File No.33-46586
811-6610
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. 12 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12 [X]
(Check appropriate box or boxes.)
DREYFUS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
X on August 1, 2000 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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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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Dreyfus California Intermediate Municipal Bond Fund
Investing for income that is exempt from federal and California state income
taxes
PROSPECTUS August 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUND
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2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
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8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
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Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus California Intermediate Municipal Bond Fund
-----------------------------
Ticker Symbol: DCIMX
GOAL/APPROACH
The fund seeks as high a level of current income exempt from federal and
California state income taxes as is consistent with the preservation of capital.
To pursue its goal, the fund normally invests substantially all of its assets in
municipal bonds that provide income exempt from federal and California personal
income taxes. The fund' s dollar-weighted average portfolio maturity ranges
between three and ten years. Although the fund currently intends to invest only
in investment grade municipal bonds, or the unrated equivalent as determined by
Dreyfus, it has the ability to invest up to 20% of its net assets in municipal
bonds of below investment grade credit quality.
Municipal bonds are typically of two types:
* GENERAL OBLIGATION BONDS, which are secured by the
full faith and credit of the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenues
derived from a specific revenue source, such as charges for water and
sewer service or highway tolls
Although the fund' s objective is to generate income exempt from federal and
California personal income taxes, interest from some of its holdings may be
subject to the federal alternative minimum tax. In addition, the fund
occasionally may invest in taxable bonds and municipal bonds that are exempt
only from federal personal income tax.
INFORMATION ON THE FUND' S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
<PAGE 2>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices and, therefore, in the fund's share
price as well. As a result, the value of your investment in the fund could go up
and down, which means that you could lose money.
Other risk factors could have an effect on the fund's performance:
* if an issuer fails to make timely interest or
principal payments, or there is a decline in the credit quality of a bond, or
perception of a decline, the bond's value could fall, potentially lowering
the fund's share price
* California' s economy and revenues underlying its
municipal bonds may decline
* investing primarily in a single state may make the
fund's portfolio securities more sensitive to risks specific to the state
* if the municipal bond market becomes illiquid,
typically when there are many more sellers than buyers for the securities,
the value of such securities, particularly those purchased at a discounted
price, and the fund's share price, may fall dramatically
The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more vulnerable to changes in the market value of a single
issuer or a group of issuers.
Other potential risks
The fund, at times, may invest in certain derivatives, such as futures and
options, that may produce taxable income, and in inverse floaters. Derivatives
are used primarily to hedge the fund's portfolio or for daily liquidity. They
also may be used to increase returns. However, these practices may lower returns
or increase volatility. Derivatives can be illiquid and highly sensitive to
changes in their underlying security, interest rate or index. A small investment
in certain derivatives could have a potentially large impact on the fund's
performance.
The Fund
<PAGE 3>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year. The
table compares the fund' s average annual total return to that of the Lehman
Brothers 10-Year Municipal Bond Index, an unmanaged total-return performance
benchmark. Of course, past performance is no guarantee of future results.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
14.44 -5.50 13.42 3.66 7.63 5.79 -1.68
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q1 '95 +5.13%
WORST QUARTER: Q1 '94 -5.17%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 6/30/00 WAS 3.82%.
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<TABLE>
<CAPTION>
Average annual total return AS OF 12/31/99
Since
inception
1 Year 5 Years (4/20/92)
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND -1.68% 5.65% 5.66%
LEHMAN BROTHERS
10-YEAR MUNICIPAL
BOND INDEX -1.25% 7.12% 6.63%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 4/30/92
IS USED AS THE BEGINNING VALUE ON 4/20/92. UNLIKE THE FUND, THE LEHMAN INDEX IS NOT COMPOSED OF BONDS OF A SINGLE STATE.
What this fund is --
and isn't
This fund is a mutual fund:
a pooled investment that is professionally managed and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or guaranteed by the FDIC or any other government agency. It is
not a complete investment program. You could lose money in this fund, but you also have the potential
to make money.
</TABLE>
<PAGE 4>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load) or Rule 12b-1 distribution fees.
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Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption fee 1.00%
CHARGED ONLY WHEN SELLING SHARES YOU
HAVE OWNED FOR LESS THAN 30 DAYS
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ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder Services fee 0.06%
Other expenses 0.13%
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TOTAL 0.79%
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<TABLE>
<CAPTION>
Expense example
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C>
$81 $252 $439 $978
</TABLE>
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the fund's portfolio and
assisting in all aspects of the fund's operations.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse the fund's
distributor for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.
The Fund
<PAGE 5>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $130
billion in over 160 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.60% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $500 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
have adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
Portfolio manager
Monica Wieboldt has managed the fund since October 1996 and has been a portfolio
manager at Dreyfus since 1983.
<PAGE 6>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
" Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been independently audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report.
YEAR ENDED MARCH 31,
2000 1999 1998 1997 1996
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PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 13.99 13.82 13.27 13.27 13.02
Investment operations:
Investment income -- net .58 .58 .59 .60 .62
Net realized and unrealized gain
(loss) on investments (.59) .17 .55 .00(1) .25
Total from Investment operations (.01) .75 1.14 .60 .87
Distributions:
Dividends from investment
income -- net (.58) (.58) (.59) (.60) (.62)
Net asset value, end of period 13.40 13.99 13.82 13.27 13.27
Total return (%) .02 5.55 8.77 4.60 6.75
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .79 .80 .79 .78 .65
Ratio of net investment income
to average net assets (%) 4.32 4.19 4.35 4.48 4.66
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) .00(2) .02 .01 .04 .14
Portfolio turnover rate (%) 19.38 26.29 44.77 35.79 41.42
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 174,706 202,436 202,997 210,790 230,357
(1) AMOUNT REPRESENTS LESS THAN $.01.
(2) AMOUNT REPRESENTS LESS THAN .01%.
</TABLE>
The Fund
<PAGE 7>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open.
YOUR ORDER WILL BE PRICED at the next NAV calculated after your order is
accepted by the fund's transfer agent or other authorized entity. Because the
fund seeks tax-exempt income, it is not recommended for purchase in IRAs or
other qualified retirement plans.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
When calculating its NAV, the fund's investments are priced at fair value by an
independent pricing service approved by the fund's board. The pricing service's
procedures are reviewed under the general supervision of the board.
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing fund shares being sold
must be returned with your redemption request. Your order will be processed
promptly, and you will generally receive the proceeds within a week.
BEFORE SELLING OR WRITING A CHECK against shares recently purchased by check,
TeleTransfer or Automatic Asset Builder, please note that:
* if you send a written request to sell such shares,
the fund may delay sending the proceeds for up to eight business days
following the purchase of those shares
* the fund will not honor redemption checks, or
process wire, telephone or TeleTransfer redemption requests, for up to eight
business days following the purchase of those shares
IF YOU ARE SELLING OR EXCHANGING SHARES you have owned for less than 30 days,
the fund may deduct a 1% redemption fee (not charged on shares sold through the
Checkwriting Privilege, Automatic Withdrawal Plan or Dreyfus Auto-Exchange
Privilege, or on shares acquired through dividend reinvestment) .
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE 9>
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that
could adversely affect the fund or its operations,
including those from any individual or group who, in the
fund' s view, is likely to engage in excessive trading
(usually defined as more than four exchanges out of the
fund within a calendar year)
* refuse any purchase or exchange request in excess of
1% of the fund's total assets
* change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to
seven days (generally applies only in cases of very large redemptions,
excessive trading or during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, the fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.
If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 30 days, the fund may close your account and
send you the proceeds.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income
once a month, and distributes any net capital gains it has realized once a year.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.
THE FUND ANTICIPATES THAT VIRTUALLY ALL OF ITS INCOME DIVIDENDS will be exempt
from federal and California personal income taxes. However, any dividends paid
from interest on taxable investments or short-term capital gains will be taxable
as ordinary income. Any distributions of long-term capital gains will be taxable
as such. The tax status of any distribution is the same regardless of how long
you have been in the fund and whether you reinvest your distributions or take
them in cash. In general, distributions are federally taxable as follows:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Any sale or exchange of fund shares, including through the checkwriting
privilege, may generate a tax liability.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold or exchanged up to 12 months after buying them. "Long-term
capital gains" applies to shares sold or exchanged after 12 months.
Your Investment
<PAGE 11>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
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For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Experienced financial con- sultants can help you make informed choices and
provide you with personalized attention in handling account transactions. The
Financial Centers also offer informative seminars and events. To find the
Financial Center nearest you, call 1-800-499-3327.
<PAGE 12>
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee may be charged if you request a stop
payment or if the transfer agent cannot honor a redemption check due to
insufficient funds or another valid reason. Please do not postdate your checks
or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE SHARES worth $500 or more from one Dreyfus fund into another.
You can request your exchange in writing or by phone. Be sure to read the
current prospectus for any fund into which you are exchanging before investing.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). There is currently no fee
for exchanges, although you may be charged a sales load when exchanging into any
fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
financial advisers and financial supermarkets may charge transaction fees and
may set different minimum investments or limitations on buying or selling
shares. Consult a representative of your plan or financial institution if in
doubt.
Your Investment
<PAGE 13>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* ABA# 021000018
* DDA# 8900204400
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* DDA# 8900204400
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
TO SELL SHARES
Write a redemption check OR write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 15>
NOTES
<PAGE 16>
<PAGE 17>
For More Information
Dreyfus California Intermediate Municipal Bond Fund
-----------------------------
SEC file number: 811-6610
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund' s performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of certain fund documents can be viewed
online or downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (for information, call 1-202-942-8090) or, after paying a
duplicating fee, by E-mail request to [email protected], or by writing to the
SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2000 Dreyfus Service Corporation 902P0800
----------------------------------------------------------------------
DREYFUS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 2000
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus California Intermediate Municipal Bond Fund (the "Fund"), dated August
1, 2000, 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 one of the following numbers:
Call Toll Free -- 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
Page
Description of the Fund..........................................B-3
Management of the Fund...........................................B-18
Management Arrangement...........................................B-23
How to Buy Shares................................................B-26
Shareholder Services Plan........................................B-28
How to Redeem Shares.............................................B-28
Shareholder Services.............................................B-31
Determination of Net Asset Value.................................B-35
Dividends, Distributions and Taxes...............................B-35
Portfolio Transactions...........................................B-39
Performance Information..........................................B-39
Information About the Fund.......................................B-41
Counsel and Independent Auditors.................................B-42
Appendix A.......................................................B-44
Appendix B.......................................................B-63
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DESCRIPTION OF THE FUND
The Fund is a Massachusetts business trust that commenced operations on
April 20, 1992. The Fund is an open-end, management investment company, known as
a mutual fund.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
Certain Portfolio Securities
The following information supplements and should be read in conjunction
with the Fund's Prospectus.
Municipal Obligations. The Fund will invest primarily in debt securities
of the State of California, its political subdivisions, authorities and
corporations, and certain other specified securities, 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 Municipal Obligations (as defined below). The Fund will
invest at least 80% of the value of its net assets (except when maintaining a
temporary defensive position) in Municipal Obligations. Municipal Obligations
are debt obligations issued by states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities, or multistate agencies or authorities, 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.
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.
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 amount 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 prescribed quality standards for
banks, or the payment obligation otherwise will be collateralized by U.S.
Government securities. For certain participation interests, the Fund will have
the right to demand payment, on not more 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.
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. Certain lease obligations may be considered 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
canceled; (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.
Tender Option Bonds. The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a fixed
rate substantially higher than prevailing short-term tax exempt rates, that has
been coupled with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal to
the difference between the Municipal Obligation's fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate. The Manager,
on behalf of the Fund, will consider on an ongoing basis the creditworthiness of
the issuer of the underlying Municipal Obligations, of any custodian and of the
third party provider of the tender option. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal Obligations and for
other reasons.
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.
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. 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 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. 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.
Ratings of Municipal Obligations. The Fund will invest at least 80% of the
value of its net assets in 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 ("S&P") or Fitch IBCA, Inc. ("Fitch" and,
together with Moody's and S&P, the "Rating Agencies"). The Fund may invest up to
20% 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 the Rating Agencies, but it currently is
the intention of the Fund that this portion of the Fund's portfolio be invested
primarily in Municipal Obligations rated no lower than Baa by Moody's or BBB by
S&P or Fitch. The Fund also may invest in securities which, while not rated, are
determined by the Manager to be of comparable quality to the rated securities in
which the Fund may invest; for purposes of the 80% requirement described in this
paragraph, such unrated securities will be considered to have the rating so
determined.
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended March 31,
2000, computed on a monthly basis, was as follows:
. Percentage of
Fitch or Moody's or S&P
------------- ------- ---
Value
AAA Aaa AAA 52.4%
AA Aa AA 14.8%
A A A 13.5%
BBB Baa BBB 10.0%
F-1+/F-1 MIG1/VMIG1, P-1 SP-1+/SP-1, A-1 6.7%
Not Rated Not Rated Not Rated 2.6%*
100.0%
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 the Rating Agencies 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
Prospectus and this Statement of Additional Information. The ratings of the
Rating Agencies represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute standards of quality.
Although these ratings may be an initial criterion for selection of portfolio
investments, the Manager also will evaluate these securities and the
creditworthiness of the issuers of such securities.
* Included in the Not Rated category are securities comprising 2.6% 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:
Baa/BBB (2.4%) and Ba/BB (.2%).
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 the Rating Agencies; obligations of the U.S. Government, its agencies
or instrumentalities; commercial paper rated not lower than P-1 by Moody's, A-1
by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic banks,
including foreign branches of domestic banks, with assets of $1 billion 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.
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 interests in such
stripped debt obligations and coupons. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon 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.
These securities may include securities that are not readily marketable, such as
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.
Investment Techniques
The following information supplements and should be read in conjunction
with the Fund's Prospectus. The Fund's use of certain of the investment
techniques described below may give rise to taxable income.
Borrowing Money. The Fund is permitted to borrow to the extent permitted
under the Investment Company Act of 1940, as amended (the "1940 Act"), which
permits an investment company to borrow in an amount up to 33-1/3% of the value
of its 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 the borrowing is made. While such borrowings exceed 5% of the Fund's total
assets, the Fund will not make any additional investments.
Lending Portfolio Securities. The Fund 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 33-1/3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting 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. 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 for securities loaned.
Short-Selling. In these transactions, the Fund sells a security it does
not own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery to
the buyer. The Fund is obligated to replace the security borrowed by purchasing
it subsequently at the market price at the time of replacement. The price at
such time may be more or less than the price at which the security was sold by
the Fund, which would result in a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Fund's net assets. The Fund may not sell short the
securities of any single issuer listed on a national securities exchange to the
extent of more than 5% of the value of the Fund's net assets. The Fund may not
make short sale which results in the Fund having sold short in the aggregate
more than 5% of the outstanding securities of any class of an issuer.
The Fund also may make short sales "against the box," in which the Fund
enters into a short sale of a security it owns. At no time will more than 15% of
the value of the Fund's net assets be in deposits on short sales against the
box.
Until the Fund closes its short position or replaces the borrowed
security, it will: (a) segregate permissible liquid assets in an amount that,
together with the amount deposited with the broker as collateral, always equals
the current value of the security sold short; or (b) otherwise cover its short
position.
Derivatives. The Fund may invest in, or enter into, derivatives, such as
options and futures, 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. However, 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 inopportune 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 unpredictable changes in the prices for
derivatives.
Although the Fund will not be a commodity pool, certain derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Fund can invest in such 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, exceeds 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.
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 variation margin system 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 the Fund. 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. 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 securities 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 permissible liquid
assets to cover its obligations relating to its transactions in 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. In addition, 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 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. 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, or at a specific date.
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 permissible liquid assets. A put option written by the Fund is
covered when, among other things, the Fund segregates permissible liquid assets
having a value equal to or greater than the exercise price of the option 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.
Successful use by the Fund of options will be subject to the Manager's
ability to predict correctly movements in interest rates. To the extent the
Manager's predictions are incorrect, the Fund may incur losses.
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 this Statement of Additional Information.
Forward Commitments. The Fund may purchase or sell Municipal Obligations
and other securities on a forward commitment, when-issued or delayed delivery
basis, which means that delivery and payment take place a number of days after
the date of the commitment to purchase. The payment obligation and the interest
rate receivable on a forward commitment or when-issued security are fixed when
the Fund enters into the commitment, but the Fund does not make payment until it
receives delivery from the counterparty. The Fund will commit to purchase such
securities only with the intention of actually acquiring the securities, but the
Fund may sell these securities before the settlement date if it is deemed
advisable. The Fund will segregate permissible liquid assets at least equal at
all times to the amount of the Fund's purchase 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 forward commitment or
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.
Investment Considerations and Risks
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 Manager 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 Internal Revenue Code of 1986, as amended (the
"Code"), relating to the issuance of Municipal Obligations may reduce the volume
of Municipal Obligations qualifying for Federal tax exemption. One effect of
these provisions could be to increase the cost of the Municipal Obligations
available for purchase by the Fund and thus reduce available yield. Shareholders
should consult their tax advisers concerning the effect of these provisions on
an investment in the Fund. Proposals that may restrict or eliminate the income
tax exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability of
Municipal Obligations for investment by the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
Taxable Investment within the applicable limits set forth herein.
Investing in California Municipal Obligations. Since the Fund is
concentrated in securities issued by California or entities within California,
an investment in the Fund may involve greater risk than investments in certain
other types of municipal bond funds. You should consider carefully the special
risks inherent in the Fund's investment in California Municipal Obligations. You
should review "Appendix A" which sets forth information relating to investing in
California Municipal Obligations.
Lower Rated Bonds. The Fund may invest up to 20% of the value of its net
assets in higher yielding (and, therefore, higher risk) debt securities such as
those rated below investment grade by the Rating Agencies (commonly known as
junk bonds). They may be subject to certain risks with respect to the issuing
entity and to greater market fluctuations than certain lower yielding, higher
rated Municipal Obligations. See "Appendix B" for a general description of the
Rating Agencies' 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.
You 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 and
will fluctuate over time. These bonds generally are considered by the Rating
Agencies to be, on balance, 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 would disrupt severely the market for such
securities and may have an adverse impact on the value of such securities, and
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon which would 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 person 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 total assets. Zero coupon bonds and pay-in-kind 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."
Simultaneous Investments. Investment decisions for the Fund are made
independently from those of other investment companies advised by the Manager.
If, however, such other investment companies desire to invest in, or dispose of,
the same securities as the Fund, available investments or opportunities for
sales will be allocated equitably to each investment company. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
Investment Restrictions
The Fund's investment objective is a fundamental policy, which cannot be
changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, the Fund has adopted
investment restrictions numbered 1 through 6 as fundamental policies. Investment
restrictions numbered 7 through 12 are not fundamental policies and may be
changed by vote of a majority of the Fund's Board members at any time. The Fund
may not:
1. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowings to no more than 33-1/3% of the Fund's total assets).
For purposes of this investment restriction, the entry into options, futures
contracts, including those relating to indices, and options on futures contracts
or indices shall not constitute borrowing.
2. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this shall not
prevent the Fund from investing in Municipal Obligations secured by real estate
or interests therein, or prevent the Fund from purchasing and selling futures
contracts, including those relating to indices, and options on futures contracts
or indices.
3. 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, and except to the extent the Fund may be deemed an
underwriter under the Securities Act of 1933, as amended, by virtue of disposing
of portfolio securities.
4. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements; 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.
5. 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.
6. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent that the activities permitted in Investment
Restriction Nos. 1, 2, 8 and 10 may be deemed to give rise to a senior security.
7. 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.
8. Purchase securities on margin, but the Fund may make margin deposits in
connection with transactions in futures, including those relating to indices,
and options on futures or indices.
9. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings, and 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
arrangements with respect to futures contracts, including those related to
indices, and options on futures contracts or indices and collateral arrangements
with respect to initial or variation margin for 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 (which
securities could include participation interests (including municipal
lease/purchase agreements) that are not subject to the demand feature described
in the Fund's Prospectus or the Statement of Additional Information, and
floating and variable rate demand obligations as to which the Fund cannot
exercise the demand feature described in the Fund's Prospectus or the Statement
of Additional Information on less than seven days' notice and as to which there
is no secondary market), if, in the aggregate, more than 15% of its net assets
would be so invested.
12. Invest in companies for the purpose of exercising
control.
For purposes of Investment Restriction No. 5, 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.
<PAGE>
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements between the Fund and those
companies that furnish services to the Fund. These companies are as follows:
The Dreyfus Corporation..............Investment Adviser
Dreyfus Service Corporation..........Distributor
Dreyfus Transfer, Inc................Transfer Agent
The Bank of New York.................Custodian
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He also is a
director of The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk management
services to health and other benefit programs, Carlyle Industries, Inc.
(formerly, Belding Heminway, Inc.), a button packager and distributor,
Century Business Services, Inc. (formerly, International Alliance
Services, Inc.), a provider of various outsourcing functions for small and
medium sized companies, and QUICKCAT.com, Inc., a private company engaged
in the development of high speed movement, routing, storage, and
encryption of data across all modes of data transport. For more than five
years prior to January 1995, he was President, a director and, until
August 1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of the Distributor. From August 1994 until
December 31, 1994, he was a director of Mellon Financial Corporation. He
is 56 years old and his address is 200 Park Avenue, New York, New York
10166.
DAVID W. BURKE, Board Member. Board member of various funds in the Dreyfus
Family of Funds. Chairman of the Broadcasting Board of Governors, an
independent board within the United States Information Agency, from August
1994 to November 1998. From August 1994 to December 31, 1994, Mr. Burke
was a Consultant to the Manager and, from October 1990 to August 1994, he
was Vice President and Chief Administrative Officer of the Manager. From
1977 to October 1990, Mr. Burke was involved in the management of national
television news, as Vice President and Executive Vice President of ABC
News, and subsequently as President of CBS News. He is 64 years old and
his address is 197 Eighth Street, Charleston, Massachusetts 02642.
DIANE DUNST, Board Member. Since June 1998, President of Hunting House Antiques.
From January 1992 to June 1998, President of Diane Dunst Promotion, Inc.,
a full service promotion agency. From January 1989 to January 1992,
Director of Promotion Services, Lear's Magazine. From 1985 to January
1989, she was Sales Promotion Manager of ELLE Magazine. She is 60 years
old and her address is 1172 Park Avenue, New York, New York 10128.
ROSALIND GERSTEN JACOBS, Board Member. Merchandise and Marketing Consultant.
From 1977 to 1998, director of Merchandise and Marketing for Corporate
Property Investors, a real estate investment company. From 1974 to 1976,
she was owner and manager of a merchandise and marketing consulting firm.
Prior to 1974, she was a Vice President of Macy's, New York. She is 75
years old and her address is c/o Corporate Property Investors, 305 East
47th Street, New York, New York 10017.
JAY I. MELTZER, Board Member. Physician engaged in private practice
specializing in internal medicine. He is a Clinical Professor of Medicine
at Columbia University, College of Physicians and Surgeons, an Adjunct
Clinical Professor at Cornell Medical College, a Consultant in Medicine at
Memorial Sloan-Kettering Hospital. He teaches in the Section on Society
and Medicine and supervises a group of medical Fellows. He also writes a
monthly commentary on medical affairs for the Medical Herald. He is 71
years old and his address is 903 Park Avenue, New York, New York 10021.
DANIEL ROSE, Board Member. Vice Chairman and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and management
firm. Pursuant to a Presidential appointment in July 1994, he serves as a
Director and Vice Chairman of the Baltic-American Enterprise Fund, which
makes equity investments and loans and provides technical business
assistance to new business concerns in the Baltic states. He is also
Chairman of the Housing Committee of The Real Estate Board of New York,
Inc., and is President of the Harlem Educational Activities Fund, Inc. He
is 70 years old and his address is c/o Rose Associates, Inc., 200 Madison
Avenue, New York, New York 10016.
WARREN B. RUDMAN, Board Member. Since January 1993, Partner in the law firm of
Paul, Weiss, Rifkind, Wharton & Garrison. He also serves as a director of
Collins & Aikman Corporation, Chubb Corporation, and the Raytheon Company,
and as a trustee of Boston College. He is also a member of the President's
Foreign Intelligence Advisory Board (as Vice Chairman, through February,
1998 and, currently, as Chairman). Mr. Rudman also serves as a member of
the Senior Advisory Board of the Institute of Politics of the Kennedy
School of Government at Harvard University. From January 1981 to January
1993, Mr. Rudman served as a United States Senator from the State of New
Hampshire. From January 1993 to December 1994, Mr. Rudman served as
Chairman of the Federal Reserve Bank of Boston. He is 70 years old and his
address is c/o Paul, Weiss, Rifkind, Wharton & Garrison, 1615 L Street,
N.W., Suite 1300, Washington D.C. 20036.
SANDER VANOCUR, Board Member. Since January 1992, President of Old Owl
Communications, a full-service communications firm. From May 1995 to June
1996, he was a Professional in Residence at the Freedom Forum in
Arlington, VA; from January 1994 to May 1995, he served as Visiting
Professional Scholar at the Freedom Forum Amendment Center at Vanderbilt
University; and from November 1989 to November 1995, he was a director of
the Damon Runyon-Walter Winchell Cancer Research Fund. From June 1977 to
December 1991, he was a Senior Correspondent of ABC News and, from October
1986 to December 1991, he was Anchor of the ABC News program "Business
World," a weekly business program on the ABC television network. He is 72
years old and his address is 2626 Sycamore Canyon, Santa Barbara,
California, 93108.
The Fund has a standing nominating committee comprised of its Board members who
are not "interested persons" of the Fund, as defined in the 1940 Act. The
function of the nominating committee is to select and nominate all candidates
who are not "interested persons" of the Fund for election to the Fund's Board.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund for the fiscal year ended March 31, 2000, and
by all 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, 1999, were as
follows:
Total
Compensation From
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund** Board Member
Joseph S. DiMartino $ 5,000 $ 642,177(189)
David W. Burke $ 4,000 $ 228,500(62)
Diane Dunst $ 3,500 $ 37,750(16)
Rosalind Gersten Jacobs $ 4,000 $ 92,250(44)
Jay I. Meltzer $ 4,000 $ 37,750(16)
Daniel Rose $ 4,000 $ 76,625(30)
Warren B. Rudman $ 3,500 $ 68,000 (25)
Sander Vanocur $ 4,000 $ 78,625 (30)
---------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Fund, for which the Board
member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $1,328 for all Board members as a group.
Officers of the Fund
STEPHEN E. CANTER, President. President, Chief Operating Officer, Chief
Investment Officer and a director of the Manager, and an officer of other
investment companies advised or administered by the Manager. Mr. Canter
also is a Director or Executive Committee Member of other investment
management subsidiaries of Mellon Financial Corporation, each of which is
an affiliate of the Manager. He is 54 years old.
MARK N. JACOBS, Vice President. Vice President, Secretary and General Counsel
of the Manager, and an officer of other investment companies advised or
administered by the Manager. He is 53 years old.
JOSEPH CONNOLLY, Vice President and Treasurer. Director - Mutual Fund
Accounting of the Manager, and an officer of other investment companies
advised or administered by the Manager. He is 42 years old.
JOHN B. HAMMALIAN, Secretary. Associate General Counsel of the Manager, and an
officer of other investment companies advised or administered by the
Manager. He is 37 years old.
MICHAEL A. ROSENBERG, Assistant Secretary. Associate General Counsel of the
Manager, and an officer of other investment companies advised or
administered by the Manager. He is 40 years old.
STEVEN F. NEWMAN, Assistant Secretary. Associate General Counsel and Assistant
Secretary of the Manager, and an officer of other investment companies
advised or administered by the Manager. He is 50 years old.
GREGORY S. GRUBER, Assistant Treasurer. Senior Accounting Manager - Municipal
Bond Funds of the Manager, and an officer of other investment companies
advised or administered by the Manager. He is 40 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's shares outstanding on June 30, 2000.
As of June 30, 2000, the following shareholders were known by the Fund to
own of record 5% or more of the outstanding voting securities of the Fund:
Charles Schwab & Company, Inc., Reinvest Account, 101 Montgomery Street, San
Francisco, California 94101, 10.12%.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a global multibank financial 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 largest bank holding companies in the United States
based on total assets.
The Manager provides management services pursuant to a Management
Agreement (the "Agreement") between the Fund and the Manager. The Agreement 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 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, upon 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:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Thomas F. Eggers, Vice Chairman--Institutional and a
director;Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman and a
director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr.,
Executive Vice President; Stephen R. Byers, Senior Vice President; Patrice M.
Kozlowski, Senior Vice President--Corporate Communications; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President--Product Development; Mary Beth Leibig, Vice President--Human
Resources; Ray Van Cott, Vice President--Information Systems; Theodore A.
Schachar, Vice President--Tax; Wendy Strutt, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G. Elliot, Martin G.
McGuinn, Richard W. Sabo and Richard F. Syron, 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 Richard J. Moynihan,
Joseph A. Darcy, A. Paul Disdier, Douglas Gaylor, Joseph Irace, Colleen Meehan,
Michael Petty, Scott Sprauer, 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 and for other funds advised by the Manager.
The Manager's Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by the Manager. In that regard, portfolio managers
and other investment personnel of the Manager must preclear and report their
personal securities transactions and holdings, which are reviewed for compliance
with the Code of Ethics and are also subject to the oversight of Mellon's
Investment Ethics Committee. Portfolio managers and other investment personnel
of the Manager who comply with the Code of Ethics's preclearance and disclosure
procedures and the requirements of the Committee may be permitted to purchase,
sell or hold securities which also may be or are held in fund(s) they manage or
for which they otherwise provide investment advice.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses borne by
the Fund include: taxes, interest, interest on securities sold short, brokerage
fees and commissions, if any, fees of Board members who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Manager, Securities and Exchange Commission fees, state Blue
Sky qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining the
Fund's existence, costs of independent pricing services, costs attributable to
investor services (including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and meetings, costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, and any extraordinary
expenses.
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 may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not including
the management fee paid by the Fund. The Distributor may use part or all of such
payments to pay securities dealers, banks or other financial institutions in
respect of these services. 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 0.60% of the value of the
Fund's average daily net assets. All fees and expenses are accrued daily and
deducted before the declaration of dividends to shareholders. For the fiscal
years ended March 31, 1998, 1999 and 2000, the management fees payable by the
Fund amounted to $1,230,454, $1,211,464 and $1,130,852, respectively, which
amounts were reduced by $23,713, $31,832 and $7,345, respectively, pursuant to
undertakings by the Manager then in effect, resulting in net fees paid to the
Manager of $1,206,741 in fiscal 1998, $1,179,632 in fiscal 1999 and $1,123,507
in fiscal 2000.
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.
Distributor. The Distributor, a wholly-owned subsidiary of the Manager
located at 200 Park Avenue, New York, New York 10166, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement with the Fund which
is renewable annually.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), 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 (the "Custodian"), 100 Church Street, New York, New
York 10286, is the Fund's custodian. The Custodian has no part in determining
the investment policies of the Fund or which securities are to be purchased or
sold by the Fund. Under a custody agreement with the Fund, the Custodian holds
the Fund's securities and keeps all necessary accounts and records. For its
custody services, the Custodian receives a monthly fee based on the market value
of the Fund's assets held in custody and receives certain securities
transactions charges.
HOW TO BUY SHARES
General. Fund shares are sold without a sales charge. You may be charged a
fee if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution. Share certificates are issued only upon your
written request. No certificates are issued for fractional shares. It is not
recommended that the Fund be used as a vehicle for Keogh, IRA or other qualified
plans. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a client of
a securities dealer, bank or other financial institution which maintains an
omnibus account in the Fund and has made an aggregate minimum initial purchase
for its customers of $2,500. Subsequent investments must be at least $100. The
initial investment must be accompanied by the Account Application. For full-time
or part-time employees of the Manager or any of its affiliates or subsidiaries,
directors of the Manager, Board members of a fund advised by the Manager,
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 Manager or any of its affiliates or subsidiaries who
elect to have a portion of their pay directly deposited into their Fund
accounts, the minimum initial investment is $50. The Fund reserves the right to
vary the initial and subsequent investment minimum requirements at any time.
Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect an investor against loss in a declining market.
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
or other entity authorized to receive orders on behalf of the Fund. 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 computing 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 the Fund's investments, see "Determination of Net Asset
Value."
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House ("ACH") member may be so designated.
Dreyfus TeleTransfer purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any day that the Transfer Agent
and the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any Federal 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 in 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 "How to Redeem Shares--Dreyfus TeleTransfer
Privilege."
Reopening an Account. You may reopen an account with a minimum investment
of $100 without filing a new Account Application during the calendar year the
account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant to
which the Fund reimburses the Distributor an amount not to exceed an annual rate
of 0.25% 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.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the Fund's
Board for its review. In addition, the Plan provides that material amendments of
the Plan must be approved 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 Plan by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plan is
subject to annual approval by such vote of the Board members cast in person at a
meeting called for the purpose of voting on the Plan. The Plan is terminable at
any time by vote of a majority of the Board members who are not "interested
persons" and have no direct or indirect financial interest in the operation of
the Plan.
For the fiscal year ended March 31, 2000, the Fund paid $122,251 under the
Plan.
HOW TO REDEEM SHARES
General. 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(R) and
subsequently submit a written redemption request to the Transfer Agent, the Fund
may delay sending the redemption proceeds for up to eight business days after
the purchase of such shares. In addition, the Fund will not honor Checks under
the Checkwriting 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(R)
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.
Fund shares may not be redeemed until the Transfer Agent has received your
Account Application.
Redemption Fee. The Fund will deduct a redemption fee equal to 1% of the
net asset value of Fund shares redeemed (including redemptions through the use
of the Fund Exchanges service) less than 30 days following the issuance of such
shares. The redemption fee will be deducted from the redemption proceeds and
retained by the Fund. For the fiscal year ended March 31, 2000, the Fund
retained $2,484 in redemption fees.
No redemption fee will be charged on the redemption or exchange of shares
(1) through the Fund's Checkwriting Privilege, Automatic Withdrawal Plan or
Dreyfus Auto-Exchange Privilege, (2) through accounts that are reflected on the
records of the Transfer Agent as omnibus accounts approved by the Distributor,
(3) through accounts established by securities dealers, banks or other financial
institutions approved by the Distributor that utilize the National Securities
Clearing Corporation's networking system, or (4) acquired through the
reinvestment of dividends or distributions. The redemption fee may be waived,
modified or terminated at any time.
Checkwriting Privilege. The Fund provides redemption checks ("Checks")
automatically upon opening an account, unless you specifically refuse the
Checkwriting Privilege by checking the applicable "No" box on the Account
Application. The Checkwriting Privilege may be established for an existing
account by a separate signed Shareholder Services Form. Checks will be sent only
to the registered owner(s) of the account and only to the address of record. The
Account Application or Shareholder Services Form 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 your agent, will cause the Fund to redeem a
sufficient number of shares in your 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 you. You generally will be subject to the same rules
and regulations that apply to checking accounts, although the election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the Check, all postdated
Checks which are dated within six months of presentment for payment, if they are
otherwise in good order.
The Transfer Agent will impose a fee for stopping payment of a Check upon
your request or if the Transfer Agent cannot honor a Check due to insufficient
funds or other valid reason. If the amount of the Check is greater than the
value of the shares in your account, the Check will be returned marked
insufficient funds. Checks should not be used to close an account.
This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions. Any 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. By using this Privilege, you authorize the
Transfer Agent to act on wire, telephone or letter redemption instructions from
any person representing himself or herself to be you 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 a 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 you on the Account Application or
Shareholder Services Form, or to a correspondent bank if your bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such bank
and borne by the investor. Immediate notification by the correspondent bank to
your bank is necessary to avoid a delay in crediting the funds to your bank
account.
If you have access to telegraphic equipment, you may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
If you do not have direct access to telegraphic equipment, you may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. You should advise the operator that the above transmittal code must be
used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Share Certificates; Signatures."
Dreyfus TeleTransfer Privilege. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be designated. Holders of jointly registered Fund or
bank accounts may redeem through the Dreyfus TeleTransfer Privilege for transfer
to their bank account not more than $500,000 within any 30-day period. You
should be aware that if you have selected the Dreyfus TeleTransfer Privilege,
any request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal specifically
is requested. Redemption proceeds will be on deposit in the your account at an
ACH member bank ordinarily two business days after receipt of the redemption
request. See "How to Buy Shares--Dreyfus TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor, and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or in part in securities or other assets of the
Fund in case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In such
event, the securities would be valued in the same manner as the Fund's portfolio
is valued. If the recipient sells such securities, brokerage charges might 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
Fund Exchanges. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by the Manager or Founders
Asset Management, LLC ("Founders"), an affiliate of the Manager, to the extent
such shares are offered for sale in your state of residence. The Fund will
deduct a redemption fee equal to 1% of the net asset value of Fund shares
exchanged where the exchange is made less than 30 days after the issuance of
such shares. 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 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"), but 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, you must notify the Transfer
Agent of your prior ownership of fund shares and your account number.
To request an exchange, you 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 you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you 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. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal administrative fee in accordance with
rules promulgated by the Securities and Exchange Commission.
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.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
you to purchase, in exchange for shares of the Fund, shares of another fund in
the Dreyfus Family of Funds or a fund managed by Founders of which you are a
shareholder. 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. You will be notified if your account falls below the amount designated
to be exchanged under this Privilege. In this case, your 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 from regular accounts to IRA accounts, but not from
IRA accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
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. Shares may be exchanged only between
accounts having identical names and other identifying designations. The Fund
Exchanges service or the Dreyfus Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
Dreyfus-Automatic Asset Builder(R). 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.
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 U.S. Government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect.
Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH 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. It is the sole responsibility of your employer to
arrange for transactions under the Dreyfus Payroll Savings Plan.
Dreyfus Step Program. Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-Automatic Asset Builder(R), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-645-6561. You may terminate your
participation in this Program at any time by discontinuing your participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund may modify or terminate this Program at any time.
Dreyfus Dividend Options. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds or a
fund managed by Founders of which you are 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 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 that
charges a sales load may be invested in shares of
other funds sold with a sales load (referred to
herein as "Offered Shares"), but if the sales load
applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which
dividends or distributions are being swept
(without giving effect to any reduced loads), the
difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial institution
which is an ACH member may be so designated. Banks may charge a fee for this
service.
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. Withdrawal
payments are the proceeds from sales of Fund shares, not the yield on the
shares. If withdrawal payments exceed reinvested dividends and distributions,
your shares will be reduced and eventually may be depleted. Automatic Withdrawal
may be terminated 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.
DETERMINATION OF NET ASSET VALUE
Valuation of Portfolio Securities. The Fund's investments are valued each
business day by an independent pricing service (the "Service") approved by the
Fund's 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 Fund's Board. Expenses and fees, including the management fee
(reduced by the expense limitation, if any), 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, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that the Fund has qualified for the fiscal year ended
March 31, 2000 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. To qualify as a regulated investment company,
the Fund must distribute at least 90% of its net income (consisting of net
investment income and net short-term capital gain) to its shareholders and meet
certain asset diversification and other requirements. If the Fund did not
qualify as a regulated investment company, it would be treated for tax purposes
as an ordinary corporation subject to Federal income tax. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
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. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
next business day. 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. 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.
If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividend or distribution and all future dividends and distributions payable to
you in additional Fund shares at net asset value. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the Fund's total assets consists of obligations which, when held by an
individual, the interest therefrom is exempt from California personal income
tax, and if the Fund qualifies as a management company under the California
Revenue and Taxation Code, then the Fund will be qualified to pay dividends to
its shareholders that are exempt from California personal income tax (but not
from California franchise tax). 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. In addition, California tax law does not consider any portion of the
exempt-interest dividends paid, an item of tax preference for the purpose of
computing the California alternative minimum tax.
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 or her shares.
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 should be a return on the investment in an
economic sense although taxable as stated under "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 shall 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 gain realized
from the sale or other disposition of certain market discount bonds will be
treated as ordinary income. In addition, all or a portion of the gain realized
from engaging in "conversion transactions" (generally including certain
transactions designed to convert ordinary income into capital gain) may be
treated as ordinary income.
Gain or loss, if any, realized by the Fund from certain financial futures
and options transactions ("Section 1256 Contracts") 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 Section 1256 Contracts as well as from
closing transactions. In addition, any Section 1256 Contracts 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 as described above.
Offsetting positions held by the Fund involving certain financial futures
contracts or options transactions may be considered, for tax purposes, to
constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. To the extent the straddle
rules apply to positions established by a Fund, losses realized by the Fund may
be deferred to the extent of unrealized gain in the offsetting position. In
addition, short-term capital loss on straddle positions may be recharacterized
as long-term capital loss, and long-term capital gains on a straddle positions
may be treated as short-term capital gains or ordinary income. Certain of the
straddle positions held by a Fund may constitute "mixed straddles." The Fund may
make one or more elections with respect to the treatment of "mixed straddles,"
resulting in different tax consequences. In certain circumstances, the
provisions governing the tax treatment of straddles override or modify certain
of the provisions discussed above.
If the Fund either (1) holds an appreciated financial position with
respect to stock, certain debt obligations, or partnership interests
("appreciated financial position") and then enters into a short sale, futures,
forward, or offsetting notional principal contract (collectively, a "Contract")
respecting the same or substantially identical property or (2) holds an
appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property, the
Fund generally will be taxed as if the appreciated financial position were sold
at its fair market value on the date the Fund enters into the financial position
or acquires the property, respectively.
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.
<PAGE>
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as principal. 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. 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 and may be selected
based upon their sales of shares of the Fund or other funds advised by the
Manager or its affiliates.
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.
PERFORMANCE INFORMATION
The Fund's current yield for the 30-day period ended March 31, 2000 was
4.29%. 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 distributions, 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 2000 Federal and California income tax rate of
45.22%, the Fund's tax equivalent yield for the 30-day period ended March 31,
2000 was 7.83%. 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 quoted 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 39.6% tax rate
has been used. For California personal income tax purposes, an 9.30% 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 yield. 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.
For the one- and five-year periods ended March 31, 2000, and for the
period April 20, 1992 (commencement of operations) through March 31, 2000, the
Fund's average annual total returns were 0.02%, 5.09% and 5.79%, respectively.
Without the fee waivers in effect, the Fund's total return would have been
lower. 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.
For the period April 20, 1992 (commencement of operations) through March
31, 2000, the Fund's total return was 56.43%. Without the fee waivers in effect,
the Fund's total return would have been lower. 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 periods), 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 are not indicative of the Fund's past or future
performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from CDA Investment
Technologies, Inc., Lipper Analytical Services, Inc., Moody's Bond Survey Bond
Index, Lehman Brothers Municipal Bond Indexes, Morningstar, Inc. and other
industry publications. From time to time, advertising materials for the Fund may
refer to or discuss then-current or past economic conditions, developments
and/or events, actual or proposed tax legislation, or statistical or other
information concerning trends relating to investment companies, as compiled by
industry associations such as the Investment Company Institute. From time to
time, advertising materials for the Fund also may refer to Morningstar ratings
and related analyses supporting such ratings. From time to time, advertising
materials may refer to studies performed by the Manager or its affiliates, such
as "The Dreyfus Tax Informed Investing Study" of The Dreyfus Gender Investment
Comparison Study (1996 & 1997) or other such studies.
INFORMATION ABOUT THE FUND
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are of one class and have equal rights as to dividends and in liquidation.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
The Fund is organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts. Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Fund. However, the Fund's Agreement and Declaration of Trust
("Trust Agreement") disclaims shareholder liability for acts or obligations of
the Fund and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Board Member.
The Trust Agreement provides for indemnification from the Fund's property for
all losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of a shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Fund, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Fund intends to conduct its operations
in a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
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, 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. Fund
shareholders may remove a Board member by the affirmative vote of two-thirds of
the Fund's outstanding voting shares. In addition, the 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 Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is following a market-timing strategy or is
otherwise engaging in excessive trading, the Fund, with or without prior notice,
may temporarily or permanently terminate the availability of Fund Exchanges, or
reject in whole or part any purchase or exchange request, with respect to such
investor's account. Such investors also may be barred from purchasing other
funds in the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes exchanges
that appear to coincide with a market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets). If an exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components -- redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.
To offset the relatively higher costs of servicing smaller accounts, the
Fund will charge regular accounts with balances below $2,000 an annual fee of
$12. The valuation of accounts and the deductions are expected to take place
during the last four months of each year. The fee will be waived for any
investor whose aggregate Dreyfus mutual fund investments total at least $25,000,
and will not apply to IRA accounts or to accounts participating in automatic
investment programs or opened through a securities dealer, bank or other
financial institution, or to other fiduciary accounts.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, has been selected as independent auditors of the Fund.
<PAGE>
APPENDIX A
RISK FACTORS--INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
The following information is a summary of special factors affecting
investments in California Municipal Obligations. It does not purport to be a
complete description and is based on information drawn from official statements
relating to securities offerings of the State of California (the "State")
available as of the date of this Statement of Additional Information. While the
Fund has not independently verified this information, it has no reason to
believe that such information is not correct in all material respects.
State Finances
The Budget Process
The State's fiscal year begins on July 1 and ends on June 30. The State
operates on a budget basis, using a modified accrual system of accounting, with
revenues credited in the period in which they are measurable and available and
expenditures debited in the period in which the corresponding liabilities are
incurred.
The annual budget is proposed by the Governor by January 10 of each year
for the next fiscal year (the "Governor's Budget"). Under State law, the annual
proposed Governor's Budget cannot provide for projected expenditures in excess
of projected revenues and balances available from prior fiscal years. Following
the submission of the Governor's Budget, the Legislature takes up the proposal.
Under the State Constitution, money may be drawn from the Treasury only
through an appropriation made by law. The primary source of the annual
expenditure authorizations is the Budget Act as approved by the Legislature and
signed by the Governor. The Budget Act must be approved by a two-thirds majority
vote of each House of the Legislature. The Governor may reduce or eliminate
specific line items in the Budget Act or any other appropriations bill without
vetoing the entire bill. Such individual line-item vetoes are subject to
override by a two-thirds majority vote of each House of the Legislature.
Appropriations also may be included in legislation other than the Budget
Act. Bills containing appropriations (except for K-12 and community college
("K-14") education) must be approved by a two-thirds majority vote in each House
of the Legislature and be signed by the Governor. Bills containing K-14
education appropriations require a simple majority vote. Continuing
appropriations, available without regard to fiscal year, also may be provided by
statute or the State Constitution. There is litigation pending concerning the
validity of such continuing appropriations. See "Litigation" below.
Funds necessary to meet an appropriation need not be in the State Treasury
at the time such appropriation is enacted; revenues may be appropriated in
anticipation of their receipt.
The General Fund
The moneys of the State are segregated into the General Fund and over 900
special funds, including bond, trust and pension funds. The General Fund
consists of revenues received by the State Treasury and not required by law to
be credited to any other fund, as well as earnings from the investment of State
moneys not allocable to another fund. The General Fund is the principal
operating fund for the majority of governmental activities and is the depository
of most of the major revenue sources of the State. The General Fund may be
expended as a consequence of appropriation measures enacted by the Legislature
and approved by the Governor, as well as appropriations pursuant to various
constitutional authorizations and initiative statutes.
The Special Fund for Economic Uncertainties
The Special Fund for Economic Uncertainties ("SFEU") is funded with
General Fund revenues and was established to protect the State from unforeseen
revenue reductions and/or unanticipated expenditure increases. Amounts in the
SFEU may be transferred by the State Controller as necessary to meet cash needs
of the General Fund. The State Controller is required to return moneys so
transferred without payment of interest as soon as there are sufficient moneys
in the General Fund.
At the time of the release of the May 2000 Revision to the 2000-01
Governor's Budget (the "May Revision") on May 15, 2000, the Department of
Finance projected the SFEU would have a balance of about $6.920 billion at June
30, 2000, compared to the amount of $880 billion projected at the time the 1999
Budget Act was signed on July 29, 1999, and the amount of $2.420 billion
projected in the 2000-01 Governor's Budget released January 10, 2000. See
"Current State Budget" below.
Inter-Fund Borrowings
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,
1999, the General Fund had no outstanding loans from the SFEU, General Fund
special accounts or other special funds.
Investment of Funds
Moneys on deposit in the State's Centralized Treasury System are invested
by the Treasurer in the Pooled Money Investment Account (the "PMIA"). As of
March 31, 2000, the PMIA held approximately $21.57 billion of State moneys
invested for about 2,785 local governmental entities through the Local Agency
Investment Fund ("LAIF").
Welfare Reform
The Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (the "Welfare Reform Law") has fundamentally reformed he nation's welfare
system. Among its many provisions, the Welfare Reform Law includes: (1)
conversion of Aid to Families with Dependent Children from an entitlement
program to a block grant titled Temporary Assistance for Needy Families (TANF),
with time limits on TANF recipients, work requirements and other changes; (ii)
provisions denying certain federal welfare and public benefits to legal
noncitizens (this provision has been amended by subsequent federal law),
allowing states to elect to deny additional benefits (including TANF) to legal
noncitizens, and generally denying almost all benefits to illegal immigrants;
and (iii) changes in the Food Stamp program, including reducing maximum benefits
and imposing work requirements.
California's response to the federal welfare reforms is embodied in
Chapter 270, Statutes of 1997 and is called California Work Opportunity and
Responsibility to Kids ("CalWORKs"), which replaced the former Aid to Families
with Dependent Children (AFDC) and Greater Avenues to Independence (GAIN)
programs, effective January 1, 1998. Consistent with the Welfare Reform Law,
CalWORKs contains new time limits on receipt of welfare aid, both lifetime as
well as for any current period on aid. The centerpiece of CalWORKs is the
linkage of eligibility to work participation requirements. Administration of the
new CalWORKs program is largely at the county level, and counties are given
financial incentives for success in this program.
The long-term impact of the Welfare Reform Law and CalWORKs cannot be
determined until there has been more experience and until an independent
evaluation of the CalWORKs program by the RAND Corporation is completed. In the
short-term, the implementation of the CalWORKs program has continued the trend
of declining welfare caseloads. The CalWORKs caseload trend is projected to have
been 580,000 in 1999-00 and to be 549,000 in 2000-01, down from a high of
921,000 cases in 1994-95.
The 2000-01 CalWORKs budget reflects California's success in meeting the
federally-mandated work participation requirements for federal fiscal year 1998.
With that goal being met, the federally-imposed maintenance-of-effort (MOE)
level for California is reduced from 80% of the federal fiscal year 1994
baseline expenditures for the former AFDC program ($2.9 billion) to 75% ($2.7
billion).
The 2000-01 May Revision to the Governor's Budget proposes expenditures
which will continue to meet, but not exceed, the federally-required $2.7 billion
combined State and county MOE requirement, Total CalWORKS-related expenditures
are estimated to be $7.2 billion for 1999-2000 and $7.0 billion for 2001-01,
including child care transfer amounts for the Department of Education.
Local Governments
The primary units of local government in California are the counties,
ranging in population from 1,200 in Alpine County to over 9,900,000 in Los
Angeles County. Counties are responsible for the provision of many basic
services, including indigent health care, welfare, jails and public safety in
unincorporated areas. There also are about 475 incorporated cities and thousands
of special districts formed for education, utility and other services. The
fiscal condition of local governments has been constrained since the enactment
of "Proposition 13" in 1978, which reduced and limited the future growth of
property taxes and limited the ability of local governments to impose "special
taxes" (those devoted to a specific purpose) without two-thirds voter approval.
Counties, in particular, have had fewer options to raise revenues than many
other local government entities, and have been required to maintain many
services.
In the aftermath of Proposition 13, the State provided aid to local
governments from the General Fund to make up some of the loss of property tax
moneys, including taking over the principal responsibility for funding K-12
schools and community colleges. During the recession, the Legislature eliminated
most of the remaining components of post-Proposition 13 aid to local government
entities other than K-14 education districts by requiring cities and counties to
transfer some of their property tax revenues to school districts. However, the
Legislature also provided additional funding sources (such as sales taxes) and
reduced certain mandates for local services. Since then, the State also has
provided additional funding to counties and cities through such programs as
health and welfare realignment, welfare reform, trial court restructuring, the
COPs program supporting local public safety departments, and various other
measures.
The 1999 Budget Act included a $150 million one-time subvention from the
General Fund to local agencies for relief from the 1992 and 1993 property tax
shifts. Legislation has been passed, subject to voter approval at the election
in November 2000, to provide a more permanent payment to local governments to
offset the property tax shift. In addition, legislation was enacted in 1999 to
provide approximately $35.8 million annual relief to cities based on 1997-98
costs of jail booking and processing fees paid to counties.
Historically, funding for the State's trial court system was divided
between the State and the counties. However, Chapter 850, Statutes of 1997,
implemented a restructuring of the State's trial court funding system. Funding
for the courts, with the exception of costs for facilities, local judicial
benefits, and revenue collection, was consolidated at the State level. The
county contribution for both their general fund and fine and penalty amounts is
capped at the 1994-95 level and becomes part of the Trial Court Trust Fund,
which supports all trial court operations. The State assumed responsibility for
future growth in trial court funding. The consolidation of funding is intended
to streamline the operation of the courts, provide a dedicated revenue source,
and relieve fiscal pressure on the counties. Beginning in 1998-99, the county
general fund contribution for court operations was reduced by $290 million, and
cities retained $62 million in fine and penalty revenue previously remitted to
the State. The General Fund reimbursed the $352 million revenue loss to the
Trial Court Trust Fund. The 1999 Budget Act included funds to further reduce the
county General Fund contribution by an additional $96 million. The 2000 May
Revision proposes to continue this permanent assistance to local governments.
The entire statewide welfare system has been changed in response to the
change in federal welfare law enacted in 1996 (see "Welfare Reform" above).
Under the CalWORKs program, counties are given flexibility to develop their own
plans, consistent with State law, to implement the program and to administer
many of its elements, and their costs for administrative and supportive services
are capped at the 1996-97 levels. Counties also are given financial incentives
if, at the individual county level or statewide, the CalWORKs program produces
savings associated with specified standards. Counties will still be required to
provide "general assistance" aid to certain persons who cannot obtain welfare
from other programs.
In 1996, voters approved Proposition 218, entitled the "Right to Vote on
Taxes Act," which incorporates new Articles XIII C and XIII D into the
California Constitution. These new provisions place limitations on the ability
of local government agencies to impose or raise various taxes, fees, charges and
assessments without voter approval. Certain "general taxes" imposed after
January 1, 1995 must be approved by voters in order to remain in effect. In
addition, Article XIII C clarifies the right of local voters to reduce taxes,
fees, assessments or charges through local initiatives. Proposition 218 does not
affect the State or its ability to levy or collect taxes.
State Appropriations Limit
The State is subject to an annual appropriations limit imposed by Article
XIII B of the State Constitution (the "Appropriations Limit"). The
Appropriations Limit does not restrict appropriations to pay debt service on
voter-authorized bonds.
Article XIII B prohibits the State from spending "appropriations subject
to limitation" in excess of the Appropriations Limit. "Appropriations subject to
limitation," with respect to the State, 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 that entity in providing the
regulation, product or service," but "proceeds of taxes" exclude most state
subventions to local governments, tax refunds and some benefit payments such as
unemployment insurance. No limit is imposed on appropriations of funds which are
not "proceeds of taxes," such as reasonable user charges or fees and certain
other non-tax funds.
Not included in the Appropriations Limit are appropriations for the debt
service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government, appropriations for qualified
capital outlay projects, appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels, and
appropriation of certain special taxes imposed by initiative (e.g., cigarette
and tobacco taxes). The Appropriations Limit may be exceeded in cases of
emergency.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in state 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 or any transfer of the financial source for the provisions of
services from tax proceeds to non tax proceeds. The measurement of change in
population is a blended average of statewide overall population growth, and
change in attendance at local K-14 school districts. The Appropriations Limit is
tested over consecutive two-year periods. Any excess of the aggregate "proceeds
of taxes" received over such two-year period above the combined Appropriations
Limits for those two years is divided equally between transfers to K-14 school
districts and refunds to taxpayers.
The Legislature has enacted legislation to implement Article XIII B which
defines certain terms used in Article XIII B and sets forth the methods for
determining the Appropriations Limit. California Government Code Section 7912
requires an estimate of the Appropriations Limit to be included in the
Governor's Budget, and thereafter to be subject to the budget process and
established in the Budget Act.
The following table shows the State's Appropriations Limit for the past three
fiscal years, the current fiscal year and proposed budget year. As of the
release of the May Revision to the 2000-01 Governor's Budget, the Department of
Finance projects the State's Appropriations Limit for 2000-01 will be $54.073
billion. As of June 2000, the Department of Finance is in the process of
determining the Appropriations Subject to the Limit. Preliminary estimates
indicate the State may be over the Appropriations Limit for 1999-2000 by several
hundred million dollars, and would be below the Limit for 2000-01 by three to
four billion dollars. No action will occur under Articles XIIIB unless the State
exceeds the Limit over a two-year period.
State Appropriations Limit
(Millions)
Fiscal Years
1996-97 1997-98 1998-99 1999-00 2000-01
State Appropriations $42,002 $44,778 $47,573 $50,673 $54,073*
Limit
Appropriations Subject (35,103) (40,743) (43,780)
to Limit ** **
-- --
Amount (Over)/Under $6,899 $4,035 $3,793 $ ** $ **
====== ====== ====== ==== =====
Limit
-------------------------------------------------------------------
---------------------
* Estimated/Projected
** Department of Finance is presently estimating Appropriations Subject to
Limit.
SOURCE: State of California, Department of Finance.
Proposition 98
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act." Proposition 98 changed State
funding of public education below the university level and the operation of the
State 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 on June 5, 1990), K-14 schools are guaranteed the greater
of (a) in general, a fixed percent 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 XIII B by reference to State per
capita personal income) and enrollment ("Test 2"), or (c) a third test, which
would replace Test 2 in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one percent is less
than the percentage growth in State 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. Legislation adopted
prior to the end of the 1988-89 Fiscal Year, implementing Proposition 98,
determined the K-14 schools' funding guarantee under Test 1 to be 40.3 percent
of the General Fund tax revenues, based on 1986-87 appropriations. However, that
percent has been adjusted to approximately 35 percent to account for a
subsequent redirection of local property taxes, since such redirection directly
affects the share of General Fund revenues to schools.
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. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools. See "State Finances--State Appropriations Limit" above.
During the recession in the early 1990s, General Fund revenues for several
years were less than originally projected, so that the original Proposition 98
appropriations turned out to be higher than the minimum percentage provided in
the law. The Legislature responded to these developments by designating the
"extra" Proposition 98 payments in one year as a "loan" from future years'
Proposition 98 entitlements, and also intended that the "extra" payments would
not be included in the Proposition 98 "base" for calculating future years'
entitlements. By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,200 from Fiscal Year
1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, California Teachers' Association v. Gould,
which challenged the validity of these off-budget loans. The settlement of this
case, finalized in July 1996, provides, among other things, that both the State
and K-14 schools share in the repayment of prior years' emergency loans to
schools. Of the total $1.76 billion in loans, the State is repaying $935 million
by forgiveness of the amount owed, while schools will repay $825 million. The
State share of the repayment will be reflected as an appropriation above the
current Proposition 98 base calculation. The schools' share of the repayment
will count as appropriations that count toward satisfying the Proposition 98
guarantee, or from "below" the current base. Repayments are spread over the
eight-year period of 1994-95 through 2001-02 to mitigate any adverse fiscal
impact.
Substantially increased General Fund revenues, above initial budget
projections, in the fiscal years 1994-95 through 1999-00 have resulted in
retroactive increases in Proposition 98 appropriations from subsequent fiscal
years' budgets. Because of the State's increasing revenues, per-pupil funding at
the K-12 level has increased by more than 50 percent from the level in place in
1991-92, and is estimated at about $6,672 per ADA in 2000-01. A significant
amount of the "extra" Proposition 98 monies in the last few years has been
allocated to special programs. Since the State expects General Fund revenue
growth to continue in 2000-01, there also are new initiatives. See "Current
State Budget" for further discussion of education funding.
Prior Fiscal Years' Financial Results
The State's financial condition improved markedly during the fiscal years
starting in 1995-96, with a combination of better than expected revenues,
slowdown in growth of social welfare programs, and continued spending restraint
based on actions taken in earlier years. The State's cash position also
improved, and no external deficit borrowing occurred over the end of the last
four fiscal years.
The State economy grew strongly during the fiscal years beginning in
1995-96 and, as a result, the General Fund took in substantially greater tax
revenues (around $2.2 billion in 1995-96, $1.6 billion in 1996-97, $2.4 billion
in 1997-98 and $1.7 billion in 1998-99) than were initially planned when the
budgets were enacted. The accumulated budget deficit from the recession years
was finally eliminated with the repayment of the revenue anticipation warrants
in April 1996. These additional funds were largely directed to school spending
as mandated by Proposition 98, to make up shortfalls from reduced federal health
and welfare aid in 1995-96 and 1996-97 and particularly in 1998-99 to fund new
program incentives.
The following were major features of the 1998 Budget Act and certain
additional fiscal bills enacted before the end of the legislative session:
1. The most significant feature of the 1998-99 budget was agreement on a
total of $1.4 billion of tax cuts. The central element was a bill which provided
for a phased-in reduction of the Vehicle License Fee ("VLF"). Since the VLF is
transferred to cities and counties under existing law, the bill provided for the
General Fund to replace the lost revenues. Starting on January 1, 1999, the VLF
has been reduced by 25 percent, at a cost to the General Fund of approximately
$500 million in the 1998-99 Fiscal Year and about $1 billion annually
thereafter.
In addition to the cut in VLF, the 1998-99 budget included both temporary
and permanent increases in the personal income tax dependent credit ($612
million General Fund cost in 1998-99, but less in future years), a nonrefundable
renters tax credit ($133 million), and various targeted business tax credits
($106 million).
2. Proposition 98 funding for K-14 schools was increased by $1.7 billion
in General Fund moneys over revised 1997-98 levels, over $300 million higher
than the minimum Proposition 98 guarantee. Of the 1998-99 funds, major new
programs included money for instructional and library materials, deferred
maintenance, support for increasing the school year to 180 days and reduction of
class sizes in Grade 9. The Budget also included $250 million as repayment of
prior years' loans to schools, as part of the settlement of the California
Teachers' Association v. Gould lawsuit. See "State Finances - Proposition 98"
above.
3. Funding for higher education increased substantially above the actual
1997-98 level. General Fund support was increased by $340 million (15.6 percent)
for the University of California and $267 million (14.1 percent) for the
California State University system. In addition, Community Colleges funding
increased by $300 million (6.6 percent).
4. The Budget included increased funding for health, welfare and social
services programs. A 4.9 percent grant increase was included in the basic
welfare grants, the first increase in those grants in 9 years.
5. Funding for the judiciary and criminal justice programs increased by
about 11 percent over 1997-98, primarily to reflect increased State support for
local trial courts and rising prison population.
6. Major legislation enacted after the 1998 Budget Act included new
funding for resources projects, a share of the purchase of the Headwaters
Forest, funding for the Infrastructure and Economic Development Bank ($50
million) and funding for the construction of local jails. The State realized
savings of $433 million from a reduction in the State's contribution to the
State Teacher's Retirement System in 1998-99.
Final tabulation of revenues and expenditures contained in the 2000-01
Governor's Budget, released on January 10, 2000, reveals that stronger than
expected economic conditions in the State produced total 1998-99 General Fund
revenues of about $58.6 billion, almost $1.6 billion above the 1998 Budget Act
estimates. Actual General Fund expenditures were $57.8 billion, the amount
estimated at the 1998 Budget Act. Some of this additional revenue will be
directed to K-14 schools pursuant to Proposition 98. The Governor's Budget
reports a balance in the SFEU at June 30, 1999, of approximately $3.1 billion on
a budgetary basis.
Current State Budget
The discussion below of the 1999-00 Fiscal Year budget is based on the
State's estimates and projections of revenues and expenditures for the current
fiscal year and must not be construed as statements of fact. These estimates and
projections are based upon various assumptions as updated in the 1999 Budget
Act, which may be affected by numerous factors, including future economic
conditions in the State and the nation, and there can be no assurance that the
estimates will be achieved.
1999-2000 Fiscal Year Budget
On January 8, 1999, the Governor released a proposed budget for Fiscal
Year 1999-00 (the "January Governor's Budget"). The January Governor's Budget
generally reported that General Fund revenues for Fiscal Year 1998-99 and Fiscal
Year 1999-00 would be lower than earlier projections (primarily due to weaker
overseas economic conditions perceived in late 1998), while some caseloads would
be higher than earlier projections. The January Governor's Budget proposed $60.5
billion of General Fund expenditures in Fiscal Year 1999-00, with a $415 million
SFEU reserve at June 30, 2000.
The 1999 May Revision showed an additional $4.3 billion of revenues for
combined fiscal years 1998-99 and 1999-00. The final Budget Bill was adopted by
the Legislature on June 16, 1999, and was signed by the Governor on June 29,
1999 (the "1999 Budget Act"), meeting the Constitutional deadline for budget
enactment for only the second time in the 1990's.
The final 1999 Budget Act estimated General Fund revenues and transfers of
$63.0 billion, and contained expenditures totaling $63.7 billion after the
Governor used the line-item veto to reduce the legislative Budget Bill
expenditures by $581 million (both General Fund and Special Fund). The 1999
Budget Act also contained expenditures of $16.1 billion from special funds and
$1.5 billion from bond funds. The Administration estimated that the SFEU would
have a balance at June 30, 2000, of about $880 million. Not included in this
amount was an additional $300 million which (after the Governor's vetoes) was
"set aside" to provide funds for employee salary increases (to be negotiated in
bargaining with employee unions), and for litigation reserves. The 1999 Budget
Act anticipated normal cash flow borrowing during the fiscal year.
The principal features of the 1999 Budget Act include the following:
1. Proposition 98 funding for K-12 schools was increased by $1.6 billion
in General Fund moneys over revised 1998-99 levels, $108.6 million higher than
the minimum Proposition 98 guarantee. Of the 1999-00 funds, major new programs
included money for reading improvement, new textbooks, school safety, improving
teacher quality, funding teacher bonuses, providing greater accountability for
school performance, increasing preschool and after school care programs and
funding deferred maintenance of school facilities. The Budget also includes $310
million as repayment of prior years' loans to schools, as part of the settlement
of the California Teachers' Association v. Gould lawsuit. See also "State
Finances - Proposition 98" above.
2. Funding for higher education increased substantially above the actual
1998-99 level. General Fund support was increased by $184 million (7.3 percent)
for the University of California and $126 million (5.9 percent) for the
California State University system. In addition, Community Colleges funding
increased by $324.3 million (6.6 percent). As a result, undergraduate fees at UC
and CSU will be reduced for the second consecutive year, and the per-unit charge
at Community Colleges will be reduced by $1.
3. The Budget included increased funding of nearly $600
million for health and human services.
4. About $800 million from the General Fund will be directed toward
infrastructure costs, including $425 million in additional funding for the
Infrastructure Bank, initial planning costs for a new prison in the Central
Valley, additional equipment for train and ferry service, and payment of
deferred maintenance for state parks.
5. The Legislature enacted a one-year additional reduction of 10 percent
of the VLF for calendar year 2000, at a General Fund cost of about $250 million
in each of Fiscal Year 1999-00 and Fiscal Year 2000-01 to make up lost funding
to local governments. Conversion of this one-time reduction to a permanent cut
will remain subject to the revenue tests in the legislation adopted last year.
Several other targeted tax cuts, primarily for businesses, also were approved at
a cost of $54 million in Fiscal Year 1999-00.
6. A one-time appropriation of $150 million, to be split between cities
and counties, was made to offset property tax shifts during the early 1990's.
Additionally, an ongoing $50 million was appropriated as a subvention to cities
for jail booking or processing fees charged by counties when an individual
arrested by city personnel is taken to a county detention facility.
Revised 1999-2000 Budget Estimates. The revised 1999-2000 budget included
in the May 2000 Revision of the 2000-01 Governor's Budget (the "2000 May
Revision"), released on May 15, 2000, reflects the latest estimated costs or
savings as provided in various pieces of legislation passed and signed after the
1999 Budget Act. As a result of the very strong economy in the State and
associated extraordinary revenue receipts, revised 1999-2000 General Fund
revenues are $70.9 billion, an increase of $7.9 billion above the projections
made when the 1999 Budget Act was enacted, and $5.7 billion above the previous
estimate made in the 2000-01 Governor's Budget in January, 2000. Revised
1999-2000 expenditures are $67.3 billion or $3.6 billion higher than projections
at the 1999 Budget Act. These additional expenditures include a supplemental
appropriation of $665 million for Smog Impact Fee refunds. The Department of
Finance projects that the balance is the SEFU will be about $6.9 billion at June
30, 2000, much of which will be appropriated for Fiscal Year 2000-01.
Proposed 2000-01 Fiscal Year Budget
On January 10, 2000, the Governor released his proposed budget for Fiscal
Year 2000-01. The 2000-01 Governor's Budget generally reflected an estimate that
General Fund revenues for Fiscal Year 1999-2000 would be higher than projections
made at the time of the 1999 Budget Act. Even these positive estimates proved to
be greatly understated as continuing economic growth and stock market gains (at
least through the first quarter of 2000) resulted in a surge of revenues. The
Administration estimated in the 2000 May Revision that General Fund revenues
would total $70.9 billion in 1999-2000, and $73.8 billion in 2000-01, a two-year
increase of $12.3 billion above the January Governor's Budget revenue estimates.
The 2000-01 revenue estimate assumes a $545 million reduction in personal income
tax revenue from the Governor's proposal to provide an income tax exemption for
all teachers in the State
The 2000 May Revision proposes General Fund expenditures of $78.2 billion,
as compared to an original spending proposal of $68.8 billion in the January
Governor's Budget. Included in the revised Budget are set-asides of $500 million
for legal contingencies and $200 million for various one-time legislative
initiatives. Based on the proposed revenues and expenditures, the 2000 May
Revision projects the June 30, 2001 balance in the SFEU to be $1.769 billion, up
from $1.238 billion proposed in the January Governor's Budget.
The Revenue and Expenditure assumptions set forth have been based upon
certain estimates of the performance of the California and national economies in
calendar years 2000 and 2001. In the 2000 May Revision released on May 15, 2000,
the Department of Finance projected that the California economy will continue to
show strong growth in 2000, followed by more moderate gains in 2001. The
projection assumes a relatively flat stock market, and a 25% reduction in stock
option income in 2000-01. The economic expansion has been market by strong
growth in high technology manufacturing and business services (including
software, computer programming and the Internet), nonresidential construction,
entertainment and tourism-related industries. Growth in 1999 was greater than
earlier years in the economic expansion, with 3.7% year-over-year increase in
nonfarm payroll employment. Unemployment, now less than 5%, is at the lowest
rate in over 30 years. Taxable sales in the first quarter of 2000 are 10% above
year-earlier levels. Significant economic improvement in Asia (Japan excluded),
ongoing strength in NAFTA partners Mexico and Canada, and stronger growth in
Europe are expected to further increase California-made exports in 2000 and
2001. Nonresidential construction has been strong for the past four years. New
residential construction has increased since lows of the early 1990's recession,
but remains lower than during the previous economic expansion in 1980's.
The 2000 May Revision contains a number of proposals for spending the
additional revenues, mostly in 2000-01. According to a report by a Legislative
Analyst's Office, about $7.2 billion is proposed for one-time expenditures,
including a general tax rebate and senior citizen's tax relief ($1.9 billion),
aid to public schools ($1.5 billion), transportation ($1.5 billion), housing
($500 million), set-asides and increased reserves ($600 million) and other uses
($1.2 billion). About $5.1 billion is proposed for program enhancements which
would be permanent, including increased Proposition 98 funds for schools ($2.4
billion), tax relief ($600 million, including the exemption for teachers
mentioned above), transportation ($440 million per year for five years), health
and social services ($1.1 billion) and other ($600 million). All of these
proposals are subject to review and action by the Legislature.
Economy and Population
Introduction
California's economy, the largest among the 50 states and one of the
largest in the world, has major components in high technology, trade,
entertainment, agriculture, manufacturing, tourism, construction and services.
Since 1994, California's economy has been performing strongly after suffering a
deep recession between 1990-93.
Population and Labor Force
The State's July 1, 1999 population of over 34 million represented over 12
percent of the total United States population.
California's population is concentrated in metropolitan areas. As of the
April 1, 1990 census, 96 percent resided in the 23 Metropolitan Statistical
Areas in the State. As of July 1, 1998, the 5-county Los Angeles area accounted
for 49 percent of the State's population, with over 16.0 million residents, and
the 10-county San Francisco Bay Area represented 21 percent, with a population
of over 7.0 million.
The following table shows California's population data for 1994 through
1999.
Population 1994-98
% Increase % Increase
Over Over California
California Preceding United States Preceding as % of
Year Population(a) Year Population(a) Year United States
1994 31,790,000 0.9 260,292,000 1.0 12.2
1995 32,063,000 0.9 262,761,000 0.9 12.2
1996 32,383,000 1.0 265,179,000 0.9 12.2
1997 32,957,000 1.8 267,636,000 0.9 12.3
1998 33,494,000 1.6 270,029,000 0.9 12.4
1999 34,036,000 1.6 272,691,000 0.9 12.5
------------
(a) Population as of July 1.
SOURCE: U.S. Department of Commerce, Bureau of the Census; State
of California, Department of Finance.
The following table presents civilian labor force data for the resident
population, age 16 and over, for the years 1993 to 1999.
Labor Force
1993-98
Labor Force Trends Unemployment Rate (%)
(Thousands)
Labor United
Year Force Employment California States
1993 15,359 13,918 9.4 6.9
1994 15,450 14,122 8.6 6.1
1995 15,412 14,203 7.8 5.6
1996 15,511 14,391 7.2 5.4
1997 15,941 14,937 6.3 4.9
1998 16,330 15,361 5.9 4.5
1999 16,586 15,722 5.2 4.2
-----------------
SOURCE: State of California, Employment Development Department.
Litigation
The State is a party to numerous legal proceedings. The following are the
more significant lawsuits pending against the State, as reported by the Office
of the Attorney General.
On December 24, 1997, a consortium of California counties filed a test
claim with the Commission on State Mandates asking the Commission on State
Mandates to determine whether the property tax shift from counties to school
districts beginning in 1993-94 is a reimbursable state mandated cost. See "State
Finances - Local Governments" above. The test claim was heard on October 29,
1998, and the Commission on State Mandates found in favor of the State. In March
1999, Sonoma County filed suit in the Superior Court to overturn the Commission
on State Mandate's decision. In October 1999, a Sonoma County Superior Court
Judge ruled in favor of the County. The State will continue to contest this
lawsuit. Should the courts ultimately find in favor of the counties, the impact
to the State General Fund could be as high as $10.0 billion. In addition, there
would be an annual Proposition 98 General Fund cost of at least $3.75 billion.
This cost would grow in accordance with the annual assessed value growth rate.
On June 24, 1998, plaintiffs in Howard Jarvis Taxpayers Association et al.
v. Kathleen Connell filed a complaint for certain declaratory and injunctive
relief challenging the authority of the State Controller to make payments from
the State Treasury in the absence of a state budget. On July 21, 1998, the trial
court issued a preliminary injunction prohibiting the State Controller from
paying moneys from the State Treasury for fiscal year 1998-99, with certain
limited exceptions, in the absence of a state budget. The preliminary
injunction, among other things, prohibited the State Controller from making any
payments pursuant to any continuing appropriation. On July 22 and 27, 1998,
various employee unions which had intervened in the case appealed the trial
court's preliminary injunction and asked the Court of Appeal to stay the
preliminary injunction. On July 28, 1998, the Court of Appeal granted the
unions' requests and stayed the preliminary injunction pending the Court of
Appeal's decision on the merits of the appeal. On August 5, 1998, the Court of
Appeal denied the plaintiffs' request to reconsider the stay. Also on July 22,
1998, the State Controller asked the California Supreme Court to immediately
stay the trial court's preliminary injunction and to overrule the order granting
the preliminary injunction on the merits. On July 29, 1998, the Supreme Court
transferred the State Controller's request to the Court of Appeal. The matters
are now pending before the Court of Appeal. Briefs have been submitted; no date
has yet been set for oral argument.
The State is involved in a lawsuit, Thomas Hayes v. Commission on State
Mandates, related to state-mandated costs. The action involves an appeal by the
Director of Finance from a 1984 decision by the State Board of Control (now
succeeded by the Commission on State Mandates (COSM)). The Board of Control
decided in favor of local school districts' claims for reimbursement for special
education programs for handicapped students. The case then was brought to the
trial court by the State and later remanded to the COSM for redetermination. The
COSM since has expanded the claim to include supplemental claims filed by
several other institutions. To date, the Legislature has not appropriated funds.
The liability to the State, if all potentially eligible school districts pursue
timely claims, has been estimated by the Department of Finance at more than $1
billion. COSM issued a decision in December 1998 determining that a small number
of components of the State's special education program are state mandated local
costs. The administrative proceeding is in the "parameters and guidelines" stage
where the commission is considering whether and to what extent the costs
associated with the state mandated components of the special education program
are offset by funds that the State already allocates to that program. The
State's position is that all costs are offset by existing funding. The State has
the option to seek judicial review of the mandate finding. Potential liability
of the State, if all potentially eligible school districts pursue timely claims,
has been estimated by the Department of Finance to be in excess of $1.5 billion,
if the State is not credited for its existing funding of the program. The COSM
was unable to resolve two other identified aspects of the state's program due to
tie votes. As such, the COSM referred these matters to an administrative law
judge for preparation of recommend decisions. One of these matters encompasses
all special education services for students between the ages of 3 to 5 and 18 to
21, and thus represents significant additional potential liability if the claim
is ultimately upheld and the State is denied credit for its existing funding.
In January 1997, California experienced major flooding in six different
areas with preliminary estimates of property damage of approximately $1.6 to
$2.0 billion. A substantial number of plaintiffs have joined suit against the
State, local agencies, and private companies and contractors seeking
compensation for the damages they suffered as a result of the 1997 flooding. The
State is vigorously defending the action.
The State is a defendant in Ceridian Corporation v. Franchise Tax Board, a
suit which challenges the validity of two sections of the California Tax Laws.
The first relates to deduction from corporate taxes for dividends received from
insurance companies to the extent the insurance companies have California
activities. The second relates to corporate deduction of dividends to the extent
the earnings of the dividend paying corporation have already been included in
the measure of their California tax. On August 13, 1998, the court issued a
judgment against the Franchise Tax Board on both issues. The Franchise Tax Board
has appealed the judgment. Briefing has been competed. The State has taken the
position that, if the challenged section of the Revenue & Taxation Code is
struck down, all deductions relating to dividends would be eliminated and the
result would be additional income to the State. Plaintiffs, however, contend
that if they prevail, the deduction should be extended to all dividends which
would result in a one-time liability for open years of approximately $60
million, including interest, and an annual revenue loss of approximately $10
million. No date has yet has been set for oral argument.
The State is also a defendant in First Credit bank etc. v. Franchise Tax
Board which challenges a Revenue & Taxation Code section similar to the one
challenged in the Ceridian case, but applicable to a different group of
corporate taxpayers. The State's motion for summary judgment is currently
pending and a trial date has been set in September 2000. A decision in the
Ceridian case could impact the outcome of this case. The State has taken the
position that, if the challenged section of the Revenue & Taxation Code is
struck down, all deductions relating to dividends would be eliminated and the
result would be additional income to the State. Plaintiffs, however, contend
that if they prevail, the deduction should be extended to all dividends which
would result in a one-time liability for open years of approximately $385
million, including interest, and an annual revenue loss of approximately $60
million.
The State is involved in a lawsuit related to contamination at the
Stringfellow toxic waste site. In United States, People of the State of
California v. J.B. Stringfellow, Jr., et al., the State is seeking recovery for
past costs of cleanup of the site, a declaration that the defendants are jointly
and severally liable for future costs, and an injunction ordering completion of
the cleanup. However, the defendants have filed a counterclaim against the State
for alleged negligent acts, resulting in significant findings of liability
against the State as owner, operator, and generator of wastes taken to the site.
The State has appealed the rulings. Present estimates of the cleanup range from
$400 million to $600 million. Potential State liability falls within this same
range. However, all or a portion of any judgment against the State could be
satisfied by recoveries from the State's insurance carriers. The State has filed
a suit against certain of these carriers and trial is currently set for January
16, 2001.
The State is a defendant in a coordinated action involving 3,000
plaintiffs seeking recovery for damages caused by the Yuba River flood of
February 1986. The trial court found liability in inverse condemnation and
awarded damages of $500,000 to a sample of plaintiffs. The State's potential
liability to the remaining plaintiffs ranges from $800 million to $1.5 billion.
In 1992, the State and plaintiffs filed appeals. In August 1999, the Court of
Appeal issued a decision reversing the trial court's judgment against the State
and remanding the case for retrial on the inverse condemnation cause of action.
Plaintiffs in County of San Bernardino v. Barlow Respiratory Hospital and
related actions seek mandamus relief requiring the State to retroactively
increase out-patient Medi-Cal reimbursement rates. Plaintiffs have estimated the
damages to be several hundred million dollars. The State is vigorously defending
these cases, as well as related federal cases addressing the calculation of
Medi-Cal reimbursement rates in the future.
The State is involved in two refund actions, Cigarettes Cheaper!, et al. v.
Board of Equalization, et al. and California Assn. Of Retail Tobacconists
(CART), et al. v. Board of Equalization, et al., that challenge the
constitutionality of Proposition 10, approved by the voters in 1998. Plaintiffs
allege that Proposition 10, which increases the excise tax on tobacco products,
violates 11 sections of the California Constitution and related provisions of
law. Plaintiffs Cigarettes Cheaper! seek declaratory and injunctive relief and a
refund of over $4 million. The CART case filed by retail tobacconists in San
Diego seeks a refund of $5 million. The State is vigorously contesting these
cases. If the statute is declared unconstitutional, exposure may include the
entire $750 million collected annually with interest.
The State is involved in two cases challenging the constitutionality of
the interest offset provisions of the Revenue and Taxation Code: Hunt-Wesson,
Inc., v. Franchise Tax Board and F.W. Woolworth Co. and Kinney Shoe Corporation
v. Franchise Tax Board. In both cases, the Franchise Tax Board prevailed in the
California Court of Appeal and the California Supreme Court denied taxpayers's
petitions for review. In both cases, the United States Supreme Court granted
centiorari. On February 22, 2000 the United States Supreme Court reversed and
remanded the Hunt-Wesson case to the California Court of Appeal for further
proceedings. Although the Court did not take similar action in the Woolworth Co.
case, it is anticipated that it will do so. The Franchise Tax Board recently
estimated that the adverse decision in these cases will result in a reduction in
state revenues of approximately $15 million annually, with past year collection
and interest exposure of approximately $95 million.
Guy F. Atkinson Company of California v. Franchise Tax Board is a
corporation tax refund action involving the solar energy system tax credit
provided for under the Revenue and Taxation Code. The case went to trial in May
1998 and the trial court entered judgment in favor of the Franchise Tax Board.
The taxpayer has filed an appeal to the California Court of Appeal and briefing
is completed. The Franchise Tax Board estimates that the cost would be $150
million annually if the plaintiff prevails. Allowing refunds for all open years
would entail a refund of at least $500 million.
Jordan, et al. v. Department of Motor Vehicles, et al. challenges the
validity of the Vehicle Smog Impact Fee, a $300 fee which is collected by the
Department of Motor Vehicles from vehicle registrants when a vehicle without a
California new-vehicle certification is first registered in California. The
plaintiffs contend that the fee violates the interstate commerce and equal
protection clauses of the United States Constitution as well as Article XIX of
the State Constitution. In October 1999, the Court of Appeals upheld a trial
court judgment for the plaintiffs in the Jordan case, and the State has declined
to appeal further. Although refunds through the court actions could be limited
by a three-year statute of limitations, with a potential liability of about $750
million, the Governor has proposed refunding fees collected back to the
initiation of these fees in 1990. Legislation has been enacted, which the
Governor is prepared to sign, providing a $665 million supplemental
appropriation in 1999-2000 to pay these claims.
PTI, Inc., et al. v. Philip Morris, et al. was filed by five distributors
in the cigarette import/re-entry business, seeking to overturn the tobacco
Master Settlement Agreement ("MSA") entered between 46 states and the tobacco
industry in November 1998. The primary focus of the complaint is the provision
of the MSA encouraging participating states to adopt a statute requiring
nonparticipating manufacturers to either become participating manufacturers and
share the financial obligations under the MSA or pay money into an escrow
account. Plaintiffs seek compensatory and punitive damages against the State and
State officials and an order placing tobacco settlement funds into a trust to be
administered by the court for the treatment of medical expenses of persons
injured by tobacco products. A motion to dismiss the complaint was heard on May
8, 2000. The potential fiscal impact of an adverse ruling is largely unknown,
but could exceed the full amount of the settlement (estimated to be $1 billion
annually, of which 50% will go directly to the State's General Fund and the
other 50% directly to the State's 58 counties and 4 largest cities).
Arnett v. California Public Employees Retirement System, et. al. was filed
by seven former employees of the State of California and local agencies seeking
back wages, damages and injunctive relief. Plaintiffs are former public safety
members who began employment after the age of 40 and are recipients of
Industrial Disability Retirement ("IDR") benefits. Plaintiffs contend that the
formula which determines the amount of IDR benefits violates the federal Age
Discrimination in Employment Act of 1967. Plaintiffs contend that, but for their
ages at hire, they would receive increased monthly IDR benefits similar to their
younger counterparts who began employment before the age of 40. On August 17,
1999, the Ninth Circuit Court of Appeals reversed the District Court's dismissal
of the complaint for failure to state a claim. The United States Supreme Court
vacated the judgment of the Ninth Circuit and remanded the case back to the
Ninth Circuit. In the event of an unfavorable result, CalPERS has estimated the
liability to the State as approximately $315.5 million.
On March 30, 2000, a group of students, parents, and community based
organizations representing school children in the Los Angeles Unified School
District brought a law suit against the State Allocation Board ("SAB"), the
State Office of Public School Construction ("OPSC") and a number of State
officials (Godinez, et al. v. Davis, et al.) in the Superior Court in the County
of Los Angeles. The lawsuit principally alleges SAB and OPSC have
unconstitutionally and improperly allocated funds to local school districts for
new public school construction as authorized by the Class Size Reduction
Kindergarten-University Public Education Facilities Bond Act (hereafter referred
to as "Proposition 1A"). Plaintiffs allege that funds are not being allocated
reasonably and fairly according to need on the basis of a uniform, state wide
assessment of highest priority needs. Plaintiffs seek a declaration of the
illegality of the current allocation system, and a preliminary and permanent
injunction and/or a writ of mandate against further allocation of Proposition 1A
funds unless the allocation system is modified. On May 12, 2000, Judge David P.
Yaffe of the Superior Court denied Plaintiffs' request for a temporary
restraining order, and a hearing on Plaintiffs' request for a preliminary
injunction is scheduled on June 20, 2000. The State will vigorously defend this
lawsuit. The Plaintiffs have not questioned the legality of, or sought any
relief concerning, any commercial paper notes or bonds issued by the State under
Proposition 1A, all of which funded projects based on allocations made prior to
the filing of the lawsuit. The Attorney General is of the opinion that the
lawsuit does not affect the validity of any State bonds.
<PAGE>
APPENDIX B
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
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 and 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 payment.
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.
Commercial Paper Ratings
The rating A is the highest rating and is assigned by S&P to issues that
are regarded as having the greatest capacity for timely payment. Issues in this
category are delineated with the numbers 1, 2 and 3 to indicate the relative
degree of safety. Paper rated A-1 indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
<PAGE>
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 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 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 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.
<PAGE>
B
Bonds 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 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 rated Ca present obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C
Bonds 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.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for bonds in each of the generic rating categories Aa,
A, Baa, Ba and B. Moody's also provides numerical modifiers of 2 and 3 in each
of these categories for bond issues in the health care, higher education and
other not-for-profit sectors; the modifier 1 indicates that the issue ranks in
the higher end of its generic rating category; the modifier 2 indicates that the
issue is in the mid-range of the generic category; and the modifier 3 indicates
that the issue is in the low end of the generic category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature is
not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as MIG
1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's assigns a
MIG or VMIG rating, all categories define an investment grade situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a wide range of financial markets and assured sources of alternate liquidity.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issuer, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's financial strength and
credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1.
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 an 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 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 satisfactory degree
of assurance for timely payments, but the margin of safety is not as great as
the F-1+ and F-1 categories.
DREYFUS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits.
------- --------
(a) Registrant's Amended and Restated Declaration of Trust is incorporated
by reference to Exhibit (1) of Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on April 4, 1992, and
Exhibit (1)(b) of Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on June 30, 1994.
(b) Registrant's By-Laws, as amended, December 31, 1999.
(d) Management Agreement is incorporated by reference to Exhibit (5) of
Post-Effective Amendment No. 5 to the Registration Statement on Form
N-1A, filed on July 18, 1995.
(e) Form of Distribution Agreement.
(g) Amended and Restated Custody Agreement is incorporated by reference to
Exhibit 8(a) of Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on June 30, 1994.
(i) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on June 30, 1994.
(j) Consent of Independent Auditors.
(p) Code of Ethics
Other Exhibits
--------------
(a) Powers of Attorney.
(b) Certificate of Secretary.
Item 24. Persons Controlled by or under Common Control with Registrant.
------- --------------------------------------------------------------
Not Applicable
Item 25. Indemnification
------- ---------------
Reference is made to Article EIGHTH of the Registrant's Amended and
Restated Agreement and Declaration of Trust incorporated by
reference to Exhibit 1 to Pre-Effective Amendment No. 1 to the
Fund's Registration Statement filed under the Securities Act of 1933
on April 14, 1992. The application of these provisions is limited by
Article 10 of the Registrant's By-Laws, incorporated by reference to
Exhibit 2 of Pre-Effective Amendment No. 1 to the Registration
Statement, and by the following undertaking set forth in the rules
promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act as is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a trustee, officer or controlling
person of the registration in the successful defense of any
action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.
Reference is also being made to Form of Distribution Agreement
which is being filed as (e) of this Post Effective Amendment No. 12
to the Registration on Form N-1A.
Item 26. 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, manager and distributor for sponsored investment
companies registered under the Investment Company Act of 1940 and as
an investment adviser to institutional and individual accounts.
Dreyfus also serves as sub-investment adviser to and/or
administrator of other investment companies. Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, serves primarily
as 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
----------------------------------------------------------------------------------
Officers and Directors of Investment Adviser
Name and Position
With Dreyfus Other Businesses Position Held Dates
CHRISTOPHER M. CONDRON Franklin Portfolio Associates, Director 1/97 - Present
Chairman of the Board and LLC*
Chief Executive Officer
TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Director 4/95 - 1/98
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 - Present
Mellon Capital Management Director 5/95 - Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 - 1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Financial Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Founders Asset Management, Chairman 12/97 - Present
LLC**** Director 12/97 - Present
The Boston Company, Inc.* Vice Chairman 1/94 - Present
Director 5/93 - Present
Laurel Capital Advisors, LLP+ Executive Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 - Present
Company*
The Boston Company Financial President 6/89 - 1/97
Strategies, Inc. * Director 6/89 - 1/97
MANDELL L. BERMAN Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
BURTON C. BORGELT DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Financial Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
STEPHEN E. CANTER Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, Director 2/99 - Present
LLC*
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Founders Asset Management, Member, Board of 12/97 - Present
LLC**** Managers
Acting Chief Executive 7/98 - 12/98
Officer
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - Present
THOMAS F. EGGERS Dreyfus Service Corporation++ Chief Executive Officer 3/00 - Present
Vice Chairman - Institutional and Chairman of the
And Director Board
Executive Vice President 4/96 - 3/00
Director 9/96 - Present
Founders Asset Management, Member, Board of 2/99 - Present
LLC**** Managers
Dreyfus Investment Advisors, Inc. Director 1/00 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 3/99 - Present
Massachusetts, Inc. +++
Dreyfus Brokerage Services, Inc. Director 11/97 - 6/98
401 North Maple Avenue
Beverly Hills, CA.
STEVEN G. ELLIOTT Mellon Financial Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Executive Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
LAWRENCE S. KASH Dreyfus Investment Director 4/97 - 12/99
Vice Chairman Advisors, Inc.++
Dreyfus Brokerage Services, Inc. Chairman 11/97 - 2/99
401 North Maple Ave. Chief Executive Officer 11/97 - 2/98
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.+++ Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - 3/99
Organization, Inc.++ President 1/97 - 3/99
Seven Six Seven Agency, Inc. ++ Director 1/97 - 4/99
Dreyfus Insurance Agency of Chairman 5/97 - 3/99
Massachusetts, Inc.++++ President 5/97 - 3/99
Director 5/97 - 3/99
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - 6/99
Corporation++ President 5/97 - 6/99
Director 12/94 - 6/99
Founders Asset Management, Member, Board of 12/97 - 12/99
LLC**** Managers
The Boston Company Advisors, Chairman 12/95 - 1/99
Inc. Chief Executive Officer 12/95 - 1/99
Wilmington, DE President 12/95 - 1/99
The Boston Company, Inc.* Director 5/93 - 1/99
President 5/93 - 1/99
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Chairman 9/93 - 1/98
President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Boston Safe Deposit & Trust Co.+ Director 6/93 - 1/99
Executive Vice President 6/93 - 4/98
MARTIN G. MCGUINN Mellon Financial Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
J. DAVID OFFICER Dreyfus Service Corporation++ President 3/00 - Present
Vice Chairman Executive Vice President 5/98 - 3/00
And Director Director 3/99 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Dreyfus Brokerage Services, Inc. Chairman 3/99 - Present
401 North Maple Avenue
Beverly Hills, CA
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - 1/99
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - 6/99
Services, Inc.* Director 8/96 - 6/99
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the Americas
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
RICHARD W. SABO Founders Asset Management President 12/98 - Present
Director LLC**** Chief Executive Officer 12/98 - Present
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
RICHARD F. SYRON Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive Officer 6/99 - Present
Waltham, MA 02454-9046
American Stock Exchange Chairman 4/94 - 6/99
86 Trinity Place Chief Executive Officer 4/94 - 6/99
New York, NY 10006
RONALD P. O'HANLEY Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
Franklin Portfolio Associates, Director 3/97 - Present
LLC*
Boston Safe Deposit and Trust Executive Committee 1/99 - Present
Company* Member
Director 1/99 - Present
The Boston Company, Inc.* Executive Committee 1/99 - Present
Member 1/99 - Present
Director
Buck Consultants, Inc.++ Director 7/97 - Present
Newton Asset Management LTD Executive Committee 10/98 - Present
(UK) Member
London, England Director 10/98 - Present
Mellon Asset Management Non-Resident Director 11/98 - Present
(Japan) Co., LTD
Tokyo, Japan
TBCAM Holdings, Inc.* Director 10/97 - Present
The Boston Company Asset Director 1/98 - Present
Management, LLC*
Boston Safe Advisors, Inc.* Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 2/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates; LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon Equity Associates; LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon-France Corporation+ Director 3/97 - Present
Laurel Capital Advisors+ Trustee 3/97 - Present
STEPHEN R. BYERS Dreyfus Service Corporation++ Senior Vice President 3/00 - Present
Director of Investments and
Senior Vice President
Gruntal & Co., LLC Executive Vice President 5/97 - 11/99
New York, NY Partner 5/97 - 11/99
Executive Committee 5/97 - 11/99
Member
Board of Directors 5/97 - 11/99
Member
Treasurer 5/97 - 11/99
Chief Financial Officer 5/97 - 6/99
MARK N. JACOBS Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - 3/99
Organization, Inc.++
WILLIAM H. MARESCA The Dreyfus Trust Company+++ Chief Financial Officer 3/99 - Present
Controller Treasurer 9/98 - Present
Director 3/97 - Present
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 - Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
WILLIAM T. SANDALLS, JR. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - Present
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97 - 12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
The Dreyfus Trust Company +++ Director 1/96 - Present
Dreyfus Service Organization, Treasurer 10/96 - 3/99
Inc.++
Dreyfus Insurance Agency of Director 5/97 - 3/99
Massachusetts, Inc.++++ Treasurer 5/97 - 3/99
Executive Vice President 5/97 - 3/99
DIANE P. DURNIN Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development Division
PATRICE M. KOZLOWSKI NONE
Senior Vice President - Corporate
Communications
MARY BETH LEIBIG NONE
Vice President -
Human Resources
THEODORE A. SCHACHAR Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
Dreyfus Investment Advisors, Vice President - Tax 10/96 - Present
Inc.++
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Vice President - Tax 10/96 - Present
Inc.++
WENDY STRUTT None
Vice President
RAYMOND J. VAN COTT Mellon Financial Corporation+ Vice President 7/98 - Present
Vice-President -
Information Systems
Computer Sciences Corporation Vice President 1/96 - 7/98
El Segundo, CA
JAMES BITETTO The TruePenny Corporation++ Secretary 9/98 - Present
ASSISTANT SECRETARY
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
STEVEN F. NEWMAN Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
**** The address of the business so indicated is 2930 East Third Avenue, Denver, Colorado 80206.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ 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 53 State Street, Boston, Massachusetts 02109.
</TABLE>
Item 27. Principal Underwriters
-------- ----------------------
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Dreyfus A Bonds Plus, Inc.
2) Dreyfus Appreciation Fund, Inc.
3) Dreyfus Balanced Fund, Inc.
4) Dreyfus BASIC GNMA Fund
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC Municipal Fund, Inc.
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus California Intermediate Municipal Bond Fund
9) Dreyfus California Tax Exempt Bond Fund, Inc.
10) Dreyfus California Tax Exempt Money Market Fund
11) Dreyfus Cash Management
12) Dreyfus Cash Management Plus, Inc.
13) Dreyfus Connecticut Intermediate Municipal Bond Fund
14) Dreyfus Connecticut Municipal Money Market Fund, Inc.
15) Dreyfus Florida Intermediate Municipal Bond Fund
16) Dreyfus Florida Municipal Money Market Fund
17) Dreyfus Founders Funds, Inc.
18) The Dreyfus Fund Incorporated
19) Dreyfus Global Bond Fund, Inc.
20) Dreyfus Global Growth Fund
21) Dreyfus GNMA Fund, Inc.
22) Dreyfus Government Cash Management Funds
23) Dreyfus Growth and Income Fund, Inc.
24) Dreyfus Growth and Value Funds, Inc.
25) Dreyfus Growth Opportunity Fund, Inc.
26) Dreyfus Debt and Equity Funds
27) Dreyfus Index Funds, Inc.
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Preferred 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 Funds, Inc.
34) Dreyfus Investment Grade Bond Funds, Inc.
35) Dreyfus Investment Portfolios
36) The Dreyfus/Laurel Funds, Inc.
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
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 MidCap Index Fund
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Municipal Cash Management
54) Dreyfus New York Tax Exempt Bond Fund, Inc.
55) Dreyfus New York Tax Exempt Intermediate Bond Fund
56) Dreyfus New York Tax Exempt Money Market Fund
57) Dreyfus U.S. Treasury Intermediate Term Fund
58) Dreyfus U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Pennsylvania Municipal Money Market Fund
63) Dreyfus Premier California Municipal Bond Fund
64) Dreyfus Premier Equity Funds, Inc.
65) Dreyfus Premier International Funds, Inc.
66) Dreyfus Premier GNMA Fund
67) Dreyfus Premier Opportunity Funds
68) Dreyfus Premier Worldwide Growth Fund, Inc.
69) Dreyfus Premier Municipal Bond Fund
70) Dreyfus Premier New York Municipal Bond Fund
71) Dreyfus Premier State Municipal Bond Fund
72) Dreyfus Premier Value Equity Funds
73) Dreyfus Short-Intermediate Government Fund
74) Dreyfus Short-Intermediate Municipal Bond Fund
75) The Dreyfus Socially Responsible Growth Fund, Inc.
76) Dreyfus Stock Index Fund
77) Dreyfus Tax Exempt Cash Management
78) The Dreyfus Premier Third Century Fund, Inc.
79) Dreyfus Treasury Cash Management
80) Dreyfus Treasury Prime Cash Management
81) Dreyfus Variable Investment Fund
82) Dreyfus Worldwide Dollar Money Market Fund, Inc.
83) General California Municipal Bond Fund, Inc.
84) General California Municipal Money Market Fund
85) General Government Securities Money Market Funds, Inc.
86) General Money Market Fund, Inc.
87) General Municipal Bond Fund, Inc.
88) General Municipal Money Market Funds, Inc.
89) General New York Municipal Bond Fund, Inc.
90) General New York Municipal Money Market Fund
<TABLE>
<CAPTION>
Positions and
Name and principal Offices with
Business address Positions and offices with the Distributor Registrant
---------------- ------------------------------------------ ----------
<S> <C> <C>
Thomas F. Eggers * Chief Executive Officer and Chairman of the None
Board
J. David Officer * President and Director None
Stephen Burke * Executive Vice President None
Charles Cardona * Executive Vice President None
Anthony DeVivio ** Executive Vice President None
David K. Mossman ** Executive Vice President None
Jeffrey N. Nachman *** Executive Vice President and Chief Operations None
Officer
William T. Sandalls, Jr. * Executive Vice President and Director None
Wilson Santos ** Executive Vice President and Director of None
Client Services
William H. Maresca * Chief Financial Officer None
Ken Bradle ** Senior Vice President None
Stephen R. Byers * Senior Vice President None
Frank J. Coates * Senior Vice President None
Joseph Connolly * Senior Vice President Vice President
and Treasurer
William Glenn * Senior Vice President None
Michael Millard ** Senior Vice President None
Mary Jean Mulligan ** Senior Vice President None
Bradley Skapyak * Senior Vice President None
Jane Knight * Chief Legal Officer and Secretary None
Stephen Storen * Chief Compliance Officer None
Jeffrey Cannizzaro * Vice President - Compliance None
Maria Georgopoulos * Vice President - Facilities Management None
William Germenis Vice President - Compliance None
Walter T. Harris * Vice President None
Janice Hayles * Vice President None
Hal Marshall * Vice President - Compliance None
Paul Molloy * Vice President None
Theodore A. Schachar * Vice President - Tax None
James Windels * Vice President None
James Bitetto * Assistant Secretary None
</TABLE>
* Principal business address is 200 Park Avenue, New York, NY 10166.
** Principal business address is 144 Glenn Curtiss Blvd., Uniondale, NY
11556-0144.
*** Principal business address is 401 North Maple Avenue, Beverly Hills,
CA 90210.
Item 28. Location of Accounts and Records
------- --------------------------------
1. The Bank of New York
100 Church Street
New York, New York 10286
2. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 29. Management Services
------- -------------------
Not Applicable
Item 30. Undertakings
------- ------------
None
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 July, 2000.
DREYFUS CALIFORNIA INTERMEDIATE MUNICIPAL BOND FUND
BY: /s/Stephen E. Canter*
---------------------------
Stephen E. Canter, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, 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/ Stephen E. Canter* President (Principal Executive 07/27/00
Stephen E. Canter Officer) and Director
/s/Joseph Conolly* Vice President and Treasurer 07/27/00
Joseph Conolly (Principal Financial Officer)
/s/David Burke* Controller (Principal Accounting 07/27/00
David Burke Officer)
/s/Joseph S. DiMartino* Trustee 07/27/00
Joseph S. DiMartino
/s/Diane Dunst* Trustee 07/27/00
Diane Dunst
/s/Rosalind Gersten Jacobs*
Rosalind Gersten Jacobs Trustee 07/27/00
/s/Jay I. Meltzer* Trustee 07/27/00
Jay I. Meltzer
/s/Daniel Rose* Trustee 07/27/00
Daniel Rose
/s/Warren B. Rudman* Trustee 07/27/00
Warren B. Rudman
/s/Sander Vanocur* Trustee 07/27/00
Sander Vanocur
*BY: /s/John B. Hammalian
__________________________
John B. Hammalian
Attorney-in-Fact
INDEX OF EXHIBITS
Exhibit No.
23. (b) Amended By-Laws
(e) Form of Distribution Agreement
(j) Consent of Independent Auditors
(p) Code of Ethics
OTHER EXHIBITS
(a) Power of Attorney
(b) Certificate of Secretary
