Dreyfus California Municipal
Income, Inc.
SEMIANNUAL REPORT March 31, 2003
DREYFUS CALIFORNIA MUNICIPAL INCOME, INC.
PROTECTING YOUR PRIVACY
OUR PLEDGE TO YOU
THE FUND IS COMMITTED TO YOUR PRIVACY. On this page, you will find the Fund's
policies and practices for collecting, disclosing, and safeguarding "nonpublic
personal information," which may include financial or other customer
information. These policies apply to individuals who purchase Fund shares for
personal, family, or household purposes, or have done so in the past. This
notification replaces all previous statements of the Fund's consumer privacy
policy, and may be amended at any time. We'll keep you informed of changes as
required by law.
YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The Fund maintains physical,
electronic and procedural safeguards that comply with federal regulations to
guard nonpublic personal information. The Fund's agents and service providers
have limited access to customer information based on their role in servicing
your account.
THE FUND COLLECTS INFORMATION IN ORDER TO SERVICE AND ADMINISTER YOUR ACCOUNT.
The Fund collects a variety of nonpublic personal information, which may
include:
* Information we receive from you, such as your name, address, and social
security number.
* Information about your transactions with us, such as the purchase or
sale of Fund shares.
* Information we receive from agents and service providers, such as proxy
voting information.
THE FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE, EXCEPT AS
PERMITTED BY LAW.
THANK YOU FOR THIS OPPORTUNITY TO SERVE YOU.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus fund are
based on numerous factors, may not be relied on as an indication of trading
intent on behalf of any Dreyfus fund.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
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2 Letter from the Chairman
3 Discussion of Fund Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Financial Highlights
14 Notes to Financial Statements
21 Officers and Directors
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus California
Municipal Income, Inc.
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus California Municipal Income, Inc. covers the
six-month period from October 1, 2002, through March 31, 2003. Inside, you'll
find valuable information about how the fund was managed during the reporting
period, including a discussion with the fund's portfolio manager, Joseph Darcy.
A number of economic and political factors continued to support higher municipal
bond prices during the reporting period. Faced with escalating tensions leading
to the start of the war in Iraq, many investors preferred fixed-income
securities over stocks. We believe that rising geopolitical tensions also
contributed to the ongoing sluggishness of the U.S. economy, as many
corporations apparently decided to wait until the situation in Iraq is resolved
before committing to new capital spending. For its part, the Federal Reserve
Board contributed to the municipal bond market's strength by further reducing
short-term interest rates in November 2002.
The result of these influences has been generally attractive total returns from
high-quality, tax-exempt bonds. While history suggests that bond prices should
moderate if the economy strengthens, we believe that the economy is unlikely to
make significant gains until current uncertainties are resolved.
In the meantime, we believe it is more important than ever to follow a
disciplined approach to investing. While it may be tempting to shift assets
between stocks and bonds in response to near-term economic and market forces,
adherence to your longstanding asset allocation strategy may be the most prudent
course for the long term. Your financial advisor can help you to ensure that
your portfolio reflects your investment needs, long-term goals and attitudes
toward risk.
Thank you for your continued confidence and support.
Sincerely,
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
April 15, 2003
DISCUSSION OF FUND PERFORMANCE
Joseph Darcy, Portfolio Manager
How did Dreyfus California Municipal Income, Inc. perform during the period?
For the six-month period ended March 31, 2003, the fund achieved a total return
of 1.38%.(1) Over the same period, the fund provided income dividends of $0.2280
per share, which is equal to a distribution rate of 5.74%.(2)
The fund and California's municipal bond market were primarily influenced during
the reporting period by a shortfall in tax revenues, which led to higher volumes
of bond issuance. With a record supply of bonds competing for investor interest,
prices of California bonds did not rise as much as bonds from many other states
when interest rates declined.
What is the fund's investment approach?
The fund seeks to maximize current income exempt from federal and California
personal income taxes to the extent consistent with the preservation of capital.
During periods of normal market conditions, the fund invests 100% of the value
of its net assets in California municipal obligations. The fund invests in
municipal obligations which, at the time of purchase, are rated investment-grade
or the unrated equivalent as determined by Dreyfus in the case of bonds, and
rated in the two highest rating categories or the unrated equivalent as
determined by Dreyfus in the case of short-term obligations having, or deemed to
have, maturities of less than one year.
We have constructed a portfolio by looking for income opportunities through
analysis of each bond's structure, including paying close attention to a bond's
yield, maturity and early redemption features.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
Over time, many of the fund's relatively higher-yielding bonds mature or are
redeemed by their issuers, and we generally attempt to replace those bonds with
what we believe are comparable securities, albeit with yields that reflect the
then-current interest-rate environment. When we believe that an opportunity
presents itself, we seek to upgrade the portfolio's investments with bonds that,
in our opinion, have better structural or income characteristics than existing
holdings. When such opportunities arise, we usually will look to sell bonds that
are close to redemption or maturity.
What other factors influenced the fund's performance?
The reporting period was difficult for California's bond market. Because the
U.S. economy grew only modestly, the state received less revenue from income
taxes, sales taxes and capital gains taxes than it had projected. Faced with a
budget deficit estimated at more than $34 billion, the state attempted to bridge
some of the gap by issuing municipal bonds. At the same time, several of the
major, independent rating services downgraded California's credit rating to the
single-A range, effectively increasing the state's borrowing costs and reducing
existing bond prices.
The credit-rating downgrade and surge in the supply of newly issued bonds
contributed to heightened market volatility. Because of the state's relatively
high tax rates, California bonds historically have tended to trade at higher
prices than bonds of other states. During much of the reporting period, however,
California bonds traded at a slight discount, as the surge in new issuance put
downward pressure on prices. As a result, California's bonds generally produced
lower total returns than bonds from other states.
The effects of California's budget problems might have been more severe had it
not been for generally favorable market conditions on the national level. The
Federal Reserve Board's attempts to stimulate renewed economic growth included
lower interest rates, which drove bond yields lower and prices higher,
contributing positively to the fund's total return.
In addition, the fund's performance was influenced positively when, early in the
reporting period, we eliminated its holdings of bonds issued on behalf of
airlines. The fund avoided further losses as these bonds continued to decline in
a troubled business climate for the U.S. travel industry.
What is the fund's current strategy?
We continue to monitor California' s fiscal condition. As market volatility
increased during the reporting period, we attempted to diversify the fund's
holdings away from the state's general obligation bonds into securities from
local issuers we considered fiscally sound, including counties and
essential-services facilities, such as revenue-producing water and sewer plants.
However, we are aware that proposed cuts in state aid could affect some
localities adversely, and we are prepared to alter our strategy accordingly.
In addition, we have maintained the fund's weighted average maturity at points
that we consider in line with or modestly shorter than those of other similar
funds. This strategy is designed to provide flexibility to pursue investment
opportunities as they become available.
April 15, 2003
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS
PAID, BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. MARKET PRICE PER SHARE, NET ASSET VALUE
PER SHARE AND INVESTMENT RETURNS FLUCTUATE. INCOME MAY BE SUBJECT TO
STATE AND LOCAL TAXES FOR NON-CALIFORNIA RESIDENTS, AND SOME INCOME MAY
BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN
INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM
NET INVESTMENT INCOME DURING THE PERIOD, ANNUALIZED, DIVIDED BY THE
MARKET PRICE PER SHARE AT THE END OF THE PERIOD.
The Fund
STATEMENT OF INVESTMENTS
March 31, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
Principal
LONG-TERM MUNICIPAL INVESTMENTS--90.3% Amount ($) Value ($)
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CALIFORNIA--77.3%
Abag Financial Authority For Nonprofit Corps.:
Revenue (Sansum-Santa Barbara) 5.50%, 4/1/2021 2,000,000 2,079,860
MFHR (Central Park Apartments) 5.60%, 7/1/2038 815,000 838,325
Bakersfield Central District Development Agency,
Tax Allocation Revenue
(Downtown Bakersfield Redevelopment)
6.625%, 4/1/2015 (Prerefunded 4/1/2003) 1,000,000 (a) 1,020,000
California 9.55%, 12/1/2018 375,000 (b,c) 388,976
California Health Facilities Financing Authority, Revenue:
Health Facilities Financing
(Cedars-Sinai Medical Center) 6.125%, 12/1/2030 1,000,000 1,060,060
(Sutter Health) 6.25%, 8/15/2035 750,000 807,900
California Pollution Control Finance Authority:
PCR 10.330%, 6/1/2014 1,000,000 (b,c) 1,375,370
SWDR:
(Browning Ferris Industries):
5.80%, 12/1/2016 2,000,000 1,861,940
6.75%, 9/1/2019 600,000 597,834
(Keller Canyon Landfill Co. Project)
6.875%, 11/1/2027 1,000,000 981,330
California Statewide Communities Development Authority,
COP (Catholic Healthcare) 6.50%, 7/1/2020 500,000 535,360
Capistrano Unified School District, Special Tax
(Community Facilities District Number 98-2-Ladera)
5.75%, 9/1/2029 1,000,000 1,000,270
Central California Joint Powers Health Financing
Authority, COP (Community Hospitals of
Central California) 6%, 2/1/2030 1,000,000 1,017,380
Emeryville Public Financing Authority, Revenue
(Shellmound Park Redevelopment Project)
6.80%, 5/1/2014 (Prerefunded 5/1/2004) 500,000 (a) 540,895
Escondido Improvement Bond, Act of 1915
(Reassessment District Number 98) 5.70%, 9/2/2026 440,000 444,928
Foothill/Eastern Transportation Corridor Agency,
Toll Road Revenue 5.75%, 1/15/2040 500,000 509,445
Long Beach Special Tax Community Facilities District
Number 5 (Towne Center) 6.875%, 10/1/2025 500,000 526,915
Palmdale Civic Authority, Revenue
(Merged Redevelopment Project Areas):
6.60%, 9/1/2034 (Prerefunded 9/1/2004) 590,000 (a) 647,083
6.60%, 9/1/2034 410,000 428,253
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
Redwood Empire Financing Authority, COP
6.40%, 12/1/2023 2,750,000 2,854,968
Sacramento County, Community
Facilities District Number 1,
Special Tax 5.70%, 12/1/2020 740,000 746,912
Sacramento City Financing Authority, Revenue
9.22%, 12/1/2014 570,000 (b) 711,297
Sacramento County Housing Authority, MFHR
(Cottage Estate Apartments) 6%, 2/1/2033 1,000,000 1,064,570
Sacramento Municipal Utility District,
Electric Revenue 9.895%,
11/15/2015 (Insured; MBIA) 1,000,000 (b,c) 1,085,990
San Diego County, COP:
5.70%, 2/1/2028 1,000,000 1,022,010
(Burnham Institute) 6.25%, 9/1/9029 1,000,000 1,047,920
Santa Cruz County Public Financing Authority,
Tax Allocation Revenue 6.20%, 9/1/2023 2,000,000 2,051,080
South Placer Authority, Wastewater Revenue
5.25%, 11/1/2027 (Insured; FGIC) 1,000,000 1,041,090
Torrance Redevelopment Agency, Tax
Allocation Revenue 5.625%, 9/1/2028 500,000 501,925
Turlock Health Facility, COP
(Emanuel Medical Center)
5.75%, 10/15/2023 2,500,000 2,507,800
Valley Health System, HR (Improvement Project)
6.50%, 5/15/2025 500,000 329,215
U.S. RELATED--13.0%
Commonwealth of Puerto Rico
Highway and Transportation Authority,
Transportation Revenue 8.74%, 7/1/2038 1,000,000 (b,c) 1,036,970
Commonwealth of Puerto Rico
Infrastructure Financing Authority,
Special Tax Revenue 8.585%, 7/1/2015 1,000,000 (b,c) 1,159,680
Guam Power Authority, Revenue 6.75%, 10/1/2024
(Prerefunded 10/1/2004) 1,000,000 (a) 1,102,460
Virgin Islands Public Finance Authority,
Revenue, Subordinated Lien-Fund
Loan Notes 6%, 10/1/2022 2,000,000 2,036,820
TOTAL LONG--TERM MUNICIPAL INVESTMENTS
(cost $35,249,629) 36,962,831
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
SHORT-TERM MUNICIPAL INVESTMENTS--8.1% Amount ($) Value ($)
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CALIFORNIA;
California Department of Water Resources,
Power Supply Revenue, VRDN:
1.20%, Series B-2 (LOC; Westdeutsche
Landesbank, Bayerische Landesbank) 1,000,000 (d) 1,000,000
1.20%, Series B-5
(LOC; Banque Nationale de Paris) 100,000 (d) 100,000
Irvine Improvement Bond Act 1915,
Limited Obligation, VRDN
(Assessment District No. 93-14)
1.15% (LOC; Bank of America, N.A.) 400,000 (d) 400,000
Metropolitan Water District, Southern California
Waterworks, Revenue, VRDN 1.15% 1,800,000 (d) 1,800,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $3,300,000) 3,300,000
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TOTAL INVESTMENTS (cost $38,549,629) 98.4% 40,262,831
CASH AND RECEIVABLES (NET) 1.6% 671,315
NET ASSETS 100.0% 40,934,146
Summary of Abbreviations
COP Certificate of Participation
HR Hospital Revenue
LOC Letter of Credit
FGIC Financial Guaranty Insurance
Company
MBIA Municipal Bond Investors Assurance
Insurance Corporation
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
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AAA Aaa AAA 22.3
A A A 19.6
BBB Baa BBB 28.3
BB Ba BB 8.5
F1 MIG1/P1 SP1/A1 8.2
Not Rated (e) Not Rated( e) Not Rated (e) 13.1
100.0
(A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(B) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(C) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES
ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO A QUALIFIED INSTITUTIONAL BUYERS. AT MARCH
31, 2003, THESE SECURITIES AMOUNTED TO $5,046,986 OR 12.3% OF NET
ASSETS.
(D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO
PERIODIC CHANGE.
(E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD &
POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY
TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2003 (Unaudited)
Cost Value
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ASSETS ($):
Investments in securities--See Statement of Investments 38,549,629 40,262,831
Cash 26,906
Interest receivable 715,837
Prepaid expenses 3,425
41,008,999
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 29,360
Accrued expenses 45,493
74,853
--------------------------------------------------------------------------------
NET ASSETS ($) 40,934,146
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 42,300,908
Accumulated undistributed investment income--net 231,422
Accumulated net realized gain (loss) on investments (3,311,386)
Accumulated net unrealized appreciation
(depreciation) on investments 1,713,202
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NET ASSETS ($) 40,934,146
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SHARES OUTSTANDING
(110 million shares of $.001 par value Common Stock authorized) 4,572,972
NET ASSET VALUE per share ($) 8.95
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2003 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 1,196,380
EXPENSES:
Management fee--Note 3(a) 141,727
Auditing fees 18,169
Shareholders' reports 12,800
Shareholder servicing costs--Note 3(b) 10,552
Legal fees 9,918
Registration fees 2,086
Custodian fees--Note 3(b) 1,955
Directors' fees and expenses--Note 3(c) 1,880
Miscellaneous 5,409
TOTAL EXPENSES 204,496
INVESTMENT INCOME--NET 991,884
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (1,506,471)
Net unrealized appreciation (depreciation) on investments 949,734
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (556,737)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 435,147
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
March 31, 2003 Year Ended
(Unaudited) September 30, 2002
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OPERATIONS ($):
Investment income--net 991,884 2,207,729
Net realized gain (loss) on investments (1,506,471) 65,428
Net unrealized appreciation
(depreciation) on investments 949,734 (715,270)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 435,147 1,557,887
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DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (1,042,638) (2,085,275)
TOTAL INCREASE (DECREASE) IN NET ASSETS (607,491) (527,388)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 41,541,637 42,069,025
END OF PERIOD 40,934,146 41,541,637
Undistributed investment income--net 231,422 254,533
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements and marketprice data for the fund's shares.
Six Months Ended
March 31, 2003 Year Ended September 30,
-----------------------------------------
(Unaudited) 2002(a) 2001 2000 1999 1998
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PER SHARE DATA ($):
Net asset value,
beginning of period 9.08 9.20 8.88 8.98 9.77 9.71
Investment Operations:
Investment income--net .22(b) .48(b) .49 .48 .48 .52
Net realized and unrealized
gain (loss) on investments (.12) (.14) .30 (.06) (.71) .12
Total from Investment Operations .10 .34 .79 .42 (.23) .64
Distributions:
Dividends from investment
income--net (.23) (.46) (.47) (.52) (.56) (.58)
Net asset value, end of period 8.95 9.08 9.20 8.88 8.98 9.77
Market value, end of period 7.94 8.31 8.30 8 1_4 9 5_8 10 7_16
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TOTAL RETURN (%)(C) (1.72)(d) 5.64 6.31 (8.70) (2.21) 7.98
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets 1.01(e) .98 .95 1.07 1.02 1.00
Ratio of net investment income
to average net assets 4.90(e) 5.35 5.36 5.54 5.09 5.34
Portfolio Turnover Rate 5.30(d) 10.23 4.26 20.44 25.65 19.28
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Net Assets, end of period
($ x 1,000) 40,934 41,542 42,069 40,617 41,031 44,386
(A) AS REQUIRED, EFFECTIVE OCTOBER 1, 2001, THE FUND HAS ADOPTED THE
PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT
COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC
BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE
FOR THE PERIOD ENDED SEPTEMBER 30, 2002 WAS TO INCREASE NET INVESTMENT
INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASED THE RATIO OF
NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 5.34% TO 5.35%. PER
SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO OCTOBER 1,
2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) CALCULATED BASED ON MARKET VALUE.
(D) NOT ANNUALIZED.
(E) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus California Municipal Income, Inc. (the "fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-diversified
closed-end management investment company. The fund's investment objective is to
maximize current income exempt from federal and California personal income taxes
to the extent consistent with the preservation of capital. The Dreyfus
Corporation (the "Manager") serves as the fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. ("Mellon"), which is a wholly-owned
subsidiary of Mellon Financial Corporation. The fund's shares trade on the
American Stock Exchange under the ticker symbol DCG.
The fund' s financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(a) Portfolio valuation: Investments in municipal debt securities (excluding
options and financial futures on municipal and U.S. Treasury securities) are
valued on the last business day of each week and month by an independent pricing
service (the "Service" ) approved by the Board of Directors. Investments for
which quoted bid prices are readily available and are representative of the bid
side of the market in the judgment of the Service are valued at the mean between
the quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities) . Other investments (which
constitute a majority of the portfolio securities) are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of municipal securities of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market conditions.
Options and financial futures on municipal and U.S. Treasury securities are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market on the last business day of each week and month.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of discount and premium on investments, is earned from
settlement date and recognized on the accrual basis. Securities purchased or
sold on a when-issued or delayed-delivery basis may be settled a month or more
after the trade date.
The fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the fund.
(c) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are declared and paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended (the
" Code" ). To the extent that net realized capital gain can be offset by capital
loss carryovers, it is the policy of the fund not to distribute such gain.
For shareholders who elect to receive their distributions in additional shares
of the fund, in lieu of cash, such distributions will be reinvested at the lower
of the market price or net asset value per share (but not less than 95% of the
market price) based on the record date's respective prices. If the net asset
value per share on the record date is lower than the market price per share,
shares will be issued by the fund at the record date's net asset value on the
payable date of the distribution. If the net asset value per share is less than
95% of the market value, shares will be issued by the fund at 95% of the market
value. If the market price is lower than the net asset value per share on the
record date, Mellon will purchase fund shares in the open market commencing on
the payable date and reinvest those shares accordingly. As a result of
purchasing fund shares in the open market, fund shares outstanding will not be
affected by this form of reinvestment.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
On March 31, 2003, the Board of Directors declared a cash dividend of $.038 per
share from investment income-net, payable on April 28, 2003 to shareholders of
record as of the close of business on April 14, 2003.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Code and to make distributions
of income and net realized capital gain sufficient to relieve it from
substantially all federal income and excise taxes.
The fund has an unused capital loss carryover of $1,804,915 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to September 30, 2002. If not applied, $274,359 of
the carryover expires in fiscal 2004, $1,222,300 expires in fiscal 2005 and
$308,256 expires in fiscal 2009.
The tax character of distributions paid to shareholder during the fiscal year
ended September 30, 2002, was as follows: tax exempt income $2,085,275. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes. Interest is charged to the fund based on prevailing market rates in
effect at the time of borrowings. During the period ended March 31, 2003, the
fund did not borrow under the line of credit.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .70 of 1% of the value of the
fund' s average weekly net assets and is payable
monthly. The Agreement provides that if in any full year the aggregate expenses
of the fund, exclusive of taxes, interest on borrowings, brokerage fees and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the fund, the fund may deduct from payments to be made to the
Manager, or the Manager will bear the amount of such excess to the extent
required by state law. During the period ended March 31, 2003, there was no
expense reimbursement pursuant to the Agreement.
(b) The fund compensates Mellon under a transfer agency agreement for providing
personnel and facilities to perform transfer agency services for the fund.
During the period ended September 30, 2002, the fund was charged $10,360
pursuant to the transfer agency agreement.
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended March 31, 2003, the fund was
charged $1,955 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Through December 31, 2002,
each Board member who is not an "affiliated person" as defined in the Act
receives an annual fee of $45,000 and an attendance fee of $5,000 for each in
person meeting and $500 for telephone meetings. Effective January 1, 2003, the
number of funds in the Fund Group comprising the fund increased and the annual
fee was increased to $60,000 while the attendance fee was increased to $7,500
for each in person meeting. These fees are allocated among the funds in that
Fund Group. The Chairman of the Board receives an additional 25% of such
compensation. Subject to the fund's Emeritus Program Guidelines, Emeritus Board
members, if any, receive 50% of the fund's annual retainer fee and per meeting
fee paid at the time the Board member achieves emeritus status.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended March 31, 2003, amounted to
$1,993,060 and $3,301,300, respectively.
At March 31, 2003, accumulated net unrealized appreciation on investments was
$1,713,202, consisting of $2,057,822 gross unrealized appreciation and $344,620
gross unrealized depreciation.
At March 31, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
NOTES
OFFICERS AND DIRECTORS
Dreyfus California Municipal Income, Inc.
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino, Chairman
Clifford L. Alexander, Jr.
Lucy Wilson Benson
David W. Burke
Whitney I. Gerard
Arthur A. Hartman
George L. Perry
OFFICERS
President
Stephen E. Canter
Vice President
Mark N. Jacobs
Executive Vice Presidents
Stephen R. Byers
Paul Disdier
Secretary
Michael A. Rosenberg
Assistant Secretaries
Steven F. Newman
Robert R. Mullery
Jeff Prusnofsky
Treasurer
James Windels
Assistant Treasurers
Gregory S. Gruber
Kenneth Sandgren
Anti-Money Laundering Compliance Officer
William Germenis
PORTFOLIO MANAGERS
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
Joseph A. Irace
Colleen A. Meehan
W. Michael Petty
Scott Sprauer
James Welch
Monica S. Wieboldt
INVESTMENT ADVISER
The Dreyfus Corporation
CUSTODIAN
Mellon Bank, N.A.
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT, DIVIDEND DISTRIBUTION AGENT AND REGISTRAR
Mellon Bank, N.A.
STOCK EXCHANGE LISTING
AMEX Symbol: DCG
INITIAL SEC EFFECTIVE DATE
10/21/88
THE NET ASSET VALUE APPEARS IN THE FOLLOWING PUBLICATIONS: BARRON'S, CLOSED-END
BOND FUNDS SECTION UNDER THE HEADING "MUNICIPAL BOND FUNDS" EVERY MONDAY; WALL
STREET JOURNAL, MUTUAL FUNDS SECTION UNDER THE HEADING "CLOSED-END BOND FUNDS"
EVERY MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING "CLOSED-END
BOND FUNDS--SINGLE STATE MUNICIPAL BOND FUNDS" EVERY SUNDAY.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT THE FUND MAY PURCHASE SHARES OF ITS COMMON
STOCK IN THE OPEN MARKET WHEN IT CAN DO SO AT PRICES BELOW THE THEN CURRENT NET
ASSET VALUE PER SHARE.
The Fund
For More Information
Dreyfus California Municipal Income, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent and Registrar
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 2003 Dreyfus Service Corporation 426SA0303