992-93 increased to $21.5 billion, 2.4% more than the amount in
1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported
pupil enrollment, the 1993-94 Budget Act projected that the 1992-93
Proposition 98 Budget Act appropriations of $16.6 billion exceeded a
revised minimum guarantee by $313 million. As a result, the 1993-94 Budget
Act reverted $25 million in 1992-93 appropriations to the General Fund.
Limiting the reversion to this amount ensures that per ADA funding for
general purposes will remain at the prior year level of $4,217 per pupil.
The 1993-94 Governor's Budget subsequently proposed deficiency funding of
$121 million for school apportionments and special education, increasing
funding per pupil in 1992-93 to $4,244. The 1993-94 Budget Act also
designated $98 million in 1992-93 appropriations toward satisfying prior
years' guarantee levels, an obligation that resulted primarily from
updating State tax revenues for 1991-92, and designates $190 million as a
loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding
level at $13.5 billion based on the "Test 3" calculation where the
guarantee is determined by the change in per capita growth in General Fund
revenues, which are projected to decrease on a year-over-year basis. This
amount also takes into account increased property taxes transferred to
school districts from other local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93)
provided a new loan of $609 million to K-12 schools in order to maintain
per ADA funding at $4,217 and a loan of $178 million to community colleges.
These loans have been combined with the K-14 1992-93 loans into one loan
totalling $1.760 billion. Repayment of this loan would be from future
years' Proposition 98 entitlements, and would be conditioned on maintaining
current funding levels per pupil for K-12 schools. Chapter 66 also reduced
the "Test 1" percentage to 35% to reflect the property tax shift among
local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K14 schools based on Test 2. This exceeded the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil
at $4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as
well as an anticipated deficiency in special education fundings. These and
other minor appropriation adjustments increased the 1993-94 Proposition 98
guarantee to $13.8 billion, which exceeded the minimum guarantee in that
year by $272 million and provided per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusted the 1993-94 minimum guarantee
to reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect
changes in the statutory continuous appropriation for apportionments. The
revised appropriations exceeded the minimum guarantee by $32 million. This
appropriation level still provided per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted
for changes in factors described above, and was calculated to be $14.9
billion. Within the minimum guarantee, the dollars per pupil were
maintained at the prior year's level; consequently, the 1994-95 minimum
guarantee included a loan repayment of $135 million, and the per-pupil
funding increased to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within
the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1992-93 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 38% of General Fund
revenue in 1992-93. Bank and corporation tax revenues comprised about 11%
of General Fund revenue in 1992-93. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict,
and the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit
in the SFEU approaching $2.8 billion at its peak. The State's budget
problems in recent years also have been caused by a structural imbalance
which has been identified by the current and previous Administrations. The
largest General Fund programs -- K-14 education, health, welfare and
corrections -- were increasing faster than the revenue base, driven by the
State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on significant cuts in program expenditures,
some transfers of program responsibilities and funding from the State to
local governments, revenue increases (particularly in the 1991-92 fiscal
year budget), and various one-time adjustments and accounting changes.
However, as the recession took hold and deepened after the summer of 1990,
revenues dropped sharply and expenditures for health and welfare programs
increased as job losses mounted, so that the State ended each of the 1990-
91 and 1991-92 fiscal years with an unanticipated deficit in the budget
reserve, the SFEU, as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous
two fiscal years, the Controller in April 1992 indicated that cash
resources (including borrowing from Special Funds) would not be sufficient
to meet all General Fund obligations due on June 30 and July 1, 1992. On
June 25, 1992, the Controller issued $475 million of 1992 Revenue
Anticipation Warrants (the "1992 Warrants") in order to provide funds to
cover all necessary payments from the General Fund at the end of the 1991-
92 fiscal year and on July 1, 1992. The 1992 Warrants were paid on July 24,
1992. In addition to the 1992 Warrants, the Controller reported that as of
June 30, 1992, the General Fund had borrowed $1.336 billion from the SFEU
and $4.699 billion from other Special Funds, using all but about $183
million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated
budget deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the
budget was passed. Starting on July 1, 1992, the Controller was required
to issue "registered warrants" in lieu of normal warrants backed by cash to
pay many State obligations. Available cash was used to pay
constitutionally mandated and priority obligations, such as debt service on
bonds and revenue anticipation warrants. Between July 1 and September 4,
1992, the Controller issued an aggregate of approximately $3.8 billion of
registered warrants payable from the General Fund, all of which were called
for redemption by September 4, 1992 following enactment of the 1992-93
Budget Act and issuance by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992,
and it was signed by the Governor on September 2, 1992. The 1992-93 Budget
Act provided for expenditures of $57.4 billion and consisted of General
Fund expenditures of $40.8 billion and Special Fund and Bond Fund
expenditures of $16.6 billion. The Department of Finance estimated a
balance in the SFEU of $28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of
$39.9 billion. It also proposed Special Fund expenditures of $12.4 billion
and Special Fund revenues of $12.1 billion. The 1993-94 fiscal year
represented the third consecutive year the Governor and the Legislature
were faced with a very difficult budget environment, requiring revenue
actions and expenditure cuts totaling billions of dollars to produce a
balanced budget. To balance the budget in the face of declining revenues,
the Governor proposed a series of revenue shifts from local government,
reliance on increased Federal aid and reductions in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. Unlike previous years, the Governor's
Budget and May Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals designed to
produce a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 fiscal year were about $800 million lower
than original projections, and expenditures were about $780 million higher,
primarily because of higher health and welfare caseloads, lower property
taxes which require greater State support for K-14 education to make up to
shortfall, and lower than anticipated Federal government payments for
immigration-related costs. The reports in May and June 1994, indicated that
revenues in the second half of the 1993-94 fiscal year were very close to
the projections made in the Governor's Budget of January 10, 1994, which
was consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-
year adjustments and reconciliations. Personal income tax and sales tax
continued to track projections. The largest factor in the higher than
anticipated revenues was from bank and corporation taxes, which were $140
million (18.4%) above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of
the 1993-94 fiscal year. Nevertheless, because of the $1.5 billion
variance from the original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget
environment to produce a balanced budget. Many program cost and budgetary
adjustments had already been made in the last three years. The Governor's
Budget Proposal, as updated in May and June 1994 proposed a two-year
solution to pass the accumulated deficit. The budget proposal set forth
revenue and expenditure forecasts and revenue and expenditure proposals
which estimated operating surpluses for the budget for both 1994-95 and
1995-96, and lead to the elimination of the accumulated budget deficit,
estimated at about $1.8 billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt
of about $360 million from the Federal government to reimburse the State's
cost of incarcerating undocumented immigrants, most of which eventually was
not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that
General Fund revenues for March 1995 were $28 million, or 1.1%, below
forecast, and that year-to-date General Fund revenues were $110 million, or
0.4%, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's
1994-95 Budget Act.
For the first time in four years, the State 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. The number of unemployed
Californians fell by nearly 400,000 during the year, while civilian
employment increased more than 300,000 in 1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's
recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual
rate, reflecting the uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of 1994 was about
4.2%. However, excluding the Northridge effects, growth would have been in
excess of 5%. Personal income is expected to grow 6.6% for 1995.
APPENDIX B
Description of S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will
include: (1) likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature and provisions of
the obligation; and (3) protection afforded by, and relative position of,
the obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" rating is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among
the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the
major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
The designation A-1 by S&P 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. Capacity for timely payment on
issues with an A-2 designation is strong. However, the relative degree of
safety is not as high as for issues designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end
of a rating category.
Municipal Note Ratings
Moody's ratings for state 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 alternative liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of
interest and/or principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD represents the highest
potential for recovery on these bonds and D represents the lowest potential
for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category covering 12-36
months or the DDD, DD or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings
on the existence of liquidity necessary to meet the issuer's obligations in
a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
__________ ________
<S> <C> <C>
CALIFORNIA-97.7%
ABAG Finance Corp., COP (ABAG XXIV) 6.90%, 4/1/2012......................... $ 3,500,000 $ 3,629,500
Allan Hancock Joint Community College District, COP, Refunding 7.625%, 10/1/2005 1,055,000 1,146,817
Anaheim Public Financing Authority, Tax Allocation Revenue 6.31%, 12/28/2018 6,000,000 6,269,940
Beaumont Unified School District, COP
(Capital Improvement Project) 7.70%, 1/1/2021........................... 1,100,000 1,142,405
Berkeley, HR (Alta Bates Project) 7.65%, 12/1/2015 (Prerefunded 8/1/2000) (a) 445,000 513,530
California:
6.125%, 10/1/2011 (Insured; FGIC)....................................... 8,000,000 8,509,920
Veterans 6.25%, 2/1/2014................................................ 5,000,000 5,003,200
California Department of Water Resources, Water System Revenue
(Central Valley Project):
6.125%, 12/1/2013..................................................... 6,500,000 6,576,245
6.40%, 12/1/2026...................................................... 12,600,000 12,830,958
California Educational Facilities Authority, Revenue:
(Chapman College) 7.50%, 1/1/2018....................................... 1,760,000 1,862,344
(Refunding-Pooled College and University Financings) 6.125%, 6/1/2009... 3,000,000 3,018,150
(Stanford University) 6%, 11/1/2016..................................... 5,910,000 5,943,391
(University of San Francisco) 6.30%, 10/1/2007.......................... 2,470,000 2,596,316
California Health Facilities Authority, Revenue
(Pacific Presbyterian Hospital) 7.60%, 6/1/2015......................... 885,000 982,846
California Health Facilities Financing Authority, Revenue:
(Help Group) 7%, 8/1/2021
(Insured; California Health Facilities Construction Loan Program)..... 1,800,000 1,900,692
(Kaiser Permanente) 5.60%, 5/1/2033..................................... 3,450,000 3,177,588
(Pomona Valley Hospital Medical Center) 7.375%, 1/1/2014................ 750,000 795,720
(Walden House) 6.85%, 3/1/2022.......................................... 3,225,000 3,384,412
California Housing Finance Agency, Home Mortgage Revenue:
6.10%, 8/1/2015 (Insured; MBIA)......................................... 5,765,000 5,712,077
7.50%, 8/1/2029......................................................... 1,525,000 1,595,653
7.65%, 8/1/2029......................................................... 900,000 947,682
7.60%, 8/1/2030......................................................... 1,855,000 1,965,539
7.70%, 8/1/2030......................................................... 1,540,000 1,630,229
California Pollution Control Financing Authority, SWDR
(North County Recycling Center) 6.75%, 7/1/2011
(LOC; Union Bank of Switzerland) (b).................................... 3,500,000 3,661,770
California Public Works Board, LR:
(Department of Correction - Madera State Prison) 6%, 6/1/2010........... 3,000,000 3,091,380
(Department of Correction - Susanville State Prison)
5.375%, 6/1/2018 (Insured; MBIA)...................................... 2,500,000 2,316,250
(Library and Courts Annex Building) 6%, 5/1/2013........................ 4,760,000 4,673,558
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ ________
CALIFORNIA (CONTINUED)
California Public Works Board, LR (continued):
Refunding 5.50%, 6/1/2014............................................... $ 5,000,000 $ 4,652,050
(University of California Projects):
5.55%, 6/1/2010....................................................... 3,195,000 3,107,297
6.40%, 12/1/2016 (Insured; AMBAC)..................................... 1,955,000 2,035,917
5.50%, 12/1/2018...................................................... 5,000,000 4,549,300
California Statewide Communities Development Authority, COP,
Health Facilities Revenue, Refunding (Barton Memorial Hospital)
6.50%, 12/1/2009 (LOC; Banque Nationale de Paris) (b)................... 1,600,000 1,667,072
California Statewide Communities Development Corp., COP
(Pacific Homes) 5.90%, 4/1/2009......................................... 7,000,000 7,132,440
Campbell, COP, Refunding (Civic Center Project)
6.90%, 10/1/2018 (Prerefunded 10/1/2001) (a)............................ 3,760,000 4,289,972
Chico Public Finance Authority, Revenue
(Chico Municipal Airport and Central Chico Redevelopment Project)
7.40%, 4/1/2021......................................................... 2,410,000 2,525,800
Chino Basin Regional Financing Authority, Revenue, Refunding
(Municipal Water District Sewer System Project) 6%, 8/1/2016 (Insured; AMBAC) 2,000,000 2,002,960
Commerce Joint Powers Financing Authority, Revenue, Multiple Project Loans
8%, 3/1/2022............................................................ 2,470,000 2,619,657
Compton, COP, Refunding 7.50%, 8/1/2005 (LOC; Mitsui Trust and Banking) (b). 2,680,000 2,880,384
Dry Creek Joint School District, Special Tax
(Community Facilities District Number 1) 7.25%, 9/1/2011................ 2,500,000 2,789,950
Folsom Public Financing Authority, Local Agency Revenue 7.70%, 10/1/2020.... 1,200,000 1,242,312
Fontana Public Financing Authority, Tax Allocation Revenue
(North Fontana Redevelopment Project) 7.25%, 9/1/2020................... 2,000,000 2,117,740
Fresno Unified School District, COP (Project Phase VI) 7.20%, 5/1/2011...... 4,250,000 4,509,122
Hollister Redevelopment Agency, Tax Allocation
(Hollister Community Development Project) 7.55%, 10/1/2013.............. 1,000,000 1,057,420
Inglewood, HR (Daniel Freeman Hospital) 6.75%, 5/1/2013..................... 2,000,000 2,064,420
La Mirada Redevelopment Agency
(Tax Allocation-Industrial Commercial Redevelopment)
6.80%, 8/15/2021 (Prerefunded 8/15/2000) (a)............................ 3,950,000 4,409,069
Lake Elsinore Public Financing Authority, Local Agency Revenue 8%, 10/1/2020 2,640,000 2,490,946
Los Alamitos Union Free School District, Special Tax
(Community Facilities District Number 1) 7.15%, 8/15/2021............... 2,000,000 2,046,820
Los Angeles, Harbor Department Revenue 6.60%, 8/1/2015...................... 4,240,000 4,412,102
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
Los Angeles Department of Water and Power:
Electric Plant Revenue:
6%, 6/1/2013 (Insured; MBIA).......................................... $ 3,100,000 $ 3,171,114
7.10%, 1/15/2031...................................................... 2,750,000 3,105,822
Waterworks Revenue 7.625%, 8/1/2027..................................... 2,000,000 2,176,160
Madera County, COP (Valley Childrens Hospital):
6.25%, 3/15/2007 (Insured; MBIA)........................................ 2,545,000 2,727,986
6.50%, 3/15/2008 (Insured; MBIA)........................................ 3,165,000 3,468,650
Metropolitan Water District, Southern California Waterworks Revenue
5.70%, 7/1/2011 (Insured; MBIA)......................................... 3,190,000 3,203,238
Mountain View, Shoreline Regional Park Community, Tax Allocation
5.75%, 8/1/2018......................................................... 5,000,000 4,887,700
Newhall Elementary and Castaic Union School District, COP
(School Improvement Project) 7.70%, 3/1/2011............................ 2,695,000 2,838,078
Northern California Power Agency, Public Power Revenue, Refunding
(Hydroelectric Project Number 1):
6.30%, 7/1/2018 (Insured; MBIA)....................................... 20,400,000 21,784,752
7.15%, 7/1/2024....................................................... 5,390,000 5,803,790
Orange County:
COP (Juvenile Justice Center) 7.625%, 6/1/2019 (Prerefunded 6/1/1999) (a) 2,500,000 2,813,025
Special Tax (Community Facilities District Number 87)
7.80%, 8/15/2015 (Prerefunded 8/15/2000) (a).......................... 1,500,000 1,736,505
Otay Municipal Water District (Improvement District Number 27) 6.70%, 9/1/2022 2,000,000 2,009,160
Oxnard Financing Authority, Solid Waste Revenue
6%, 5/1/2016 (Insured; AMBAC)........................................... 5,000,000 4,927,050
Palm Desert (Assessment District Number 94-1) 7.625%, 9/2/2019.............. 1,965,000 2,005,676
Port Oakland, Special Facility Revenue (Mitsui O.S.K. Lines Limited)
6.80%, 1/1/2019 (LOC; Industrial Bank of Japan) (b)..................... 3,000,000 3,071,010
Pittsburgh Redevelopment Agency, Tax Allocation
(Los Medanos Project) 5.80%, 8/1/2034................................... 5,000,000 4,886,400
Richmond Joint Powers Financing Authority, Revenue 7.25%, 5/15/2013......... 2,000,000 2,098,120
Sacramento County, Special Tax (Community Facilities District Number 1)
8.25%, 12/1/2020........................................................ 5,610,000 5,990,134
Sacramento Municipal Utility District, Electric Revenue:
6.30%, 8/1/2018 (Insured; FGIC)......................................... 8,000,000 8,080,320
5.75%, 5/15/2022........................................................ 3,795,000 3,592,271
Sacramento Schools Insurance Authority, Revenue
(Workers Compensation Program) 5.75%, 6/1/2003.......................... 6,885,000 7,081,980
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
San Bernardino, Health Care Systems Revenue (Sisters of Charity) 7%, 7/1/2021 $ 2,000,000 $ 2,179,480
San Francisco City and County Airports Commission, International Airport
Revenue
6.25%, 5/1/2014 (Insured; AMBAC)........................................ 3,505,000 3,594,798
San Marcos Public Facilities Authority, Revenue, Refunding
(Public Improvement-Civic Center) 6.15%, 8/1/2013....................... 4,500,000 4,298,085
Santa Barbara County, COP, Refunding 5.70%, 3/1/2011........................ 5,960,000 5,851,826
Simi Valley, Single Family Residential Mortgage Revenue 7.625%, 8/1/2022 (c) 3,000,000 1,080,000
Sonoma County Office of Education, COP, Refunding
(Capital Financing Project) 5.625%, 7/1/2020............................ 3,115,000 2,813,157
Southern California Home Finance Authority, SFMR
6.90%, 10/1/2024 (Collateralized: FNMA and GNMA)........................ 1,665,000 1,725,989
Southern California Public Power Authority, Power Project Revenue
(Multiple Projects) 6.75%, 7/1/2011..................................... 3,750,000 4,089,825
Tehachapi Unified School District, COP (Tompkins Elementary School Project)
7.80%, 2/1/2021 (Prerefunded 2/1/2001) (a).............................. 1,000,000 1,166,590
Upland, HR, COP (San Antonio Community Hospital) 7.125%, 1/1/2011........... 745,000 763,893
Waterford Public Financing Authority, Revenue 8.20%, 9/15/2020.............. 3,700,000 3,955,670
Watsonville Mammoth Lakes, COP 7.875%, 6/1/2011............................. 1,770,000 1,909,175
West Sacramento Redevelopment Agency, Tax Allocation
(West Sacramento Redevelopment Project) 6.25%, 9/1/2021 (Insured; MBIA). 4,250,000 4,353,573
Yolo County Housing Authority, Mortgage Revenue (Walnut Park Apartments)
7.20%, 8/1/2033 (Insured; FHA).......................................... 4,150,000 4,342,851
Yorba Linda Redevelopment Agency, Tax Allocation Revenue
(Yorba Linda Redevelopment Project) Zero Coupon, 9/1/2019 (Insured; MBIA) 5,000,000 1,147,000
U. S. RELATED-2.3%
Puerto Rico Electric Power Authority, Power Revenue 7.125%, 7/1/2014........ 540,000 585,322
Virgin Islands Port Authority, Airport Revenue
(Cyril E. King Airport Project) 8.10%, 10/1/2005........................ 4,135,000 4,547,714
Virgin Islands Territory (Hugo Insurance Claims Funds Program) 7.75%, 10/1/2006 1,760,000 1,925,933
-----------
TOTAL INVESTMENTS (cost $300,890,870)....................................... $311,270,684
=============
</TABLE>
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation LR Lease Revenue
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FNMA Federal National Mortgage Association SFMR Single Family Mortgage Revenue
GNMA Government National Mortgage Association SWDR Solid Waste Disposal Revenue
HR Hospital Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ---- ------ ------------------ -------------------
<S> <C> <C> <C>
AAA Aaa AAA 37.4%
AA Aa AA 13.6
A A A 30.3
BBB Baa BBB 10.4
D N/A D .3
Not Rated (e) Not Rated (e) Not Rated (e) 8.0
----
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Non-income producing security; interest payments in default.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's, have been determined by the Manager to be of comparable quality
to those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $300,890,870)-see statement..................................... $311,270,684
Cash.................................................................... 707,661
Interest receivable..................................................... 5,389,673
Receivable for investment securities sold............................... 715,778
Prepaid expenses........................................................ 18,136
------------
318,101,932
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $173,218
Accrued expenses........................................................ 93,241 266,459
----------- ---------
NET ASSETS ................................................................ $317,835,473
=============
REPRESENTED BY:
Paid-in capital......................................................... $304,488,724
Accumulated undistributed investment income-net......................... 47,029
Accumulated undistributed net realized gain on investments.............. 2,919,906
Accumulated net unrealized appreciation on investments-Note 3........... 10,379,814
------------
NET ASSETS at value applicable to 23,889,286 shares outstanding
(500 million shares of $.001 par value Common Stock authorized)......... $317,835,473
=============
NET ASSET VALUE, offering and redemption price per share
($317,835,473 / 23,889,286 shares)...................................... $13.30
========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $20,318,018
EXPENSES:
Management fee-Note 2(a).............................................. $1,897,821
Shareholder servicing costs-Note 2(b)................................. 331,616
Custodian fees........................................................ 52,904
Professional fees..................................................... 48,566
Directors' fees and expenses-Note 2(c)................................ 30,683
Registration fees..................................................... 13,470
Prospectus and shareholders' reports.................................. 13,349
Miscellaneous......................................................... 25,647
------
TOTAL EXPENSES.................................................... 2,414,056
-------
INVESTMENT INCOME-NET............................................. 17,903,962
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $2,920,516
Net unrealized appreciation on investments.............................. 7,663,008
------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 10,583,524
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $28,487,486
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
-----------------
1994 1995
-------- ---------
OPERATIONS:
<S> <C> <C>
Investment income-net................................................... 22,427,244 $ 17,903,962
Net realized gain on investments........................................ 2,108,962 2,920,516
Net unrealized appreciation (depreciation) on investments for the year.. (43,545,566) 7,663,008
_____________ ____________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... (19,009,360) 28,487,486
_____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (22,427,244) (17,856,933)
Net realized gain on investments........................................ (1,957,211) (2,098,798)
_____________ ____________
TOTAL DIVIDENDS....................................................... (24,384,455) (19,955,731)
_____________ ____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 143,167,610 136,023,008
Dividends reinvested.................................................... 17,051,843 13,460,614
Cost of shares redeemed................................................. (226,190,833) (187,243,378)
_____________ ____________
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS.............. (65,971,380) (37,759,756)
_____________ ____________
TOTAL (DECREASE) IN NET ASSETS.................................... (109,365,195) (29,228,001)
NET ASSETS:
Beginning of year....................................................... 456,428,669 347,063,474
_____________ ____________
End of year (including undistributed investment income-net; $47,029 on
September 30, 1995)................................................... $ 347,063,474 $317,835,473
=============== ==============
SHARES SHARES
_____________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 10,562,987 10,429,450
Shares issued for dividends reinvested.................................. 1,251,353 1,047,791
Shares redeemed......................................................... (16,686,997) (14,495,652)
_____________ ____________
NET (DECREASE) IN SHARES OUTSTANDING.................................. (4,872,657) (3,018,411)
=============== ==============
See notes to financial statements.
</TABLE>
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Prospectus, dated February 1, 1996.
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
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. Premier Mutual
Fund Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares, which are sold to the public without a sales charge. 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. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Directors. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations
held by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the 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 the expense limitation of any state having
jurisdiction over the Fund. The most stringent state expense limitation
applicable to the Fund presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 2 1/2% of the first $30 million, 2% of the next $70
million and 1 1/2% of the excess over $100 million of the average value of
the Fund's net assets in accordance with California "blue sky" regulations.
There was no expense reimbursement for the year ended September 30, 1995.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the year ended September 30, 1995, the Fund was charged an aggregate
of $143,052 pursuant to the Shareholder Services Plan.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities
amounted to $426,518,774 and $448,286,475, respectively, for the year ended
September 30, 1995, and consisted entirely of long-term and short-term
municipal investments.
At September 30, 1995, accumulated net unrealized appreciation on
investments was $10,379,814, consisting of $13,192,204 gross unrealized
appreciation and $2,812,390 gross unrealized depreciation.
At September 30, 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).
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
We have audited the accompanying statement of assets and liabilities of
General California Municipal Bond Fund, Inc., including the statement of
investments, as of September 30, 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 September 30, 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 Bond Fund, Inc. at September 30,
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 & Young LLP signature logo]
New York, New York
November 1, 1995
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement:
Condensed Financial Information -- For the period from
October 10, 1989 (commencement of operations) to September
30, 1990 and for each of the five years in the period ended
September 30, 1995.
Included in Part B of the Registration Statement:
Statement of Investments--September 30, 1995.
Statement of Assets and Liabilities--September 30, 1995.
Statement of Operations--year ended September 30, 1995.
Statement of Changes in Net Assets--for each of the years
ended September 30, 1994 and 1995.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors, dated
November 1, 1995.
Schedule Nos. I through VII and other financial statement information, for
which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission, are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes which
are included in Part B to the Registration Statement.
Item 24. Financial Statements and Exhibits - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1) Registrant's Articles of Incorporation and Articles of Amendment.
(2) Registrant's By-Laws, as amended.
(5) Management Agreement is incorporated by reference to Exhibit (5)
of Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A filed on January 30, 1995.
(6)(a) Distribution Agreement is incorporated by reference to Exhibit
(6)(a) of Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A filed on January 30, 1995.
(6)(b) Forms of Service Agreements are incorporated by reference to
Exhibit (8)(a) of Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A filed on January 30, 1995.
(8)(a) Amended and Restated Custody Agreement.
(8)(b) Forms of Sub-Custodian Agreements.
(9) Shareholder Services Plan is incorporated by reference to Exhibit
(9) of Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A filed on January 30, 1995.
(10) Opinion and consent of Registrant's counsel.
(11) Consent of Independent Auditors.
(15) Service Plan is incorporated by reference to Exhibit (15) of Post-
Effective Amendment No. 6 to the Registration Statement on Form
N-1A filed on January 30, 1995.
(16) Schedules of Computation of Performance Data are incorporated by
reference to Exhibit (16) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A filed on December 3, 1993.
(17) Financial Data Schedule.
Item 24. Financial Statements and Exhibits. - List (continued)
Other Exhibits
(a) Powers of Attorney is incorporated by reference to Item
No. 24 of the Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A filed on January 30,
1995.
(b) Certificate of Secretary is incorporated by reference to
Item No. 24 of the Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A filed on January 30,
1995.
Item 25. Persons Controlled by or under Common Control with Registrant
Not Applicable
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders as of January 19, 1996
Shares of Common Stock, 5,968
par value $.001 per share
Item 27. Indemnification
Reference is made to Articles SEVENTH of the Registrant's
Articles of Incorporation filed as Exhibit 1 hereto and to
Section 2-418 of the Maryland General Corporation Law. The
application of these provisions is limited by Article VIII of
the Registrant's By-Laws filed as Exhibit 2 hereto and by the
following undertaking set forth in the rules promulgated by the
Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.
Reference is made to the Distribution Agreement incorporated by
reference to Exhibit (6)(a) of Form N-1A, filed on January 30,
1995.
Item 28. Business and Other Connections of Investment Adviser
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business
consists primarily of providing investment management services
as the investment adviser and manager for sponsored investment
companies registered under the Investment Company Act of 1940
and as an investment adviser to institutional and individual
accounts. Dreyfus also serves as sub-investment adviser to
and/or administrator of other investment companies. Dreyfus
Service Corporation, a wholly-owned subsidiary of Dreyfus,
serves primarily as a registered broker-dealer of shares of
investment companies sponsored by Dreyfus and of other
investment companies for which Dreyfus acts as investment
adviser, sub-investment adviser or administrator. Dreyfus
Management, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
JULIAN M. SMERLING None
Director
HOWARD STEIN Chairman of the Board:
Chairman of the Board and Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company*****
Vice Chairman of the Board:
Mellon Bank Corporation****
Mellon Bank, N.A.****
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****
Operating Officer The Boston Company*****
and Director Deputy Director:
Mellon Trust****
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****
President:
Boston Safe Deposit and Trust Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****
Laurel Capital Advisors****
Boston Group Holdings, Inc.
Executive Vice President:
Mellon Bank, N.A.****
Boston Safe Deposit & Trust*****
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.*****
Dreyfus Service Corporation*
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*;
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and General Dreyfus Precious Metals, Inc.*;
Counsel Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
Director and Secretary:
Dreyfus Acquisition Corporation*;
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director, Vice President and Treasurer:
Lion Management, Inc.*;
Director:
The Dreyfus Trust Company++;
Secretary:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*
JEFFREY N. NACHMAN None
Vice President-Mutual Fund
Accounting
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President- Lion Management, Inc.*;
Legal and Secretary Secretary:
The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
Dreyfus Service Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Capital Value Fund, Inc.
14) Dreyfus Cash Management
15) Dreyfus Cash Management Plus, Inc.
16) Dreyfus Connecticut Intermediate Municipal Bond Fund
17) Dreyfus Connecticut Municipal Money Market Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) The Dreyfus Fund Incorporated
22) Dreyfus Global Bond Fund, Inc.
23) Dreyfus Global Growth, L.P. (A Strategic Fund)
24) Dreyfus GNMA Fund, Inc.
25) Dreyfus Government Cash Management
26) Dreyfus Growth and Income Fund, Inc.
27) Dreyfus Growth and Value Funds, Inc.
28) Dreyfus Growth Opportunity Fund, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) The Dreyfus/Laurel Investment Series
38) Dreyfus Life and Annuity Index Fund, Inc.
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus Michigan Municipal Money Market Fund, Inc.
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus Ohio Municipal Money Market Fund, Inc.
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Short-Intermediate Government Fund
66) Dreyfus Short-Intermediate Municipal Bond Fund
67) Dreyfus Short-Term Income Fund, Inc.
68) The Dreyfus Socially Responsible Growth Fund, Inc.
69) Dreyfus Strategic Growth, L.P.
70) Dreyfus Strategic Income
71) Dreyfus Strategic Investing
72) Dreyfus Tax Exempt Cash Management
73) The Dreyfus Third Century Fund, Inc.
74) Dreyfus Treasury Cash Management
75) Dreyfus Treasury Prime Cash Management
76) Dreyfus Variable Investment Fund
77) Dreyfus-Wilshire Target Funds, Inc.
78) Dreyfus Worldwide Dollar Money Market Fund, Inc.
79) General California Municipal Bond Fund, Inc.
80) General California Municipal Money Market Fund
81) General Government Securities Money Market Fund, Inc.
82) General Money Market Fund, Inc.
83) General Municipal Bond Fund, Inc.
84) General Municipal Money Market Fund, Inc.
85) General New York Municipal Bond Fund, Inc.
86) General New York Municipal Money Market Fund
87) Pacifica Funds Trust -
Pacifica Prime Money Market Fund
Pacifica Treasury Money Market Fund
88) Peoples Index Fund, Inc.
89) Peoples S&P MidCap Index Fund, Inc.
90) Premier Insured Municipal Bond Fund
91) Premier California Municipal Bond Fund
92) Premier Capital Growth Fund, Inc.
93) Premier Global Investing, Inc.
94) Premier GNMA Fund
95) Premier Growth Fund, Inc.
96) Premier Municipal Bond Fund
97) Premier New York Municipal Bond Fund
98) Premier State Municipal Bond Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Associate Vice President
General Counsel and Assistant
Secretary
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02903-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a director or directors when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares of common stock and in
connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York on the 26th day of January, 1996.
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
BY: /s/Marie E. Connolly*
--------------------------------------
Marie E. Connolly, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signatures Title Date
__________________________ ______________________________ __________
/s/Marie E. Connolly* President (Principal Executive 01/26/96
- -------------------------- Officer)
Marie E. Connolly
/s/Joseph F. Tower, III* Assistant Treasurer (Principal 01/26/96
- -------------------------- Accounting and Financial Officer)
Joseph F. Tower, III
/s/Clifford L. Alexander, Jr.* Director 01/26/96
- --------------------------
Clifford L. Alexander, Jr.
/s/Peggy C. Davis* Director 01/26/96
- --------------------------
Peggy C. Davis
/s/Joseph S. DiMartino* Director 01/26/96
- --------------------------
Joseph S. DiMartino
/s/Ernest Kakfa* Director 01/26/96
- --------------------------
Ernest Kafka
/s/Saul B. Klaman* Director 01/26/96
- --------------------------
Saul B. Klaman
/s/Nathan Leventhal* Director 01/26/96
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Nathan Leventhal
*BY: /s/Eric B. Fischman
-----------------------
Eric B. Fischman
Attorney-in-Fact
GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
INDEX OF EXHIBITS
(1) Registrant's Articles of Incorporation
and Articles of Amendment
(2) Registrant's By-Laws, as Amended
(8)(a) Amended and Restated Custody Agreement
(8)(b) Forms of Sub-Custodian Agreements
(10) Opinion and Consent of Registrant's Counsel
(11) Consent of Independent Auditors
(17) Financial Data Schedule
Exhibit (1)
ARTICLES OF INCORPORATION
OF
DREYFUS HIGH YIELD MUNICIPAL BOND FUND, INC.
FIRST: The undersigned, David Stephens, whose address
is Seven Hanover Square, New York, New York 10004-2696, being at
least eighteen years of age, hereby forms a corporation under the
Maryland General Corporation Law.
SECOND: The name of the corporation (hereinafter called
the "corporation") is Dreyfus High Yield Municipal Bond Fund, Inc.
THIRD: The corporation is formed for the following
purpose or purposes:
(a) to conduct, operate and carry on the
business of an investment company;
(b) to subscribe for, invest in, reinvest
in, purchase or otherwise acquire, hold, pledge, sell,
assign, transfer, lend, write options on, exchange,
distribute or otherwise dispose of and deal in and with
securities of every nature, kind, character, type and
form, including without limitation of the generality of
the foregoing, all types of stocks, shares, futures
contracts, bonds, debentures, notes, bills and other
negotiable or non-negotiable instruments, obligations,
evidences of interest, certificates of interest,
certificates of participation, certificates, interests,
evidences of ownership, guarantees, warrants, options or
evidences of indebtedness issued or created by or
guaranteed as to principal and interest by any state or
local government or any agency or instrumentality
thereof, by the United States Government or any agency,
instrumentality, territory, district or possession
thereof, by any foreign government or any agency,
instrumentality, territory, district or possession
thereof, by any corporation organized under the laws of
any state, the United States or any territory or
possession thereof or under the laws of any foreign
country, bank certificates of deposit, bank time
deposits, bankers' acceptances and commercial paper; to
pay for the same in cash or by the issue of stock,
including treasury stock, bonds or notes of the
corporation or otherwise; and to exercise any and all
rights, powers and privileges of ownership or interest
in respect of any and all such investments of every kind
and description, including without limitation, the right
to consent and otherwise act with respect thereto, with
power to designate one or more persons, firms,
associations or corporations to exercise any of said
rights, powers and privileges in respect of any said
instruments;
(c) to borrow money or otherwise obtain credit
and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the
corporation;
(d) to issue, sell, repurchase, redeem,
retire, cancel, acquire, hold, resell, reissue, dispose
of, transfer, and otherwise deal in, shares of stock of
the corporation, including shares of stock of the
corporation in fractional denominations, and to apply to
any such repurchase, redemption, retirement,
cancellation or acquisition of shares of stock of the
corporation any funds or property of the corporation
whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by the laws of the
State of Maryland;
(e) to conduct its business, promote its
purposes and carry on its operations in any and all of
its branches and maintain offices both within and
without the State of Maryland, in any States of the
United States of America, in the District of Columbia
and in any other parts of the world; and
(f) to do all and everything necessary,
suitable, convenient, or proper for the conduct,
promotion and attainment of any of the businesses and
purposes herein specified or which at any time may be
incidental thereto or may appear conducive to or
expedient for the accomplishment of any of such
businesses and purposes and which might be engaged in or
carried on by a corporation incorporated or organized
under the Maryland General Corporation Law, and to have
and exercise all of the powers conferred by the laws of
the State of Maryland upon corporations incorporated or
organized under the Maryland General Corporation Law.
The foregoing provisions of this Article THIRD shall be
construed both as purposes and powers and each as an independent
purpose and power. The foregoing enumeration of specific purposes
and powers shall not be held to limit or restrict in any manner
the purposes and powers of the corporation, and the purposes and
powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by
reference to, or inference from, the terms of any provision of
this or any other Article of these Articles of Incorporation;
provided, that the corporation shall not conduct any business,
promote any purpose, or exercise any power or privilege within or
without the State of Maryland which, under the laws thereof, the
corporation may not lawfully conduct, promote, or exercise.
FOURTH: The post office address of the principal office
of the corporation within the State of Maryland, and of the
resident agent of the corporation within the State of Maryland, is
The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202.
FIFTH: (1) The total number of shares of stock which
the corporation has authority to issue is five hundred million
(500,000,000) shares of Common Stock, all of which are of a par
value of one tenth of one cent ($.001) each.
(2) The aggregate par value of all the authorized
shares of stock is five hundred thousand dollars ($500,000.00).
(3) The Board of Directors of the corporation is
authorized, from time to time, to fix the price or the minimum
price or the consideration or minimum consideration for, and to
issue the shares of stock of the corporation.
(4) The Board of Directors of the corporation is
authorized, from time to time, to classify or to reclassify, as
the case may be, any unissued shares of stock of the corporation.
(5) Subject to the power of the Board of Directors to
reclassify unissued shares, the shares of each class of stock of
the corporation shall have the following preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption:
(i) All consideration received by the
corporation for the issuance or sale of shares together
with all income, earnings, profits and proceeds thereof,
shall irrevocably belong to such class for all purposes,
subject only to the rights of creditors, and are herein
referred to as "assets belonging to" such class.
(ii) The assets belonging to such class shall
be charged with the liabilities of the corporation in
respect of such class and with such class's share of the
general liabilities of the corporation, in the latter
case in proportion that the net asset value of such
class bears to the net asset value of all classes. The
determination of the Board of Directors shall be
conclusive as to the allocation of liabilities,
including accrued expenses and reserves, to a class.
(iii) Dividends or distributions on shares of
each class, whether payable in stock or cash, shall be
paid only out of earnings, surplus or other assets
belonging to such class.
(iv) In the event of the liquidation or
dissolution of the corporation, stockholders of each
class shall be entitled to receive, as a class, out of
the assets of the corporation available for distribution
to stockholders, the assets belonging to such class and
the assets so distributable to the stockholders of such
class shall be distributed among such stockholders in
proportion to the number of shares of such class held by
them.
(v) On each matter submitted to a vote of the
stockholders, each holder of a share of stock shall be
entitled to one vote for each such share of stock
standing in his name on the books of the corporation
irrespective of the class thereof; provided, however,
that to the extent class voting is required by the
Investment Company Act of 1940 or Maryland law as to any
such matter, those requirements shall apply.
Except as provided above, all provisions of the Articles of
Incorporation relating to stock of the corporation shall apply to
shares of, and to the holders of, all classes of stock.
(6) Notwithstanding any provisions of the Maryland Gen-
eral Corporation Law requiring a greater proportion than a
majority of the votes of stockholders entitled to be cast in order
to take or authorize any action, any such action may be taken or
authorized upon the concurrence of a majority of the aggregate
number of votes entitled to be cast thereon.
(7) The presence in person or by proxy of the holders
of one-third of the shares of stock of the corporation entitled to
vote (without regard to class) shall constitute a quorum at any
meeting of the stockholders, except with respect to any matter
which, under applicable statutes or regulatory requirements,
requires approval by a separate vote of one or more classes of
stock, in which case the presence in person or by proxy of the
holders of one-third of the shares of stock of each class required
to vote as a class on the matter shall constitute a quorum.
(8) The corporation may issue shares of stock in
fractional denominations to the same extent as its whole shares,
and shares in fractional denominations shall be shares of stock
having proportionately to the respective fractions represented
thereby all the rights of whole shares, including, without
limitation, the right to vote, the right to receive dividends and
distributions and the right to participate upon liquidation of the
corporation, but excluding the right to receive a stock
certificate evidencing a fractional share.
(9) No holder of any shares of any class of the
corporation shall be entitled as of right to subscribe for,
purchase, or otherwise acquire any shares of any class which the
corporation proposes to issue, or any rights or options which the
corporation proposes to issue or to grant for the purchase of
shares of any class or for the purchase of any shares, bonds,
securities, or obligations of the corporation which are
convertible into or exchangeable for, or which carry any rights to
subscribe for, purchase, or otherwise acquire shares of any class
of the corporation; and any and all of such shares, bonds,
securities or obligations of the corporation, whether now or
hereafter authorized or created, may be issued, or may be reissued
or transferred if the same have been reacquired and have treasury
status, and any and all of such rights and options may be granted
by the Board of Directors to such persons, firms, corporations and
associations, and for such lawful consideration, and on such
terms, as the Board of Directors in its discretion may determine,
without first offering the same, or any thereof, to any said
holder.
SIXTH: (1) The number of directors of the corporation,
until such number shall be increased or decreased pursuant to the
by-laws of the corporation, is one. The number of directors shall
never be less than the minimum number prescribed by the Maryland
General Corporation Law.
(2) The name of the person who shall act as director of
the corporation until the first annual meeting or until his
successor or successors are duly chosen and qualify is as follows:
Daniel C. Maclean
(3) The initial by-laws of the corporation shall be
adopted by the directors at their organizational meeting or by
their informal written action, as the case may be. Thereafter,
the power to make, alter, and repeal the by-laws of the
corporation shall be vested in the Board of Directors of the
corporation.
(4) Any determination made in good faith by or pursuant
to the direction of the Board of Directors, as to: the amount of
the assets, debts, obligations, or liabilities of the corporation;
the amount of any reserves or charges set up and the propriety
thereof; the time of or purpose for creating such reserves or
charges; the use, alteration or cancellation of any reserves or
charges (whether or not any debt, obligation or liability for
which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to
be paid or discharged); the value of any investment or fair value
of any other asset of the corporation; the amount of net
investment income; the number of shares of stock outstanding; the
estimated expense in connection with purchases or redemptions of
the corporation's stock; the ability to liquidate investments in
orderly fashion; the extent to which it is practicable to deliver
a cross-section of the portfolio of the corporation in payment for
any such shares, or as to any other matters relating to the issue,
sale, purchase, redemption and/or other acquisition or disposition
of investments or shares of the corporation, or the determination
of the net asset value of shares of the corporation shall be final
and conclusive, and shall be binding upon the corporation and all
holders of its shares, past, present and future, and shares of the
corporation are issued and sold on the condition and understanding
that any and all such determinations shall be binding as
aforesaid.
SEVENTH: (1) To the fullest extent that limitations on
the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the
corporation shall have any liability to the corporation or its
stockholders for damages. This limitation on liability applies to
events occurring at the time a person serves as a director or
officer of the corporation whether or not such person is a
director or officer at the time of any proceeding in which
liability is asserted.
(2) The corporation shall indemnify and advance
expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by
the Maryland General Corporation Law. The corporation shall
indemnify and advance expenses to its officers to the same extent
as its directors and to such further extent as is consistent with
law. The board of directors may, through a by-law, resolution or
agreement, make further provisions for indemnification of
directors, officers, employees and agents to the fullest extent
permitted by the Maryland General Corporation Law.
(3) No provision of this Article SEVENTH shall be
effective to protect or purport to protect any director or officer
of the corporation against any liability to the corporation or its
stockholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(4) References to the Maryland General Corporation Law
in this Article SEVENTH are to the law as from time to time
amended. No amendment to the Articles of Incorporation of the
corporation shall affect any right of any person under this
Article SEVENTH based on any event, omission or proceeding prior
to such amendment.
EIGHTH: Any holder of shares of stock of the
corporation may require the corporation to redeem and the
corporation shall be obligated to redeem at the option of such
holder all or any part of the shares of the corporation owned by
said holder, at the redemption price, pursuant to the method, upon
the terms and subject to the conditions hereinafter set forth:
(a) The redemption price per share shall be the
net asset value per share determined at such time or
times as the Board of Directors of the corporation shall
designate in accordance with any provision of the
Investment Company Act of 1940, as amended, any rule or
regulation thereunder or exemption or exception
therefrom, or any rule or regulation made or adopted by
any securities association registered under the Securi-
ties Exchange Act of 1934.
(b) Net asset value per share of a class shall
be determined by dividing:
(i) The total value of the assets of
such class determined as provided in Subsec-
tion (c) below less, to the extent determined
by or pursuant to the direction of the Board
of Directors, all debts, obligations and
liabilities of such class (which debts,
obligations and liabilities shall include,
without limitation of the generality of the
foregoing, any and all debts, obligations,
liabilities, or claims, of any and every kind
and nature, fixed, accrued and otherwise,
including the estimated accrued expenses of
management and supervision, administration and
distribution and any reserves or charges for
any or all of the foregoing, whether for
taxes, expenses or otherwise) but excluding
such class' liability upon its shares and its
surplus, by
(ii) The total number of shares of such
class outstanding.
The Board of Directors is empowered, in its
absolute discretion, to establish other methods for
determining such net asset value whenever such other
methods are deemed by it to be necessary in order to
enable the corporation to comply with, or are deemed by
it to be desirable provided they are not inconsistent
with, any provision of the Investment Company Act of
1940, as amended, or any rule or regulation thereunder.
(c) In determining for the purposes of these
Articles of Incorporation the total value of the assets
of the corporation at any time, investments and any
other assets of the corporation shall be valued in such
manner as may be determined from time to time by the
Board of Directors.
(d) Payment of the redemption price by the
corporation may be made either in cash or in securities
or other assets at the time owned by the corporation or
partly in cash and partly in securities or other assets
at the time owned by the corporation. The value of any
part of such payment to be made in securities or other
assets of the corporation shall be the value employed in
determining the redemption price. Payment of the
redemption price shall be made on or before the seventh
day following the day on which the shares are properly
presented for redemption hereunder, except that delivery
of any securities included in any such payment shall be
made as promptly as any necessary transfers on the books
of the issuers whose securities are to be delivered may
be made.
The corporation, pursuant to resolution of the
Board of Directors, may deduct from the payment made for
any shares redeemed a liquidating charge not in excess
of one percent (1%) of the redemption price of the
shares so redeemed, and the Board of Directors may alter
or suspend any such liquidating charge from time to
time.
(e) The right of any holder of shares of stock
redeemed by the corporation as provided in this Article
EIGHTH to receive dividends or distributions thereon and
all other rights of such holder with respect to such
shares shall terminate at the time as of which the
redemption price of such shares is determined, except
the right of such holder to receive (i) the redemption
price of such shares from the corporation in accordance
with the provisions hereof, and (ii) any dividend or
distribution to which such holder had previously become
entitled as the record holder of such shares on the
record date for such dividend or distribution.
(f) Redemption of shares of stock by the
corporation is conditional upon the corporation having
funds or property legally available therefor.
(g) The corporation, either directly or through an
agent, may repurchase its shares, out of funds legally
available therefor, upon such terms and conditions and
for such consideration as the Board of Directors shall
deem advisable, by agreement with the owner at a price
not exceeding the net asset value per share as
determined by the corporation at such time or times as
the Board of Directors of the corporation shall
designate, less a liquidating charge not to exceed one
percent (1%) of such net asset value, if and as fixed by
resolution of the Board of Directors of the corporation
from time to time, and take all other steps deemed
necessary or advisable in connection therewith.
(h) The corporation, pursuant to
resolution of the Board of Directors, may cause the
redemption, upon the terms set forth in such resolution
and in subsections (a) through (f) and subsection (i) of
this Article EIGHTH, of shares of stock owned by
stockholders whose shares have an aggregate net asset
value of five hundred dollars or less. Notwithstanding
any other provision of this Article EIGHTH, if
certificates representing such shares have been issued,
the redemption price need not be paid by the corporation
until such certificates are presented in proper form for
transfer to the corporation or the agent of the
corporation appointed for such purpose; however, the
redemption shall be effective, in accordance with the
resolution of the Board of Directors, regardless of
whether or not such presentation has been made.
(i) The obligations set forth in this Article
EIGHTH may be suspended or postponed as may be
permissible under the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(j) The Board of Directors may establish other
terms and conditions and procedures for redemption,
including requirements as to delivery of certificates
evidencing shares, if issued.
NINTH: All persons who shall acquire stock or other
securities of the corporation shall acquire the same subject to
the provisions of the corporation's Charter, as from time to time
amended.
TENTH: From time to time any of the provisions of the
Charter of the corporation may be amended, altered or repealed,
including amendments which alter the contract rights of any class
of stock outstanding, and other provisions authorized by the Mary-
land General Corporation Law at the time in force may be added or
inserted in the manner and at the time prescribed by said Law, and
all rights at any time conferred upon the stockholders of the
corporation by its Charter are granted subject to the provisions
of this Article.
IN WITNESS WHEREOF, I have adopted and signed these
Articles of Incorporation and do hereby acknowledge that the
adoption and signing are my act.
Dated: August 17, 1989
/s/ David Stephens
David Stephens, Incorporator
ARTICLES OF AMENDMENT
Dreyfus High Yield Municipal Bond Fund, Inc., a
Maryland corporation having its principal office in Baltimore
City, Maryland (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: The charter of the Corporation is hereby
amended by striking Article SECOND of the Articles of
Incorporation and inserting in lieu thereof the following:
"SECOND: The name of the
corporation (hereinafter called the
'corporation') is General California
Municipal Bond Fund, Inc."
SECOND: The Sole Director of the Corporation
approved the foregoing amendment to the charter as set forth in
Article FIRST hereto, and declared that said amendment was
advisable. The Corporation has no stockholders.
The Vice President acknowledges these Articles of
Amendment to be the corporate act of the Corporation and states
that to the best of his knowledge, information and belief the
matters and facts set forth in these Articles with respect to
the authorization and approval of the amendment of the
Corporation's charter are true in all material respects and that
this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, has caused this
instrument to be filed in its name and on its behalf by its Vice
President, , and witnessed by its Secretary,
, on the day of September, 1989.
[NAME OF FUND]
By:/s/ Mark N. Jacobs
Mark N. Jacobs, Vice
President
ATTEST:
/s/ Christine Pavalos
Christine Pavalos, Secretary
EXHIBIT A
BY-LAWS
OF
General California Municipal Bond Fund, Inc.
(A Maryland Corporation)
___________
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates
representing shares of stock shall set forth thereon the
statements prescribed by Section 2-211 of the Maryland General
Corporation Law ("General Corporation Law") and by any other
applicable provision of law and shall be signed by the Chairman of
the Board or the President or a Vice President and countersigned
by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer and may be sealed with the corporate seal.
The signatures of any such officers may be either manual or
facsimile signatures and the corporate seal may be either
facsimile or any other form of seal. In case any such officer who
has signed manually or by facsimile any such certificate ceases to
be such officer before the certificate is issued, it nevertheless
may be issued by the corporation with the same effect as if the
officer had not ceased to be such officer as of the date of its
issue.
No certificate representing shares of stock shall be
issued for any share of stock until such share is fully paid,
except as otherwise authorized in Section 2-206 of the General
Corporation Law.
The corporation may issue a new certificate of stock in
place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Board of Directors may
require, in its discretion, the owner of any such certificate or
his legal representative to give bond, with sufficient surety, to
the corporation to indemnify it against any loss or claim that may
arise by reason of the issuance of a new certificate.
2. SHARE TRANSFERS. Upon compliance with provisions
restricting the transferability of shares of stock, if any,
transfers of shares of stock of the corporation shall be made only
on the stock transfer books of the corporation by the record
holder thereof or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the
corporation or with a transfer agent or a registrar, if any, and
on surrender of the certificate or certificates for such shares of
stock properly endorsed and the payment of all taxes due thereon.
3. RECORD DATE FOR STOCKHOLDERS. The Board of
Directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to
vote at, any meeting of stockholders, or stockholders entitled to
receive payment of any dividend or the allotment of any rights or
in order to make a determination of stockholders for any other
proper purpose. Such date, in any case, shall be not more than
90 days, and in case of a meeting of stockholders not less than
10 days, prior to the date on which the meeting or particular
action requiring such determination of stockholders is to be held
or taken. In lieu of fixing a record date, the Board of Directors
may provide that the stock transfer books shall be closed for a
stated period but not to exceed 20 days. If the stock transfer
books are closed for the purpose of determining stockholders
entitled to notice of, or to vote at, a meeting of stockholders,
such books shall be closed for at least 10 days immediately
preceding such meeting. If no record date is fixed and the stock
transfer books are not closed for the determination of stock-
holders: (1) The record date for the determination of stock-
holders entitled to notice of, or to vote at, a meeting of
stockholders shall be at the close of business on the day on which
the notice of meeting is mailed or the day 30 days before the
meeting, whichever is the closer date to the meeting; and (2) The
record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any rights shall
be at the close of business on the day on which the resolution of
the Board of Directors declaring the dividend or allotment of
rights is adopted, provided that the payment or allotment date
shall not be more than 60 days after the date on which the
resolution is adopted.
4. MEANING OF CERTAIN TERMS. As used herein in respect
of the right to notice of a meeting of stockholders or a waiver
thereof or to participate or vote thereat or to consent or dissent
in writing in lieu of a meeting, as the case may be, the term
"share of stock" or "shares of stock" or "stockholder" or "stock-
holders" refers to an outstanding share or shares of stock and to
a holder or holders of record of outstanding shares of stock when
the corporation is authorized to issue only one class of shares of
stock and said reference also is intended to include any outstand-
ing share or shares of stock and any holder or holders of record
of outstanding shares of stock of any class or series upon which
or upon whom the Charter confers such rights where there are two
or more classes or series of shares or upon which or upon whom the
General Corporation Law confers such rights notwithstanding that
the Charter may provide for more than one class or series of
shares of stock, one or more of which are limited or denied such
rights thereunder.
5. STOCKHOLDER MEETINGS.
- ANNUAL MEETINGS. If a meeting of the stockholders of
the corporation is required by the Investment Company Act of 1940,
as amended, to elect the directors, then there shall be submitted
to the stockholders at such meeting the question of the election
of directors, and a meeting called for that purpose shall be
designated the annual meeting of stockholders for that year. In
other years in which no action by stockholders is required for the
aforesaid election of directors, no annual meeting need be held.
- SPECIAL MEETINGS. Special stockholder meetings for
any purpose may be called by the Board of Directors or the
President and shall be called by the Secretary for the purpose
of removing a Director and for all other purposes whenever the
holders of shares entitled to at least ten percent of all the
votes entitled to be cast at such meeting shall make a duly
authorized request that such meeting be called. Such request
shall state the purpose of such meeting and the matters proposed
to be acted on thereat, and no other business shall be transacted
at any such special meeting. Notwithstanding the foregoing,
unless requested by stockholders entitled to cast a majority of
the votes entitled to be cast at the meeting, a special meeting of
the stockholders need not be called at the request of stockholders
to consider any matter that is substantially the same as a matter
voted on at any special meeting of the stockholders held during
the preceding twelve (12) months.
- PLACE AND TIME. Stockholder meetings shall be held
at such place, either within the State of Maryland or at such
other place within the United States, and at such date or dates as
the directors from time to time may fix.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE.
Written or printed notice of all meetings shall be given by the
Secretary and shall state the time and place of the meeting. The
notice of a special meeting shall state in all instances the
purpose or purposes for which the meeting is called. Written or
printed notice of any meeting shall be given to each stockholder
either by mail or by presenting it to him personally or by leaving
it at his residence or usual place of business not less than ten
days and not more than ninety days before the date of the meeting,
unless any provisions of the General Corporation Law shall
prescribe a different elapsed period of time, to each stockholder
at his address appearing on the books of the corporation or the
address supplied by him for the purpose of notice. If mailed,
notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his post office
address as it appears on the records of the corporation with
postage thereon prepaid. Whenever any notice of the time, place
or purpose of any meeting of stockholders is required to be given
under the provisions of these by-laws or of the General Corpora-
tion Law, a waiver thereof in writing, signed by the stockholder
and filed with the records of the meeting, whether before or after
the holding thereof, or actual attendance or representation at the
meeting shall be deemed equivalent to the giving of such notice to
such stockholder. The foregoing requirements of notice also shall
apply, whenever the corporation shall have any class of stock
which is not entitled to vote, to holders of stock who are not
entitled to vote at the meeting, but who are entitled to notice
thereof and to dissent from any action taken thereat.
- STATEMENT OF AFFAIRS. The President of the corpora-
tion or, if the Board of Directors shall determine otherwise, some
other executive officer thereof, shall prepare or cause to be
prepared annually a full and correct statement of the affairs of
the corporation, including a balance sheet and a financial state-
ment of operations for the preceding fiscal year, which shall be
filed at the principal office of the corporation in the State of
Maryland.
- QUORUM. At any meeting of stockholders, the presence
in person or by proxy of stockholders entitled to cast one-third
of the votes thereat shall constitute a quorum. In the absence of
a quorum, the stockholders present in person or by proxy, by
majority vote and without notice other than by announcement, may
adjourn the meeting from time to time, but not for a period
exceeding 120 days after the original record date until a quorum
shall attend.
- ADJOURNED MEETINGS. A meeting of stockholders
convened on the date for which it was called (including one
adjourned to achieve a quorum as provided in the paragraph above)
may be adjourned from time to time without further notice to a
date not more than 120 days after the original record date, and
any business may be transacted at any adjourned meeting which
could have been transacted at the meeting as originally called.
- CONDUCT OF MEETING. Meetings of the stockholders
shall be presided over by one of the following officers in the
order of seniority and if present and acting: the President, the
Chairman of the Board, a Vice President or, if none of the
foregoing is in office and present and acting, by a chairman to be
chosen by the stockholders. The Secretary of the corporation or,
in his absence, an Assistant Secretary, shall act as secretary of
every meeting, but if neither the Secretary nor an Assistant
Secretary is present the chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may
authorize another person or persons to act for him by proxy in all
matters in which a stockholder is entitled to participate, whether
for the purposes of determining his presence at a meeting, or
whether by waiving notice of any meeting, voting or participating
at a meeting, expressing consent or dissent without a meeting or
otherwise. Every proxy shall be executed in writing by the stock-
holder or by his duly authorized attorney-in-fact and filed with
the Secretary of the corporation. No unrevoked proxy shall be
valid after eleven months from the date of its execution, unless a
longer time is expressly provided therein.
- INSPECTORS OF ELECTION. The directors, in advance of
any meeting, may, but need not, appoint one or more inspectors to
act at the meeting or any adjournment thereof. If an inspector or
inspectors are not appointed, the person presiding at the meeting
may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or
act, the vacancy may be filled by appointment made by the direc-
tors in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector, if any, before entering upon
the discharge of his duties, shall take and sign an oath to
execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares outstand-
ing and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the validity and effect of
proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with
the right to vote, count and tabulate all votes, ballots or
consents, determine the result and do such acts as are proper to
conduct the election or vote with fairness to all stockholders.
On request of the person presiding at the meeting or any stock-
holder, the inspector or inspectors, if any, shall make a report
in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or
them.
- VOTING. Each share of stock shall entitle the holder
thereof to one vote, except in the election of directors, at which
each said vote may be cast for as many persons as there are direc-
tors to be elected. Except for election of directors, a majority
of the votes cast at a meeting of stockholders, duly called and at
which a quorum is present, shall be sufficient to take or
authorize action upon any matter which may come before a meeting,
unless more than a majority of votes cast is required by the
corporation's Articles of Incorporation. A plurality of all the
votes cast at a meeting at which a quorum is present shall be
sufficient to elect a director.
6. INFORMAL ACTION. Any action required or permitted
to be taken at a meeting of stockholders may be taken without a
meeting if a consent in writing, setting forth such action, is
signed by all the stockholders entitled to vote on the subject
matter thereof and any other stockholders entitled to notice of a
meeting of stockholders (but not to vote thereat) have waived in
writing any rights which they may have to dissent from such action
and such consent and waiver are filed with the records of the
corporation.
ARTICLE II
BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs
of the corporation shall be managed under the direction of a Board
of Directors. The use of the phrase "entire board" herein refers
to the total number of directors which the corporation would have
if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director shall be a
natural person of full age. A director need not be a stockholder,
a citizen of the United States or a resident of the State of
Maryland. The initial Board of Directors shall consist of one
person. Thereafter, the number of directors constituting the
entire board shall never be less than three or the number of
stockholders, whichever is less. At any regular meeting or at any
special meeting called for that purpose, a majority of the entire
Board of Directors may increase or decrease the number of direc-
tors, provided that the number thereof shall never be less than
three or the number of stockholders, whichever is less, nor more
than twelve and further provided that the tenure of office of a
director shall not be affected by any decrease in the number of
directors.
3. ELECTION AND TERM. The first Board of Directors
shall consist of the director named in the Articles of Incorpora-
tion and shall hold office until the first meeting of stockholders
or until his successor has been elected and qualified.
Thereafter, directors who are elected at a meeting of
stockholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until
their successors have been elected and qualified. Newly created
directorships and any vacancies in the Board of Directors, other
than vacancies resulting from the removal of directors by the
stockholders, may be filled by the Board of Directors, subject to
the provisions of the Investment Company Act of 1940. Newly
created directorships filled by the Board of Directors shall be by
action of a majority of the entire Board of Directors then in
office. All vacancies to be filled by the Board of Directors may
be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum thereof.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the
Board shall fix, except that the first meeting of a newly elected
Board shall be held as soon after its election as the directors
conveniently may assemble.
- PLACE. Meetings shall be held at such place within
or without the State of Maryland as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings
for which the time and place have been fixed. Special meetings
may be called by or at the direction of the President or of a
majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. Whenever
any notice of the time, place or purpose of any meeting of direc-
tors or any committee thereof is required to be given under the
provisions of the General Corporation Law or of these by-laws, a
waiver thereof in writing, signed by the director or committee
member entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual
attendance at the meeting shall be deemed equivalent to the giving
of such notice to such director or such committee member.
- QUORUM AND ACTION. A majority of the entire Board of
Directors shall constitute a quorum except when a vacancy or
vacancies prevents such majority, whereupon a majority of the
directors in office shall constitute a quorum, provided such
majority shall constitute at least one-third of the entire Board
and, in no event, less than two directors. A majority of the
directors present, whether or not a quorum is present, may adjourn
a meeting to another time and place. Except as otherwise
specifically provided by the Articles of Incorporation, the
General Corporation Law or these by-laws, the action of a majority
of the directors present at a meeting at which a quorum is present
shall be the action of the Board of Directors.
- CHAIRMAN OF THE MEETING. The Chairman of the Board,
if any and if present and acting, or the President or any other
director chosen by the Board, shall preside at all meetings.
5. REMOVAL OF DIRECTORS. Any or all of the directors
may be removed for cause or without cause by the stockholders, who
may elect a successor or successors to fill any resulting vacancy
or vacancies for the unexpired term of the removed director or
directors.
6. COMMITTEES. The Board of Directors may appoint from
among its members an Executive Committee and other committees
composed of two or more directors and may delegate to such
committee or committees, in the intervals between meetings of
the Board of Directors, any or all of the powers of the Board of
Directors in the management of the business and affairs of the
corporation, except the power to amend the by-laws, to approve any
consolidation, merger, share exchange or transfer of assets, to
declare dividends, to issue stock (except to the extent permitted
by law) or to recommend to stockholders any action requiring the
stockholders' approval. In the absence of any member of any such
committee, the members thereof present at any meeting, whether or
not they constitute a quorum, may appoint a member of the Board of
Directors to act in the place of such absent member.
7. INFORMAL ACTION. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written
consent to such action is signed by all members of the Board of
Directors or any such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of
the Board or any such committee.
Members of the Board of Directors or any committee
designated thereby may participate in a meeting of such Board or
committee by means of a conference telephone or similar communica-
tions equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation by
such means shall constitute presence in person at a meeting.
ARTICLE III
OFFICERS
The corporation may have a Chairman of the Board and
shall have a President, a Secretary and a Treasurer, who shall
be elected by the Board of Directors, and may have such other
officers, assistant officers and agents as the Board of Directors
shall authorize from time to time. Any two or more offices,
except those of President and Vice President, may be held by the
same person, but no person shall execute, acknowledge or verify
any instrument in more than one capacity, if such instrument is
required by law to be executed, acknowledged or verified by two or
more officers.
Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the
corporation will be served thereby.
ARTICLE IV
PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the principal office of the corporation
in the State of Maryland prescribed by the General Corporation Law
is 32 South Street, c/o The Corporation Trust Incorporated,
Baltimore, Maryland 21202. The name and address of the resident
agent in the State of Maryland prescribed by the General
Corporation Law are: The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202.
The corporation shall maintain, at its principal office
in the State of Maryland prescribed by the General Corporation Law
or at the business office or an agency of the corporation, an
original or duplicate stock ledger containing the names and ad-
dresses of all stockholders and the number of shares of each class
held by each stockholder. Such stock ledger may be in written
form or any other form capable of being converted into written
form within a reasonable time for visual inspection.
The corporation shall keep at said principal office in
the State of Maryland the original or a certified copy of the by-
laws, including all amendments thereto, and shall duly file
thereat the annual statement of affairs of the corporation
prescribed by Section 2-313 of the General Corporation Law.
ARTICLE V
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name
of the corporation and shall be in such form and contain such
other words and/or figures as the Board of Directors shall deter-
mine or the law require.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and
shall be subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BY-LAWS
The power to make, alter, amend and repeal the by-laws
is vested in the Board of Directors of the corporation.
ARTICLE VIII
INDEMNIFICATION
1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
corporation shall indemnify its directors to the fullest extent
that indemnification of directors is permitted by the law. The
corporation shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law.
The corporation shall indemnify its directors and officers who
while serving as directors or officers also serve at the request
of the corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership,
joint venture, trust, other enterprise or employee benefit plan to
the same extent as its directors and, in the case of officers, to
such further extent as is consistent with law. The indemnifica-
tion and other rights provided by this Article shall continue as
to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of
such a person. This Article shall not protect any such person
against any liability to the corporation or any stockholder
thereof to which such person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office
("disabling conduct").
2. ADVANCES. Any current or former director or officer
of the corporation seeking indemnification within the scope of
this Article shall be entitled to advances from the corporation
for payment of the reasonable expenses incurred by him in con-
nection with the matter as to which he is seeking indemnification
in the manner and to the fullest extent permissible under the
General Corporation Law. The person seeking indemnification shall
provide to the corporation a written affirmation of his good faith
belief that the standard of conduct necessary for indemnification
by the corporation has been met and a written undertaking to repay
any such advance if it should ultimately be determined that the
standard of conduct has not been met. In addition, at least one
of the following additional conditions shall be met: (a) the
person seeking indemnification shall provide a security in form
and amount acceptable to the corporation for his undertaking;
(b) the corporation is insured against losses arising by reason of
the advance; or (c) a majority of a quorum of directors of the
corporation who are neither "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion,
shall have determined, based on a review of facts readily avail-
able to the corporation at the time the advance is proposed to be
made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
3. PROCEDURE. At the request of any person claiming
indemnification under this Article, the Board of Directors shall
determine, or cause to be determined, in a manner consistent with
the General Corporation Law, whether the standards required by
this Article have been met. Indemnification shall be made only
following: (a) a final decision on the merits by a court or other
body before whom the proceeding was brought that the person to be
indemnified was not liable by reason of disabling conduct or
(b) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the person to be
indemnified was not liable by reason of disabling conduct by
(i) the vote of a majority of a quorum of disinterested non-party
directors or (ii) an independent legal counsel in a written
opinion.
4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees
and agents who are not officers or directors of the corporation
may be indemnified, and reasonable expenses may be advanced to
such employees or agents, as may be provided by action of the
Board of Directors or by contract, subject to any limitations
imposed by the Investment Company Act of 1940, as amended.
5. OTHER RIGHTS. The Board of Directors may make
further provision consistent with law for indemnification and
advance of expenses to directors, officers, employees and agents
by resolution, agreement or otherwise. The indemnification
provided by this Article shall not be deemed exclusive of any
other right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled under any
insurance or other agreement or resolution of stockholders or
disinterested non-party directors or otherwise.
6. AMENDMENTS. References in this Article are to the
General Corporation Law and to the Investment Company Act of 1940
as from time to time amended. No amendment of the by-laws shall
affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
Amended, April 12, 1995
Exhibit 8(a)
AMENDED AND RESTATED CUSTODY AGREEMENT
Amended and Restated Custody Agreement made as of
October 4, 1989 between GENERAL CALIFORNIA MUNICIPAL BOND FUND,
INC., a corporation organized and existing under the laws of the
State of Maryland, having its principal office and place of
business at 666 Old Country Road, Garden City, New York 11530
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New
York corporation authorized to do a banking business, having its
principal office and place of business at 48 Wall Street, New
York, New York 10015 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Person" shall be deemed to include the
Treasurer, the Controller or any other person, whether or not any
such person is an Officer or employee of the Fund, duly authorized
by the Directors of the Fund to give Oral Instructions and Written
Instructions on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
2. "Available Balance" shall mean for any given day
during a calendar year the aggregate amount of Federal Funds held
in the Fund's custody account(s) at The Bank of New York, or its
successors, as of the close of such day or, if such day is not a
business day, the close of the preceding business day.
3. "Bankruptcy" shall mean with respect to a party such
party's making a general assignment, arrangement or composition
with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or the entry of an order for relief under
the Federal bankruptcy law or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or if a petition is presented for the winding
up or liquidation of the party or a resolution is passed for its
winding up or liquidation, or it seeks, or becomes subject to, the
appointment of an administrator, receiver, trustee, custodian or
other similar official for it or for all or substantially all of
its assets or its taking any action in furtherance of, or
indicating its consent to approval of, or acquiescence in, any of
the foregoing.
4. "Book-Entry System" shall mean the Federal Reserve/
Treasury book-entry system for United States and Federal agency
securities, its successor or successors and its nominee or
nominees.
5. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options, Futures
Contracts and Futures Contract Options entitling the holder, upon
timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified
underlying Securities.
6. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually received
by the Custodian and signed on behalf of the Fund by any two
Officers of the Fund.
7. "Clearing Member" shall mean a registered broker-
dealer which is a clearing member under the rules of O.C.C. and a
member of a national securities exchange qualified to act as a
custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
8. "Collateral Account" shall mean a segregated account
so denominated and pledged to the Custodian as security for, and
in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in para-
graph 8 of Article V herein, or (b) any receipt described in
Article V or VIII herein.
9. "Consumer Price Index" shall mean the U.S. Consumer
Price Index, all items and all urban consumers, U.S. city average
l982-84 equals l00, as first published without seasonal adjustment
by the Bureau of Labor Statistics, the Department of Labor,
without regard to subsequent revisions or corrections by such
Bureau.
10. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the
writer thereof the specified Securities (excluding Futures
Contracts) which are owned by the writer thereof and subject to
appropriate restrictions.
11. "Depository" shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the Securities
and Exchange Commission, its successor or successors and its
nominee or nominees, provided the Custodian has received a
certified copy of a resolution of the Fund's Directors
specifically approving deposits in DTC. The term "Depository"
shall further mean and include any other person authorized to act
as a depository under the Investment Company Act of 1940, its
successor or successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the Fund's
Directors specifically approving deposits therein by the
Custodian.
12. "Earnings Credit" shall mean for any given day
during a calendar year the product of (a) the Federal Funds Rate
for such date minus .25%, and (b) 82% of the Available Balance.
13. "Federal Funds" shall mean immediately available
same day funds.
14. "Federal Funds Rate" shall mean, for any day, the
Federal Funds (Effective) interest rate so denominated as
published in Federal Reserve Statistical Release H.15 (519) and
applicable to such day and each succeeding day which is not a
business day.
15. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities, including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S.
Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
16. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
17. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
18. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant or
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or
Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may
from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry on its books and records.
19. "Merger" shall mean (a) with respect to the Fund,
the consolidation or amalgamation with, merger into, or transfer
of all or substantially all of its assets to, another entity,
where the Fund is not the surviving entity, and (b) with respect
to the Custodian, any consolidation or amalgamation with, merger
into, or transfer of all or substantially all of its assets to,
another entity, except for any such consolidation, amalgamation,
merger or transfer of assets between the Custodian and The Bank of
New York Company, Inc. or any subsidiary thereof, or the Irving
Bank Corporation or any subsidiary thereof, provided that the
surviving entity agrees to be bound by the terms of this
Agreement.
20. "Money Market Security" shall be deemed to include,
without limitation, debt obligations issued or guaranteed as to
principal and interest by the government of the United States or
agencies or instrumentalities thereof, commercial paper,
certificates of deposit and bankers' acceptances, repurchase and
reverse repurchase agreements with respect to the same and bank
time deposits, where the purchase and sale of such securities
normally requires settlement in Federal funds on the same date as
such purchase or sale.
21. "O.C.C." shall mean Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its nominee
or nominees.
22. "Officers" shall be deemed to include the
President, any Vice President, the Secretary, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Treasurer or
any other person or persons duly authorized by the Directors of
the Fund to execute any Certificate, instruction, notice or other
instrument on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix B or such other Certificate as may be
received by the Custodian from time to time.
23. "Option" shall mean a Call Option, Covered Call
Option, Stock Index Option and/or a Put Option.
24. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Authorized Person or
from a person reasonably believed by the Custodian to be an
Authorized Person.
25. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and tender of the specified underlying Securities,
to sell such Securities to the writer thereof for the exercise
price.
26. "Reverse Repurchase Agreement" shall mean an
agreement pursuant to which the Fund sells Securities and agrees
to repurchase such Securities at a described or specified date and
price.
27. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
stock and other instruments or rights having characteristics
similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities
(including, without limitation, general obligation bonds, revenue
bonds and industrial bonds and industrial development bonds),
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase, sell or subscribe for the same, or
evidencing or representing any other rights or interest therein,
or any property or assets.
28. "Segregated Security Account" shall mean an account
maintained under the terms of this Agreement as a segregated
account, by recordation or otherwise, within the custody account
in which certain Securities and/or other assets of the Fund shall
be deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
29. "Shares" shall mean the shares of Common Stock of
the Fund, each of which, in the case of a Fund having Series, is
allocated to a particular Series.
30. "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
stock index at the close of the last business day of the contract
and the price at which the futures contract is originally struck.
31. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference between
the exercise price and the value of the index on the date of
exercise.
32. "Written Instructions" shall mean written
communications actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person by telex or any other such
system whereby the receiver of such communications is able to
verify by codes or otherwise with a reasonable degree of certainty
the authenticity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of all the Securities and moneys at any
time owned by the Fund during the period of this Agreement, except
that (a) if the Custodian fails to provide for the custody of any
of the Fund's Securities and moneys located or to be located
outside the United States in a manner satisfactory to the Fund,
the Fund shall be permitted to arrange for the custody of such
Securities and moneys located or to be located outside the United
States other than through the Custodian at rates to be negotiated
and borne by the Fund and (b) if the Custodian fails to continue
any existing sub-custodial or similar arrangements on
substantially the same terms as exist on the date of this
Agreement, the Fund shall be permitted to arrange for such or
similar services other than through the Custodian at rates to be
negotiated and borne by the Fund. The Custodian shall not charge
the Fund for any such terminated services after the date of such
termination.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter
set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to be
delivered to the Custodian all Securities and all moneys owned by
it, including cash received for the issuance of its shares, at any
time during the period of this Agreement. The Custodian will not
be responsible for such Securities and such moneys until actually
received by it. The Custodian will be entitled to reverse any
credits made on the Fund's behalf where such credits have been
previously made and moneys are not finally collected. The Fund
shall deliver to the Custodian a certified resolution of the
Directors of the Fund approving, authorizing and instructing the
Custodian on a continuous and on-going basis to deposit in the
Book-Entry System all Securities eligible for deposit therein and
to utilize the Book-Entry System to the extent possible in
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales
of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Prior to a deposit of Securities of the
Fund in the Depository the Fund shall deliver to the Custodian a
certified resolution of the Directors of the Fund approving,
authorizing and instructing the Custodian on a continuous and on-
going basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository
all Securities eligible for deposit therein and to utilize the
Depository to the extent possible in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
collateral. Securities and moneys of the Fund deposited in either
the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for
customers, including, but not limited to, accounts in which the
Custodian acts in a fiduciary or representative capacity. Prior
to the Custodian's accepting, utilizing and acting with respect to
Clearing Member confirmations for Options and transactions in
Options as provided in this Agreement, the Custodian shall have
received a certified resolution of the Fund's Board of Directors
approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by
a Certificate actually received by the Custodian, to accept,
utilize and act in accordance with such confirmations as provided
in this Agreement.
2. The Custodian shall credit to a separate account in
the name of the Fund all moneys received by it for the account of
the Fund, and shall disburse the same only:
(a) In payment for Securities purchased, as provided in
Article IV hereof;
(b) In payment of dividends or distributions, as
provided in Article XI hereof;
(c) In payment of original issue or other taxes, as
provided in Article XII hereof;
(d) In payment for Shares redeemed by it, as provided
in Article XII hereof;
(e) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, and the
purpose for which payment is to be made; or
(f) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian, as provided in Article
XV hereof.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary of all transfers to or from the account of the Fund during
said day. Where Securities are transferred to the account of the
Fund, the Custodian shall also by book-entry or otherwise identify
as belonging to the Fund a quantity of Securities in a fungible
bulk of Securities registered in the name of the Custodian (or its
nominee) or shown on the Custodian's account on the books of the
Book-Entry System or the Depository. At least monthly and from
time to time, the Custodian shall furnish the Fund with a detailed
statement of the Securities and moneys held for the Fund under
this Agreement.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held for the Fund,
which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by
the Custodian in that form; all other Securities held for the Fund
may be registered in the name of the Fund, in the name of any duly
appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name
of its registered nominee or in the name of the Book-Entry System
or the Depository, any Securities which it may hold for the
account of the Fund and which may from time to time be registered
in the name of the Fund. The Custodian shall hold all such
Securities which are not held in the Book-Entry System or in the
Depository in a separate account in the name of the Fund
physically segregated at all times from those of any other person
or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System
or the Depository with respect to Securities therein deposited,
shall with respect to all Securities held for the Fund in
accordance with this Agreement:
(a) Collect all income due or payable and, in any
event, if the Custodian receives a written notice from the Fund
specifying that an amount of income should have been received by
the Custodian within the last 90 days, the Custodian will provide
a conditional payment of income within 60 days from the date the
Custodian received such notice, unless the Custodian reasonably
concludes that such income was not due or payable to the Fund,
provided that the Custodian may reverse any such conditional
payment upon its reasonably concluding that all or any portion of
such income was not due or payable, and provided further that the
Custodian shall not be liable for failing to collect on a timely
basis the full amount of income due or payable in respect of a
"floating rate instrument" or "variable rate instrument" (as such
terms are defined under Rule 2a-7 under the Investment Company Act
of l940, as amended) if it has acted in good faith, without
negligence or willful misconduct.
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice
of such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the
Custodian upon five business days' prior notification to the Fund;
(c) Present for payment and collect the amount payable
upon all Securities which may mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as Custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws or
the laws or regulations of any other taxing authority now or
hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for
the account of the Fund all rights and similar securities issued
with respect to any Securities held by the Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or
the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as
owner of any Securities may be exercised;
(b) Deliver any Securities held for the Fund in
exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(c) Deliver any Securities held for the Fund to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such
delivery;
(d) Make such transfers or exchanges of the assets of
the Fund and take such other steps as shall be stated in said
order to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this
Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, Option or Futures Contract Option until after it shall
have determined, or shall have received a Certificate from the
Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to such
availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures
Contracts, Options or Futures Contract Options by making payments
or deliveries specified in Certificates received by the Custodian
in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer or futures
commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by
brokers, dealers, or futures commission merchants with respect to
such Futures Contracts, Options or Futures Contract Options, as
the case may be, confirming that such Security is held by such
broker, dealer or futures commission merchant, in book-entry form
or otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that
payments to or deliveries from the Margin Account shall be made in
accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision in
this Agreement to the contrary, make payment for any Futures
Contract, Option or Futures Contract Option for which such
instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract
Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment
therefor. Any such instrument or certificate delivered to the
Custodian shall be held by the Custodian hereunder in accordance
with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS,
FUTURES CONTRACTS, FUTURES CONTRACT OPTIONS AND REVERSE
REPURCHASE AGREEMENTS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of any Option, Futures Contract,
Futures Contract Option or Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each purchase
of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such purchase: (a)
the name of the issuer and the title of the Securities; (b) the
number of shares or the principal amount purchased and accrued
interest, if any; (c) the date of purchase and settlement; (d) the
purchase price per unit; (e) the total amount payable upon such
purchase; (f) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing
broker, if any; and (g) the name of the broker to which payment is
to be made. The Custodian shall, upon receipt of Securities
purchased by or for the Fund, pay out of the moneys held for the
account of the Fund the total amount payable to the person from
whom, or the broker through whom, the purchase was made, provided
that the same conforms to the total amount payable as set forth in
such Certificate, Oral Instructions or Written Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option or Reverse Repurchase Agreement, the Fund shall
deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the name of the issuer and
the title of the Security; (b) the number of shares or principal
amount sold, and accrued interest, if any; (c) the date of sale;
(d) the sale price per unit; (e) the total amount payable to the
Fund upon such sale; (f) the name of the broker through whom or
the person to whom the sale was made, and the name of the clearing
broker, if any; and (g) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the
Securities upon receipt of the total amount payable to the Fund
upon such sale, provided that the same conforms to the total
amount payable as set forth in such Certificate, Oral Instructions
or Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it,
and may deliver Securities and arrange for payment in accordance
with the customs prevailing among dealers in Securities.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the type of
Option (put or call); (b) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock
Index Option, the stock index to which such Option relates and the
number of Stock Index Options purchased; (c) the expiration date;
(d) the exercise price; (e) the dates of purchase and settlement;
(f) the total amount payable by the Fund in connection with such
purchase; (g) the name of the Clearing Member through which such
Option was purchased; and (h) the name of the broker to whom
payment is to be made. The Custodian shall pay, upon receipt of a
Clearing Member's statement confirming the purchase of such Option
held by such Clearing Member for the account of the Custodian (or
any duly appointed and registered nominee of the Custodian) as
custodian for the Fund, out of moneys held for the account of the
Fund, the total amount payable upon such purchase to the Clearing
Member through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such
sale: (a) the type of Option (put or call); (b) the name of the
issuer and the title and number of shares subject to such Option
or, in the case of a Stock Index Option, the stock index to which
such Option relates and the number of Stock Index Options sold;
(c) the date of sale; (d) the sale price; (e) the date of
settlement; (f) the total amount payable to the Fund upon such
sale; and (g) the name of the Clearing Member through which the
sale was made. The Custodian shall consent to the delivery of the
Option sold by the Clearing Member which previously supplied the
confirmation described in preceding paragraph 1 of this Article
with respect to such Option against payment to the Custodian of
the total amount payable to the Fund, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Call Option: (a) the name of the issuer and the
title and number of shares subject to the Call Option; (b) the
expiration date; (c) the date of exercise and settlement; (d) the
exercise price per share; (e) the total amount to be paid by the
Fund upon such exercise; and (f) the name of the Clearing Member
through which such Call Option was exercised. The Custodian
shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account of
the Fund the total amount payable to the Clearing Member through
whom the Call Option was exercised, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the name of the issuer and the
title and number of shares subject to the Put Option; (b) the
expiration date; (c) the date of exercise and settlement; (d) the
exercise price per share; (e) the total amount to be paid to the
Fund upon such exercise; and (f) the name of the Clearing Member
through which such Put Option was exercised. The Custodian shall,
upon receipt of the amount payable upon the exercise of the Put
Option, deliver or direct the Depository to deliver the
Securities, provided the same conforms to the amount payable to
the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the type of Stock
Index Option (put or call); (b) the number of Options being
exercised; (c) the stock index to which such Option relates;
(d) the expiration date; (e) the exercise price; (f) the total
amount to be received by the Fund in connection with such
exercise; and (g) the Clearing Member from which such payment is
to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the name
of the issuer and the title and number of shares for which the
Covered Call Option was written and which underlie the same;
(b) the expiration date; (c) the exercise price; (d) the premium
to be received by the Fund; (e) the date such Covered Call Option
was written; and (f) the name of the Clearing Member through which
the premium is to be received. The Custodian shall deliver or
cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call
Option, such receipts as are required in accordance with the
customs prevailing among Clearing Members dealing in Covered Call
Options and shall impose, or direct the Depository to impose, upon
the underlying Securities specified in the Certificate such
restrictions as may be required by such receipts. Notwithstanding
the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any
receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct the
Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (b) the
Clearing Member to whom the underlying Securities are to be
delivered; and (c) the total amount payable to the Fund upon such
delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the underlying
Securities as specified in the Certificate for the amount to be
received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the name of the issuer and
the title and number of shares for which the Put Option is written
and which underlie the same; (b) the expiration date; (c) the
exercise price; (d) the premium to be received by the Fund;
(e) the date such Put Option is written; (f) the name of the
Clearing Member through which the premium is to be received and to
whom a Put Option guarantee letter is to be delivered; (g) the
amount of cash, and/or the amount and kind of Securities, if any,
to be deposited in the Segregated Security Account; and (h) the
amount of cash and/or the amount and kind of Securities to be
deposited into the Collateral Account. The Custodian shall, after
making the deposits into the Collateral Account specified in the
Certificate, issue a Put Option guarantee letter substantially in
the form utilized by the Custodian on the date hereof, and deliver
the same to the Clearing Member specified in the Certificate
against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter or similar
document if it is unable to make any of the representations
contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying:
(a) the name of the issuer and title and number of shares subject
to the Put Option; (b) the Clearing Member from which the
underlying Securities are to be received; (c) the total amount
payable by the Fund upon such delivery; (d) the amount of cash
and/or the amount and kind of Securities to be withdrawn from the
Collateral Account; and (e) the amount of cash and/or the amount
and kind of Securities, if any, to be withdrawn from the
Segregated Security Account. Upon the return and/or cancellation
of any Put Option guarantee letter or similar document issued by
the Custodian in connection with such Put Option, the Custodian
shall pay out of the moneys held for the account of the Fund the
total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) whether
such Stock Index Option is a put or a call; (b) the number of
Options written; (c) the stock index to which such Option relates;
(d) the expiration date; (e) the exercise price; (f) the Clearing
Member through which such Option was written; (g) the premium to
be received by the Fund; (h) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in the Segregated
Security Account; (i) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Collateral
Account; and (j) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in a Margin Account, and the
name in which such account is to be or has been established. The
Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Segregated
Security Account specified in the Certificate, and either (1)
deliver such receipts, if any, which the Custodian has
specifically agreed to issue, which are in accordance with the
customs prevailing among Clearing Members in Stock Index Options
and make the deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) such information as may be necessary to identify the Stock
Index Option being exercised; (b) the Clearing Member through
which such Stock Index Option is being exercised; (c) the total
amount payable upon such exercise, and whether such amount is to
be paid by or to the Fund; (d) the amount of cash and/or amount
and kind of Securities, if any, to be withdrawn from the Margin
Account; and (e) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Segregated Security
Account and the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account.
Upon the return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs 6, 8 or 10 of
this Article in a transaction expressly designated as a "Closing
Purchase Transaction" in order to liquidate its position as a
writer of an Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the name of the issuer and the title and number
of shares subject to the Option, or, in the case of a Stock Index
Option, the stock index to which such Option relates and the
number of Options held; (c) the exercise price; (d) the premium to
be paid by the Fund; (e) the expiration date; (f) the type of
Option (put or call); (g) the date of such purchase; (h) the name
of the Clearing Member to which the premium is to be paid; and (i)
the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified
Margin Account or the Segregated Security Account. Upon the
Custodian's payment of the premium and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8 or
10 of this Article with respect to the Option being liquidated
through the Closing Purchase Transaction, the Custodian shall
remove, or direct the Depository to remove, the previously imposed
restrictions on the Securities underlying the Call Option.
13. Upon the expiration or exercise of, or consummation
of a Closing Purchase Transaction with respect to, any Option
purchased or written by the Fund and described in this Article,
the Custodian shall delete such Option from the statements
delivered to the Fund pursuant to paragraph 3 of Article III
herein, and upon the return and/or cancellation of any receipts
issued by the Custodian, shall make such withdrawals from the
Collateral Account, the Margin Account and/or the Segregated
Security Account as may be specified in a Certificate received in
connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract (or with respect
to any number of identical Futures Contract(s)): (a) the category
of Futures Contract (the name of the underlying stock index or
financial instrument); (b) the number of identical Futures
Contracts entered into; (c) the delivery or settlement date of the
Futures Contract(s); (d) the date the Futures Contract(s) was
(were) entered into and the maturity date; (e) whether the Fund is
buying (going long) or selling (going short) on such Futures
Contract(s); (f) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Segregated Security
Account; (g) the name of the broker, dealer or futures commission
merchant through which the Futures Contract was entered into; and
(h) the amount of fee or commission, if any, to be paid and the
name of the broker, dealer or futures commission merchant to whom
such amount is to be paid. The Custodian shall make the deposits,
if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall
make payment of the fee or commission, if any, specified in the
Certificate and deposit in the Segregated Security Account the
amount of cash and/or the amount and kind of Securities specified
in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer or futures
commission merchant with respect to an outstanding Futures
Contract shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer or futures commission merchant to the Fund
with respect to an outstanding Futures Contract shall be received
and dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement is
made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Futures Contract; (b)
with respect to a Stock Index Futures Contract, the total cash
settlement amount to be paid or received, and with respect to a
Financial Futures Contract, the Securities and/or amount of cash
to be delivered or received; (c) the broker, dealer or futures
commission merchant to or from which payment or delivery is to be
made or received; and (d) the amount of cash and/or Securities to
be withdrawn from the Segregated Security Account. The Custodian
shall make the payment or delivery specified in the Certificate
and delete such Futures Contract from the statements delivered to
the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the
Futures Contract being offset. The Custodian shall make payment
of the fee or commission, if any, specified in the Certificate and
delete the Futures Contract being offset from the statements
delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Segregated Security
Account as may be specified in such Certificate. The withdrawals,
if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract
Option: (a) the type of Futures Contract Option (put or call);
(b) the type of Futures Contract and such other information as may
be necessary to identify the Futures Contract underlying the
Futures Contract Option purchased; (c) the expiration date; (d)
the exercise price; (e) the dates of purchase and settlement; (f)
the amount of premium to be paid by the Fund upon such purchase;
(g) the name of the broker or futures commission merchant through
which such option was purchased; and (h) the name of the broker or
futures commission merchant to whom payment is to be made. The
Custodian shall pay the total amount to be paid upon such purchase
to the broker or futures commission merchant through whom the
purchase was made, provided that the same conforms to the amount
set forth in such Certificate.
2. Promptly after the sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the type of
Futures Contract Option (put or call); (b) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (c) the date of sale; (d) the sale price; (e) the date of
settlement; (f) the total amount payable to the Fund upon such
sale; and (g) the name of the broker or futures commission
merchant through which the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying:
(a) the particular Futures Contract Option (put or call) being
exercised; (b) the type of Futures Contract underlying the Futures
Contract Option; (c) the date of exercise; (d) the name of the
broker or futures commission merchant through which the Futures
Contract Option is exercised; (e) the net total amount, if any,
payable by the Fund; (f) the amount, if any, to be received by the
Fund; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Segregated Security Account.
The Custodian shall make the payments, if any, and the deposits,
if any, into the Segregated Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the
type of Futures Contract Option (put or call); (b) the type of
Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; the name of the broker or
futures commission merchant through which the premium is to be
received; and (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Segregated Security
Account. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits into the
Segregated Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the particular
Futures Contract Option exercised; (b) the type of Futures
Contract underlying the Futures Contract Option; (c) the name of
the broker or futures commission merchant through which such
Futures Contract Option was exercised; (d) the net total amount,
if any, payable to the Fund upon such exercise; (e) the net total
amount, if any, payable by the Fund upon such exercise; and (f)
the amount of cash and/or the amount and kind of Securities to be
deposited in the Segregated Security Account. The Custodian
shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in such Certificate make the payments, if
any, and the deposits, if any, into the Segregated Security
Account as specified in the Certificate. The deposits, if any, to
be made to the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a Put Option is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the particular Futures Contract Option exercised; (b) the type of
Futures Contract underlying such Futures Contract Option; (c) the
name of the broker or futures commission merchant through which
such Futures Contract Option is exercised; (d) the net total
amount, if any, payable to the Fund upon such exercise; (e) the
net total amount, if any, payable by the Fund upon such exercise;
and (f) the amount and kind of Securities and/or cash to be
withdrawn from or deposited in the Segregated Security Account, if
any. The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in the Certificate,
make the payments, if any, and the deposits, if any, into the
Segregated Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a
writer of such Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) that the
transaction is a closing transaction; (b) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (c) the exercise price; (d) the premium to be paid by the
Fund; (e) the expiration date; (f) the name of the broker or
futures commission merchant to which the premium is to be paid;
and (g) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Segregated Security
Account. The Custodian shall effect the withdrawals from the
Segregated Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be
made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
8. Upon the expiration or exercise of, or consummation
of a closing transaction with respect to, any Futures Contract
Option written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to para-
graph 3 of Article III herein, and (b) make such withdrawals from,
and/or, in the case of an exercise, such deposits into, the
Segregated Security Account as may be specified in a Certificate.
The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sale, the Fund shall
deliver to the Custodian a Certificate specifying: (a) the name
of the issuer and the title of the Security; (b) the number of
shares or principal amount sold, and accrued interest or
dividends, if any; (c) the dates of the sale and settlement; (d)
the sale price per unit; (e) the total amount credited to the Fund
upon such sales, if any; (f) the amount of cash and/or the amount
and kind of Securities, if any, which are to be deposited in a
Margin Account and the name in which such Margin Account has been
or is to be established; (g) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in a Segregated
Security Account; and (h) the name of the broker through which
such short sale was made. The Custodian shall upon its receipt of
a statement from such broker confirming such sale and that the
total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the
account of the Custodian (or any nominee of the Custodian) as
custodian of the Fund, issue a receipt or make the deposits into
the Margin Account and the Segregated Security Account specified
in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing-out: (a)
the name of the issuer and the title of the Security; (b) the
number of shares or the principal amount, and accrued interest or
dividends, if any, required to effect such closing-out to be
delivered to the broker; (c) the dates of the closing-out and
settlement; (d) the purchase price per unit; (e) the net total
amount payable to the Fund upon such closing-out; (f) the net
total amount payable to the broker upon such closing-out; (g) the
amount of cash and the amount and kind of Securities to be
withdrawn, if any, from the Margin Account; (h) the amount of cash
and/or the amount and kind of Securities, if any, to be withdrawn
from the Segregated Security Account; and (i) the name of the
broker through which the Fund is effecting such closing-out. The
Custodian shall, upon receipt of the net total amount payable to
the Fund upon such closing-out and the return and/or cancellation
of the receipts, if any, issued by the custodian with respect to
the short sale being closed-out, pay out of the moneys held for
the account of the Fund to the broker the net total amount payable
to the broker, and make the withdrawals from the Margin Account
and the Segregated Security Account, as the same are specified in
the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse
Repurchase Agreement with respect to Securities and money held by
the Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate or in the event such Reverse Repurchase Agreement is a
Money Market Security, a Certificate, Oral Instructions or Written
Instructions specifying: (a) the total amount payable to the Fund
in connection with such Reverse Repurchase Agreement; (b) the
broker or dealer through or with which the Reverse Repurchase
Agreement is entered; (c) the amount and kind of Securities to be
delivered by the Fund to such broker or dealer; (d) the date of
such Reverse Repurchase Agreement; and (e) the amount of cash
and/or the amount and kind of Securities, if any, to be deposited
in a Segregated Security Account in connection with such Reverse
Repurchase Agreement. The Custodian shall, upon receipt of the
total amount payable to the Fund specified in the Certificate,
Oral Instructions or Written Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Segregated
Security Account, specified in such Certificate, Oral Instructions
or Written Instructions.
2. Upon the termination of a Reverse Repurchase
Agreement described in paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate,
Oral Instructions or Written Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being
terminated; (b) the total amount payable by the Fund in connection
with such termination; (c) the amount and kind of Securities to be
received by the Fund in connection with such termination; (d) the
date of termination; (e) the name of the broker or dealer with or
through which the Reverse Repurchase Agreement is to be
terminated; and (f) the amount of cash and/or the amount and kind
of Securities to be withdrawn from the Segregated Security
Account. The Custodian shall, upon receipt of the amount and kind
of Securities to be received by the Fund specified in the
Certificate, Oral Instructions or Written Instructions, make the
payment to the broker or dealer, and the withdrawals, if any, from
the Segregated Security Account, specified in such Certificate,
Oral Instructions or Written Instructions.
ARTICLE X
CONCERNING MARGIN ACCOUNTS, SEGREGATED SECURITY
ACCOUNTS AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Segregated Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the amount of cash and/or the amount and
kind of Securities to be deposited in, or withdrawn from, the
Segregated Security Account. In the event that the Fund fails to
specify in a Certificate the name of the issuer, the title and the
number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn
from, a Segregated Securities Account, the Custodian shall be
under no obligation to make any such deposit or withdrawal and
shall so notify the Fund.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose benefit,
the account was established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In
accordance with applicable law, the Custodian may enforce its lien
and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or
similar document or any receipt issued hereunder by the Custodian.
In the event the Custodian should realize on any such property net
proceeds which are less than the Custodian's obligations under any
Put Option guarantee letter or similar document or any receipt,
such deficiency shall be a debt owed the Custodian by the Fund
within the scope of Article XIII herein.
5. On each business day, the Custodian shall furnish
the Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close of
business on the previous business day: (a) the name of the Margin
Account; (b) the amount and kind of Securities held therein; and
(c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer or futures commission
merchant specified in the name of a Margin Account a copy of the
statement furnished the Fund with respect to such Margin Account.
6. Promptly after the close of business on each
business day in which cash and/or Securities are maintained in a
Collateral Account, the Custodian shall furnish the Fund with a
Statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to
the Custodian a Certificate or Written Instructions specifying the
then market value of the securities described in such statement.
In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put
Option, guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate
such deficiency.
ARTICLE XI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of
the resolution of the Directors, certified by the Secretary or any
Assistant Secretary, either (i) setting forth the date of the
declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per share to the
shareholders of record as of that date and the total amount
payable to the Dividend Agent of the Fund on the payment date, or
(ii) authorizing the declaration of dividends and distributions on
a daily basis and authorizing the Custodian to rely on Oral
Instructions, Written Instructions or a Certificate setting forth
the date of the declaration of such dividend or distribution, the
date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of that date and the total
amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions, Written Instructions or Certificate, as the
case may be, the Custodian shall pay out of the moneys held for
the account of the Fund the total amount payable to the Dividend
Agent of the Fund.
ARTICLE XII
SALE AND REDEMPTION OF SHARES OF COMMON STOCK
1. Whenever the Fund shall sell any of its Shares, it
shall deliver to the Custodian a Certificate duly specifying:
(a) The number of Shares sold, trade date, and price;
and
(b) The amount of money to be received by the Custodian
for the sale of such Shares.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the account of the Fund.
3. Upon issuance of any of the Fund's Shares in
accordance with the foregoing provisions of this Article, the
Custodian shall pay, out of the money held for the account of the
Fund, all original issue or other taxes required to be paid by the
Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
shall hereafter redeem any of its Shares, it shall furnish to the
Custodian a Certificate specifying:
(a) The number of Shares redeemed; and
(b) The amount to be paid for the Shares redeemed.
5. Upon receipt from the Transfer Agent of an advice
setting forth the number of Shares received by the Transfer Agent
for redemption and that such Shares are valid and in good form for
redemption, the Custodian shall make payment to the Transfer Agent
out of the moneys held for the account of the Fund of the total
amount specified in the Certificate issued pursuant to the
foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the
redemption of any of the Fund's Shares, whenever its Shares are
redeemed pursuant to any check redemption privilege which may from
time to time be offered by the Fund, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part of
such check redemption privilege out of the money held in the
account of the Fund for such purposes.
ARTICLE XIII
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion
advance funds on behalf of the Fund which results in an overdraft
because the moneys held by the Custodian for the account of the
Fund shall be insufficient to pay the total amount payable upon a
purchase of Securities as set forth in a Certificate or Oral
Instructions issued pursuant to Article IV, or which results in an
overdraft for some other reason, or if the Fund is for any other
reason indebted to the Custodian (except a borrowing for
investment or for temporary or emergency purposes using Securities
as collateral pursuant to a separate agreement and subject to the
provisions of paragraph 2 of this Article XIII), such overdraft or
indebtedness shall be deemed to be a loan made by the Custodian to
the Fund payable on demand and shall bear interest from the date
incurred at a rate per annum (based on a 360-day year for the
actual number of days involved) equal to the Federal Funds Rate
plus l/2%, such rate to be adjusted on the effective date of any
change in such Federal Funds Rate but in no event to be less than
6% per annum, except that any overdraft resulting from an error by
the Custodian shall bear no interest. Any such overdraft or
indebtedness shall be reduced by an amount equal to the total of
all amounts due the Fund which have not been collected by the
Custodian on behalf of the Fund when due because of the failure of
the Custodian to make timely demand or presentment for payment.
In addition, the Fund hereby agrees that the Custodian shall have
a continuing lien and security interest in and to any property at
any time held by it for the benefit of the Fund or in which the
Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third
party acting in the Custodian's behalf. The Fund authorizes the
Custodian, in its sole discretion, at any time to charge any such
overdraft or indebtedness together with interest due thereon
against any balance of account standing to the Fund's credit on
the Custodian's books. For purposes of this Section 1 of
Article XIII, "overdraft" shall mean a negative Available Balance.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for
investment or for temporary or emergency purposes using Securities
as collateral for such borrowings, a notice or undertaking in the
form currently employed by any such bank setting forth the amount
which such bank will loan to the Fund against delivery of a stated
amount of collateral. The Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such
borrowing: (a) the name of the bank; (b) the amount and terms of
the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund,
or other loan agreement; (c) the time and date, if known, on which
the loan is to be entered into; (d) the date on which the loan
becomes due and payable; (e) the total amount payable to the Fund
on the borrowing date; (f) the market value of Securities to be
delivered as collateral for such loan, including the name of the
issuer, the title and the number of shares or the principal amount
of any particular Securities; and (g) a statement specifying
whether such loan is for investment purposes or for temporary or
emergency purposes and that such loan is in conformance with the
Investment Company Act of 1940 and the Fund's prospectus. The
Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory
note, if any, against delivery by the lending bank of the total
amount of the loan payable, provided that the same conforms to the
total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject
to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver
such Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described in
this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and
the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the name of the issuer, the
title and number of shares or the principal amount of any
particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XIV
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. If the Fund is permitted by the terms of its
Articles of Incorporation and as disclosed in its most recent and
currently effective prospectus to lend its portfolio Securities,
within 24 hours after each loan of portfolio Securities the Fund
shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan: (a) the
name of the issuer and the title of the Securities; (b) the number
of shares or the principal amount loaned; (c) the date of loan and
delivery; (d) the total amount to be delivered to the Custodian
against the loan of the Securities, including the amount of cash
collateral and the premium, if any, separately identified; and (e)
the name of the broker, dealer or financial institution to which
the loan was made. The Custodian shall deliver the Securities
thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount
designated as to be delivered against the loan of Securities. The
Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or Depository only in
the form of a certified or bank cashier's check payable to the
order of the Fund or the Custodian drawn on New York Clearing
House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
name of the issuer and the title of the Securities to be returned;
(b) the number of shares or the principal amount to be returned;
(c) the date of termination; (d) the total amount to be delivered
by the Custodian (including the cash collateral for such
Securities minus any offsetting credits as described in said
Certificate); and (e) the name of the broker, dealer or financial
institution from which the Securities will be returned. The
Custodian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were
loaned and upon receipt thereof shall pay, out of the moneys held
for the account of the Fund, the total amount payable upon such
return of Securities as set forth in the Certificate.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the
Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to
act or otherwise, either hereunder or under any Margin Account
Agreement, except for any such loss or damage arising out of its
own negligence or willful misconduct. The Custodian may, with
respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of
counsel to the Fund or of its own counsel, at the expense of the
Fund, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, misfeasance or
willful misconduct on the part of the Custodian or any of its
employees or agents.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into, and
shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount
paid or received therefor;
(b) The legality of the issue or sale of any of the
Fund's Shares, or the sufficiency of the amount to be received
therefor;
(c) The legality of the redemption of any of the Fund's
Shares, or the propriety of the amount to be paid therefor;
(d) The legality of the declaration or payment of any
dividend by the Fund;
(e) The legality of any borrowing by the Fund using
Securities as collateral;
(f) The legality of any loan of portfolio Securities
pursuant to Article XIV of this Agreement, nor shall the Custodian
be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the Fund is adequate collateral for the
Fund against any loss it might sustain as a result of such loan.
The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or
notify the Fund that the amount of such cash collateral held by it
for the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund. In
addition, the Custodian shall be under no duty or obligation to
see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article XIV
of this Agreement makes payment to it of any dividends or interest
which are payable to or for the account of the Fund during the
period of such loan or at the termination of such loan, provided,
however, that the Custodian shall promptly notify the Fund in the
event that such dividends or interest are not paid and received
when due; or
(g) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Segregated Security
Account or Collateral Account in connection with transactions by
the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be
entitled to receive from such broker, dealer, futures commission
merchant or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive,
or to notify the Fund of the Custodian's receipt or non-receipt of
any such payment; provided however that the Custodian, upon the
Fund's written request, shall, as Custodian, demand from any
broker, dealer, futures commission merchant or Clearing Member
identified by the Fund the payment of any variation margin payment
or similar payment that the Fund asserts it is entitled to receive
pursuant to the terms of a Margin Account Agreement or otherwise
from such broker, dealer, futures commission merchant or Clearing
Member.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented by
any check, draft or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls,
conversions, exchange, offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in the
Depository which may mature or be redeemed, retired, called or
otherwise become payable. However, upon receipt of a Certificate
from the Fund of an overdue amount on Securities held in the
Depository, the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any
action, suit or proceeding in respect to any Securities held by
the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount due
to the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent of
the Fund of any amount paid by the Custodian to the Transfer Agent
of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount, if
the Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
7. The Custodian may appoint one or more banking
institutions as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, but not limited to, banking
institutions located in foreign countries, of Securities and
moneys at any time owned by the Fund, upon terms and conditions
approved in a Certificate, which shall, if requested by the
Custodian, be accompanied by an approving resolution of the Fund's
Board of Directors adopted in accordance with Rule 17f-5 under the
Investment Company Act of 1940, as amended.
8. The Custodian shall not be under any duty or
obligation to ascertain whether any Securities at any time
delivered to or held by it for the account of the Fund are such as
properly may be held by the Fund under the provisions of its
Articles of Incorporation.
9. (a) The Custodian shall be entitled to receive and
the Fund agrees to pay to the Custodian all reasonable out-of-
pocket expenses and such compensation and fees as are specified on
Schedule A hereto. The Custodian shall not deem amounts payable
in respect of foreign custodial services to be out-of-pocket
expenses, it being the parties' intention that all fees for such
services shall be as set forth on Schedule B hereto and shall be
provided for the term of this Agreement without any automatic or
unilateral increase. The Custodian shall have the right to
unilaterally increase the figures on Schedule A on or after
March 1, 1991 and on or after each succeeding March 1 thereafter
by an amount equal to 50% of the increase in the Consumer Price
Index for the calendar year ending on the December 31 immediately
preceding the calendar year in which such March 1 occurs,
provided, however, that during each such annual period commencing
on a March 1, the aggregate increase during such period shall not
be in excess of 10%. Any increase by the Custodian shall be
specified in a written notice delivered to the Fund at least
thirty days prior to the effective date of the increase. The
Custodian may charge such compensation and any expenses incurred
by the Custodian in the performance of its duties pursuant to such
agreement against any money held by it for the account of the
Fund. The Custodian shall also be entitled to charge against any
money held by it for the account of the Fund the amount of any
loss, damage, liability or expense, including counsel fees, for
which it shall be entitled to reimbursement under the provisions
of this Agreement. The expenses which the Custodian may charge
against the account of the Fund include, but are not limited to,
the expenses of Sub-Custodians and foreign branches of the
Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the
Fund.
(b) The Fund shall receive a credit for each
calendar month against such compensation and fees of the Custodian
as may be payable by the Fund with respect to such calendar month
in an amount equal to the aggregate of its Earnings Credit for
such calendar month. In no event may any Earnings Credits be
carried forward to any fiscal year other than the fiscal year in
which it was earned, or, unless permitted by applicable law,
transferred to, or utilized by, any other person or entity,
provided that any such transferred Earnings Credit can be used
only to offset compensation and fees of the Custodian for services
rendered to such transferee and cannot be used to pay the
Custodian's out-of-pocket expenses. For purposes of this sub-
section (b), the Fund is permitted to transfer Earnings Credits
only to The Dreyfus Corporation, its affiliates and/or any
investment company now or in the future sponsored by The Dreyfus
Corporation or any of its affiliates or for which The Dreyfus
Corporation or any of its affiliates acts as the sole investment
adviser or as the principal distributor, and Daiwa Money Fund Inc.
For purposes of this sub-section (b), a fiscal year shall mean the
twelve-month period commencing on the effective date of this
Agreement and on each anniversary thereof.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by the Custodian pursuant to Article IV or XI hereof. The Fund
agrees to forward to the Custodian a Certificate or facsimile
thereof, confirming such Oral Instructions or Written Instructions
in such manner so that such Certificate or facsimile thereof is
received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business of the same day that such Oral
Instructions or Written Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions
are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions
hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions, provided such instructions reasonably appear to have
been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained
as required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access
to such books and records during the Custodian's normal business
hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian to the
Fund or the Fund's authorized representative at the Fund's
expense.
13. The Custodian shall provide the Fund with any
report obtained by the Custodian on the system of internal
accounting control of the Book-Entry System or the Depository, or
O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims, losses
and demands whatsoever, including attorney's fees, howsoever
arising or incurred because of or in connection with the
Custodian's payment or non-payment of checks pursuant to paragraph
6 of Article XII as part of any check redemption privilege program
of the Fund, except for any such liability, claim, loss and demand
arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this
Agreement, the Custodian may deliver and receive Securities, and
receipts with respect to such Securities, and arrange for payments
to be made and received by the Custodian in accordance with the
customs prevailing from time to time among brokers or dealers in
such Securities.
16. The Custodian shall have no duties or responsi-
bilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
ARTICLE XVI
TERMINATION
1. (a) Except as provided in subparagraphs (b), (c)
and (d) herein, neither party may terminate this Agreement until
the earlier of the following: (i) August 31, 1993, and (ii) the
third anniversary of the earliest date on which none of the
companies listed on Schedule C hereto is a transfer agency
customer of the Custodian. Any such termination may be effected
only by the terminating party giving to the other party a notice
in writing specifying the date of such termination, which shall be
not less than two hundred seventy (270) days after the date of
giving of such notice.
(b) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its obligations
under this Agreement and such breach has remained uncured for a
period of thirty days after the Custodian's receipt from the Fund
of written notice specifying such breach.
(c) Either party, immediately upon written notice
to the other party, may terminate this Agreement upon the Merger
or Bankruptcy of the other party.
(d) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its obligations
under the "Amendment to Transfer Agency Agreements" dated August
18, 1989 and has not cured such breach as promptly as practicable
and in any event within seven days of its receipt of written
notice of such breach, provided that the Custodian shall not be
permitted to cure any such material breach arising from the
willful misconduct of the Custodian.
In the event notice of termination is given by the Fund,
it shall be accompanied by a copy of a resolution of the Directors
of the Fund, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event notice of
termination is given by the Custodian, the Fund shall, on or
before the termination date, deliver to the Custodian a copy of a
resolution of its Directors, certified by the Secretary or any
Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth
in such notice, this Agreement shall terminate and the Custodian
shall, upon receipt of a notice of acceptance by the successor
custodian, on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall
then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding paragraph,
the Fund shall, upon the date specified in the notice of
termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund, be deemed to be its own custodian,
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book-Entry System, in any
Depository or by a Clearing Member which cannot be delivered to
the Fund, to hold such Securities hereunder in accordance with
this Agreement.
ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal, setting
forth the names and the signatures of the present Authorized
Persons. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present
Authorized Person ceases to be an Authorized Person or in the
event that other or additional Authorized Persons are elected or
appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions
of this Agreement upon Oral Instructions or signatures of the
present Authorized Persons as set forth in the last delivered
Certificate.
2. Annexed hereto as Appendix B is a Certificate signed
by two of the present Officers of the Fund under its seal, setting
forth the names and the signatures of the present Officers of the
Fund. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event any such present Officer
ceases to be an Officer of the Fund, or in the event that other or
additional Officers are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon
the signatures of the Officers as set forth in the last delivered
Certificate.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, shall be sufficiently given if addressed to the
Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10015, or at such other
place as the Custodian may from time to time designate in writing.
4. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Fund,
shall be sufficiently given if addressed to the Fund and mailed or
delivered to it at its office at 666 Old Country Road, Garden
City, New York 11530, or at such other place as the Fund may from
time to time designate in writing.
5. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the same formality as this Agreement and approved by a resolution
of the Directors of the Fund.
6. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of its Directors.
7. This Agreement shall be construed in accordance with
the laws of the State of New York.
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
9. This Agreement shall not be effective on the date
hereof and instead shall become effective on January 1, 1990.
When effective, this Agreement shall supercede the then-existing
Custody Agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers, thereunto
duly authorized, and their respective corporate seals to be
hereunto affixed, as of the day and year first above written.
GENERAL CALIFORNIA MUNICIPAL
BOND FUND, INC.
By:
Attest:
THE BANK OF NEW YORK
By:
Attest:
AMENDED AND RESTATED CUSTODY AGREEMENT
APPENDIX A
I, ______________, President and I, Mark N. Jacobs,
Secretary of GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC. (the
"Fund"), do hereby certify that the following individuals have
been duly authorized by the Directors of the Fund in conformity
with the Fund's Articles of Incorporation and By-Laws to give Oral
Instructions and Written Instructions* on behalf of the Fund, and
the signatures set forth opposite their respective names are their
true and correct signatures:
Name Signature
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
_________________________
______________________ _____________________
Secretary President
* Two (2) signatures required.
** Custodian account for portfolio securities transactions
only.
AMENDED AND RESTATED CUSTODY AGREEMENT
APPENDIX B
I, _______________, President and I, Mark N. Jacobs,
Secretary of GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC. (the
"Fund"), do hereby certify that the following individuals serve in
the following positions with the Fund and each individual has been
duly elected or appointed by the Directors of the Fund to each
such position and qualified therefor in conformity with the Fund's
Articles of Incorporation and By-Laws, and the signatures set
forth opposite their respective names are their true and correct
signatures:
Name Position Signature
President and __________________
Investment Officer
Vice President __________________
and Investment
Officer
Vice President __________________
and Investment
Officer
Vice President __________________
Treasurer __________________
Secretary __________________
Assistant Secretary __________________
Controller __________________
Secretary President
AMENDED AND RESTATED CUSTODY AGREEMENT
APPENDIX C
The following are designated publications for purposes
of paragraph 5(b) of Article III:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
Schedule A
The fees payable to the Custodian with respect to
securities held in domestic custody are:
Those existing on August 18, 1989.
The fees payable to the Custodian with respect to
securities held in foreign custody are as set forth in a letter
dated August 10, 1989 from Masao Yamaguchi of The Bank of New York
to Keven Flood of Dreyfus Service Corporation.
The above foreign custody fees apply to the following
Global Custody Network countries:
1. Australia 12. Japan
2. Austria 13. Luxembourg
3. Belgium 14. Malasia
4. Canada 15. Netherlands
5. Denmark 16. New Zealand
6. Finland 17. Norway
7. France 18. Singapore
8. Germany 19. Spain
9. Hong Kong 20. Sweden
10. Ireland 21. Switzerland
11. Italy 22. United Kingdom
Exhibit 8(b)
SUBCUSTODIAN AGREEMENT
The undersigned custodian (the "Custodian") for the
investment companies identified in Schedule A attached
(collectively, the "Funds") hereby appoints on the following
terms and conditions Chemical Bank as subcustodian (the
"Subcustodian") for it and the Subcustodian hereby accepts such
appointment on the following terms and conditions as of the date
set forth below.
1. Qualification. The Custodian and the Subcustodian each
represent to the other and to each Fund that it is qualified to
act as a custodian for a registered investment company under the
Investment Company Act of 1940, as amended (the "1940 Act").
2. Subcustody. The Subcustodian agrees to hold in a
separate account, segregated at all times from all other
accounts maintained by the Subcustodian, all securities and
evidence of rights thereto of each of the Funds (collectively,
"Fund Securities") deposited, from time to time by the Custodian
with the Subcustodian. The Subcustodian will accept, hold or
dispose of and take such other reasonable actions with respect
to Fund Securities, in addition to those specified in Section 3,
in accordance with the instructions of the Custodian relating to
Fund Securities given in the manner set forth in Section 4
("Instructions"). The Subcustodian hereby waives any claim
against, or lien on, any Fund Securities for any claim
hereunder. Registered Fund Securities may be held in the name
of the Subcustodian or its nominee. To the extent that
ownership of Fund Securities may be recorded by a book entry
system maintained by any transfer agent or registrar for such
Fund Securities (including, but not limited to, any such system
operated by the Subcustodian) or by Depository Trust Company,
the Subcustodian may hold Fund Securities as a book entry
reflecting the ownership of such Fund Securities by it or its
nominee and need not possess certificates or any other evidence
of ownership.
3. Subcustodian's Acts Without Instructions. Except as
otherwise instructed pursuant to Section 4, the Subcustodian
will (i) present all Fund Securities requiring presentation for
any payment thereon, (ii) distribute to the Custodian cash
received thereupon, (iii) collect and distribute to the
Custodian interest and any dividends and distributions on Fund
Securities, (iv) forward to the Custodian all confirmations,
notices, proxies or proxy soliciting materials relating to the
Fund Securities received by it (and the Custodian agrees to
forward same to the Fund), (v) report to the Custodian any
missed payment or other default upon any Fund Securities known
to it as Subcustodian hereunder, (the Subcustodian shall be
deemed to have knowledge of any payment default on any Fund
Securities in respect of which it acts as paying agent); all
cash distributions from the Subcustodian to the Custodian will
be in same day funds, on the same day funds are received by the
Subcustodian unless such distribution required instructions from
the Custodian which were not timely received, and (vi) at the
request of the Custodian, or on its behalf, execute any
necessary declarations or certificates of ownership (provided by
the Custodian or on its behalf) under any tax law now or
hereafter in effect. The Subcustodian will furnish to the
Custodian, upon the Custodian's request, any report of the
Subcustodian's independent public accountants on an examination
of its internal accounting controls and procedures for
safeguarding securities held in its custody for the account of
others.
4. Instructions, Other Communications. Any officer of the
Custodian designated from time to time, by letter to the
Subcustodian, signed by the President or any Vice President and
any Assistant Vice President, Assistant Secretary or Assistant
Treasurer of the Custodian or any other officer or employee
designated by the Custodian in writing, as an officer of the
Custodian authorized to give Instructions to the Subcustodian
with respect to Fund Securities (an "Authorized Officer") shall
be authorized to instruct the Subcustodian as to the acceptance,
holding, voting, presentation, disposition or any other action
with respect to Fund Securities from time to time in writing
signed by such Authorized Officer and delivered by hand, mail,
telecopier, tested telex, tested computer printout or such other
reasonable method as the Custodian and Subcustodian shall agree
is designed to prevent unauthorized officer's instructions. The
Subcustodian is also authorized to accept and act upon
Instructions regardless of the manner in which given (whether
orally, by telephone or otherwise) if the Subcustodian
reasonably believes such Instructions are given by an Authorized
Officer. The Subcustodian will promptly transmit to the
Custodian all receipts, confirmations or other transactional
evidence received by it in respect of Fund Securities as to
which the Subcustodian has received any Instructions.
Instructions and other communications to the Subcustodian shall
be given to Chemical Bank, 55 Water Street, Room 504, New York,
New York, Attention: Debt Securities Administration, Phone
(212) 820-5616 Telex: (212) 269-8510 (or to such other address
as the Subcustodian shall specify by notice to the Custodian and
each of the Funds). Communications to the Custodian and the
Funds shall be made at the addresses set forth below (or to such
other address as the Custodian or the Fund or Funds giving such
notice, shall specify by notice to the Subcustodian).
5. The Subcustodian. The Subcustodian shall not be liable
for any action taken or omitted to be taken in carrying out the
terms and provision of this Agreement if done without willful
malfeasance, bad faith, negligence or reckless disregard of its
obligations and duties under this Agreement.
The Subcustodian shall not have any responsibility for
ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters
relating to the Fund Securities, except upon Instructions from
the Custodian, nor for informing the Custodian with respect
thereto, unless the Subcustodian has knowledge or is deemed to
have knowledge of the aforesaid. The Subcustodian shall be
deemed to have knowledge in circumstances where it is acting as
tender agent or paying agent for the Fund Securities. The
Subcustodian shall not be under a duty to supervise or to
provide advice (other than notice) to the Custodian or any of
the Funds relative to any purchase, sale, retention or other
disposition of any Fund Securities held hereunder. The
Subcustodian shall for the benefit of the Custodian and the
Funds be required to exercise the same care with respect to the
receiving, safekeeping, handling and delivery of Fund Securities
than it customarily exercises in respect of its own securities.
The Subcustodian will indemnify, defend and save harmless
the Custodian and the Funds from any loss or liability incurred
by the Custodian arising out of or in connection with the
Subcustodian's willful malfeasance, bad faith, negligence or
reckless disregard of its obligations and duties under this
Agreement; provided, however, that the Subcustodian shall in no
event be liable for any special, indirect or consequential
damages.
The Custodian agrees to be responsible for, and will
indemnify, defend and save harmless the Subcustodian (or any
nominee in whose name any Fund Securities are registered) for,
any loss or liability incurred by the Subcustodian (or such
nominee) arising out of or in connection with any action taken
by the Subcustodian (or such nominee) in accordance with any
Instructions or any other action taken by the Subcustodian (or
such nominee) in good faith and without negligence pursuant to
this Agreement, including any expenses, taxes or other charges
which the Subcustodian (or such nominee) is required to incur or
pay in connection therewith.
6. Resignation. The Subcustodian may resign as such at
any time upon not less than five business days' prior written
notice to the Custodian. In the event of such resignation or
any other termination of this Agreement, the Subcustodian shall
deliver all Fund Securities then held by it to the Custodian, or
as otherwise directed by the Custodian pursuant to Instructions
received by the Subcustodian, at the Custodian's expense;
provided, however, that the Subcustodian shall not be required
to effect any such delivery outside the Borough of Manhattan.
7. Miscellaneous. This Agreement (i) shall be governed by
and construed in accordance with the laws of the State of New
York, (ii) may be executed in counterparts each of which shall
be deemed an original but all of which shall constitute the same
instrument, and (iii) may be amended only by written agreement
executed by the parties hereto. IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date set forth below.
Dated: , 199_
The Bank of New York
By:
As Custodian for the Funds
Listed in Schedule A Attached
Chemical Bank
By:
SUBCUSTODIAN AGREEMENT
The undersigned custodian (the "Custodian") for the
investment companies identified in Schedule A attached
(collectively, the "Funds") hereby appoints on the following
terms and conditions Chemical Bank as subcustodian (the
"Subcustodian") for it and the Subcustodian hereby accepts such
appointment on the following terms and conditions as of the date
set forth below.
1. Qualification. The Custodian and the Subcustodian each
represent to the other and to each Fund that it is qualified to
act as a custodian for a registered investment company under the
Investment Company Act of 1940, as amended (the "1940 Act").
2. Subcustody. The Subcustodian agrees to hold in a
separate account, segregated at all times from all other
accounts maintained by the Subcustodian, all securities and
evidence of rights thereto of each of the Funds (collectively,
"Fund Securities") deposited, from time to time by the Custodian
with the Subcustodian. The Subcustodian will accept, hold or
dispose of and take such other reasonable actions with respect
to Fund Securities, in addition to those specified in Section 3,
in accordance with the instructions of the Custodian relating to
Fund Securities given in the manner set forth in Section 4
("Instructions"). The Subcustodian hereby waives any claim
against, or lien on, any Fund Securities for any claim
hereunder. Registered Fund Securities may be held in the name
of the Subcustodian or its nominee. To the extent that
ownership of Fund Securities may be recorded by a book entry
system maintained by any transfer agent or registrar for such
Fund Securities (including, but not limited to, any such system
operated by the Subcustodian) or by Depository Trust Company,
the Subcustodian may hold Fund Securities as a book entry
reflecting the ownership of such Fund Securities by it or its
nominee and need not possess certificates or any other evidence
of ownership.
3. Subcustodian's Acts Without Instructions. Except as
otherwise instructed pursuant to Section 4, the Subcustodian
will (i) present all Fund Securities requiring presentation for
any payment thereon, (ii) distribute to the Custodian cash
received thereupon, (iii) collect and distribute to the
Custodian interest and any dividends and distributions on Fund
Securities, (iv) forward to the Custodian all confirmations,
notices, proxies or proxy soliciting materials relating to the
Fund Securities received by it (and the Custodian agrees to
forward same to the Fund), (v) report to the Custodian any
missed payment or other default upon any Fund Securities known
to it as Subcustodian hereunder, (the Subcustodian shall be
deemed to have knowledge of any payment default on any Fund
Securities in respect of which it acts as paying agent); all
cash distributions from the Subcustodian to the Custodian will
be in same day funds, on the same day funds are received by the
Subcustodian unless such distribution required instructions from
the Custodian which were not timely received, and (vi) at the
request of the Custodian, or on its behalf, execute any
necessary declarations or certificates of ownership (provided by
the Custodian or on its behalf) under any tax law now or
hereafter in effect. The Subcustodian will furnish to the
Custodian, upon the Custodian's request, any report of the
Subcustodian's independent public accountants on an examination
of its internal accounting controls and procedures for
safeguarding securities held in its custody for the account of
others.
4. Instructions, Other Communications. Any officer of the
Custodian designated from time to time, by letter to the
Subcustodian, signed by the President or any Vice President and
any Assistant Vice President, Assistant Secretary or Assistant
Treasurer of the Custodian or any other officer or employee
designated by the Custodian in writing, as an officer of the
Custodian authorized to give Instructions to the Subcustodian
with respect to Fund Securities (an "Authorized Officer") shall
be authorized to instruct the Subcustodian as to the acceptance,
holding, voting, presentation, disposition or any other action
with respect to Fund Securities from time to time in writing
signed by such Authorized Officer and delivered by hand, mail,
telecopier, tested telex, tested computer printout or such other
reasonable method as the Custodian and Subcustodian shall agree
is designed to prevent unauthorized officer's instructions. The
Subcustodian is also authorized to accept and act upon
Instructions regardless of the manner in which given (whether
orally, by telephone or otherwise) if the Subcustodian
reasonably believes such Instructions are given by an Authorized
Officer. The Subcustodian will promptly transmit to the
Custodian all receipts, confirmations or other transactional
evidence received by it in respect of Fund Securities as to
which the Subcustodian has received any Instructions.
Instructions and other communications to the Subcustodian shall
be given to Chemical Bank, 55 Water Street, Room 504, New York,
New York, Attention: Debt Securities Administration, Phone
(212) 820-5616 Telex: (212) 269-8510 (or to such other address
as the Subcustodian shall specify by notice to the Custodian and
each of the Funds). Communications to the Custodian and the
Funds shall be made at the addresses set forth below (or to such
other address as the Custodian or the Fund or Funds giving such
notice, shall specify by notice to the Subcustodian).
5. The Subcustodian. The Subcustodian shall not be liable
for any action taken or omitted to be taken in carrying out the
terms and provision of this Agreement if done without willful
malfeasance, bad faith, negligence or reckless disregard of its
obligations and duties under this Agreement.
The Subcustodian shall not have any responsibility for
ascertaining or acting upon any calls, conversions, exchange
offers, tenders, interest rate changes or similar matters
relating to the Fund Securities, except upon Instructions from
the Custodian, nor for informing the Custodian with respect
thereto, unless the Subcustodian has knowledge or is deemed to
have knowledge of the aforesaid. The Subcustodian shall be
deemed to have knowledge in circumstances where it is acting as
tender agent or paying agent for the Fund Securities. The
Subcustodian shall not be under a duty to supervise or to
provide advice (other than notice) to the Custodian or any of
the Funds relative to any purchase, sale, retention or other
disposition of any Fund Securities held hereunder. The
Subcustodian shall for the benefit of the Custodian and the
Funds be required to exercise the same care with respect to the
receiving, safekeeping, handling and delivery of Fund Securities
than it customarily exercises in respect of its own securities.
The Subcustodian will indemnify, defend and save harmless
the Custodian and the Funds from any loss or liability incurred
by the Custodian arising out of or in connection with the
Subcustodian's willful malfeasance, bad faith, negligence or
reckless disregard of its obligations and duties under this
Agreement; provided, however, that the Subcustodian shall in no
event be liable for any special, indirect or consequential
damages.
The Custodian agrees to be responsible for, and will
indemnify, defend and save harmless the Subcustodian (or any
nominee in whose name any Fund Securities are registered) for,
any loss or liability incurred by the Subcustodian (or such
nominee) arising out of or in connection with any action taken
by the Subcustodian (or such nominee) in accordance with any
Instructions or any other action taken by the Subcustodian (or
such nominee) in good faith and without negligence pursuant to
this Agreement, including any expenses, taxes or other charges
which the Subcustodian (or such nominee) is required to incur or
pay in connection therewith.
6. Resignation. The Subcustodian may resign as such at
any time upon not less than five business days' prior written
notice to the Custodian. In the event of such resignation or
any other termination of this Agreement, the Subcustodian shall
deliver all Fund Securities then held by it to the Custodian, or
as otherwise directed by the Custodian pursuant to Instructions
received by the Subcustodian, at the Custodian's expense;
provided, however, that the Subcustodian shall not be required
to effect any such delivery outside the Borough of Manhattan.
7. Miscellaneous. This Agreement (i) shall be governed by
and construed in accordance with the laws of the State of New
York, (ii) may be executed in counterparts each of which shall
be deemed an original but all of which shall constitute the same
instrument, and (iii) may be amended only by written agreement
executed by the parties hereto. IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date set forth below.
Dated: , 199_
The Bank of New York
By:
As Custodian for the Funds
Listed in Schedule A Attached
Chemical Bank
By:
EXHIBIT 10
[LETTERHEAD OF STROOCK & STROOCK & LAVAN]
October 10, 1989
General California Municipal Bond Fund, Inc.
666 Old Country Road
Garden City, New York 11530
Gentlemen:
We have acted as counsel to General California Municipal Bond
Fund, Inc. (the "Fund") in connection with the preparation of a
Registration Statement on Form N-1A, Registration No. 33-30703
(the "Registration Statement"), covering shares of Common Stock,
par value $.001 per share, of the Fund.
We have examined copies of the Article of Incorporation and By-
Laws of the Fund, the Registration Statement, and such other
corporate records and documents as we have deemed necessary for
the purpose of this opinion. We also have examined such other
documents, papers, statutes and authorities as we deemed
necessary to form a basis for the opinion hereinafter expressed.
In our examination of such material, we have assumed the
genuineness of all signatures and the conformity to original
documents of all copies submitted to us. As to various
questions of fact material to such opinion, we have relied upon
statements and certificates of officers and representatives of
the Fund and others.
Attorneys involved in the preparation of this opinion ar
admitted only to the bar of the State of New York. As to
various questions arising under the laws of the State of
Maryland, we have relied on the opinion of Messrs. Venable,
Baetjer and Howard, a copy of which is attached hereto.
Qualifications set forth in their opinion are deemed
incorporated herein.
Based upon the foregoing, we are of the opinion that the shares
of Common Stock, par value $.001 per share, of the Fund to be
issued in accordance with the terms of the offering as set forth
in the Prospectus included as part of the Registration
Statement, when so issued and paid for, will constitute validly
authorized and issued shares of Common Stock, fully paid and
non-assessable. We hereby consent to the filing of this opinion
as an exhibit to the Registration Statement and to the reference
to use in the Prospectus included in the Registration Statement,
and to the filing of this opinion as an exhibit to any
application made by or on behalf of the Fund or any distributor
or dealer in connection with the registration and qualification
of the Fund or its Common Stock under the securities laws of any
state or jurisdiction. In giving such permission, we do not
admit hereby that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of
1933 or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Stroock & Stroock & Lavan
STROOCK & STROOCK & LAVAN
[LETTERHEAD OF VENABLE, BAETJER & HOWARD]
October 10, 1989
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2594
Re: General California Municipal Bond Fund, Inc.
Gentlemen:
We have acted as special Maryland counsel for General
California Municipal Bond Fund, Inc., a Maryland corporation
(the "Fund"), in connection with the organization of the Fund
and the issuance of shares of its Common Stock (the "Common
Stock").
As Maryland counsel for the Fund, we are familiar with
its Charter and By-laws. We have examined the Prospectus
included in its Registration Statement on Form N-1A,
substantially in the form in which it is to become effective
(the "Prospectus"), and have examined and relied upon such
corporate records of the Fund and other documents and
certificates as to factual matters as we have deemed to be
necessary to render the opinion expressed herein. We have
assumed without independent verification the genuineness of all
signatures and the conformity with originals of all documents
submitted to us as copies.
Based on such examination, we are of the opinion and so
advise you that:
1. The Fund is duly organized and validly existing as
a corporation in good standing under the laws of the State of
Maryland.
2. The 8,000 shares of presently issued and
outstanding Common Stock of the Fund have been validly and
legally issued and are fully paid and nonassessable shares under
the laws of the State of Maryland.
3. The shares of Common Stock of the Fund to be
offered for sale pursuant to the Prospectus are duly authorized
and, when sold, issued and paid for as contemplated by the
Prospectus, will have been validly and legally issued and will
be fully paid and nonassessable.
This letter expresses our opinion as to the Maryland
General Corporation Law governing matters such as due
organization and the authorization and issuance of stock, but
does not extend to the securities or "Blue Sky" laws of Maryland
or to federal securities or other laws.
You may rely upon our foregoing opinion in rendering
your opinion to the Fund which is to be filed as an exhibit to
the Registration Statement. We consent to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Venable, Baetjer & Howard
8183C/57-58
Exhibit (11)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors" and to the use of our report
dated November 1, 1995, in this Registration Statement (Form N-1A 33-30703)
of General California Municipal Bond Fund, Inc.
ERNST & YOUNG LLP
New York, New York
January 26, 1996
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<ARTICLE> 6
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<NAME> GENERAL CALIFORNIA MUNICIPAL BOND FUND, INC.
<MULTIPLIER> 1000
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<PER-SHARE-GAIN-APPREC> .48
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