REGISTRATION NO. 333-_____
==========================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No. / / Post-Effective Amendment No.
(Check appropriate box or boxes)
PREMIER NEW YORK MUNICIPAL BOND FUND
(Exact Name of Registrant as Specified in Charter)
(212) 922-6000
(Area Code and Telephone Number)
c/o The Dreyfus Corporation
200 PARK AVENUE, NEW YORK, NEW YORK 10166
(Address of Principal Executive Offices: Number,
Street, City, State, Zip Code)
(Name and Address of Agent for Service)
Mark N. Jacobs, Esq.
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
copy to:
Lewis G. Cole, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement is declared effective.
It is proposed that this filing will become effective on January 8, 1997
pursuant to Rule 488.
---------------------
Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the Investment Company
Act of 1940, as amended; accordingly, no fee is payable herewith. Registrant's
Rule 24f-2 Notice for the fiscal year ended November 30, 1995 was filed on
January 24, 1996.
<PAGE>
PREMIER NEW YORK MUNICIPAL BOND FUND
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
Prospectus/Proxy
FORM N-14 ITEM NO. STATEMENT CAPTION
PART A
Item 1. Beginning of Registration Cover Page
Statement and Outside Front
Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Cover Page
Page of Prospectus
Item 3. Synopsis Information and Risk Summary
Factors
Item 4. Information About the Transaction Letter to Shareholders; Proposal
No. 1; Certain Differences
Between the Series and the Funds
Item 5. Information About the Registrant Letter to Shareholders; Certain
Differences Between the Series
and the Funds
Item 6. Information About the Company Letter to Shareholders; Certain
being Acquired Differences Between the Series
and the Funds
Item 7. Voting Information Letter to Shareholders; Voting
Information
Item 8. Interest of Certain Persons and Not Applicable
Experts
Item 9. Additional Information Required Not Applicable
for Reoffering by Persons Deemed
to be Underwriters
<PAGE>
Statement of Additional
PART B INFORMATION CAPTION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Not Applicable
Item 12. Additional Information about the Statement of Additional
Registrant Information of Premier New York
Municipal Bond Fund dated April
1, 19961
Item 13. Additional Information about the Not Applicable
Company being Acquired
Item 14. Financial Statements Statement of Additional
Information of Premier New York
Municipal Bond Fund dated April
1, 19961 and Statement of
Additional Information of
Premier Insured Municipal Bond
Fund dated December 2, 19962
PART C
Item 15. Indemnification
Item 16. Exhibits
Item 17. Undertakings
1 Incorporated herein by reference to the Registration Statement of the
Registrant on Form N-1A dated April 1, 1996 (File No. 33-7497).
2 Incorporated herein by reference to the Registration Statement of
Premier Insured Municipal Bond Fund on Form N-1A dated December 2, 1996
(File No. 33-61738).
<PAGE>
Preliminary Copy
PREMIER INSURED MUNICIPAL BOND FUND
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Dear Shareholder:
As a shareholder of the California Series, the Connecticut Series, the
Florida Series, the New Jersey Series or the New York Series of Premier Insured
Municipal Bond Fund (the "Trust"), you are entitled to vote on the proposal
described below and in the enclosed materials.
Because each Series has been unable to attract sufficient assets under
management to operate efficiently as a separate series of the Trust investing
primarily in insured Municipal Obligations without significant expense
subsidization, management of the Trust has determined that it would be in the
best interest of the Series and their shareholders if each Series were to
exchange its assets (subject to liabilities) for shares of corresponding funds
advised by The Dreyfus Corporation that have the same or substantially similar
investment objectives and management policies, but which do not invest primarily
in insured Municipal Obligations; namely, Premier California Municipal Bond
Fund, the Connecticut Series, the Florida Series and the New Jersey Series of
Premier State Municipal Bond Fund, and Premier New York Municipal Bond Fund
(where appropriate each, a "Fund" and, collectively, the "Funds").
The proposal provides that each Series exchange (the "Exchange") all of its
assets, subject to liabilities, attributable to its Class A, Class B and Class C
shares, for Class A, Class B and Class C shares, respectively, of its
corresponding Fund (collectively, the "Fund Shares"). Promptly thereafter, each
Series will distribute pro rata the Fund Shares received in the Exchange to its
shareholders in complete liquidation of the Series. Thus, each shareholder will
receive for his or her Class A, Class B or Class C Series shares a number of
corresponding Class A, Class B or Class C Fund Shares equal to the value of such
Series shares as of the date of the Exchange. No sales charge or contingent
deferred sales charge will be imposed at the time of the Exchange. The Exchange
will not result in the imposition of Federal income tax on you. Shareholders who
do not wish to participate in the Exchange may redeem their shares prior to the
Exchange. Any contingent deferred sales charge applicable upon redemption of
such shares will be waived and any sales load deducted at the time of purchase
of such shares on or after ____________, 1996 will be reimbursed to such
shareholders by The Dreyfus Corporation.
Further information about the transaction is contained in the enclosed
materials, which you should review carefully. You are entitled to vote on the
proposed transaction with respect to each Series and Class in which you are a
Shareholder.
Please take the time to consider the enclosed materials and then vote by
completing, dating and signing the enclosed proxy card. A self-addressed,
postage-paid envelope has been enclosed for your convenience.
THE TRUST'S BOARD MEMBERS RECOMMEND THAT EACH SERIES' SHAREHOLDERS VOTE IN
FAVOR OF THE PROPOSED TRANSACTION WITH RESPECT TO THEIR SERIES.
If you have any questions after considering the enclosed
materials, please contact your Service Agent.
Sincerely,
Marie E. Connolly,
President
January __, 1997
<PAGE>
Preliminary Copy
PREMIER INSURED MUNICIPAL BOND FUND
(CALIFORNIA SERIES)
(CONNECTICUT SERIES)
(FLORIDA SERIES)
(NEW JERSEY SERIES)
(NEW YORK SERIES)
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
A Special Meeting of Shareholders of each of the California Series (the
"California Series"), the Connecticut Series (the "Connecticut Series), the
Florida Series (the "Florida Series"), the New Jersey Series (the "New Jersey
Series") and the New York Series (the "New York Series") of Premier Insured
Municipal Bond Fund (the "Trust") will be held at the offices of The Dreyfus
Corporation, 200 Park Avenue, 7th Floor, New York, New York 10166, on ________,
February __, 1997 at 10:00 a.m. for the following purposes:
1. To consider an Agreement and Plan of Reorganization providing for the
transfer of all or substantially all of the assets, subject to liabilities,
attributable to Class A, Class B and Class C shares of each of the California
Series, Connecticut Series, Florida Series, New Jersey Series and New York
Series, to a corresponding fund, namely Premier California Municipal Bond Fund,
the Connecticut Series, the Florida Series and the New Jersey Series of Premier
State Municipal Bond Fund, and Premier New York Municipal Bond Fund (each, a
"Fund" and, collectively, the "Funds"), respectively, in exchange (the
"Exchange") for each Fund's corresponding Class A, Class B and Class C shares
and the assumption by the Fund of the relevant Series' stated liabilities. Class
A, Class B and Class C shares of a Fund received in the Exchange will be
distributed by the relevant Series to its Class A, Class B and Class C
shareholders, respectively, in liquidation of such Series, after which such
Series will be terminated as a series of the Trust; and
2. To transact such other business as may properly come before the meeting,
or any adjournment or adjournments thereof.
Shareholders of record at the close of business on November __, 1996, will
be entitled to receive notice of and to vote at the meeting.
By Order of the Board of Trustees
John E. Pelletier,
Secretary
New York, New York
January __, 1997
<PAGE>
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY LAW,
THE MEETING OF SHAREHOLDERS OF A SERIES WILL HAVE TO BE ADJOURNED WITHOUT
CONDUCTING ANY BUSINESS IF LESS THAN A QUORUM OF ITS SHARES ELIGIBLE TO VOTE IS
REPRESENTED. IN THAT EVENT, SUCH SERIES, AT ITS SHAREHOLDERS' EXPENSE, WOULD
CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE
COULD BE CRITICAL TO ENABLE YOUR SERIES TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY. YOU AND ALL OTHER SHAREHOLDERS WILL
BENEFIT FROM YOUR COOPERATION.
<PAGE>
PRELIMINARY COPY
JANUARY __, 1997
ACQUISITION OF THE ASSETS OF
PREMIER INSURED MUNICIPAL BOND FUND
(CALIFORNIA SERIES)
(CONNECTICUT SERIES)
(FLORIDA SERIES)
(NEW JERSEY SERIES)
(NEW YORK SERIES)
BY AND IN EXCHANGE FOR SHARES OF
PREMIER CALIFORNIA MUNICIPAL BOND FUND
PREMIER STATE MUNICIPAL BOND FUND
(CONNECTICUT SERIES)
(FLORIDA SERIES)
(NEW JERSEY SERIES)
PREMIER NEW YORK MUNICIPAL BOND FUND
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _________, FEBRUARY __, 1997
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Premier Insured Municipal Bond Fund (the
"Trust") on behalf of its California Series (the "California Series"),
Connecticut Series (the "Connecticut Series"), Florida Series (the "Florida
Series"), New Jersey Series (the "New Jersey Series") and New York Series (the
"New York Series") to be used at the Special Meeting of Shareholders (the
"Meeting") of the Series to be held on ____________, February __, 1997 at 10:00
a.m., at the offices of The Dreyfus Corporation, 200 Park Avenue, 7th Floor, New
York, New York 10166, for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders. Shareholders of record at the close of business
on November __, 1996 (each, a "Shareholder" and, collectively, the
"Shareholders") are entitled to receive notice of and to vote at the Meeting.
Shareholders are entitled to one vote for each share of beneficial interest of a
Series, par value $.001 per share ("Series Share"), held and fractional votes
for each fractional Series Share held. Class A, Class B and Class C shareholders
will vote together on the Proposal. Series Shares represented by executed and
unrevoked proxies will be voted in accordance with the specifications made
thereon. If the enclosed form of proxy is executed and returned, it nevertheless
may be revoked by giving another proxy or by letter or telegram directed to the
relevant Series, which must indicate the Shareholder's name and account number.
To be effective, such revocation must be received before the Meeting. Also, any
Shareholder who attends the Meeting in person may vote by ballot at the Meeting,
thereby canceling any proxy previously given. As of __________, 1996, the
following numbers of Series Shares were issued and outstanding:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
NAME OF SERIES OUTSTANDING OUTSTANDING OUTSTANDING
<S> <C> <C> <C>
California Series _____ _____ _____
Connecticut Series _____ _____ _____
Florida Series _____ _____ _____
New Jersey Series _____ _____ _____
New York Series _____ _____ _____
</TABLE>
Proxy materials will be mailed to shareholders of record on or about
January __, 1997. The Trust's principal executive offices are located at 200
Park Avenue, New York, New York 10166.
If the Proposal is approved by one or more Series, and disapproved by the
other Series, the Proposal will be implemented only for each Series that
approved the Proposal.
It is proposed that each Series transfer all or substantially all of its
assets, subject to liabilities, attributable to its Class A, Class B and Class C
shares, to a corresponding fund, as follows:
TRANSFERRING SERIES ACQUIRING FUND
California Series Premier California Municipal Bond
Fund (the "California Fund")
Connecticut Series Connecticut Series (the
"Connecticut Fund") of Premier
State Municipal Bond Fund (the
"State Fund")
Florida Series Florida Series (the "Florida Fund")
of the State Fund
New Jersey Series New Jersey Series (the "New Jersey
Fund") of the State Fund
New York Series Premier New York Municipal Bond
Fund (the "New York Fund")
Such transfer will be in exchange (the "Exchange") for corresponding Class
A shares ("Fund Class A Shares"), Class B shares ("Fund Class B Shares") and
Class C shares ("Fund Class C Shares" and, together with Fund Class A Shares and
Fund Class B Shares, "Fund Shares") of the corresponding fund, as described
above (where appropriate each, a "Fund" and, collectively, the "Funds"), all as
more fully described herein. Upon consummation of the Exchange, Fund Shares
received by a Series will be distributed to its Shareholders, with each
Shareholder receiving a pro rata distribution of Fund Shares (or fractions
thereof) for Series Shares held prior to the Exchange. Thus, it is contemplated
that each Class A, Class B and Class C Shareholder will receive for the
Shareholder's Series Shares of any such Class a number of Fund Class A Shares,
Fund Class B Shares and Fund Class C Shares (or fractions thereof),
respectively, equal in value to the aggregate net asset value of such Series
Shares of each such Class as of the date of the Exchange.
Each Series and Fund is an open-end management investment company. The
Series and the Funds have the same investment adviser and distributor, and
substantially similar investment objectives and management policies, except that
each Fund invests primarily in Municipal Obligations (as defined herein) whereas
each Series invests primarily in Municipal Obligations that are insured as to
the timely payment of principal and interest by recognized insurers of Municipal
Obligations. The substantive differences between each Series and its
corresponding Fund are set forth herein.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely information about the Funds that Shareholders
should know before voting on the Proposal or investing in the Funds.
The following documents accompany this Prospectus/Proxy Statement and are
incorporated herein by reference:
Name of Fund Prospectus Annual and
Semi-Annual Reports
California Fund Prospectus dated June 3, Annual Report for the
1996, as revised December 1, fiscal year ended
1996 (the "California Fund January 31, 1996
Prospectus")
Semi-Annual Report for
the six months ended
July 31, 1996
Connecticut Fund, Prospectus dated Connecticut Fund's and
Florida Fund and December __, 1996 Florida Fund's Annual
New Jersey Fund (the "State Fund Report for the fiscal
Prospectus") year ended April 30, 1996
New York Fund Prospectus dated April 1, Annual Report for the
1996, as revised Fiscal year ended November
December 1, 1996 (the 30, 1996
"New York Fund Prospectus")
Semi-Annual Report for
the six months ended
May 31, 1996
Trust Prospectus dated December 2,
1996 (the "Trust Prospectus")
Additional information, contained in a Statement of Additional Information
dated January __, 1997 forming a part of the California Fund's Registration
Statement on Form N-14 (File No. 333-__________), the State Fund's Registration
Statement on Form N-14 (File No. 333-________), and the New York Fund's
Registration Statement on Form N-14 (File No. 333-___________) has been filed
with the Securities and Exchange Commission (the "Commission") and is available
without charge by calling 1-800- 554-4611 or writing to the respective Fund at
its principal executive offices located at 200 Park Avenue, New York, New York
10166. The Statement of Additional Information is incorporated herein by
reference in its entirety.
<PAGE>
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MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. MUTUAL FUND SHARES INVOLVE
CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
- ----------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
Summary.............................................................
Reasons for the Exchanges...........................................
Information about the Exchanges.....................................
Information about the Series and Funds..............................
Voting Information..................................................
Financial Statements and Experts....................................
Other Matters.......................................................
Notice to Banks, Broker/Dealers and
Voting Trustees and Their Nominees................................
<PAGE>
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION
PROVIDING FOR THE TRANSFER OF ALL OR SUBSTANTIALLY ALL
OF THE ASSETS OF EACH SERIES TO THE CORRESPONDING FUND
SUMMARY
This Summary is qualified by reference to the more complete information
contained elsewhere in this Prospectus/Proxy Statement, the California Fund
Prospectus, the State Fund Prospectus, the New York Fund Prospectus, the Trust
Prospectus and the form of Agreement and Plan of Reorganization attached to this
Prospectus/Proxy Statement as Exhibit A.
PROPOSED TRANSACTION. The Trust's Board, including the Board members who
are not "interested persons" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")), has unanimously approved an Agreement and Plan of
Reorganization (each a "Plan" and, collectively, the "Plans"), with respect to
each Series. The Plans are identical except for the name of the parties, the
provision under the Internal Revenue Code of 1986, as amended (the "Code"),
under which the reorganization will be effected, the classification of a Fund as
either diversified or non-diversified, and the dates of certain financial
statements. Each Plan provides that, subject to the requisite approval of its
Shareholders, on the date of the Exchange each Series shall assign, transfer and
convey to the corresponding Fund all of the assets (subject to liabilities) of
such Series, including all securities and cash, attributable to its Class A,
Class B and Class C shares, in exchange for Fund Class A Shares, Fund Class B
Shares and Fund Class C Shares, respectively, having an aggregate net asset
value equal to the value of the net assets of such Series' corresponding Class
acquired. Each Series will distribute all Fund Shares received by it among its
Shareholders so that each Class A, Class B and Class C Shareholder will receive
a pro rata distribution of Fund Class A Shares, Fund Class B Shares and Fund
Class C Shares (or fractions thereof), respectively, having an aggregate net
asset value equal to the aggregate net asset value of the Shareholder's Series
Shares as of the date of the Exchange. Thereafter, each Series will be
terminated as a series of the Trust.
As a result of the Exchange, each Shareholder will cease to be a
shareholder of the relevant Series and will become a shareholder of the
corresponding Fund as of the close of business on the closing date of the
Exchange. No sales charge or contingent deferred sales charge ("CDSC") will be
imposed on the Fund Shares received at the time of the Exchange.
The Trust's Board has concluded unanimously that the Exchange would be in
the best interests of Shareholders of each Series and the interests of existing
Shareholders of each Series would not be diluted as a result of the transactions
contemplated thereby. See "Reasons for the Exchanges."
TAX CONSEQUENCES. As a condition to the closing of the Exchange, the Trust
and the California Fund, State Fund and New York Fund will receive an opinion of
counsel to the effect that, for Federal income tax purposes, (a) no gain or loss
will be recognized by Series Shareholders for Federal income tax purposes as a
result of the Exchange, (b) the holding period and aggregate tax basis of Fund
Shares received by a Series Shareholder will be the same as the holding period
and aggregate tax basis of the Shareholder's Series Shares, and (c) the holding
period and tax basis of the Series' assets transferred to the Fund as a result
of the Exchange will be the same as the holding period and tax basis of such
assets held by the Series immediately prior to the Exchange. See "Information
about the Exchanges--Tax Consequences."
COMPARISON OF THE SERIES AND FUNDS. The following discussion is a summary
of certain parts of the Trust Prospectus, the California Fund Prospectus, State
Fund Prospectus and New York Fund Prospectus. Information contained herein is
qualified by the more complete information set forth therein, which is
incorporated herein by reference.
GENERAL. Each Series and each Fund is an open-end, management investment
company advised by The Dreyfus Corporation ("Dreyfus"). The investment
objectives of each Fund and Series are substantially similar--to maximize
current income exempt from Federal income tax and, where applicable, State
income tax of the State after which it is named, to the extent consistent with
the preservation of capital, with respect to the Series and the California Fund
and New York Fund, or without undue risk, with respect to the Connecticut Fund,
Florida Fund and New Jersey Fund.
The management policies of each Series and Fund are substantially similar.
Each invests primarily in debt securities issued by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from which
is exempt from Federal income tax and, where applicable, from the income tax of
the State after which it is named ("Municipal Obligations"). Each Series invests
primarily in Municipal Obligations insured as to the timely payment of principal
and interest under insurance policies (i) purchased by the Series or by a
previous owner of the Municipal Obligation or (ii) obtained by the issuer or
underwriter of the Municipal Obligation. See "Description of the Fund--Insurance
Feature" in the Trust Prospectus for a discussion of Municipal Obligation
insurance. The Funds are not required by their management policies to purchase
insured Municipal Obligations. See "Risk Factors" below.
The Municipal Obligations in which each Series invests consist only of
those considered investment grade by Moody's Investors Service, Inc. ("Moody's")
(Aaa, Aa, A and Baa), Standard & Poor's Ratings Group ("S&P") (AAA, AA, A and
BBB) or Fitch Investors Service, L.P. ("Fitch") (AAA, AA, A and BBB) in the case
of bonds, and in the two highest rating categories of Moody's, S&P or Fitch in
the case of short-term obligations, or determined to be of comparable quality by
Dreyfus. At least 70% of each Fund's net assets must consist of Municipal
Obligations which, in the case of bonds, are rated no lower than investment
grade by Moody's, S&P or Fitch. Each Fund may invest up to 30% of its net assets
in Municipal Obligations, which in the case of bonds, are rated lower than
investment grade and as low as the lowest rating assigned by Moody's, S&P or
Fitch. Each Fund may invest in short-term Municipal Obligations which are rated
in the two highest rating categories by Moody's, S&P or Fitch. Investments rated
below investment grade by Moody's, S&P and Fitch ordinarily provide higher
yields but involve greater risk because of their speculative characteristics.
See "Risk Factors" below.
Each Series and Fund may invest on a temporary basis (but not to exceed 20%
of its net assets) or for temporary defensive purposes, in taxable investments,
such as obligations of the U.S. Government, its agencies or instrumentalities,
commercial paper, certificates of deposit, time deposits, bankers' acceptances
and other short-term bank obligations and repurchase agreements. Each Series and
Fund may engage in various investment techniques, such as options and futures
transactions, lending portfolio securities and short-selling, which may give
rise to taxable income. In all other material respects, the management policies
of the Series and the Funds are the same. For a more complete discussion of each
Series' or Fund's management policies, see "Description of the Fund" in the
Trust Prospectus or the relevant Fund Prospectus.
Each Series is a separate portfolio of the Trust, which, like the
California Fund, State Fund and New York Fund, is an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts.
INVESTMENT RESTRICTIONS. The 1940 Act requires that a relatively limited
number of investment policies and restrictions be designated as fundamental
policies that cannot be changed without shareholder approval. One such
fundamental policy is a fund's classification as either a diversified or
non-diversified investment company. Each Series and Fund, except the California
Fund, is a NON-DIVERSIFIED investment company, meaning that the proportion of
its assets that may be invested in the securities of a single issuer is not
limited by the 1940 Act. The California Fund is a DIVERSIFIED investment company
that may not invest more than 5% of the value of its total assets in the
obligations of a single issuer, except that up to 25% of the value of the
California Fund's total assets may be invested, and securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities may be
purchased, without regard to any such limitation.
Each Series and Fund, except the New York Fund, has adopted a fundamental
policy permitting it to borrow money to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of a
fund's total assets). Each such Series and Fund, however, currently intends to
borrow, and the New York Fund is permitted to borrow, 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 of
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the value of its total assets,
such Series or Fund will not make any additional investments.
Each Series has adopted as a fundamental policy a restriction on issuing
any senior security; such restriction also applies to each Fund pursuant to the
provisions of the 1940 Act.
In all other respects, the fundamental policies and investment restrictions
of each Series and Fund are substantially similar.
INITIAL SALES CHARGE ON CLASS A SHARES. The schedule of the initial sales
charge imposed on Series Class A shares and Fund Class A Shares is identical. In
addition, Series Class A shares and Fund Class A Shares purchased without an
initial sales charge as part of an investment of at least $1,000,000 and
redeemed within one year after purchase are subject to the same CDSC. See "How
To Buy Shares--Class A Shares" in the relevant Prospectus for a discussion of
the initial sales charge.
CONTINGENT DEFERRED SALES CHARGE ON CLASS B AND CLASS C SHARES. The
schedule of the CDSC imposed at the time of redemption on Series Class B shares
and Fund Class B Shares is identical. The CDSC imposed on any redemption of
Series Class C shares and Fund Class C Shares within one year after purchase
also is identical. See "How to Redeem Shares--Contingent Deferred Sales Charge"
in the relevant Prospectus for a discussion of the CDSC imposed on Class B and
Class C shares.
FEES AND EXPENSES. The following information concerning fees and expenses
of the Series and Funds is derived from information set forth under the caption
"Fee Table" in the relevant Prospectus. Other Expenses for Class A, Class B and
Class C of the New Jersey Fund and for Class C of each Series and other Fund are
based on estimated amounts. The "Pro Forma After Exchange" information is based
on assets of the Series and Funds as of September 30, 1996. The expense
information set forth below for the Series and the Funds does not reflect any
fee waivers or expense reimbursement arrangements that may be or may have been
in effect.
<TABLE>
<CAPTION>
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of average
daily net assets):
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS A CLASS A CLASS A
<S> <C> <C> <C>
Management Fees .55% .55% .55%
12b-1 Fees None None None
Other Expenses .89% .38% .35%
Total Operating
Expenses 1.44% .93% .90%
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS B CLASS B CLASS B
Management Fees .55% .55% .55%
12b-1 Fees .50% .50% .50%
Other Expenses .92% .40% .37%
Total Operating
Expenses 1.97% 1.45% 1.42%
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS C CLASS C CLASS C
Management Fees .55% .55% .55%
12b-1 Fees .75% .75% .75%
Other Expenses 1.95% .38% .35%
Total Operating
Expenses 3.25% 1.68% 1.65%
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS A CLASS A CLASS A
Management Fees .55% .55% .55%
12b-1 Fees None None None
Other Expenses .61% .37% .33%
Total Operating
Expenses 1.16% .92% .88%
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS B CLASS B CLASS B
Management Fees .55% .55% .55%
12b-1 Fees .50% .50% .50%
Other Expenses .61% .39% .35%
Total Operating
Expenses 1.66% 1.44% 1.40%
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS C CLASS C CLASS C
Management Fees .55% .55% .55%
12b-1 Fees .75% .75% .75%
Other Expenses .68% .34% .34%
Total Operating
Expenses 1.98% 1.64% 1.64%
Pro Forma
After
Florida Florida Exchange
Series Fund Florida Fund
CLASS A CLASS A CLASS A
Management Fees .55% .55% .55%
12b-1 Fees None None None
Other Expenses .63% .36% .35%
Total Operating
Expenses 1.18% .91% .90%
Pro Forma
After
Florida Florida Exchange
Series Fund Florida Fund
CLASS B CLASS B CLASS B
Management Fees .55% .55% .55%
12b-1 Fees .50% .50% .50%
Other Expenses .62% .36% .36%
Total Operating
Expenses 1.67% 1.41% 1.41%
Pro Forma
After
Florida Florida Exchange
Series Fund Florida Fund
CLASS C CLASS C CLASS C
Management Fees .55% .55% .55%
12b-1 Fees .75% .75% .75%
Other Expenses .56% .69% .36%
Total Operating
Expenses 1.86% 1.99% 1.66%
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS A CLASS A* CLASS A
Management Fees .55% .55% .55%
12b-1 Fees None None None
Other Expenses .67% .67% .54%
Total Operating
Expenses 1.22% 1.22% 1.09%
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS B CLASS B* CLASS B
Management Fees .55% .55% .55%
12b-1 Fees .50% .50% .50%
Other Expenses .66% .66% .52%
Total Operating
Expenses 1.71% 1.71% 1.57%
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS C CLASS C* CLASS C
Management Fees .55% .55% .55%
12b-1 Fees .75% .75% .75%
Other Expenses .67% .67% .67%
Total Operating
Expenses 1.97% 1.97% 1.97%
Pro Forma
After
New York New York Exchange
Series Fund New York Fund
CLASS A CLASS A CLASS A
Management Fees .55% .55% .55%
12b-1 Fees None None None
Other Expenses .69% .39% .36%
Total Operating
Expenses 1.24% .94% .91%
Pro Forma
After
New York New York Exchange
Series Fund New York Fund
CLASS B CLASS B CLASS B
Management Fees .55% .55% .55%
12b-1 Fees .50% .50% .50%
Other Expenses .69% .41% .39%
Total Operating
Expenses 1.74% 1.46% 1.44%
Pro Forma
After
New York New York Exchange
Series Fund New York Fund
CLASS C CLASS C CLASS C
Management Fees .55% .55% .55%
12b-1 Fees .75% .75% .75%
Other Expenses 1.03% .44% .33%
Total Operating
Expenses 2.33% 1.74% 1.63%
- --------------------
* The New Jersey Fund has not commenced operations; "Other Expenses" and
"Total Operating Expenses" are based on amounts for the New Jersey
Series.
</TABLE>
EXAMPLE
An investor would pay the following expenses(a) on a $1,000 investment,
assuming (1) 5% annual return and (2) except where noted, redemption at the end
of each time period:
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS A CLASS A CLASS A
<S> <C> <C> <C>
1 Year $ 59 $ 54 $ 54
3 Years $ 89 $ 73 $ 72
5 Years $120 $ 94 $ 93
10 Years $210 $154 $151
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS B CLASS B CLASS B
1 Year $ 60/$ 20* $ 55/$15* $ 54/$14*
3 Years $ 92/$ 62* $ 76/$46* $ 75/$45*
5 Years $126/$106* $ 99/$79* $ 98/$78*
10 Years $203** $147** $143**
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS C CLASS C CLASS C
1 Year $ 43/$33* $ 27/$17* $ 27/$17*
3 Years $100 $ 53 $ 52
5 Years $170 $ 91 $ 90
10 Years $355 $199 $195
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS A CLASS A CLASS A
1 Year $ 56 $ 54 $ 54
3 Years $ 80 $ 73 $ 72
5 Years $106 $ 94 $ 92
10 Years $180 $153 $149
<PAGE>
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS B CLASS B CLASS B
1 Year $ 57/$17* $ 55/$15* $ 54/$14*
3 Years $ 82/$52* $ 76/$46* $ 74/$44*
5 Years $110/$90* $ 99/$79* $ 97/$77*
10 Years $171** $145** $141**
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS C CLASS C CLASS C
1 Year $ 30/$20* $ 27/$ 17* $
27/$17*
3 Years $ 62 $ 52 $ 52
5 Years $107 $ 89 $ 89
10 Years $231 $194 $194
Pro Forma
After
Exchange
Florida Florida Florida
Series Fund Fund
CLASS A CLASS A CLASS A
1 Year $ 56 $ 54 $ 54
3 Years $ 81 $ 73 $ 72
5 Years $107 $ 93 $ 93
10 Years $182 $152 $151
Pro Forma
After
Exchange
Florida Florida Florida
Series Fund Fund
CLASS B CLASS B CLASS B
1 Year $ 57/$17* $ 54/$14* $ 54/$14*
3 Years $ 83/$53* $ 75/$45* $ 75/$45*
5 Years $111/$91* $ 97/$77* $ 97/$77*
10 Years $173** $143** $142**
Pro Forma
After
Exchange
Florida Florida Florida
Series Fund Fund
CLASS C CLASS C CLASS C
1 Year $ 29/$19* $ 27/$ 17* $
30/$20*
3 Years $ 58 $ 62 $ 52
5 Years $101 $107 $ 90
10 Years $218 $232 $197
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS A CLASS A CLASS A
1 Year $ 57 $ 57 $ 56
3 Years $ 82 $ 82 $ 78
5 Years $109 $109 $102
10 Years $186 $186 $172
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS B CLASS B CLASS B
1 Year $ 57/$17* $ 57/$17* $ 56/$16*
3 Years $ 84/$54* $ 84/$54* $ 80/$50*
5 Years $113/$93* $113/$93* $106/$86*
10 Years $177** $177** $162**
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS C CLASS C CLASS C
1 Year $ 30/$20* $ 30/$20* $ 30/$20*
3 Years $ 62 $ 62 $ 62
5 Years $106 $106 $106
10 Years $230 $230 $230
<PAGE>
Pro Forma
After
Exchange
New York New York New York
Series Fund Fund
CLASS A CLASS A CLASS A
1 Year $ 57 $ 54 $ 54
3 Years $ 83 $ 74 $ 73
5 Years $110 $ 95 $ 93
10 Years $188 $155 $152
Pro Forma
After
Exchange
New York New York New York
Series Fund Fund
CLASS B CLASS B CLASS B
1 Year $ 58/$ 18* $ 55/$15* $ 55/$15*
3 Years $ 85/$ 55* $ 76/$46* $ 76/$46*
5 Years $114/$ 94* $100/$80* $ 99/$79*
10 Years $180** $148** $145**
Pro Forma
After
Exchange
New York New York New York
Series Fund Fund
CLASS C CLASS C CLASS C
1 Year $ 34/$24* $ 27/$17* $
28/$18*
3 Years $ 73 $ 55 $ 51
5 Years $125 $ 94 $ 89
10 Years $267 $205 $193
- -------------
(a) The amounts listed in the examples reflect the maximum chargeable sales
charges or contingent deferred sales charges, as applicable.
* Assuming no redemption of shares.
** Ten year figure assumes conversion of Class B shares to Class A shares
at the end of the sixth year following the date of purchase.
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS
THAN 5%.
<PAGE>
DISTRIBUTION PLAN. Fund Class B Shares and Fund Class C Shares are subject
to a Rule 12b-1 Plan which is identical to that adopted by each Series for its
Class B and Class C shares. See "Distribution Plan and Shareholder Services
Plan-- Distribution Plan" in the relevant Prospectus for a discussion of the
Rule 12b-1 Plan.
SHAREHOLDER SERVICES PLAN. Fund Class A Shares, Fund Class B Shares and
Fund Class C Shares are subject to a Shareholder Services Plan which is
identical to that adopted by each Series for its Class A, Class B and Class C
shares. See "Distribution Plan and Shareholder Services Plan--Shareholder
Services Plan" in the relevant Prospectus for a discussion of the Shareholder
Services Plan.
PRIMARY PORTFOLIO MANAGERS. The primary portfolio manager for the
California, Connecticut and Florida Series is Stephen C. Kris, who has been
employed by Dreyfus since February 1988. Mr. Kris also is the primary portfolio
manager for the California Fund and Florida Fund. The primary portfolio manager
for the Connecticut Fund is Samuel J. Weinstock, who has been employed by
Dreyfus since March 1987. Mr. Weinstock also is the primary portfolio for the
New Jersey Series. The primary portfolio manager for the New Jersey Fund is
______________, who has been employed by Dreyfus since _____. The primary
portfolio manager for the New York Series is Richard J. Moynihan, who has been
employed by Dreyfus since 1973. The primary portfolio manager for the New York
Fund is Monica S. Wieboldt, who has been employed by Dreyfus since November
1983. Each primary portfolio manager for a particular Series or Fund also serves
as a portfolio manager for each other Series and Fund.
CAPITALIZATION. Each of the Series and the Funds has classified its shares
into three classes--Class A, Class B and Class C. The following table sets forth
as of September 30, 1996 (1) the capitalization of each class of each Series'
shares, (2) the capitalization of each class of each Fund's shares and (3) the
pro forma capitalization of each class of each Fund's shares, as adjusted
showing the effect of the Exchange had it occurred on such date.
<TABLE>
<CAPTION>
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS A CLASS A CLASS A
<S> <C> <C> <C>
Total net assets.................... $3,396,053 $169,011,598 $172,407,651
Net asset value
per share......................... $12.05 $12.51 $12.51
Shares outstanding.................. 281,833 13,507,982 13,781,587
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS B CLASS B CLASS B
Total net assets.................... $4,245,005 $20,642,613 $24,887,618
Net asset value
per share......................... $12.06 $12.52 $12.52
Shares outstanding.................. 351,931 1,648,972 1,987,829
Pro Forma
After
Exchange
California California California
Series Fund Fund
CLASS C CLASS C CLASS C
Total net assets.................... $1,009 $511,972 $512,981
Net asset value
per share......................... $12.06 $12.54 $12.54
Shares outstanding.................. 84 40,836 40,908
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS A CLASS A CLASS A
Total net assets.................... $11,079,767 $316,941,666 $328,021,433
Net asset value
per share......................... $13.02 $12.07 $12.07
Shares outstanding.................. 850,750 26,252,867 27,176,589
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS B CLASS B CLASS B
Total net assets.................... $17,492,751 $41,257,810 $58,750,561
Net asset value
per share......................... $13.03 $12.07 $12.07
Shares outstanding.................. 1,342,296 3,419,106 4,867,486
Pro Forma
After
Exchange
Connecticut Connecticut Connecticut
Series Fund Fund
CLASS C CLASS C CLASS C
Total net assets.................... $174,023 $925,226 $1,099,249
Net asset value
per share......................... $13.02 $12.06 $12.06
Shares outstanding.................. 13,363 76,710 91,148
Pro Forma
After
Exchange
Florida Florida Florida
Series Fund Fund
CLASS A CLASS A CLASS A
Total net assets.................... $16,121,893 $217,557,621 $233,679,514
Net asset value
per share......................... $13.28 $14.55 $14.55
Shares outstanding.................. 1,213,961 14,955,576 16,060,448
Pro Forma
After
Exchange
Florida Florida Florida
Series Fund Fund
CLASS B CLASS B CLASS B
Total net assets.................... $17,846,485 $26,404,273 $44,250,758
Net asset value
per share......................... $13.28 $14.54 $14.54
Shares outstanding.................. 1,343,617 1,815,940 3,043,381
Pro Forma
After
Exchange
Florida Florida Florida
Series Fund Fund
CLASS C CLASS C CLASS C
Total net assets.................... $993 $56,404 $57,397
Net asset value
per share......................... $13.28 $14.54 $14.54
Shares outstanding.................. 75 3,880 3,948
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS A CLASS A* CLASS A
Total net assets.................... $4,924,407 $12.50 $4,924,420
Net asset value
per share......................... $12.83 $12.50 $12.50
Shares outstanding.................. 383,806 1 393,954
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS B CLASS B* CLASS B
Total net assets.................... $8,948,826 $12.50 $8,948,839
Net asset value
per share......................... $12.83 $12.50 $12.50
Shares outstanding.................. 697,468 1 715,907
Pro Forma
After
Exchange
New Jersey New Jersey New Jersey
Series Fund Fund
CLASS C CLASS C* CLASS C
Total net assets.................... $6,088 $12.50 $6,101
Net asset value
per share......................... $12.82 $12.50 $12.50
Shares outstanding.................. 475 1 488
- ---------------
* The New Jersey Fund has not commenced operations and will issue one
share of each class prior to the Exchange.
Pro Forma
After
Exchange
New York New York New York
Series Fund Fund
CLASS A CLASS A CLASS A
Total net assets.................... $4,825,999 $134,127,445 $138,953,444
Net asset value
per share......................... $12.97 $14.60 $14.60
Shares outstanding.................. 372,200 9,186,753 9,517,359
Pro Forma
After
Exchange
New York New York New York
Series Fund Fund
CLASS B CLASS B CLASS B
Total net assets.................... $10,479,699 $70,374,696 $80,854,395
Net asset value
per share......................... $12.98 $14.60 $14.60
Shares outstanding.................. 807,184 4,818,768 5,537,287
Pro Forma
After
Exchange
New York New York New York
Series Fund Fund
CLASS C CLASS C CLASS C
Total net assets.................... $108,535 $470,839 $579,374
Net asset value
per share......................... $12.98 $14.61 $14.61
Shares outstanding.................. 8,359 32,237 39,656
</TABLE>
<PAGE>
PURCHASE PROCEDURES. The purchase procedures of the Series and Funds are
identical. See "How to Buy Shares" in the relevant Prospectus for a discussion
of purchase procedures.
REDEMPTION PROCEDURES. The redemption procedures of the Series and Funds
are identical. See "How to Redeem Shares" in the relevant Prospectus for a
discussion of redemption procedures.
DISTRIBUTIONS. The dividend and distributions policies of the Series and
Funds are identical. See "Dividends, Distributions and Taxes" in the relevant
Prospectus for a discussion of such policies.
SHAREHOLDER SERVICES. The shareholder services offered by the Series and
Funds are identical. See "Shareholder Services" in the relevant Prospectus for a
description of shareholder services.
RISK FACTORS. The investment risks of each Series and Fund are
substantially similar. Certain of the States in which the Series and Funds
invest have experienced financial difficulties, the recurrence of which could
result in defaults or declines in the market values of various Municipal
Obligations. If there should be a default or other financial crisis relating to
the applicable State or an agency or municipality thereof, the market value and
marketability of outstanding State Municipal Obligations in a Series' or Fund's
portfolio and the interest income to the Series or Fund could be adversely
affected. Even though interest-bearing securities are investments which promise
a stable stream of income, the prices of such securities are inversely affected
by changes in interest rates and, therefore, are subject to the risk of market
price fluctuations. Certain securities in which each Series or Fund invests may
earn a higher level of current income than certain short-term or higher quality
securities which generally have greater liquidity, less market risk and less
fluctuation in market value.
Each Series invests primarily in insured Municipal Obligations. An
insurance feature on a Municipal Obligation is designed to reduce the financial
risk of the investment. If a Municipal Obligation held by a Series defaults, the
Series, if it continues to pay the insurance premium, is entitled to collect
interest payments and the full amount of principal from the insurer when such
payments come due. Some types of insurance purchased for a Municipal Obligation
increase the market value and marketability of the Municipal Obligation.
However, the cost of insurance and the restrictions on investments imposed by
the guidelines in insurance policies result in a reduction in the yield on such
Municipal Obligations. Because the Funds do not invest primarily in insured
Municipal Obligations, the Funds' portfolio securities are exposed to a greater
extent to the risk of loss if a Municipal Obligation held by a Fund defaults.
Each Fund may invest up to 30% of the value of its net assets in the higher
yielding (and, therefore, higher risk) debt securities (commonly known as junk
bonds). The market price and yield of these bonds are more volatile than those
of higher rated bonds. Factors adversely affecting the market price and yield of
these securities will adversely affect a Fund's net asset value. In addition,
the retail secondary market for these bonds may be less liquid than that of
higher rated bonds; adverse market conditions could make it difficult at times
for a Fund to sell certain securities or could result in lower prices than those
used in calculating a Fund's net asset value.
Certain municipal lease/purchase obligations in which each Series and 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.
See "Description of the Fund--Investment Considerations and Risks" in the
relevant Prospectus for a further description of investment risks.
REASONS FOR THE EXCHANGES
The Boards of Trustees of the Trust and each Fund have concluded that the
Exchange is in the best interests of their respective shareholders. Each Board
believes that the Exchange will permit shareholders to pursue substantially
similar investment goals in a larger fund without diluting shareholders'
interests. Each Series has been unable to attract sufficient assets to operate
efficiently as a separate series of the Trust investing primarily in insured
Municipal Obligations without significant expense subsidization. As of October
10, 1996, the California Series, Connecticut Series, Florida Series, New Jersey
Series and New York Series had assets under management of approximately
$7,578,000, $28,607,000, $33,840,000, $13,939,000 and $15,412,000, respectively.
The expense ratio of each Fund is lower than that of each Series. By combining
the Series with the Funds, which have larger aggregate net assets, Series
Shareholders should obtain the benefits of economies of scale.
In determining whether to recommend approval of the Exchange, each Board
considered the following factors, among others: (1) the compatibility of each
Series' and its corresponding Fund's investment objective, management policies
and investment restrictions, as well as shareholder services offered by the
Series and Funds; (2) the terms and conditions of the Exchange and whether the
Exchange would result in dilution of shareholder interests; (3) expense ratios
and published information regarding the fees and expenses of the Series and
Funds, as well as the expense ratios of similar funds and the estimated expense
ratio of the combined Funds; (4) the tax consequences of the Exchange; and (5)
the estimated costs incurred by the Series and the Funds as a result of the
Exchange. In addition, the Trust's Board considered the Series' inability to
attract sufficient assets to operate efficiently without sufficient expense
subsidization.
INFORMATION ABOUT THE EXCHANGES
PLANS OF EXCHANGE. The following summary of the Plans is qualified in its
entirety by reference to the form of Plan attached hereto as Exhibit A. Each
Plan provides that the relevant Fund will acquire all or substantially all of
the assets of its corresponding Series, attributable to such Series' Class A,
Class B and Class C shares, in exchange for the relevant Fund Class A Shares,
Fund Class B Shares and Fund Class C Shares, respectively, and the assumption by
the Fund of such corresponding Series' stated liabilities on __________ __, 1997
or such later date as may be agreed upon by the parties (the "Closing Date").
The number of Fund Shares to be issued to the Series will be determined on the
basis of the relative net asset values per share and aggregate net assets of the
corresponding Class of the Fund and the Series, generally computed as of the
close of trading on the floor of the New York Stock Exchange (currently at 4:00
p.m., New York time) (except for options and futures contracts, if any, which
will be valued 15 minutes after the close of trading) on the Closing Date.
Portfolio securities of the Series and the Fund will be valued in accordance
with the valuation practices of the Fund, which are described under the caption
"How to Buy Shares" in the relevant Fund Prospectus and under the caption
"Determination of Net Asset Value" in the relevant Statement of Additional
Information.
Prior to the Closing Date, each Series will declare a dividend or dividends
which, together with all previous such dividends, will have the effect of
distributing to Series' Shareholders all of such Series' previously
undistributed investment company taxable income, if any, for the taxable year
ending on or prior to the Closing Date (computed without regard to any deduction
for dividends paid), its net exempt interest income for the taxable year ending
on or prior to the Closing Date, and all of its previously undistributed net
capital gain realized in the taxable year ending on or prior to the Closing Date
(after reduction for any capital loss carry forward).
As conveniently as practicable after the Closing Date, each Series will
liquidate and distribute pro rata to its Class A, Class B and Class C
Shareholders of record as of the close of business on the Closing Date Fund
Class A Shares, Fund Class B Shares and Fund Class C Shares, respectively,
received by it in the Exchange. Such liquidation and distribution will be
accomplished by establishing accounts on the share records of the relevant Fund
in the name of the corresponding Series Shareholder, each account representing
the respective pro rata number of Fund Shares due to the Shareholder. After such
distribution and the winding up of its affairs, each Series will be terminated
as a series of the Trust. After the Closing Date, any outstanding certificates
representing Series Shares will represent the Fund Shares distributed to the
record holders of the Series. Upon presentation to the transfer agent of the
Fund, Series Share certificates will be exchanged for Fund Share certificates,
at the applicable exchange rate. Certificates for Fund Shares will be issued
only upon the investor's written request.
Each Plan may be amended at any time prior to the relevant Exchange. The
Trust will provide Series Shareholders with information describing any material
amendment to the relevant Plan prior to Shareholder consideration. The
obligations of each Series and Fund under the Plans are subject to various
conditions, including approval by the requisite number of Series Shareholders
and the continuing accuracy of various representations and warranties of the
Series and the Fund being confirmed by the respective parties.
The total expenses of the Exchanges are expected to be approximately
$25,000 for the Series. Each Series will bear its own expenses, except for the
expenses of preparing, printing and mailing this Prospectus/Proxy Statement, the
proxy cards and other related materials, which will be borne by each Series
ratably according to their respective aggregate net assets on the date of the
Exchange.
If the Exchange is not approved by a Series' Shareholders, the Trust's
Board will consider other appropriate courses of action, including liquidating
the Series.
TEMPORARY SUSPENSION OF CERTAIN OF THE SERIES' INVESTMENT RESTRICTIONS.
Since certain of the Series' existing investment restrictions could preclude the
Series from consummating the Exchange in the manner contemplated in the Plan,
Series Shareholders are requested to authorize the temporary suspension of
certain investment restrictions which restrict the Series' ability to (i)
purchase securities other than Municipal Obligations and Taxable Investments and
(ii) invest more than 25% of its total assets in the securities of issuers in
any single industry, as set forth in the Trust's Statement of Additional
Information, as well as the temporary suspension of any other investment
restriction of the Series to the extent necessary to permit the consummation of
the Exchange. The temporary suspension of the Series' investment restrictions
will not affect the investment restrictions of the Funds. A vote in favor of the
Proposal is deemed to be a vote in favor of the temporary suspensions.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of each Series' assets for
Fund Shares is intended to qualify for Federal income tax purposes as a tax-free
reorganization under Section 368(a) of the Code. As a condition to the closing
of the Exchanges, the Funds and Series will receive the opinion of Stroock &
Stroock & Lavan, counsel to the Funds and the Series, to the effect that, on the
basis of the existing provisions of the Code, Treasury regulations issued
thereunder, current administrative regulations and pronouncements and court
decisions, and certain facts, assumptions and representations, for Federal
income tax purposes: (1) the transfer of all or substantially all of a Series'
assets in exchange for the relevant Fund Shares and the assumption by such Fund
of the corresponding Series liabilities will constitute a "reorganization"
within the meaning of Section 368(a)(1)(C) with respect to the California
Series, Connecticut Series, Florida Series and New York Series, or Section
368(a)(1)(F) of the Code with respect to the New Jersey Series, as the case may
be; (2) no gain or loss will be recognized by the Fund upon the receipt of the
Series' assets solely in exchange for Fund Shares and the assumption by the Fund
of liabilities of the Series; (3) no gain or loss will be recognized by a Series
upon the transfer of its assets to the Fund in exchange for Fund Shares and the
assumption by the Fund of the Series' liabilities or upon the distribution
(whether actual or constructive) of Fund Shares to Shareholders in exchange for
their Series Shares; (4) no gain or loss will be recognized by the Series
Shareholders upon the exchange of Series Shares for Fund Shares; (5) the
aggregate tax basis for Fund Shares received by each Series Shareholder pursuant
to the Exchange will be the same as the aggregate tax basis for Series Shares
held by such Shareholder immediately prior to the Exchange, and the holding
period of Fund Shares to be received by each Series Shareholder will include the
period during which Series Shares surrendered in exchange therefor were held by
such Shareholder (provided Series Shares were held as capital assets on the date
of the Exchange); and (6) the tax basis of Series assets acquired by the Fund
will be the same as the tax basis of such assets to the Series immediately prior
to the Exchange, and the holding period of Series assets in the hands of the
Fund will include the period during which those assets were held by the Series.
NONE OF THE SERIES OR THE FUNDS HAS SOUGHT A TAX RULING FROM THE INTERNAL
REVENUE SERVICE ("IRS"). THE OPINION OF COUNSEL IS NOT BINDING ON THE IRS NOR
DOES IT PRECLUDE THE IRS FROM ADOPTING A CONTRARY POSITION. Series Shareholders
should consult their tax advisers regarding the effect, if any, of the proposed
Exchanges in light of their individual circumstances. Since the foregoing
discussion relates only to the Federal income tax consequences of the Exchanges,
Series Shareholders also should consult their tax advisers as to state and local
tax consequences, if any, of the Exchanges.
REQUIRED VOTE AND BOARD'S RECOMMENDATION
The Trust's Board has approved the Plan and the Exchange and has determined
that (i) participation in the Exchange is in the respective Series' best
interests and (ii) the interests of Shareholders of such Series will not be
diluted as a result of the Exchange. Pursuant to the Trust's charter documents,
an affirmative vote of a majority of the Series' Shareholders is required to
approve the Plan and the Exchange with respect to such Series.
THE BOARD OF THE TRUST, INCLUDING THE "NON-INTERESTED" BOARD MEMBERS,
RECOMMENDS THAT EACH SERIES' SHAREHOLDERS VOTE "FOR" APPROVAL OF THE PLAN AND
THE EXCHANGE.
ADDITIONAL INFORMATION ABOUT THE FUNDS AND SERIES
Information about the California Fund is incorporated by reference into
this Prospectus/Proxy Statement from the California Fund Prospectus forming a
part of the Registration Statement on Form N-1A (File No. 33-7498). Information
about the State Fund is incorporated by reference into this Prospectus/Proxy
Statement from the State Fund Prospectus forming a part of the Registration
Statement on Form N-1A (File No. 33- 10238). Information about the New York Fund
is incorporated by reference into the Prospectus/Proxy Statement from the New
York Fund Prospectus forming a part of the Registration Statement on Form N-1A
(File No. 33-7497). Information about the Series is incorporated by reference
into this Prospectus/Proxy Statement from the Trust Prospectus forming a part of
the Registration Statement on Form N-1A (File No. 33-61738).
The Funds and Series are subject to the requirements of the 1940 Act, and
file reports, proxy statements and other information with the Commission.
Reports, proxy statements and other information filed by the Funds or Series may
be inspected and copied at the Public Reference Facilities of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Northeast
regional office of the Commission at 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
VOTING INFORMATION
In addition to the use of the mails, proxies may be solicited personally,
by telephone or by telegraph, and each Series may pay persons holding its Series
Shares in their names or those of their nominees for their expenses in sending
soliciting materials to their principals.
If a proxy is properly executed and returned accompanied by instructions to
withhold authority to vote, represents a broker "non-vote" (that is, a proxy
from a broker or nominee indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote Series
Shares on a particular matter with respect to which the broker or nominee does
not have discretionary power) or is marked with an abstention (collectively,
"abstentions"), the Series Shares represented thereby will be considered to be
present at a Meeting for purposes of determining the existence of a quorum for
the transaction of business. Abstentions will not constitute a vote "for" or
"against" a matter and will be disregarded in determining the "votes cast" on an
issue. For this reason, abstentions will have the effect of a "no" vote for the
purpose of obtaining requisite approval for the Proposal.
In the event that a quorum is not present at the Meeting, or if a quorum is
present but sufficient votes to approve the Proposal are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. In determining whether to adjourn the
Meeting, the following factors may be considered: the nature of the Proposal,
the percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to Shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at the Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote those
proxies which they are entitled to vote "FOR" the Proposal in favor of such
adjournment, and will vote those proxies required to be voted "AGAINST" the
Proposal against any adjournment. A quorum is constituted with respect to a
Series by the presence in person or by proxy of the holders of more than 30% of
the outstanding Series Shares entitled to vote at the Meeting.
The votes of each Fund's shareholders are not being solicited since their
approval or consent is not necessary for the Exchange.
As of __________ __, 1996, the following were known by the Trust to own of
record 5% or more of the outstanding voting shares of the indicated Series and
Class: _____________________. [As of _______ __, 1996, the following were known
by each Fund to own of record 5% or more of the outstanding voting shares of the
indicated Class: _______________________.]
As of _______ __, 1996, Trustees and officers of the California Fund, State
Fund and New York Fund, as a group, owned less than 1% of the relevant Fund's
outstanding shares. As of ________ __, 1996, Trustees and officers of Trust, as
a group, owned less than 1% of each Series' outstanding shares.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Series for the fiscal year ended
July 31, 1996, which are included in the Trust's Statement of Additional
Information, and the audited financial statements of the California Fund for the
fiscal year ended January 31, 1996, which are included in the California Fund's
Statement of Additional Information, the audited financial statements of the
Connecticut Series and Florida Series for the fiscal year ended April 30, 1996,
which are included in the State Fund's Statement of Additional Information, and
the audited financial statements of the New York Fund for the fiscal year ended
November 30, 1995, which are included in the New York Fund's Statement of
Additional Information, have each been audited by Ernst & Young LLP, independent
auditors, whose respective reports thereon are included therein. The unaudited
financial statements of the New York Fund and California Fund for the six months
ended May 31, 1996 and July 31, 1996, respectively, are included in such Fund's
Semi-Annual Report.
The financial statements of each Series audited by Ernst & Young LLP have
been incorporated herein by reference in reliance upon their reports given on
their authority as experts in accounting and auditing.
OTHER MATTERS
The Trust's Trustees are not aware of any other matters which may come
before the Meeting. However, should any such matters properly come before the
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy in accordance with their judgment on such matters.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Trust, in care of Dreyfus Transfer, Inc., Attention:
Premier Insured Municipal Bond Fund, P.O. Box 9671, Providence, Rhode Island
02940-9671 whether other persons are the beneficial owners of Series Shares for
which proxies are being solicited from you, and, if so, the number of copies of
the Prospectus/Proxy Statement and other soliciting material you wish to receive
in order to supply copies to the beneficial owners of Series Shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN EACH PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
Dated: January __, 1997
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated
___________, 1996 (the "Agreement"), between PREMIER INSURED MUNICIPAL BOND
FUND, a Massachusetts business trust (the "Trust"), on behalf of
its 1 (the "Series") and 2 , a
Massachusetts business trust (the 3 ) 4 .
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)( 5 ) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of
substantially all of the assets of the Series, attributable to the Series' Class
A, Class B and Class C shares, in exchange solely for Class A shares ("Fund
Class A Shares"), Class B shares ("Fund Class B Shares") and Class C shares
("Fund Class C Shares" and, together with Fund Class A Shares and Fund Class B
Shares, the "Fund Shares"), respectively, of beneficial interest, par value
$.001 per share, of the Fund and the assumption by the Fund of certain
liabilities of the Series and the distribution, after the Closing Date
hereinafter referred to, of the Fund Shares to the shareholders of the Series in
liquidation of the Series as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Series is a registered, non-diversified, open-end management
investment company and the Fund is a registered, 6 , open-end management
investment company, and the Series owns securities which are assets of the
character in which the Fund is permitted to invest;
WHEREAS, both the Fund and the Series are authorized to issue their shares
of beneficial interest;
WHEREAS, the Board of the 7 has determined that the exchange of all or
substantially all of the assets of the Series and certain liabilities of the
Series, attributable to the Series' Class A, Class B and Class C shares, for
Fund Class A Shares, Fund Class B Shares and Fund Class C Shares, respectively,
and the assumption of such liabilities is in the best interests of the Fund's
shareholders and that the interests of the Fund's existing shareholders would
not be diluted as a result of this transaction; and
- --------
1 Insert CALIFORNIA SERIES, CONNECTICUT SERIES, FLORIDA
SERIES, NEW JERSEY SERIES or NEW YORK SERIES, as
appropriate.
2 Insert PREMIER CALIFORNIA MUNICIPAL BOND FUND, PREMIER
STATE MUNICIPAL BOND FUND or PREMIER NEW YORK MUNICIPAL
BOND FUND, as appropriate.
3 Insert "Fund" for Premier California Municipal Bond Fund and Premier
New York Municipal Bond Fund, and "State Fund" for Premier State
Municipal Bond Fund.
4 Insert on behalf of its CONNECTICUT SERIES, FLORIDA SERIES or NEW
JERSEY SERIES (the "Fund"), as appropriate, for Premier State Municipal
Bond Fund.
5 Insert F for the New Jersey Series transaction and C for
all others.
6 Insert diversified or non-diversified, as appropriate.
7 Insert Fund or State Fund, as appropriate.
<PAGE>
WHEREAS, the Board of the Trust has determined that the exchange of all or
substantially all of the assets and certain of the liabilities of the Series,
attributable to the Series' Class A, Class B and Class C shares, for Fund Class
A Shares, Fund Class B Shares and Fund Class C Shares, respectively, and the
assumption of such liabilities is in the best interests of the Series'
shareholders and that the interests of the Series' existing shareholders would
not be diluted as a result of this transaction:
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE SERIES IN EXCHANGE FOR THE
FUND SHARES AND ASSUMPTION OF SERIES LIABILITIES AND
LIQUIDATION OF THE SERIES.
1.1. Subject to the terms and conditions contained herein, the
Series agrees to assign, transfer and convey to the Fund all of the assets of
the Series, including all securities and cash (subject to liabilities),
attributable to the Series' Class A, Class B and Class C shares, and the Fund
agrees in exchange therefor (i) to deliver to the Series the number of Fund
Shares, including fractional Fund Shares, determined as set forth in paragraph
2.3; and (ii) to assume certain liabilities of the Series, as set forth in
paragraph 1.2. Such transactions shall take place at the closing (the "Closing")
on the closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Fund Shares, the Fund shall credit the Fund
Shares to the Series' account on the books of the Fund and shall deliver a
confirmation thereof to the Series.
1.2. The Series will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Fund shall assume all
liabilities, expenses, costs, charges and reserves reflected on an unaudited
statement of assets and liabilities of the Series prepared by The Dreyfus
Corporation, as of the Valuation Date (as defined in paragraph 2.1), in
accordance with generally accepted accounting principles consistently applied
from the prior audited period. The Fund shall assume only those liabilities of
the Series reflected in that unaudited statement of assets and liabilities and
shall not assume any other liabilities, whether absolute or contingent.
1.3. Delivery of the assets of the Series to be transferred
shall be made on the Closing Date and shall be delivered to [The Bank of New
York, 90 Washington Street, New York, New York 10286], the Fund's custodian (the
"Custodian"), for the account of the Fund, with all securities not in bearer or
book-entry form duly endorsed, or accompanied by duly executed separate
assignments or stock powers, in proper form for transfer, with signatures
guaranteed, and with all necessary stock transfer stamps, sufficient to transfer
good and marketable title thereto (including all accrued interest and dividends
and rights pertaining thereto) to the Custodian for the account of the Fund free
and clear of all liens, encumbrances, rights, restrictions and claims. All cash
delivered shall be in the form of immediately available funds payable to the
order of the Custodian for the account of the Fund.
1.4. The Series will pay or cause to be paid to the Fund any
interest received on or after the Closing Date with respect to assets
transferred to the Fund hereunder. The Series will transfer to the Fund any
distributions, rights or other assets received by the Series after the Closing
Date as distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Fund on the Closing
Date and shall not be separately valued.
1.5. As soon after the Closing Date as is conveniently
practicable (the "Liquidation Date"), the Series will liquidate and distribute
pro rata to the Series' Class A, Class B and Class C shareholders of record,
determined as of the close of business on the Closing Date (the "Series
Shareholders"), Fund Class A Shares, Fund Class B Shares and Class C Shares,
respectively, received by the Series pursuant to paragraph 1.1. Such liquidation
and distribution will be accomplished by the transfer of the applicable Fund
Shares then credited to the account of the Series on the books of the Fund to
open accounts on the share records of the Fund in the names of the Series
Shareholders and representing the respective pro rata number of the applicable
Fund Shares due such shareholders. All issued and outstanding shares of the
Series simultaneously will be canceled on the books of the Series.
1.6. Ownership of Fund Shares will be shown on the books of
the Fund's transfer agent. Shares of the Fund will be issued in the manner
described in the Fund's current prospectus and statement of additional
information.
1.7. Any transfer taxes payable upon issuance of the Fund
Shares in a name other than the registered holder of the Fund shares on the
books of the Series as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Fund Shares are to be issued and
transferred.
1.8. Any reporting responsibility of the Series is and shall
remain the responsibility of the Series up to and including the Closing Date and
such later date on which the Series' existence is terminated.
2. VALUATION.
2.1. The value of the Series' assets to be acquired by the
Fund hereunder shall be the value of such assets computed as of the close of
trading on the floor of the New York Stock Exchange (currently, 4:00 p.m., New
York time), except that options and futures contracts will be valued 15 minutes
after the close of trading on the floor of the New York Stock Exchange, on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the 8 Trust Agreement and
then-current prospectus or statement of additional information.
2.2. The net asset value of a Fund Share shall be the net
asset value per share computed as of the Valuation Date, using the valuation
procedures set forth in the 8 Trust Agreement and then-current prospectus or
statement of additional information.
2.3. The number of Fund Class A Shares, Fund Class B Shares
and Fund Class C Shares to be issued (including fractional shares, if any) in
exchange for the Series' net assets shall be determined by dividing the value of
the net assets of the applicable Class of the Series determined using the same
valuation procedures referred to in paragraph 2.1 by the net asset value of one
Fund Class A Share, Fund Class B Share or Fund Class C Share, as the case may
be, determined in accordance with paragraph 2.2.
2.4. All computations of value shall be made in
accordance with the regular practices of the Fund.
3. CLOSING AND CLOSING DATE.
3.1. The Closing Date shall be ________, 1996 or such later
date as the parties may mutually agree. All acts taking place at the Closing
shall be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at __:__ _.m.,
New York time, at the offices of The Dreyfus Corporation, 200 Park Avenue, New
York, New York, or such other time and/or place as the parties may mutually
agree.
3.2. The Custodian shall deliver at the Closing a certificate
of an authorized officer stating that: (a) the Series' portfolio securities,
cash and any other assets have been delivered in proper form to the Fund within
two business days prior to or on the Closing Date; and (b) all necessary taxes
including all applicable stock transfer stamps have been paid, or provision for
payment shall have been made, in conjunction with the delivery of portfolio
securities.
3.3. If on the Valuation Date (a) the New York Stock Exchange
or another primary trading market for portfolio securities of the Fund or the
Series shall be closed to trading or trading thereon shall be restricted; or (b)
trading or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the Fund
or the Series is impracticable, the Closing Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4. The transfer agent for the Series shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Series Class A, Class B, and Class C Shareholders
and the number and percentage ownership of outstanding Class A, Class B and
Class C shares, respectively, owned by each such shareholder immediately prior
to the Closing. The Fund shall issue and deliver a confirmation evidencing the
Fund Shares to be credited on the Closing Date to the Secretary of the Series,
or provide evidence satisfactory to the Series that such Fund Shares have been
credited to the Series' account on the books of the Fund. At the Closing, each
party shall deliver to the other such bills of sale, checks, assignments,
receipts or other documents as such other party or its counsel may reasonably
request.
- --------
8 Insert Fund's or State Fund's, as appropriate.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES.
4.1. The Trust represents and warrants to the Fund as
follows:
(a) The Series is a series of the Trust, a
business trust duly organized and validly existing and in good standing under
the laws of The Commonwealth of Massachusetts and has power to own all of its
properties and assets and to carry out this Agreement.
(b) The Series is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
non-diversified, management investment company, and such registration has not
been revoked or rescinded and is in full force and effect.
(c) The Series is not, and the execution,
delivery and performance of this Agreement will not result, in material
violation of the Trust's Declaration of Trust dated March 12, 1992, as the same
may have been amended (the "Charter"), or its Bylaws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the Series
is a party or by which it is bound.
(d) The Series has no material contracts or
other commitments outstanding (other than this Agreement) which will be
terminated with liability to it on or prior to the Closing Date.
(e) No litigation or administrative proceeding
or investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Series or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Series knows of no facts which might form the basis for the institution of such
proceedings, and is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(f) The Statements of Assets and Liabilities of
the Series for the three fiscal years ended July 31, 1996 have been audited by
Ernst & Young LLP, independent auditors, and are in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Fund) fairly reflect the financial
condition of the Series as of such dates, and there are no known contingent
liabilities of the Series as of such dates not disclosed therein.
(g) Since July 31, 1996, there has not been any
material adverse change in the Series' financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Series of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as disclosed on the statement of
assets and liabilities referred to in Section 1.2 hereof.
(h) At the Closing Date, all Federal and other
tax returns and reports of the Series required by law to have been filed by such
dates shall have been filed, and all Federal and other taxes shall have been
paid so far as due, or provision shall have been made for the payment thereof,
and to the best of the Trust's knowledge no such return is currently under audit
and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the
Series has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding shares of the
Series are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable by the Series. All of the issued and
outstanding shares of the Series will, at the time of Closing, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.4. The Series does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Series shares,
nor is there outstanding any security convertible into any of the Series shares.
(k) On the Closing Date, the Series will have
full right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(l) The execution, delivery and performance of
this Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Trust's Board and, subject to the approval
of the Series Shareholders, this Agreement will constitute the valid and legally
binding obligation of the Series, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and to general
principles of equity and the discretion of the court (regardless of whether the
enforceability is considered in a proceeding in equity or at law).
(m) The proxy statement of the Trust, on behalf
of the Series (the "Proxy Statement"), included in the Registration Statement
referred to in paragraph 5.5 (other than information therein that has been
furnished by the Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
4.2. The 7 represents and warrants to the
Series as follows:
(a) The Fund is 9 a business trust
duly organized, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts and has power to carry on its business as it is
now being conducted and to carry out this Agreement.
(b) The Fund is registered under the 1940 Act as
an open-end, 6 management investment company, and
such registration has not been revoked or rescinded and is in
full force and effect.
(c) The current prospectus and statement of
additional information of the 7 conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading.
(d) The Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of 8
Declaration of Trust or its Bylaws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Fund is a party or by which it
is bound.
(e) No litigation or administrative proceeding
or investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Fund or any of its properties
or assets which, if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business. The Fund knows of no
facts which might form the basis for the institution of such proceedings, and is
not a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(f) The Statements of Assets and Liabilities of
the Fund for the 10 fiscal years ended 11
have been audited by Ernst & Young LLP, independent auditors,
and are in accordance with generally accepted accounting principles,
consistently applied, and such statements (copies of which have been furnished
to the Series) fairly reflect the financial condition of the Fund as of such
dates.
(g) Since 11 there has not been any
material adverse change in the Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Fund of indebtedness maturing more than one year from the
date such indebtedness was incurred, except as disclosed on the statement of
assets and liabilities referred to in Section 4.2(f) hereof.
(h) At the Closing Date, all Federal and other
tax returns and reports of the Fund required by law then to be filed shall have
been filed, and all Federal and other taxes shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof.
- --------
9 Insert "a series of the State Fund," for Premier State
Municipal Bond Fund.
10 Insert ten for each of Premier California Municipal Bond Fund and
Premier New York Municipal Bond Fund, nine for each of the Connecticut
Series and the Florida Series of Premier State Municipal Bond Fund, and
delete for the New Jersey Series of Premier State Municipal Bond Fund.
11 Insert January 31, 1996, April 30, 1996 or November 30, 1996, as
appropriate, or delete for the New Jersey Series.
<PAGE>
(i) For each fiscal year of its operation, the
Fund has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(j) All issued and outstanding shares of the
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable by the Fund. The Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the Fund Shares, nor is there outstanding any security convertible into
any Fund Shares.
(k) The execution, delivery and performance of
this Agreement will have been duly authorized prior to the Closing Date by all
necessary action, if any, on the part of the
8 Trustees and shareholders, and this Agreement will constitute the
valid and legally binding obligation of the Acquiring Fund enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a proceeding in
equity or at law).
(l) The Proxy Statement included in the
Registration Statement (only insofar as it relates to the 7
and is based on information furnished by the Fund) will, on
the effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading.
5. COVENANTS OF THE FUND AND THE SERIES.
\
5.1. The Fund and the Series each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include payment of
customary dividends and distributions.
5.2. The Trust will call a meeting of the Series Shareholders
to consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated herein.
5.3. Subject to the provisions of this Agreement, the Fund and
the Series will each take, or cause to be taken, all action, and do or cause to
be done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.4. As promptly as practicable, but in any case within sixty
days after the Closing Date, the Series shall furnish the Fund, in such form as
is reasonably satisfactory to the Fund, a statement of the earnings and profits
of the Series for Federal income tax purposes which will be carried over to the
Fund as a result of Section 381 of the Code and which will be certified by the
Trust's President or its Vice President and Treasurer.
5.5. The Trust will provide the Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(m), all to
be included in a Registration Statement on Form N-14 of the 7 (the "Registration
Statement"), in compliance with the 1933 Act, the Securities Exchange Act of
1934, as amended, and the 1940 Act in connection with the meeting of the Series
Shareholders to consider approval of this Agreement and the transactions
contemplated herein.
5.6. The Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND.
The obligations of the Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by the Series of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
6.1. All representations and warranties of the Trust contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date.
6.2. The Series shall have delivered to the Fund a statement
of the Series' assets and liabilities, together with a list of the Series'
portfolio securities showing the tax basis of such securities by lot and the
holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the Trust.
6.3. The Trust shall have delivered to the Fund on the Closing
Date a certificate executed in its name by the Trust's President or Vice
President and its Treasurer, in form and substance satisfactory to the Fund, to
the effect that the representations and warranties of the Trust made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SERIES.
The obligations of the Series to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Fund of all
the obligations to be performed by it hereunder on or before the Closing Date
and, in addition thereto, the following conditions:
7.1. All representations and warranties of the 7
contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date.
7.2. The 7 shall have delivered to the Series on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer, in form and substance reasonably satisfactory to the Series, to
the effect that the representations and warranties of the 7 made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
FUND AND THE SERIES.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Series or the Fund, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement.
8.1. This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the outstanding
shares of the Series in accordance with the provisions of the Trust's Charter.
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents,
orders and permits of Federal, state and local regulatory authorities (including
those of the Securities and Exchange Commission and of state Blue Sky and
securities authorities) deemed necessary by the Fund or the Series to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve a risk of a material adverse effect on the assets or
properties of the Fund or the Series, provided that either party hereto may for
itself waive any of such conditions.
8.4. The Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the effectiveness thereof shall
have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5. The Series shall have declared a dividend or dividends
which, together with all previous such dividends, shall have the effect of
distributing to the Series Shareholders all of the Series' investment company
taxable income for all taxable years [or periods] ending on or prior to the
Closing Date (computed without regard to any deduction for dividends paid); the
excess of its interest income excludable from gross income under Section 103(a)
of the Code over its disallowed deductions under Sections 265 and 171(a)(2) of
the Code, for all taxable years [or periods] ending on or prior to the Closing
Date; and all of its net capital gain realized in all taxable years ending on or
prior to the Closing Date (after reduction for any capital loss carry forward).
8.6. The parties shall have received an opinion of Stroock &
Stroock & Lavan substantially to the effect that for Federal income tax
purposes:
(a) The transfer of all or substantially all of
the Series' assets in exchange for the Fund Shares and the assumption by the
Fund of certain identified liabilities of the Series will constitute a
"reorganization" within the meaning of Section 368(a)(1)( 5 ) of the Code; (b)
No gain or loss will be recognized by the Fund upon the receipt of the assets of
the Series solely in exchange for the Fund Shares and the assumption by the Fund
of certain identified liabilities of the Series; (c) No gain or loss will be
recognized by the Series upon the transfer of the Series' assets to the Fund in
exchange for the Fund Shares and the assumption by the Fund of certain
identified liabilities of the Series or upon the distribution (whether actual or
constructive) of the Fund Shares to Series Shareholders in exchange for their
shares of the Series; (d) No gain or loss will be recognized by the Series
Shareholders upon the exchange of their Series shares for the Fund Shares; (e)
The aggregate tax basis for the Fund Shares received by each of the Series
Shareholders pursuant to the Reorganization will be the same as the aggregate
tax basis of the Series shares held by such shareholder immediately prior to the
Reorganization, and the holding period of the Fund Shares to be received by each
Series Shareholder will include the period during which the Series shares
exchanged therefor were held by such shareholder (provided the Series shares
were held as capital assets on the date of the Reorganization); and (f) The tax
basis of the Series assets acquired by the Fund will be the same as the tax
basis of such assets to the Series immediately prior to the Reorganization, and
the holding period of the assets of the Series in the hands of the Fund will
include the period during which those assets were held by the Series.
9. TERMINATION OF AGREEMENT.
9.1. This Agreement and the transaction contemplated hereby
may be terminated and abandoned by resolution of the Board of the Trust or of 7
as the case may be, at any time prior to the Closing Date (and notwithstanding
any vote of the Series Shareholders) if circumstances should develop that, in
the opinion of either of the parties' Board, make proceeding with the Agreement
inadvisable.
9.2. If this Agreement is terminated and the transaction
contemplated hereby is abandoned pursuant to the provisions of this Section 9,
this Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the directors, trustees, officers or
shareholders of the 7 or of the Trust, as the case may be, in respect of this
Agreement, except that the parties shall bear the aggregate expenses of the
transaction contemplated hereby in proportion to their respective net assets as
of the date this Agreement is terminated or the exchange contemplated hereby is
abandoned.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions may
be waived by the Board of the 7 or of the Trust if, in the judgment of either,
such waiver will not have a material adverse effect on the benefits intended
under this Agreement to the shareholders of the Fund or of the Series, as the
case may be.
11. MISCELLANEOUS.
11.1. None of the representations and warranties
included or provided for herein shall survive consummation of
the transactions contemplated hereby.
11.2. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof, and merges and supersedes all prior discussions, agreements and
understandings of every kind and nature between them relating to the subject
matter hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be, on or subsequent to the date hereof, set forth in a
writing signed by the party to be bound thereby.
11.3. This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York, without giving
effect to principles of conflict of laws; provided, however, that the due
authorization, execution and delivery of this Agreement by the Fund and the
Series shall be governed and construed in accordance with the internal laws of
The Commonwealth of Massachusetts without giving effect to principles of
conflict of laws.
11.4. This Agreement may be executed in counterparts,
each of which, when executed and delivered, shall be deemed to
be an original.
11.5. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder shall be
made by any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
11.6. (a) The names " 2 " and "Trustees of 2 " refer
respectively to the 7 and its Trustees, as trustees but not individually or
personally, acting from time to time under the Trust Agreement, a copy of which
is on file at the office of the Secretary of The Commonwealth of Massachusetts
and at the principal office of the 7 . The obligations of the 7 entered into in
the name or on behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, shareholders or representatives of the 7 personally, but bind
only the relevant Fund's property, and all persons dealing with any class of
shares of the Fund must look solely to the Fund's property belonging to such
class for the enforcement of any claims against the Fund.
(b) The names "Premier Insured Municipal Bond Fund" and
"Trustees of Premier Insured Municipal Bond Fund" refer respectively to the
Trust and its Trustees, as trustees but not individually or personally, acting
from time to time under the Charter, a copy of which is on file at the office of
the Secretary of The Commonwealth of Massachusetts and at the principal office
of the Trust. The obligations of the Trust entered into in the name or on behalf
of the Series by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the relevant Series' property, and all persons dealing with any Series' class of
shares of the Trust must look solely to the Series' property belonging to such
class for the enforcement of any claims against the Trust.
11.7. [(a)] Any references in this Agreement to actions taken,
deliveries by or to, or representations and warranties made by or to, the Series
shall be deemed references to actions taken, deliveries by or to, or
representations and warranties made by or to, the Trust on behalf of the Series.
[(b) Any references in this Agreement to actions taken,
deliveries by or to, or representations and warranties made by or to, the Fund
shall be deemed references to actions taken, deliveries by or to, or
representations and warranties made by or to, the State Fund on behalf of the
Fund.]
<PAGE>
IN WITNESS WHEREOF, the Fund and the Series have caused this
Agreement and Plan of Reorganization to be executed and attested on its behalf
by its duly authorized representatives as of the date first above written.
2
4
By:
Marie E. Connolly,
President
ATTEST:
John E. Pelletier,
Secretary
PREMIER INSURED MUNICIPAL
BOND FUND, on behalf of its
1
By:
Marie E. Connolly,
President
ATTEST:
John E. Pelletier,
Secretary
<PAGE>
Preliminary Copy
PREMIER INSURED MUNICIPAL BOND FUND
(CALIFORNIA SERIES)
The undersigned shareholder of the above-named Series (the "Series") of
Premier Insured Municipal Bond Fund (the "Trust") hereby appoints ______________
and _____________, and each of them, the attorneys and proxies of the
undersigned, with full power of substitution, to vote, as indicated herein, all
of the shares of beneficial interest of the Series standing in the name of the
undersigned at the close of business on November __, 1996, at a Special Meeting
of Shareholders to be held at the offices of The Dreyfus Corporation, 200 Park
Avenue, 7th Floor, New York, New York 10166, at 10:00 a.m. on __________,
February __, 1997, and at any and all adjournments thereof, with all of the
powers the undersigned would possess if then and there personally present and
especially (but without limiting the general authorization and power hereby
given) to vote as indicated on the proposal, as more fully described in the
Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Reorganization between the
Series and Premier California Municipal Bond Fund, providing for the transfer of
substantially all of the assets of the Series, subject to its liabilities,
attributable to its Class A, Class B and Class C shares.
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE TRUST'S BOARD OF TRUSTEES AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this proxy. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: , 199_
Signature(s)
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
Preliminary Copy
PREMIER INSURED MUNICIPAL BOND FUND
(CONNECTICUT SERIES)
The undersigned shareholder of the above-named Series (the "Series") of
Premier Insured Municipal Bond Fund (the "Trust") hereby appoints
________________ and ________________, and each of them, the attorneys and
proxies of the undersigned, with full power of substitution, to vote, as
indicated herein, all of the shares of beneficial interest of the Series
standing in the name of the undersigned at the close of business on November __,
1996, at a Special Meeting of Shareholders to be held at the offices of The
Dreyfus Corporation, 200 Park Avenue, 7th Floor, New York, New York 10166, at
10:00 a.m. on __________, February __, 1997, and at any and all adjournments
thereof, with all of the powers the undersigned would possess if then and there
personally present and especially (but without limiting the general
authorization and power hereby given) to vote as indicated on the proposal, as
more fully described in the Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Reorganization between the
Series and the Connecticut Series of Premier State Municipal Bond Fund,
providing for the transfer of substantially all of the assets of the Series,
subject to its liabilities, attributable to its Class A, Class B and Class C
shares.
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE TRUST'S BOARD OF TRUSTEES AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this proxy. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: , 199_
Signature(s)
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
Preliminary Copy
PREMIER INSURED MUNICIPAL BOND FUND
(FLORIDA SERIES)
The undersigned shareholder of the above-named Series (the "Series") of
Premier Insured Municipal Bond Fund (the "Trust") hereby appoints ______________
and _____________, and each of them, the attorneys and proxies of the
undersigned, with full power of substitution, to vote, as indicated herein, all
of the shares of beneficial interest of the Series standing in the name of the
undersigned at the close of business on November __, 1996, at a Special Meeting
of Shareholders to be held at the offices of The Dreyfus Corporation, 200 Park
Avenue, 7th Floor, New York, New York 10166, at 10:00 a.m. on _________,
February __, 1997, and at any and all adjournments thereof, with all of the
powers the undersigned would possess if then and there personally present and
especially (but without limiting the general authorization and power hereby
given) to vote as indicated on the proposal, as more fully described in the
Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Reorganization between the
Series and the Florida Series of Premier State Municipal Bond Fund, providing
for the transfer of substantially all of the assets of the Series, subject to
its liabilities, attributable to its Class A, Class B and Class C shares.
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE TRUST'S BOARD OF TRUSTEES AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this proxy. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: , 199_
Signature(s)
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
Preliminary Copy
PREMIER INSURED MUNICIPAL BOND FUND
(NEW JERSEY SERIES)
The undersigned shareholder of the above-named Series (the "Series") of
Premier Insured Municipal Bond Fund (the "Trust") hereby appoints ______________
and _____________, and each of them, the attorneys and proxies of the
undersigned, with full power of substitution, to vote, as indicated herein, all
of the shares of beneficial interest of the Series standing in the name of the
undersigned at the close of business on November __, 1996, at a Special Meeting
of Shareholders to be held at the offices of The Dreyfus Corporation, 200 Park
Avenue, 7th Floor, New York, New York 10166, at 10:00 a.m. on ___________,
February __, 1997, and at any and all adjournments thereof, with all of the
powers the undersigned would possess if then and there personally present and
especially (but without limiting the general authorization and power hereby
given) to vote as indicated on the proposal, as more fully described in the
Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Reorganization between the
Series and the New Jersey Series of Premier State Municipal Bond Fund, providing
for the transfer of substantially all of the assets of the Series, subject to
its liabilities, attributable to its Class A, Class B and Class C shares.
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE TRUST'S BOARD OF TRUSTEES AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this proxy. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: , 199_
Signature(s)
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
Preliminary Copy
PREMIER INSURED MUNICIPAL BOND FUND
(NEW YORK SERIES)
The undersigned shareholder of the above-named Series (the "Series") of
Premier Insured Municipal Bond Fund (the "Trust") hereby appoints ______________
and _____________, and each of them, the attorneys and proxies of the
undersigned, with full power of substitution, to vote, as indicated herein, all
of the shares of beneficial interest of the Series standing in the name of the
undersigned at the close of business on November __, 1996, at a Special Meeting
of Shareholders to be held at the offices of The Dreyfus Corporation, 200 Park
Avenue, 7th Floor, New York, New York 10166, at 10:00 a.m. on __________,
February __, 1997, and at any and all adjournments thereof, with all of the
powers the undersigned would possess if then and there personally present and
especially (but without limiting the general authorization and power hereby
given) to vote as indicated on the proposal, as more fully described in the
Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Reorganization between the
Series and Premier New York Municipal Bond Fund, providing for the transfer of
substantially all of the assets of the Series, subject to its liabilities,
attributable to its Class A, Class B and Class C shares.
FOR AGAINST ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting, or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED BY THE TRUST'S BOARD OF TRUSTEES AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names
appearing on this proxy. If shares are held jointly,
each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please
give full title.
Dated: , 199_
Signature(s)
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
PROSPECTUS JUNE 3, 1996
AS REVISED DECEMBER 1, 1996
Registration Mark
Premier California Municipal Bond Fund (the "Fund") is an open-end,
diversified, management investment company, known as a mutual fund. The Fund's
investment objective is to maximize current income exempt from Federal and State
of California personal income taxes to the extent consistent with the
preservation of capital.
By this Prospectus, the Fund is offering three Classes of shares--Class A,
Class B and Class C--which are described herein. See "Alternative Purchase
Methods."
The Fund provides free redemption checks with respect to Class A, which you
can use in amounts of $500 or more for cash or to pay bills. You continue to
earn income on the amount of the check until it clears. You can purchase or
redeem all Classes of shares by telephone using the TELETRANSFER Privilege.
The Dreyfus Corporation professionally manages the Fund's portfolio.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information, dated June 3, 1996, which may be
revised from time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to some investors. It
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Securities and Exchange Commission maintains a Web site
(http://www.sec.go v) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
For a free copy of the Statement of Additional Information, write to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
1-800-554-4611. When telephoning, ask for Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Fee Table.......................................... 3
Condensed Financial Information.................... 4
Alternative Purchase Methods....................... 5
Description of the Fund............................ 6
Management of the Fund............................. 11
How to Buy Shares.................................. 12
Shareholder Services............................... 16
How to Redeem Shares............................... 20
Distribution Plan and Shareholder Services Plan.... 25
Dividends, Distributions and Taxes................. 25
Performance Information............................ 27
General Information................................ 28
Appendix........................................... 30
<TABLE>
<CAPTION>
FEE TABLE
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......... 4.50% none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) none* 4.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees........................... .55% .55% .55%
12b-1 Fees................................ none .50% .75%
Other Expenses ........................... .38% .40% .38%
Total Fund Operating Expenses............. .93% 1.45% 1.68%
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) except where noted, redemption
at the end of each time period: CLASS A CLASS B CLASS C
1 YEAR..................................... $ 54 $ 55/15** $27/$17**
3 YEARS..................................... $ 73 $ 76/46** $53
5 YEARS..................................... $ 94 $ 99/79** $91
10 YEARS.................................... $154 $ 147*** $199
* A contingent deferred sales charge of 1.00% may be assessed on
certain redemptions of Class A shares purchased without an initial
sales charge as part of an investment of $1 million or more.
** Assuming no redemption of shares.
*** Ten-year figure assumes conversion of Class B shares to Class A
shares at the end of the sixth year following the date of purchase.
</TABLE>
- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS
THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding the
costs and expenses borne by the Fund and investors, the payment of which will
reduce investors' annual return. Other Expenses for Class C are based on
estimated amounts for the current fiscal year. Long-term investors in Class B or
Class C shares could pay more in 12b-1 fees than the economic equivalent of
paying a front-end sales charge. Certain Service Agents (as defined below) may
charge their clients direct fees for effecting transactions in Fund shares; such
fees are not reflected in the foregoing table. See "Management of the Fund,"
"How to Buy Shares" and "Distribution Plan and Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and related notes
are included in the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------------------------
Year Ended January 31,
----------------------------------------------------------------------------------------------
1987(1) 1988 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of year..... $12.50 $12.92 $11.82 $12.00 $12.02 $12.23 $12.58 $12.80 $13.64 $12.24
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .20 .84 .89 .89 .89 .82 .80 .77 .72 .67
Net realized and
unrealized gain (loss)
on investments .42 (1.10) .18 .02 .21 .36 .39 .94 (.80) 1.02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS .62 (.26) 1.07 .91 1.10 1.18 1.19 1.71 (.08) 1.69
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net.. (.20) (.84) (.89) (.89) (.89) (.82) (.80) (.77) (.72) (.67)
Dividends from net realized
gain on investments -- -- -- -- -- (.01) (.17) (.10) (.60) (.29)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.20) (.84) (.89) (.89) (.89) (.83) (.97) (.87) (1.32) (.96)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year. $12.92 $11.82 $12.00 $12.02 $12.23 $12.58 $12.80 $13.64 $12.24 $12.97
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT
RETURN(2)..... 21.90%(3) (1.61%) 9.52% 7.82% 9.45% 10.02% 9.78% 13.62% (4.34%) 14.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets -- -- -- -- .11% .47% .65% .78% .90% .93%
Ratio of net investment
income to average
net assets.. 5.60%(3) 7.22% 7.41% 7.20% 7.19% 6.62% 6.30% 5.71% 5.72% 5.22%
Decrease reflected in above expense ratios due to undertakings by The Dreyfus
Corporation (limited to the expense limitation provision of the Management
Agreement).. 1.50%(3) 1.50% 1.50% 1.26% .91% .48% .28% .15% .02% ._-
Portfolio Turnover Rate -- 2.77% 33.68% 28.64% 5.95% 10.29% 36.54% 26.69% 37.39% 92.42%
Net Assets, end of year
(000's omitted) $1,010 $2,713 $12,063 $58,714 $166,095 $218,703 $224,555 $245,435 $191,939 $185,187
(1)From November 10, 1986 (commencement of operations) to January 31, 1987.
(2)Exclusive of sales load.
(3)Annualized.
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
--------------------------------------- -----------------------
Year Ended January 31, Year Ended January 31,
--------------------------------------- -----------------------
1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year $12.69 $12.81 $13.64 $12.25 $12.98
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net.. .03 .69 .65 .60 .37
Net realized and unrealized gain
(loss) on investments. .12 .93 (.79) 1.02 .29
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .15 1.62 (.14) 1.62 .66
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.03) (.69) (.65) (.60) (.37)
Dividends from net realized
gain on investments... -- (.10) (.60) (.29) (.29)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS... (.03) (.79) (1.25) (.89) (.66)
------- ------- ------- ------- -------
Net asset value, end of year $12.81 $13.64 $12.25 $12.98 $12.98
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)...... 25.98%(4) 12.91% (4.77%) 13.55% 7.90%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.07%(4) 1.31% 1.42% 1.45% 4.42%(4)
Ratio of net investment income
to average net assets.. 4.92%(4) 4.90% 5.17% 4.69% 4.31%(4)
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation .13%(4) .13% .02% -- --
Portfolio Turnover Rate. 36.54% 26.69% 37.39% 92.42% 92.42%
Net Assets, end of year
(000's omitted)......... $325 $16,906 $18,981 $21,530 $1
(1) From January 15, 1993 (commencement of initial offering of Class B shares)
to January 31, 1993. (2) From June 2, 1995 (commencement of initial offering of
Class C shares) to January 31, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
Further information about the Fund's performance is contained in its annual
report, which may be obtained without charge by writing to the address or
calling the number set forth on the cover page of this Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you three methods of purchasing Fund shares. You may choose
the Class of shares that best suits your needs, given the amount of your
purchase, the length of time you expect to hold your shares and any other
relevant circumstances. Each Fund share represents an identical pro rata
interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a maximum initial
sales charge of 4.50% of the public offering price imposed at the time of
purchase. The initial sales charge may be reduced or waived for certain
purchases. See "How to Buy Shares _ Class A Shares." These shares are subject to
an annual service fee at the rate of .25 of l% of the value of the average daily
net assets of Class A. See "Distribution Plan and Shareholder Services Plan _
Shareholder Services Plan."
Class B shares are sold at net asset value per share with no initial sales
charge at the time of purchase; as a result, the entire purchase price is
immediately invested in the Fund. Class B shares are subject to a maximum 4%
contingent deferred sales charge ("CDSC"), which is assessed if you redeem Class
B shares within six years of their purchase. See "How to Buy Shares _ Class B
Shares" and "How to Redeem Shares _ Contingent Deferred Sales Charge _ Class B
Shares." These shares also are subject to an annual service fee at the rate of
.25 of 1% of the value of the average daily net assets of Class B. In addition,
Class B shares are subject to an annual distribution fee at the rate of .50 of
l% of the value of the average daily net assets of Class B. See "Distribution
Plan and Shareholder Services Plan." The distribution fee paid by Class B will
cause such Class to have a higher expense ratio and to pay lower dividends than
Class A. Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative net asset
values for shares of each such Class, and will no longer be subject to the
distribution fee. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total Class B shares
not acquired through the reinvestment of dividends and distributions.
Class C shares are sold at net asset value per share with no initial sales
charge at the time of purchase; as result, the entire purchase price is
immediately invested in the Fund. Class C shares are subject to a 1% CDSC, which
is assessed only if you redeem Class C shares within one year of purchase. See
"How to Buy Shares _ Class C Shares" and "How to Redeem Shares _ Contingent
Deferred Sales Charge _ Class C Shares." These shares also are subject to an
annual service fee at the rate of .25 of 1%, and an annual distribution fee at
the rate of .75 of 1%, of the value of the average daily net assets of Class C.
See "Distribution Plan and Shareholder Services Plan." The distribution fee paid
by Class C will cause such Class to have a higher expense ratio and to pay lower
dividends than Class A.
The decision as to which Class of shares is more beneficial to you depends
on the amount and the intended length of your investment. You should consider
whether, during the anticipated life of your investment in the Fund, the
accumulated distribution fee and CDSC, if any, on Class B or Class C shares
would be less than the initial sales charge on Class A shares purchased at the
same time, and to what extent, if any, such differential would be offset by the
return of Class A. Additionally, investors qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A shares because the accumulated continuing
distribution fees on Class B or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment. Finally, you should
consider the effect of the CDSC period and any conversion rights of the Classes
in the context of your own investment time frame. For example, while Class C
shares have a shorter CDSC period than Class B shares, Class C shares do not
have a conversion feature and, therefore, are subject to an ongoing distribution
fee. Thus, Class B shares may be more attractive than Class C shares to
investors with long term investment outlooks. Generally, Class A shares may be
more appropriate for investors who invest $1,000,000 or more in Fund shares, and
for investors who invest between $100,000 and $999,999 in Fund shares with long
term investment outlooks. Class A shares will not be appropriate for investors
who invest less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize current income exempt from
Federal and State of California personal income taxes to the extent consistent
with the preservation of capital. To accomplish its investment objective, the
Fund invests primarily in the debt securities of the State of California, its
political subdivisions, authorities and corporations, the interest from which
is, in the opinion of bond counsel to the issuer, exempt from Federal and State
of California personal income taxes (collectively, "California Municipal
Obligations"). To the extent acceptable California Municipal Obligations are at
any time unavailable for investment by the Fund, the Fund will invest
temporarily in other debt securities the interest from which is, in the opinion
of bond counsel to the issuer, exempt from Federal, but not State of California,
income tax. The Fund's investment objective cannot be changed without approval
by the holders of a majority (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting shares. There can
be no assurance that the Fund's investment objective will be achieved.
MUNICIPAL OBLIGATIONS
Debt securities the interest from which is, in the opinion of bond counsel
to the issuer, exempt from Federal income tax ("Municipal Obligations")
generally include debt obligations issued to obtain funds for various public
purposes as well as certain industrial development bonds issued by or on behalf
of public authorities. Municipal Obligations are classified as general
obligation bonds, revenue bonds and notes. General obligation bonds are secured
by the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from the
general taxing power. Tax exempt industrial development bonds, in most cases,
are revenue bonds that do not carry the pledge of the credit of the issuing
municipality, but generally are guaranteed by the corporate entity on whose
behalf they are issued. Notes are short-term instruments which are obligations
of the issuing municipalities or agencies and are sold in anticipation of a bond
sale, collection of taxes or receipt of other revenues. Municipal Obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities. Municipal
Obligations bear fixed, floating or variable rates of interest, which are
determined in some instances by formulas under which the Municipal Obligation's
interest rate will change directly or inversely to changes in interest rates or
an index, or multiples thereof, in many cases subject to a maximum and minimum.
Certain Municipal Obligations are subject to redemption at a date earlier than
their stated maturity pursuant to call options, which may be separated from the
related Municipal Obligation and purchased and sold separately.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least 80% of
the value of its net assets (except when maintaining a temporary defensive
position) in Municipal Obligations. At least 65% of the value of the Fund's net
assets (except when maintaining a temporary defensive position) will be invested
in bonds, debentures and other debt instruments. At least 65% of the value of
the Fund's net assets will be invested in California Municipal Obligations and
the remainder may be invested in securities that are not California Municipal
Obligations and therefore may be subject to California income tax. See
"Investment Considerations and Risks _ Investing in California Municipal
Obligations" below, and "Dividends, Distributions and Taxes."
At least 70% of the value of the Fund's net assets must consist of
Municipal Obligations which, in the case of bonds, are rated no lower than Baa
by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group, a division of The McGraw-Hill Companies, Inc. ("S&P"), or Fitch
Investors Service, L.P. ("Fitch"). The Fund may invest up to 30% of the value of
its net assets in Municipal Obligations which, in the case of bonds, are rated
lower than Baa by Moody's and BBB by S&P and Fitch and as low as the lowest
rating assigned by Moody's, S&P or Fitch. The Fund may invest in short-term
Municipal Obligations which are rated in the two highest rating categories by
Moody's, S&P or Fitch. See "Appendix B" in the Statement of Additional
Information. Municipal Obligations rated Baa by Moody's or BBB by S&P or Fitch
are considered investment grade obligations; those rated Baa by Moody's are
considered medium grade obligations which lack outstanding investment
characteristics and have speculative characteristics, while those rated BBB by
S&P and Fitch are regarded as having an adequate capacity to pay principal and
interest. Investments rated Ba or lower by Moody's and BB or lower by S&P and
Fitch ordinarily provide higher yields but involve greater risk because of their
speculative characteristics. The Fund may invest in Municipal Obligations rated
C by Moody's or D by S&P or Fitch, which is the lowest rating assigned by such
rating organizations and indicates that the Municipal Obligation is in default
and interest and/or repayment of principal is in arrears. See "Investment
Considerations and Risks _ Lower Rated Bonds" below for a further discussion of
certain risks. The Fund also may invest in securities which, while not rated,
are determined by The Dreyfus Corporation to be of comparable quality to the
rated securities in which the Fund may invest; for purposes of the 70%
requirement described in this paragraph, such unrated securities shall be deemed
to have the rating so determined. The Fund also may invest in Taxable
Investments of the quality described under "Appendix--Certain Portfolio
Securities--Taxable Investments." Under normal market conditions, the weighted
average maturity of the Fund's portfolio is expected to exceed ten years.
From time to time, the Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), issued after August 7, 1986, while exempt from Federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a
regulated investment company receives such interest, a proportionate share of
any exempt-interest dividend paid by the investment company may be treated as
such a preference item to shareholders. The Fund may invest without limitation
in such Municipal Obligations if The Dreyfus Corporation determines that their
purchase is consistent with the Fund's investment objective. See "Investment
Considerations and Risks" below.
The Fund's annual portfolio turnover rate is not expected to exceed 100%.
The Fund may engage in various investment techniques, such as options and
futures transactions, lending portfolio securities and short-selling. Use of
certain of these techniques may give rise to taxable income. For a discussion of
the investment techniques and their related risks see "Investment Considerations
and Risks," "Appendix -- Investment Techniques" and "Dividends, Distributions
and Taxes" below and "Investment Objective and Management Policies -- Management
Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments which
promise a stable stream of income, the prices of such securities are inversely
affected by changes in interest rates and, therefore, are subject to the risk of
market price fluctuations. Certain securities that may be purchased by the Fund,
such as those with interest rates that fluctuate directly or indirectly based
upon multiples of a stated index, are designed to be highly sensitive to changes
in interest rates and can subject the holders thereof to extreme reductions of
yield and possibly loss of principal. The values of fixed-income securities also
may be affected by changes in the credit rating or financial condition of the
issuing entities. Once the rating of a portfolio security has been changed, the
Fund will consider all circumstances deemed relevant in determining whether to
hold the security. The Fund's net asset value generally will not be stable and
should fluctuate based upon changes in the value of the Fund's portfolio
securities. Securities in which the Fund invests may earn a higher level of
current income than certain shorter-term or higher quality securities which
generally have greater liquidity, less market risk and less fluctuation in
market value.
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS -- You should consider
carefully the special risks inherent in the Fund's investment in California
Municipal Obligations. These risks result from certain amendments to the
California Constitution and other statutes that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial condition of the State of California. From mid-1990 to late 1993, the
State suffered a recession with the worst economic, fiscal and budget conditions
since the 1930s. As a result, the State experienced recurring budget deficits
for four of its five fiscal years ended June 30, 1992. The State had operating
surpluses of approximately $109 million in fiscal 1992-93 and $917 million in
fiscal 1993-94. However, at June 30, 1994, according to California Department of
Finance, the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further consequence
of the large budget imbalances has been that the State depleted its available
cash resources and has had to use a series of external borrowings to meet its
cash needs. To meet its cash flow needs in the 1994-95 fiscal year, the State
issued, in July and August 1994, $4.0 billion of revenue anticipation warrants
and $3.0 billion of revenue anticipation notes. The 1994-95 Budget Act contained
a plan to retire a projected $1.025 billion deficit in the 1995-96 fiscal year.
The Department of Finance projects that, after repaying the last of the
carryover budget deficit, there will be a positive balance of $28 million in the
Special Fund for Economic Uncertainties at June 30, 1996. As a result of the
deterioration in the State's budget and cash situation between October 1991 and
July 1994, the rating on the State's general obligation bonds was reduced by S&P
from AAA to A, by Moody's from Aaa to A1 and by Fitch from AAA to A. These and
other factors may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay the principal of,
such California Municipal Obligations. You should obtain and review a copy of
the Statement of Additional Information which more fully sets forth these and
other risk factors.
INVESTING IN MUNICIPAL OBLIGATIONS -- The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in such
a way that an economic, business or political development or change affecting
one such security also would affect the other securities; for example,
securities the interest upon which is paid from revenues of similar types of
projects. As a result, the Fund may be subject to greater risk as compared to a
fund that does not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may invest
may contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase obligation that is
unrated, The Dreyfus Corporation will consider, on an ongoing basis, a number of
factors including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Fund and thus
reduce available yield. Shareholders should consult their tax advisers
concerning the effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax exemption for interest
on Municipal Obligations may be introduced in the future. If any such proposal
were enacted that would reduce the availability of Municipal Obligations for
investment by the Fund so as to adversely affect Fund shareholders, the Fund
would reevaluate its investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal Obligation as
taxable, the Fund would treat such security as a permissible Taxable Investment
within the applicable limits set forth herein.
ZERO COUPON SECURITIES -- Federal income tax law requires the holder of a
zero coupon security or of certain pay-in-kind bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To maintain
its qualification as a regulated investment company and avoid liability for
Federal income taxes, the Fund may be required to distribute such income accrued
with respect to these securities and may have to dispose of portfolio securities
under disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.
LOWER RATED BONDS -- The Fund may invest up to 30% of its net assets in
higher yielding (and, therefore, higher risk) debt securities, such as those
rated Ba by Moody's or BB by S&P or Fitch or as low as the lowest rating
assigned by Moody's, S&P or Fitch (commonly known as junk bonds). They may be
subject to certain risks with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher rated fixed-income
securities. The retail secondary market for these securities may be less liquid
than that of higher rated securities; adverse conditions could make it difficult
at times for the Fund to sell certain securities or could result in lower prices
than those used in calculating the Fund's net asset value. See "Appendix --
Certain Portfolio Securities -- Ratings."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Fund may use include options and
futures. While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix_Investment Techniques_Use of Derivatives" below and
"Investment Objective and Management Policies_Management Policies_Derivatives"
in the Statement of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest in,
or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment company.
In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Fund or the price paid or received by the
Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's investment
adviser. The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of September 30, 1996, The Dreyfus Corporation
managed or administered approximately $81 billion in assets for more than 1.7
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall management of
the Fund's affairs under a Management Agreement with the Fund, subject to the
authority of the Fund's Board in accordance with Massachusetts law. The Fund's
primary portfolio manager is Stephen C. Kris. He has held that position since
January 1996 and has been employed by The Dreyfus Corporation since February
1988. The Fund's other portfolio managers are identified in the Statement of
Additional Information. The Dreyfus Corporation also provides research services
for the Fund and for other Funds advised by The Dreyfus Corporation through a
professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Federal Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon is
among the twenty-five largest bank holding companies in the United States based
on total assets. Mellon's principal wholly-owned subsidiaries are Mellon Bank,
N.A., Mellon Bank (DE) National Association, Mellon Bank (MD), The Boston
Company, Inc., AFCO Credit Corporation and a number of companies known as Mellon
Financial Services Corporations. Through its subsidiaries, including The Dreyfus
Corporation, Mellon managed more than $220 billion in assets as of June 30,
1996, including approximately $83 billion in proprietary mutual fund assets. As
of June 30, 1996, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than $876
billion in assets, including approximately $57 billion in mutual fund assets.
For the fiscal year ended January 31, 1996, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of .55 of 1% of the
value of the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the overall
expense ratio of the Fund and increasing yield to investors. The Fund will not
pay The Dreyfus Corporation at a later time for any amounts it may waive, nor
will the Fund reimburse The Dreyfus Corporation for any amounts it may assume.
In allocating brokerage transactions for the Fund, The Dreyfus Corporation
seeks to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among other
things, the receipt of research services and/or the sale of shares of the Fund
or other funds managed, advised or administered by The Dreyfus Corporation as
factors in the selection of broker-dealers to execute portfolio transactions for
the Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation may pay the Fund's distributor for shareholder
services from The Dreyfus Corporation's own assets, including past profits but
not including the management fee paid by the Fund. The Fund's distributor may
use part or all of such payments to pay Service Agents in respect of these
services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
GENERAL -- Fund shares may be purchased only by clients of certain
financial institutions (which may include banks), securities dealers ("Selected
Dealers") and other industry professionals (collectively, "Service Agents"),
except that full-time or part-time employees of The Dreyfus Corporation or any
of its affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of the
Fund's Board, or the spouse or minor child of any of the foregoing may purchase
Class A shares directly through the Distributor. Subsequent purchases may be
sent directly to the Transfer Agent or your Service Agent.
When purchasing Fund shares, you must specify which Class is being
purchased. 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 retirement plans.
The Fund reserves the right to reject any purchase order.
Service Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution Plan or
Shareholder Services Plan. You should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must be at
least $100. The initial investment must be accompanied by the Account
Application. The Fund reserves the right to vary the initial and subsequent
investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the TELETRANSFER
Privilege described below. Checks should be made payable to "The Dreyfus Family
of Funds." Payments which are mailed should be sent to Premier California
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. If you
are opening a new account, please enclose your Account Application indicating
which Class of shares is being purchased. For subsequent investments, your Fund
account number should appear on the check and an investment slip should be
enclosed. Neither initial nor subsequent investments should be made by third
party check.
Wire payments may be made if your bank account is in a commercial bank that
is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the Fund's
DDA#8900119306/Premier California Municipal Bond Fund, for purchase of Fund
shares in your name. The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be included
instead), account registration and dealer number, if applicable, and must
indicate the Class of shares being purchased. If your initial purchase of Fund
shares is by wire, please call 1-800-645-6561 after completing your wire payment
to obtain your Fund account number. Please include your Fund account number on
the Account Application and promptly mail the Account Application to the Fund,
as no redemptions will be permitted until the Account Application is received.
You may obtain further information about remitting funds in this manner from
your bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark and the Government Direct Deposit Privilege described
under "Shareholder Services." These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House member. You must direct the institution to
transmit immediately available funds through the Automated Clearing House to The
Bank of New York with instructions to credit your Fund account. The instructions
must specify your Fund account registration and your Fund account number
PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis. Net asset value per share is
determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), on each day the New York Stock
Exchange is open for business. For purposes of determining net asset value,
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
of each Class is computed by dividing the value of the Fund's net assets
represented by such Class (i.e., the value of its assets less liabilities) by
the total number of shares of such Class outstanding. The Fund's investments are
valued each business day by an independent pricing service approved by the
Fund's Board and are valued at fair value as determined by the pricing service.
The pricing service's procedures are reviewed under the general supervision of
the Fund's Board. For further information regarding the methods employed in
valuing Fund investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
If an order is received by the Transfer Agent by the close of trading on
the floor of the New York Stock Exchange (currently 4:00 p.m., New York time) on
any business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, Fund shares will be purchased at the public
offering price determined as of the close of trading on the floor of the New
York Stock Exchange on the next business day, except where shares are purchased
through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the New York Stock Exchange on a business day and
transmitted to the Distributor or its designee by the close of its business day
(normally 5:15 p.m., New York time) will be based on the public offering price
per share determined as of the close of trading on the floor of the New York
Stock Exchange on that day. Otherwise, the orders will be based on the next
determined public offering price. It is the dealers' responsibility to transmit
orders so that they will be received by the Distributor or its designee before
the close of its business day.
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Distributions and Taxes" and the
Account Application for further information concerning this requirement. Failure
to furnish a certified TIN to the Fund could subject you to a $50 penalty
imposed by the Internal Revenue Service (the "IRS").
CLASS A SHARES -- The public offering price for Class A shares is the net
asset value per share of that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
--------------------------------------
As a % of As a % of Dealers' Reallowance
offering price net asset value as a % of
Amount of Transaction per share per share offering price
----------------------- ---------------- ---------------- --------------------------
<S> <C> <C> <C>
Less than $50,000......... 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more........ -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of Class A shares
purchased without an initial sales charge as part of an investment of at least
$1,000,000 and redeemed within one year of purchase. The terms contained in the
section of the Prospectus entitled "How to Redeem Shares--Contingent Deferred
Sales Charge" (other than the amount of the CDSC and time periods) are
applicable to the Class A shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to sales of Fund shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children, at net asset value, provided
that they have furnished the Distributor with such information as it may request
from time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible to
purchase Class A shares at net asset value. In addition, Class A shares are
offered at net asset value to full-time or part-time employees of The Dreyfus
Corporation or any of its affiliates or subsidiaries, directors of The Dreyfus
Corporation, Board members of a fund advised by The Dreyfus Corporation,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing.
Class A shares may be purchased at net asset value through certain
brokers-dealers and other financial institutions which have entered into an
agreement with the Distributor, which includes a requirement that such shares be
sold for the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a registered
open-end management investment company not managed by The Dreyfus Corporation or
its affiliates. The purchase of Class A shares of the Fund must be made within
60 days of such redemption and the shareholder must have either (i) paid an
initial sales charge or a contingent deferred sales charge or (ii) been
obligated to pay at any time during the holding period, but did not actually pay
on redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by (i)qualified separate accounts maintained by an
insurance company pursuant to the laws of any State or territory of the United
States, (ii) a State, county or city or instrumentality thereof, (iii) a
charitable organization (as defined in Section 501(c)(3) of the Code investing
$50,000 or more in Fund shares, and (iv) a charitable remainder trust (as
defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds advised
by The Dreyfus Corporation which are sold with a sales load, such as Class A
shares. In some instances, these incentives may be offered only to certain
dealers who have sold or may sell significant amounts of such shares.
CLASS B SHARES -- The public offering price for Class B shares is the net
asset value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described under "How to Redeem Shares." The Distributor compensates
certain Service Agents for selling Class B and Class C shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES -- The public offering price for Class C shares is the net
asset value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How to
Redeem Shares."
RIGHT OF ACCUMULATION -- CLASS A SHARES -- Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Premier Family of
Funds, shares of certain other funds advised by The Dreyfus Corporation which
are sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the Statement of Additional Information, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you have previously purchased and still hold Class A shares of the
Fund, or of any other Eligible Fund or combination thereof, with an aggregate
current market value of $40,000 and subsequently purchase Class A shares of the
Fund or an Eligible Fund having a current value of $20,000, the sales load
applicable to the subsequent purchase would be reduced to 4% of the offering
price. All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Service Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
TELETRANSFER PRIVILEGE -- You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Account Application or have filed
a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of Fund shares by calling 1-800-645-6561 or, if you are
calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Service Agent in this
regard.
FUND EXCHANGES
Clients of certain Service Agents may purchase, in exchange for Class A,
Class B or Class C shares of the Fund, shares of the same Class in certain other
funds managed or administered by The Dreyfus Corporation, to the extent such
shares are offered for sale in your state of residence. These funds have
different investment objectives which may be of interest to you. You also may
exchange your Fund shares that are subject to a CDSC for shares of Dreyfus
Worldwide Dollar Money Market Fund, Inc. The shares so purchased will be held in
a special account created solely for this purpose ("Exchange Account").
Exchanges of shares from an Exchange Account only can be made into certain other
funds managed or administered by The Dreyfus Corporation. No CDSC is charged
when an investor exchanges into an Exchange Account; however, the applicable
CDSC will be imposed when shares are redeemed from an Exchange Account or other
applicable Fund account. Upon redemption, the applicable CDSC will be calculated
without regard to the time such shares were held in an Exchange Account. See
"How to Redeem Shares." Redemption proceeds for Exchange Account shares are paid
by Federal wire or check only. Exchange Account shares also are eligible for the
Auto-Exchange Privilege, Dividend Sweep and the Automatic Withdrawal Plan. To
use this service, you should consult your Service Agent or call 1-800-645-6561
to determine if it is available and whether any conditions are imposed on its
use.
To request an exchange, your Service Agent acting on your behalf must give
exchange instructions to the Transfer Agent in writing or by telephone. Before
any exchange, you must obtain and should review a copy of the current prospectus
of the fund into which the exchange is being made. Prospectuses may be obtained
by calling 1-800-645-6561. Except in the case of personal retirement plans, the
shares being exchanged must have a current value of at least $500; furthermore,
when establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the fund
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. The Telephone Exchange Privilege
may be established for an existing account by written request, signed by all
shareholders on the account, or by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark Automated
Telephone System) by calling 1-800-645-6561. If you are calling from overseas,
call 516-794-5452. See "How to Redeem Shares--Procedures." Upon an exchange into
a new account, the following shareholder services and privileges, as applicable
and where available, will be automatically carried over to the fund into which
the exchange is made: Telephone Exchange Privilege, Check Redemption Privilege,
TELETRANSFER Privilege and the dividend/capital gain distribution option (except
for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value; however, a
sales load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or Class C shares at
the time of an exchange; however, Class B or Class C shares acquired through an
exchange will be subject on redemption to the higher CDSC applicable to the
exchanged or acquired shares. The CDSC applicable on redemption of the acquired
Class B or Class C shares will be calculated from the date of the initial
purchase of the Class B or Class C shares exchanged. If you are exchanging Class
A shares into a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load, if
the shares you are exchanging were: (a) purchased with a sales load, (b)
acquired by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect to
the foregoing categories of shares. To qualify, at the time of the exchange your
Service Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the Statement of Additional Information. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
Fund Exchanges may be modified or terminated at any time upon notice to
shareholders. See "Dividends, Distributions and Taxes."
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a semi-monthly,
monthly, quarterly or annual basis), in exchange for shares of the Fund, in
shares of the same class of other funds in the Premier Family of Funds or
certain other funds in the Dreyfus Family of Funds of which you are a
shareholder. The amount you designate, which can be expressed either in terms of
a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however, a sales load may be charged with respect to exchanges of
Class A shares into funds sold with a sales load. No CDSC will be imposed on
Class B or Class C shares at the time of an exchange; however, Class B or Class
C shares acquired through an exchange will be subject on redemption to the
higher CDSC applicable to the exchanged or acquired shares. The CDSC applicable
on redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged. See
"Shareholder Services" in the Statement of Additional Information. The right to
exercise this Privilege may be modified or cancelled by the Fund or the Transfer
Agent. You may modify or cancel your exercise of this Privilege at any time by
mailing written notification to Premier California Municipal Bond Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. For more
information concerning this Privilege and the funds in the Premier Family of
Funds or the Dreyfus Family of Funds eligible to participate in this Privilege,
or to obtain an Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-Automatic Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular intervals
selected by you. Fund shares are purchased by transferring funds from the bank
account designated by you. At your option, the bank account designated by you
will be debited in the specified amount, and Fund shares will be purchased, once
a month, on either the first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish a
Dreyfus-Automatic Asset Builder account, you must file an authorization form
with the Transfer Agent. You may obtain the necessary authorization form by
calling 1-800-645-6561. You may cancel your participation in this Privilege or
change the amount of purchase at any time by mailing written notification to
Premier California Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587, and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase Fund shares
(minimum of $100 and maximum of $50,000 per transaction) by having Federal
salary, Social Security, or certain veterans', military or other payments from
the Federal government automatically deposited into your Fund account. You may
deposit as much of such payments as you elect. To enroll in Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained from your Service Agent or by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. Further,
the Fund may terminate your participation upon 30 days' notice to you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends or dividends
and capital gain distributions, if any, paid by the Fund in shares of the same
Class of another fund in the Premier Family of Funds or the Dreyfus Family of
Funds of which you are a shareholder. Shares of the other fund will be purchased
at the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load. If
you are investing in a fund that charges a CDSC, the shares purchased will be
subject on redemption to the CDSC, if any, applicable to the purchased shares.
See "Shareholder Services" in the Statement of Additional Information. Dividend
ACH permits you to transfer electronically dividends or dividends and capital
gain distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
For more information concerning these privileges, or to request a Dividend
Options Form, please call toll free 1-800-645-6561. You may cancel these
privileges by mailing written notification to Premier California Municipal Bond
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dividend Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly basis
if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through the
Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares withdrawn pursuant to the Automatic Withdrawal Plan will
be subject to any applicable CDSC. Purchases of additional Class A shares where
the sales load is imposed concurrently with withdrawals of Class A shares
generally are undesirable.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form, which can be obtained by calling
1-800-645-6561, you become eligible for the reduced sales load applicable to the
total number of Eligible Fund shares purchased in a 13-month period pursuant to
the terms and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter of
Intent) in any Eligible Fund that may be used toward "Right of Accumulation"
benefits described above may be used as a credit toward completion of the Letter
of Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares held in escrow to realize the difference.
Signing a Letter of Intent does not bind you to purchase, or the Fund to sell,
the full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales load. At
the time you purchase Class A shares, you must indicate your intention to do so
under a Letter of Intent. Purchases pursuant to a Letter of Intent will be made
at the then-current net asset value plus the applicable sales load in effect at
the time such Letter of Intent was executed.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption requests
should be transmitted to the Transfer Agent as described below. When a request
is received in proper form, the Fund will redeem the shares at the next
determined net asset value as described below. If you hold Fund shares of more
than one Class, any request for redemption must specify the Class of shares
being redeemed. If you fail to specify the Class of shares to be redeemed or if
you own fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further instructions
from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Service Agents may charge their clients a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund shares
being redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon the
Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER
PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND
SUBSEQUENTLY SUBMIT A WRITTEN REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER,
WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT
HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A PERIOD
OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK, THE TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER
AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF
YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer Agent
has received your Account Application.
The Fund reserves the right to redeem your account at its option upon not
less than 30 days' written notice if your account's net asset value is $500 or
less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE
CLASS B SHARES -- A CDSC payable to the Distributor is imposed on any
redemption of Class B shares which reduces the current net asset value of your
Class B shares to an amount which is lower than the dollar amount of all
payments by you for the purchase of Class B shares of the Fund held by you at
the time of redemption. No CDSC will be imposed to the extent that the net asset
value of the Class B shares redeemed does not exceed (i) the current net asset
value of Class B shares acquired through reinvestment of dividends or capital
gain distributions, plus (ii) increases in the net asset value of Class B shares
above the dollar amount of all your payments for the purchase of Class B shares
of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined below
their original cost as a result of the Fund's performance, a CDSC may be applied
to the then-current net asset value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month. The following table sets forth the rates of
the CDSC for Class B shares, except as set forth below:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
First........................................ 4.00
Second....................................... 4.00
Third............. .......................... 3.00
Fourth....................................... 3.00
Fifth........................................ 2.00
Sixth........................................ 1.00
The following table sets forth the rates of the CDSC for Class B shares
purchased by shareholders who beneficially owned Class B shares on November 30,
1996:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
First........................................ 3.00
Second....................................... 3.00
Third........................................ 2.00
Fourth....................................... 2.00
Fifth........................................ 1.00
Sixth........................................ 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in net asset value of Class B shares
above the total amount of payments for the purchase of Class B shares made
during the preceding six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996); then of amounts representing the cost of
shares purchased six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996) prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period (five-year period for shareholders
beneficially owning Class B shares on November 30, 1996).
For example, assume an investor purchased 100 shares at $10 per share for a
cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the net asset value has appreciated to $12 per share, the
value of the investor's shares would be $1,260 (105 shares at $12 per share).
The CDSC would not be applied to the value of the reinvested dividend shares and
the amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4% (the
applicable rate in the second year after purchase) for a total CDSC of $9.60.
CLASS C SHARES -- A CDSC of 1% payable to the Distributor is imposed on any
redemption of Class C shares within one year of the date of purchase. The basis
for calculating the payment of any such CDSC will be the method used in
calculating the CDSC for Class B shares. See "Contingent Deferred Sales Charge _
Class B Shares" above.
WAIVER OF CDSC -- The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined in
Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in qualified or non-qualified employee benefit plans or other
programs where (i) the employers or affiliated employers maintaining such plans
or programs have a minimum of 250 employees eligible for participation in such
plans or programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor exceeds one million dollars, (c) redemptions as a result of a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 70 1/2 in the case of an IRA
or Keogh plan or custodial account pursuant to Section 403(b) of the Code and
(e) redemptions made pursuant to the Automatic Withdrawal Plan, as described in
the Fund's Prospectus. If the Fund's Board determines to discontinue the waiver
of the CDSC, the disclosure in the Prospectus will be revised appropriately. Any
Fund shares subject to a CDSC which were purchased prior to the termination of
such waiver will have the CDSC waived as provided in the Prospectus at the time
of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Service Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
PROCEDURES
You may redeem shares by using the regular redemption procedure through the
Transfer Agent, or, if you have checked the appropriate box and supplied the
necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent, through the Check Redemption Privilege
with respect to Class A shares only, or the TELETRANSFER Privilege. If you are a
client of a Selected Dealer, you may redeem shares through the Selected Dealer.
If you have given your Service Agent authority to instruct the Transfer Agent to
redeem shares and to credit the proceeds of such redemptions to a designated
account at your Service Agent, you may redeem shares only in this manner and in
accordance with the regular redemption procedure described below. If you wish to
use the other redemption methods described below, you must arrange with your
Service Agent for delivery of the required application(s) to the Transfer Agent.
Other redemption procedures may be in effect for clients of certain Service
Agents. The Fund makes available to certain large institutions the ability to
issue redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate any redemption
Privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares for which certificates have been
issued are not eligible for the Check Redemption or TELETRANSFER Privilege.
Your redemption request may direct that the redemption proceeds be used to
purchase shares of other funds advised or administered by The Dreyfus
Corporation that are not available through the Exchange Privilege. The
applicable CDSC will be charged upon the redemption of Class B or Class C
shares. Your redemption proceeds will be invested in shares of the other fund on
the next business day. Before you make such a request, you must obtain and
should review a copy of the current prospectus of the fund being purchased.
Prospectuses may be obtained by calling 1-800-645-6561. The prospectus will
contain information concerning minimum investment requirements and other
conditions that may apply to your purchase.
You may redeem Fund shares by telephone if you have checked the appropriate
box on the Account Application or have filed a Shareholder Services Form with
the Transfer Agent. If you select the TELETRANSFER redemption privilege or
telephone exchange privilege (which is granted automatically unless you refuse
it), you authorize the Transfer Agent to act on telephone instructions
(including over The Dreyfus TouchRegistration Mark Automated Telephone System)
from any person representing himself or herself to be you, or a representative
of your Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Fund or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be liable
for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a
TELETRANSFER redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if TELETRANSFER redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may
redeem shares by written request mailed to Premier California Municipal Bond
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. Written redemption
requests must specify the Class of shares being redeemed. Redemption requests
must be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. If you have any
questions with respect to signature-guarantees, please contact your Service
Agent or call the telephone number listed on the cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any member bank of
the Federal Reserve System in accordance with a written signature-guaranteed
request.
CHECK REDEMPTION PRIVILEGE -- CLASS A SHARES -- You may write Redemption
Checks drawn on your Fund account. Redemption Checks may be made payable to the
order of any person in the amount of $500 or more. Potential fluctuations in the
net asset value of Class A shares should be considered in determining the amount
of the check. Redemption Checks should not be used to close your account.
Redemption Checks are free, but the Transfer Agent will impose a fee for
stopping payment of a Redemption Check upon your request or if the Transfer
Agent cannot honor the Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not postdate your Redemption Checks. If you do, the
Transfer Agent will honor, upon presentment, even if presented before the date
of the check, all postdated Redemption Checks which are dated within six months
of presentment for payment, if they are otherwise in good order. This Privilege
will be terminated immediately, without notice, with respect to any account
which is, or becomes, subject to backup withholding on redemptions (See
"Dividends, Distributions and Taxes"). Any Redemption Check written on an
account which has become subject to backup withholding on redemptions will not
be honored by the Transfer Agent.
TELETRANSFER PRIVILEGE -- You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be designated.
Redemption proceeds will be on deposit in your account at an Automated Clearing
House member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to your
address. Holders of jointly registered Fund or bank accounts may redeem through
the TELETRANSFER Privilege for transfer to their bank account not more than
$250,000 within any 30-day period.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER redemption of shares by calling 1-800-645-6561 or, if you are
calling from overseas, call 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER -- If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer Agent
after the close of trading on the floor of the New York Stock Exchange, the
redemption request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to your
account with the Selected Dealer. See "How to Buy Shares" for a discussion of
additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by dealers
by the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to the Distributor or its designee prior to the
close of its business day (normally 5:15 p.m., New York time) are effected at
the price determined as of the close of trading on the floor of the New York
Stock Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
REINVESTMENT PRIVILEGE -- Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing net asset value without a sales load, or
reinstate your account for the purpose of exercising the Exchange Privilege.
Upon reinvestment, with respect to Class B shares or Class A shares if such
shares were subject to a CDSC, the shareholder's account will be credited with
an amount equal to the CDSC previously paid upon redemption of the Class A or
Class B shares reinvested. The Reinvestment Privilege may be exercised only
once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class B and Class C shares are subject to a Distribution Plan and Class A,
Class B and Class C shares are subject to a Shareholder Services Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1 under the 1940
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B and .75 of 1% of the value of the average daily net assets of
Class C.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays the Distributor for the
provision of certain services to the holders of Class A, Class B and Class C
shares a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of each such Class. 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. The Distributor may
make payments to Service Agents in respect of these services. The Distributor
determines the amounts to be paid to Service Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income on
each day the New York Stock Exchange is open for business. Fund shares begin
earning income dividends on the day immediately available funds ("Federal Funds"
(monies of member banks within the Federal Reserve System which are held on
deposit at a Federal Reserve Bank) ) are received by the Transfer Agent in
written or telegraphic form. If a purchase order is not accompanied by
remittance in Federal Funds, there may be a delay between the time the purchase
order becomes effective and the time the shares purchased start earning
dividends. If your payment is not made in Federal Funds, it must be converted
into Federal Funds. This usually occurs within one business day of receipt of a
bank wire and within two business days of receipt of a check drawn on a member
bank of the Federal Reserve System. Checks drawn on banks which are not members
of the Federal Reserve System may take considerably longer to convert into
Federal Funds.
Dividends usually are paid on the last calendar day of each month and are
automatically reinvested in additional shares of the same Class from which they
were paid at net asset value without a sales load or, at your option, paid in
cash. The Fund's earnings for Saturdays, Sundays and holidays are declared as
dividends on the preceding business day. If you redeem all shares in your
account at any time during the month, all dividends to which you are entitled
will be paid to you along with the proceeds of the redemption. If you are an
omnibus accountholder and indicate in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her account, such
portion of the accrued dividends will be paid to you along with the proceeds of
the redemption. Distributions from net realized securities gains, if any,
generally are declared and paid once a year, but the Fund may make distributions
on a more frequent basis to comply with the distribution requirements of the
Code, in all events in a manner consistent with the provisions of the 1940 Act.
The Fund will not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. You may
choose whether to receive dividends and distributions in cash or to reinvest in
additional Fund shares of the same Class from which they were paid at net asset
value without a sales load. All expenses are accrued daily and deducted before
declaration of dividends to investors. Dividends paid by each Class will be
calculated at the same time and in the same manner and will be of the same
amount, except that the expenses attributable solely to a particular Class will
be borne exclusively by such Class. Class B and Class C shares will receive
lower per share dividends than Class A shares because of the higher expenses
borne by the relevant Class. See "Fee Table."
Except for dividends from Taxable Investments, the Fund anticipates that
substantially all dividends paid by the Fund will not be subject to Federal
income tax or California personal income taxes. Dividends and distributions
derived from Taxable Investments, from income or gain derived from securities
transactions and from the use of certain of the investment techniques described
under "Appendix _ Investment Techniques," will be subject to Federal income tax.
To the extent that you are obligated to pay state or local taxes outside of the
State of California, dividends earned by an investment in the Fund may represent
taxable income. Dividends derived from Taxable Investments, together with
distributions from any net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund are subject to Federal income tax as
ordinary income whether received in cash or reinvested in additional shares. No
dividend paid by the Fund will qualify for the dividends received deduction
allowable to certain U.S. corporations. Distributions from net realized
long-term securities gains of the Fund generally are subject to Federal income
tax as long-term capital gains if you are a citizen or resident of the United
States. The Code provides that the net capital gain of an individual generally
will not be subject to Federal income tax at a rate in excess of 28%. Under the
Code, interest on indebtedness incurred or continued to purchase or carry Fund
shares which is deemed to relate to exempt-interest dividends is not deductible.
Although all or a substantial portion of the dividends paid by the Fund may
be excluded by shareholders of the Fund from their gross income for Federal
income tax purposes, the Fund may purchase specified private activity bonds, the
interest from which may be (i) a preference item for purposes of the alternative
minimum tax, (ii) a component of the "adjusted current earnings" preference item
for purposes of the corporate alternative minimum tax as well as a component in
computing the corporate environmental tax or (iii) a factor in determining the
extent to which a shareholder's Social Security benefits are taxable. If the
Fund purchases such securities, the portion of the Fund's dividends related
thereto will not necessarily be tax exempt to an investor who is subject to the
alternative minimum tax and/or tax on Social Security benefits and may cause an
investor to be subject to such taxes.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if you exchange your Class A shares for shares of
another fund advised or administered by The Dreyfus Corporation within 91 days
of purchase and such other fund reduces or eliminates its otherwise applicable
sales load for the purpose of the exchange. In this case, the amount of the
sales load charge for Class A shares, up to the amount of the reduction of the
sales load charge on the exchange, is not included in the basis of your Class A
shares for purposes of computing gain or loss on the exchange, and instead is
added to the basis of the fund shares received on the exchange.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your account
which will include information as to dividends and distributions from securities
gains, if any, paid during the year. These statements set forth the dollar
amount of income exempt from Federal tax and the dollar amount, if any, subject
to Federal tax. These dollar amounts will vary depending on the size and length
of time of your investment in the Fund. If the Fund pays dividends derived from
taxable income, it intends to designate as taxable the same percentage of the
day's dividends as the actual taxable income earned on that day bears to total
income earned on that day. Thus, the percentage of the dividend designated as
taxable, if any, may vary from day to day.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized, paid
to a shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may notify
the Fund to institute backup withholding if the IRS determines a shareholder's
TIN is incorrect or if a shareholder has failed to properly report taxable
dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account, and may be claimed as a credit on the record owner's
Federal income tax return.
Management of the Fund believes that the Fund has qualified for the fiscal
year ended January 31, 1996 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 taxes to the extent its earnings are distributed in
accordance with applicable provisions of the Code. The Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of shares may be
calculated on several bases, including current yield, tax equivalent yield,
average annual total return and/or total return. These total return figures
reflect changes in the price of the shares and assume that any income dividends
and/or capital gains distributions made by the Fund during the measuring period
were reinvested in shares of the same Class. Class A total return figures
include the maximum initial sales charge and Class B and Class C total return
figures include any applicable CDSC. These figures also take into account any
applicable service and distribution fees. As a result, at any given time, the
performance of Class B and Class C should be expected to be lower than that of
Class A. Performance for each Class will be calculated separately.
Current yield refers to the Fund's annualized net investment income per
share over a 30-day period, expressed as a percentage of the net asset value (or
maximum offering price in the case of Class A) per share at the end of the
period. For purposes of calculating current yield, the amount of net investment
income per share during that 30-day period, computed in accordance with
regulatory requirements, is compounded by assuming that it is reinvested at a
constant rate over a six-month period. An identical result is then assumed to
have occurred during a second six-month period which, when added to the result
for the first six months, provides an "annualized" yield for an entire one-year
period. Calculations of the Fund's current yield may reflect absorbed expenses
pursuant to any undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield which,
after being taxed at a stated rate, would be equivalent to a stated current
yield calculated as described above.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the redeemable
value of the investment at the end of the period. Advertisements of the Fund's
performance will include the Fund's average annual total return for one, five
and ten year periods, or for shorter periods depending upon the length of time
during which the Fund has operated.
Total return is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Total return generally is expressed as a
percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value (or maximum
offering price in the case of Class A) per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may include
the value of a hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return. Total return also may be
calculated by using the net asset value per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the period
for Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or Class C shares. Calculations based on the net asset
value per share do not reflect the deduction of the applicable sales charge on
Class A shares which, if reflected, would reduce the performance quoted.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman Brothers
Municipal Bond Index, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Trust Agreement") dated July 24, 1985, and commenced operations on
November 10, 1986. Prior to July 2, 1990, the Fund's name was Premier California
Tax Exempt Bond Fund. The Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per share. The Fund's shares are
classified into three classes _ Class A, Class B and Class C . Each share has
one vote and shareholders will vote in the aggregate and not by class except as
otherwise required by law. Only holders of Class B or Class C shares, as the
case may be, will be entitled to vote on matters submitted to shareholders
pertaining to the Distribution Plan.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Fund, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Fund intends to conduct its operations
in such a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund. As discussed under "Management of the
Fund" in the Statement of Additional Information, the Fund ordinarily will not
hold shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by writing to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an amount
up to 331/3% of the value of 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 the Fund's total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the value of the Fund's total assets, the Fund will not
make any additional investments.
SHORT-SELLING -- In these transactions, the Fund sells a security it does
not own in anticipation of a decline in the market value of that 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 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 a 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 in order to hedge an unrealized
gain on the security. At no time will the Fund have more than 15% of the value
of its net assets in deposits on short sales against the box.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and Risks
- -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management Policies
- -- Management Policies -- Derivatives" in the Statement of Additional
Information.
Derivatives 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.
Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in Derivatives could have a
large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges the
market conditions incorrectly, such investments may lower the Fund's return or
result in a loss. The Fund also could experience losses if it 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 is not a commodity pool, Derivatives subject the Fund to
the rules of the Commodity Futures Trading Commission which limit the extent to
which the Fund can invest in certain Derivatives. The Fund may invest in futures
contracts and options with respect thereto for hedging purposes without limit.
However, the Fund may not invest in such contracts and options for other
purposes if the sum of the amount of initial margin deposits and premiums paid
for unexpired options with respect to such contracts, other than bona fide
hedging purposes, exceed 5% of the liquidation value of the Fund's assets, after
taking into account unrealized profits and unrealized losses on such contracts
and options; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation.
The Fund may invest up to 5% of its assets, represented by the premium
paid, in the purchase of call and put options. The Fund may write (i.e., sell)
covered call and put option contracts to the extent of 20% of the value of its
net assets at the time of such option contracts are written. When required by
the Securities and Exchange Commission, the Fund will set aside permissible
liquid assets in a segregated account to cover its obligations relating to its
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.
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 at any time upon specified
notice. The Fund might experience risk of loss if the institution with which it
has engaged in a portfolio loan transaction breaches its agreement with the
Fund.
FORWARD COMMITMENTS -- The Fund may purchase Municipal Obligations and
other securities on a forward commitment or when-issued basis, which means
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such securities
only with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. A
segregated account of the Fund consisting of permissible liquid assets at least
equal at all times to the amount of the commitments will be established and
maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- The Fund may purchase floating and
variable rate demand notes and bonds, which are tax exempt obligations
ordinarily having stated maturities in excess of 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.
TENDER OPTION BONDS -- The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a fixed
rate substantially higher than prevailing short-term tax exempt rates, that has
been coupled with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal to
the difference between the Municipal Obligation's fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate. The Dreyfus
Corporation, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying Municipal 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.
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
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with stand-by commitments will be
taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund generally would purchase these call options to protect the
Fund from the issuer of the related Municipal Obligation redeeming, or other
holder of the call option from calling away, the Municipal Obligation before
maturity. The sale by the Fund of a call option that it owns on a specific
Municipal Obligation could result in the receipt of taxable income by the Fund.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon securities
which are debt securities issued or sold at a discount from their face value
which do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date). The amount of
the discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and perceived
credit quality of the issuer. Zero coupon securities also may take the form of
debt securities that have been stripped of their unmatured interest coupons, the
coupons themselves and receipts or certificates representing 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.
Such securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, and repurchase agreements providing for settlement in more than seven
days after notice. As to these securities, the Fund is subject to a risk that
should the Fund desire to sell them when a ready buyer is not available at a
price the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other than
for temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest in
taxable short-term investments ("Taxable Investments") consisting of: notes of
issuers having, at the time of purchase, a quality rating within the two highest
grades of Moody's, S&P or Fitch; obligations of the U.S. Government, its
agencies or instrumentalities; commercial paper rated not lower than P-1 by
Moody's, A-1 by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic
banks, including foreign branches of domestic banks, with assets of one billion
dollars or more; time deposits; 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 tax. Under normal
market conditions, the Fund anticipates that not more than 5% of the value of
its total assets will be invested in any one category of Taxable Investments.
Taxable Investments are more fully described in the Statement of Additional
Information, to which reference hereby is made.
RATINGS -- Bonds rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate. Bonds rated
BB by S&P are regarded as having predominantly speculative characteristics and,
while such obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. Bonds rated
BB by Fitch are considered speculative and the payment of principal and interest
may be affected at any time by adverse economic changes. Bonds rated C by
Moody's are regarded as having extremely poor prospects of ever attaining any
real investment standing. Bonds rated D by S&P are in default and the payment of
interest and/or repayment of principal is in arrears. Bonds rated DDD, DD or D
by Fitch are in actual or imminent default, are extremely speculative and should
be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the issuer; DDD represents the highest potential for recovery
of such bonds; and D represents the lowest potential for recovery. Such bonds,
though high yielding, are characterized by great risk. See "Appendix B" in the
Statement of Additional Information for a general description of Moody's, S&P
and Fitch ratings of Municipal Obligations.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these bonds. Although
these ratings may be an initial criterion for selection of portfolio
investments, The Dreyfus Corporation also will evaluate these securities and the
ability of the issuers of such securities to pay interest and principal. The
Fund's ability to achieve its investment objective may be more dependent on The
Dreyfus Corporation's credit analysis than might be the case for a fund that
invested in higher rated securities.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
PCCp120196
[This Page Intentionally Left Blank]
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND
PROSPECTUS SEPTEMBER 3, 1996
Premier State Municipal Bond Fund (the "Fund") is an open-end,
non-diversified, management investment company, known as a mutual fund. The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk.
The Fund permits you to invest in any of twelve separate portfolios (each,
a "Series"): the Connecticut Series, the Florida Series, the Georgia Series, the
Maryland Series, the Massachusetts Series, the Michigan Series, the Minnesota
Series, the North Carolina Series, the Ohio Series, the Pennsylvania Series, the
Texas Series and the Virginia Series. Each Series seeks to achieve the Fund's
investment objective by investing in Municipal Obligations primarily issued by
issuers in the State after which it is named and believed to be exempt from
Federal and, where applicable, from that State's income tax. It is anticipated
that substantially all dividends paid by each Series will be exempt from Federal
income tax and also, where applicable, will be exempt from the personal income
tax of the State after which the Series is named.
By this Prospectus, each Series is offering three Classes of shares-Class
A, Class B and Class C-which are described herein. See "Alternative Purchase
Methods."
The Fund provides free redemption checks with respect to Class A shares,
which you can use in amounts of $500 or more for cash or to pay bills. You can
purchase or redeem all classes of shares by telephone using the TELETRANSFER
Privilege.
The Dreyfus Corporation serves as the Fund's investment adviser and, in
that capacity, is responsible for determining whether investing in particular
securities is consistent with the Fund's investment objective, including whether
the securities subject the Fund to undue risk.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information dated September 3, 1996, which may
be revised from time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to some investors. It
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
For a free copy of the Statement of Additional Information, write to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
1-800-554-4611. When telephoning, ask for Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
FEE TABLE.......................................... 3
CONDENSED FINANCIAL INFORMATION.................... 6
ALTERNATIVE PURCHASE METHODS....................... 28
DESCRIPTION OF THE FUND............................ 29
MANAGEMENT OF THE FUND............................. 35
HOW TO BUY SHARES.................................. 37
SHAREHOLDER SERVICES............................... 41
HOW TO REDEEM SHARES............................... 45
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN.... 50
DIVIDENDS, DISTRIBUTIONS AND TAXES................. 50
PERFORMANCE INFORMATION............................ 57
GENERAL INFORMATION................................ 58
APPENDIX........................................... 59
<TABLE>
<CAPTION>
FEE TABLE
CONNECTICUT SERIES FLORIDA SERIES
---------------------------- ---------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
.. (as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.................... .55% .55% .55% .55% .55% .55%
12b-1 Fees......................... None .50% .75% None .50% .75%
Other Expenses..................... .37% .39% .34% .36% .36% .69%
Total Fund Operating Expenses...... .92% 1.44% 1.64% .91% 1.41% 1.99%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 YEAR........................... $ 54 $45/15** $27/17** $ 54 $44/14** $30/20**
3 YEARS.......................... $ 73 $66/46** $52 $ 73 $65/45** $62
5 YEARS.......................... $ 94 $89/79** $89 $ 93 $87/77** $107
10 YEARS......................... $153 $145*** $194 $152 $143*** $232
GEORGIA SERIES MARYLAND SERIES
----------------------------- ---------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .40% .39% .68% .35% .38% .50%
Total Fund Operating Expenses.. .95% 1.44% 1.98% .90% 1.43% 1.80%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 YEAR........................ $ 54 $45/15** $30/20** $ 54 $45/15** $28/18**
3 YEARS....................... $ 74 $66/46** $62 $ 72 $65/45** $57
5 YEARS....................... $ 95 $89/79** $107 $ 93 $88/78** $97
10 YEARS...................... $156 $147*** $231 $151 $144*** $212
*A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
FEE TABLE
MASSACHUSETTS SERIES MICHIGAN SERIES
----------------------------- ---------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .37% .38% .39% .38% .39% .40%
Total Fund Operating Expenses.. .92% 1.43% 1.69% .93% 1.44% 1.70%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 YEAR........................ $ 54 $45/15** $27/17** $ 54 $45/15** $27/17**
3 YEARS....................... $ 73 $65/45** $53 $ 73 $66/46** $54
5 YEARS....................... $ 94 $88/78** $92 $ 94 $89/79** $92
10 YEARS...................... $153 $145*** $200 $154 $146*** $201
MINNESOTA SERIES NORTH CAROLINA SERIES
----------------------------- ---------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .35% .38% .12% .45% .46% .43%
Total Fund Operating Expenses.. .90% 1.43% 1.42% 1.00% 1.51% 1.73%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
except where noted, redemption at the end of each
time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 Year........................ $ 54 $45/15** $24/14** $ 55 $45/15** $28/18**
3 Years....................... $ 72 $65/45** $45 $ 75 $68/48** $54
5 Years....................... $ 93 $88/78** $78 $ 98 $92/82** $94
10 Years...................... $151 $144*** $170 $162 $154*** $204
*A contingent deferred sales charge of 1% may be
assessed on certain redemptions of Class A shares
purchased without an initial sales charge as part of
an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares
to Class A shares at the end of the sixth year
following the date of purchase.
FEE TABLE
OHIO SERIES PENNSYLVANIA SERIES
------------------------------ -----------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................. .55% .55% .55% .55% .55% .55%
12b-1 Fees...................... None .50% .75% None .50% .75%
Other Expenses.................. .34% .37% .33% .37% .38% .40%
Total Fund Operating Expenses... .89% 1.42% 1.63% .92% 1.43% 1.70%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
except where noted, redemption at the end of each
time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 Year........................ $ 54 $44/14** $27/17** $ 54 $45/15** $28/18**
3 Years....................... $ 72 $65/45** $51 $ 73 $65/45** $55
5 Years....................... $ 92 $88/78** $89 $ 94 $88/78** $95
10 Years...................... $150 $143*** $193 $153 $145*** $207
TEXAS SERIES VIRGINIA SERIES
------------------------------ -----------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .37% .38% .46% .50% .51% .43%
Total Fund Operating Expenses.. .92% 1.43% 1.76% 1.05% 1.56% 1.73%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
except where noted, redemption at the end of each
time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 Year........................ $ 54 $45/15** $27/17** $ 55 $46/16** $28/18**
3 Years....................... $ 73 $65/45** $54 $ 77 $69/49** $54
5 Years....................... $ 94 $88/78** $92 $100 $95/85** $94
10 Years...................... $153 $145*** $201 $167 $159*** $204
*A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as part
of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A shares
at the end of the sixth year following the date of purchase.
</TABLE>
- ------------------------------------------------------------------------------
The amounts listed in the examples should not be considered as representative of
past or future expenses and actual expenses may be greater or less than those
indicated. Moreover, while the example assumes a 5% annual return, each Series'
actual performance will vary and may result in an actual return greater or less
than 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing tables is to assist you in understanding the
costs and expenses borne by each Series of the Fund, the payment of which will
reduce investors' annual return. Other expenses for Class C are based on
estimated amounts for the current fiscal year. Long-term investors in Class B or
Class C could pay more in 12b-1 fees than the economic equivalent of paying a
front-end sales charge. The information in the foregoing tables does not reflect
any fee waivers or expense reimbursement arrangements that may be in effect.
Certain Service Agents (as defined below) may charge their clients direct fees
for effecting transactions in the relevant Series' shares; such fees are not
reflected in the foregoing tables. See "Management of the Fund," "How to Buy
Shares" and "Distribution Plan and Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and related notes
are included in the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each Series for each year indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CONNECTICUT SERIES
-----------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------
Year Ended April 30,
-----------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $11.00 $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.76
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net .76 .81 .80 .77 .72 .71 .68 .67 .66
Net realized and unrealized gain
(loss) on investments (.28) .38 (.15) .40 .17 .81 (.42) (.05) .14
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM
INVESTMENT OPERATIONS .48 1.19 .65 1.17 .89 1.52 .26 .62 .80
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net........ (.76) (.81) (.80) (.77) (.72) (.71) (.68) (.67) (.66)
Dividends from net realized
gain on investments - (.05) (.02) - - - (.03) - -
Dividends in excess of net
realized gain on investments - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.76) (.86) (.82) (.77) (.72) (.71) (.71) (.67) (.66)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year........ $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.76 $11.90
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 5.00%(3) 11.54% 5.93% 11.10% 8.14% 13.62% 1.92% 5.47% 6.85%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... - - - .21% .52% .69% .80% .89% .92%
Ratio of net investment income to
average net assets. 7.31%(3) 7.24% 7.05% 6.81% 6.30% 5.93% 5.44% 5.77% 5.45%
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation
(limited to the expense
limitation provision of the
Management Agreement) 1.50%(3) 1.42% 1.10% .75% .41% .21% .09% .01% ._
Portfolio Turnover Rate 91.09%(4) 72.52% 12.62% 6.30% 8.53% 24.22% 10.83% 10.48% 28.83%
Net Assets, end of year
(000's omitted).... $11,641 $31,056 $83,206 $183,788 $280,305 $360,020 $364,182 $335,964 $321,559
(1)From May 28, 1987 (commencement of
operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
<TABLE>
<CAPTION>
CONNECTICUT SERIES (CONTINUED)
-------------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
PER SHARE DATA:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $11.89 $12.26 $11.80 $11.76 $11.84
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net.............. .18 .61 .61 .60 .40
Net realized and unrealized gain (loss)
on investments...................... .37 (.43) (.04) .13 .05
------- ------- ------- ------- -------
Total from Investment Operations.... .55 .18 .57 .73 .45
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income--net (.18) (.61) (.61) (.60) (.40)
Dividends from net realized gain
on investments...................... - (.03) - - -
------- ------- ------- ------- -------
Total Distributions................. (.18) (.64) (.61) (.60) (.40)
------- ------- ------- ------- -------
Net asset value, end of year........ $12.26 $11.80 $11.76 $11.89 $11.89
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.08%(4) 1.26% 4.99% 6.20% 5.31%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.12%(4) 1.36% 1.41% 1.44% 1.64%(4)
Ratio of net investment income to
average net assets.................. 4.57%(4) 4.78% 5.21% 4.92% 4.31%(4)
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus
Corporation (limited to the expense limitation
provision of the Management Agreement) .12%(4) .08% .01% ._ ._
Portfolio Turnover Rate............. 24.22% 10.83% 10.48% 28.83% 28.83%
Net Assets, end of year (000's omitted) $9,492 $32,246 $35,425 $38,838 $1,007
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
<TABLE>
<CAPTION>
FLORIDA SERIES
-----------------------------------------------------------------------------------
Class A Shares
--------------------------------------------------------------------------------
Year Ended April 30,
--------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $12.00 $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.51
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .92 1.02 1.02 .99 .95 .92 .85 .81 .79
Net realized and unrealized gain
(loss) on investments .85 .63 (.11) .61 .41 .86 (.51) .12 .17
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... 1.77 1.65 .91 1.60 1.36 1.78 .34 .93 .96
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.92) (1.02) (1.02) (.99) (.95) (.92) (.85) (.81) (.79)
Dividends from net realized
gain on investments - - (.03) (.02) (.01) (.17) (.04) (.04) (.20)
Dividends in excess of net
realized gain on investments - - - - - - (.04) - -
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.92) (1.02) (1.05) (1.01) (.96) (1.09) (.93) (.85) (.99)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.51 $14.48
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 16.24%(3) 13.32% 6.83% 12.40% 10.09% 12.84% 2.14% 6.71% 6.63%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets. - - - .21% .52% .69% .80% .90% .91%
Ratio of net investment income
to average net assets 7.76%(3) 7.26% 7.24% 7.11% 6.65% 6.21% 5.61% 5.67% 5.29%
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation
(limited to the expense
limitation provision of the
Management Agreement) 1.50%(3) 1.50% 1.08% .74% .41% .21% .10% .01% ._
Portfolio Turnover Rate 31.25%(4) 17.16% 27.69% .28% 20.99% 33.18% 20.84% 50.62% 54.37%
Net Assets, end of year
(000's omitted).... $1,493 $15,061 $67,416 $177,927 $245,474 $299,775 $289,791 $252,406 $227,478
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
<TABLE>
<CAPTION>
FLORIDA SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $14.59 $15.01 $14.42 $14.51 $14.65
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .24 .77 .73 .71 .48
Net realized and unrealized gain (loss)
on investments...................... .42 (.51) .13 .16 .02
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .66 .26 .86 .87 .50
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.24) (.77) (.73) (.71) (.48)
Dividends from net realized gain
on investments...................... - (.04) (.04) (.20) (.20)
Dividends in excess of net realized gain
on investments...................... - (.04) - - -
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.24) (.85) (.77) (.91) (.68)
------- ------- ------- ------- -------
Net asset value, end of year........ $15.01 $14.42 $14.51 $14.47 $14.47
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.60%(4) 1.54% 6.21% 6.01% 4.69%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.12%(4) 1.34% 1.41% 1.41% 1.99%(4)
Ratio of net investment income to
average net assets.................. 4.87%(4) 4.91% 5.13% 4.77% 4.20%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to the
expense limitation provision of the
Management Agreement)................. .12%(4) .09% .01% ._ ._
Portfolio Turnover Rate............. 33.18% 20.84% 50.62% 54.37% 54.37%
Net Assets, end of year (000's omitted) $5,916 $22,476 $25,282 $27,023 $35
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
<TABLE>
<CAPTION>
GEORGIA SERIES
------------------------------------------------------------------------------------------
CLASS C
CLASS A SHARES CLASS B SHARES SHARES
-------------------------------- -------------------------------- ----------------
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
-------------------------------- ------------------------------------ ----------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1993(2) 1994 1995 1996 1996(3)
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $12.50 $13.27 $12.69 $12.80 $12.71 $13.27 $12.69 $12.80 $12.85
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .51 .73 .73 .66 .20 .67 .66 .59 .38
Net realized and unrealized gain
(loss) on investments .77 (.58) .11 .25 .56 (.58) .11 .26 .20
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS...... 1.28 .15 .84 .91 .76 .09 .77 .85 .58
------- ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net...... (.51) (.73) (.73) (.66) (.20) (.67) (.66) (.59) (.38)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year..... $13.27 $12.69 $12.80 $13.05 $13.27 $12.69 $12.80 $13.06 $13.05
======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(4) 15.91%(5) .97% 6.87% 7.14% 20.66%(5) .46% 6.33% 6.69% 6.28%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets - .07% .25% .74% .50%(5) .58% .75% 1.24% 1.98%(5)
Ratio of net investment income
to average net assets 5.55%(5) 5.41% 5.80% 5.00% 4.60%(5) 4.85% 5.27% 4.46% 3.73%(5)
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
limitation provision of the expense
Management Agreement) 1.46%(5) 1.02% .78% .21% 1.37%(5) 1.02% .80% .20% ._
Portfolio Turnover Rate 37.79%(6) 6.76% 34.04% 33.09% 37.79%(6) 6.76% 34.04% 33.09% 33.09%
Net Assets, end of year
(000's omitted). $7,304 $10,058 $8,985 $8,346 $6,319 $16,243 $19,429 $20,106 $88
(1)From September 3, 1992 (commencement of operations) to April 30, 1993.
(2)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(3)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(4)Exclusive of sales load.
(5)Annualized.
(6)Not annualized.
MARYLAND SERIES
-----------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------
Year Ended April 30,
-----------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
beginning of year.. $12.50 $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.54
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .80 .87 .86 .85 .79 .76 .73 .70 .67
Net realized and unrealized gain
(loss) on investments (1.12) .34 (.09) .53 .35 .68 (.53) .08 .23
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... (.32) 1.21 .77 1.38 1.14 1.44 .20 .78 .90
DISTRIBUTIONS:
Dividends from investment
income-net......... (.80) (.87) (.86) (.85) (.79) (.76) (.73) (.70) (.67)
Dividends from net realized
gain on investments - - (.02) (.01) (.05) (.09) (.03) - (.08)
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.80) (.87) (.88) (.86) (.84) (.85) (.76) (.70)( .75)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.54 $12.69
======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) (2.50%)(3) 11.05% 6.69% 12.24% 9.68% 11.93% 1.33% 6.52% 7.24%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... - - - .21% .53% .69% .80% .90% .90%
Ratio of net investment income
to average net assets 7.44%(3) 7.26% 7.12% 6.98% 6.40% 5.93% 5.51% 5.69% 5.23%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.11% .75% .41% .22% .10% .01% ._
Portfolio Turnover Rate 75.21%(4) 8.67% 30.03% 1.45%16.21% 17.92%10.27% 35.39%41.65%
Net Assets, end of year
(000's omitted).... $4,353 $24,383 $85,794 $179,959 $254,240 $337,307 $335,518 $301,834 $283,878
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
MARYLAND SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
------- ------- ------- ------- -------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
Net asset value, beginning of year.. $12.64 $13.02 $12.46 $12.54 $12.67
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .20 .65 .63 .61 .41
Net realized and unrealized gain (loss)
on investments...................... .38 (.53) .08 .23 .10
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .58 .12 .71 .84 .51
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.20) (.65) (.63) (.61) (.41)
Dividends from net realized gain on investments - (.03) - (.08) (.08)
Dividends in excess of net realized gain
on investments...................... - - - - -
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.20) (.68) (.63) (.69) (.49)
------- ------- ------- ------- -------
Net asset value, end of year........ $13.02 $12.46 $12.54 $12.69 $12.69
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.74%(4) .75% 5.94% 6.66% 5.57%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.09%(4) 1.37% 1.44% 1.43% 1.80%(4)
Ratio of net investment income to
average net assets.................. 4.55%(4) 4.82% 5.13% 4.68% 4.59%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of
the Management Agreement)............. .12%(4) .08% .01% ._ ._
Portfolio Turnover Rate............. 17.92% 10.27% 35.39% 41.65% 41.65%
Net Assets, end of year (000's omitted) $5,931 $30,527 $35,090 $41,179 $27
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
MASSACHUSETTS SERIES
-----------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------
Year Ended April 30,
-----------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
beginning of year.. $11.50 $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.53
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .76 .83 .82 .79 .75 .73 .71 .69 .66
Net realized and unrealized gain
(loss) on investments (.96) .38 (.23) .37 .36 .73 (.44) (.06) ._
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... (.20) 1.21 .59 1.16 1.11 1.46 .27 .63 .66
------- ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.76) (.83) (.82) (.79) (.75) (.73) (.71) (.69) (.66)
Dividends from net realized
gain on investments - - - (.01) - (.01) (.05) - (.03)
Dividends in excess of net
realized gain on investments - - - - - - - (.05) -
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.76) (.83) (.82) (.80) (.75) (.74) (.76) (.74) (.69)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.53 $11.50
======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) (1.67%)(3) 11.91% 5.49% 11.23% 10.32% 13.14% 2.08% 5.72% 5.69%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets. - - - .19% .55% .69% .82% .94% .92%
Ratio of net investment income
to average net assets 7.63%(3) 7.58% 7.40% 7.21% 6.65% 6.16% 5.80% 6.04% 5.57%
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation (limited
to the expense limitation provision
of the Management Agreement) 1.50%(3) 1.48% 1.11% .78% .41% .24% .11% .01% ._
Portfolio Turnover Rate 36.11%(4) 17.76% 28.44% 47.07% 24.75% 11.36% 12.04% 13.62% 34.86%
Net Assets, end of year
(000's omitted).... $5,174 $21,578 $43,375 $57,328 $66,873 $79,701 $76,865 $72,731 $68,812
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
------- ------- ------- ------- -------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $11.79 $12.13 $11.63 $11.52 $11.59
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .19 .64 .63 .60 .40
Net realized and unrealized gain (loss)
on investments...................... .34 (.45) (.06) ._ (.08)
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .53 .19 .57 .60 .32
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.19) (.64) (.63) (.60) (.40)
Dividends from net realized gain on investments - (.05) - (.03) (.03)
Dividends in excess of net realized gain
on investments...................... - - (.05) - -
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.19) (.69) (.68) (.63) (.43)
------- ------- ------- ------- -------
Net asset value, end of year........ $12.13 $11.63 $11.52 $11.49 $11.48
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.56%(4) 1.44% 5.15% 5.15% 3.76%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.15%(4) 1.36% 1.45% 1.43% 1.69%(4)
Ratio of net investment income to
average net assets 4.92%(4) 5.18% 5.47% 5.03% 4.72%(4)
Decrease reflected in above expense
ratios due to undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of the
Management Agreement)................. .13%(4) .10% .01% ._ ._
Portfolio Turnover Rate............. 11.36% 12.04% 13.62% 34.86% 34.86%
Net Assets, end of year (000's omitted) $1,066 $3,702 $4,220 $5,255 $1
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
<TABLE>
<CAPTION>
MICHIGAN SERIES
-----------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------
Year Ended April 30,
--------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $13.00 $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.14
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net 1.00 1.07 1.05 1.01 .95 .92 .89 .85 .83
Net realized and unrealized gain
(loss) on investments .45 .65 (.27) .54 .46 .98 (.30) .11 .20
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... 1.45 1.72 .78 1.55 1.41 1.90 .59 .96 1.03
------- ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (1.00) (1.07) (1.05) (1.01) (.95) (.92) (.89) (.85) (.83)
Dividends from net realized
gain on investments - - (.03) - - (.13) (.08) (.24) (.19)
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.00) (1.07) (1.08) (1.01) (.95) (1.05) (.97) (1.09) (1.02)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.14 $15.15
======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 12.32%(3) 13.25% 5.59% 11.61% 10.12% 13.25% 3.65% 6.65% 6.81%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... - - - .20% .53% .69% .81% .92% .93%
Ratio of net investment income
to average net assets 7.97%(3) 7.49% 7.23% 7.07% 6.47% 6.01% 5.56% 5.66% 5.35%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.16% .79% .42% .25% .11% .01% ._
Portfolio Turnover Rate 48.80%(4) 32.72% 20.23% 27.31% 21.42% 14.99% 19.96% 48.30% 56.88%
Net Assets, end of year
(000's omitted).... $1,671 $8,548 $56,699 $111,696 $145,159 $184,138 $187,405 $176,604 $166,538
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
<TABLE>
<CAPTION>
MICHIGAN SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
------- ------- ------- ------- -------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $15.20 $15.64 $15.27 $15.13 $15.18
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .24 .80 .77 .75 .50
Net realized and unrealized gain (loss)
on investments...................... .44 (.29) .10 .21 .17
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .68 .51 .87 .96 .67
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.24) (.80) (.77) (.75) (.50)
Dividends from net realized gain on investments ._ (.08) (.24) (.19) (.19)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.24) (.88) (1.01) (.94) (.69)
------- ------- ------- ------- -------
Net asset value, end of year........ $15.64 $15.27 $15.13 $15.15 $15.16
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.50%(4) 3.11% 6.01% 6.33% 6.12%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.18%(4) 1.38% 1.44% 1.44% 1.70%(4)
Ratio of net investment income to
average net assets.................. 4.85%(4) 4.88% 5.10% 4.82% 4.47%(4)
Decrease reflected in above expense ratios due
to undertakings by The Dreyfus Corporation
(limited to the expense limitation provision of the
Management Agreement)................. .14%(4) .09% .01% ._ ._
Portfolio Turnover Rate............. 14.99% 19.96% 48.30% 56.88% 56.88%
Net Assets, end of year (000's omitted) $3,581 $13,861 $16,471 $19,031 $133
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA SERIES
-----------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------
Year Ended April 30,
------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $13.50 $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $14.90
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .97 1.07 1.04 1.02 .96 .92 .87 .83 .82
Net realized and unrealized gain
(loss) on investments (.13) .55 (.13) .56 .36 .77 (.53) .18 .08
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... .84 1.62 .91 1.58 1.32 1.69 .34 1.01 .90
------- ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.97) (1.07) (1.04) (1.02) (.96) (.92) (.87) (.83) (.82)
Dividends from net realized
gain on investments - - (.05) (.02) (.01) (.09) (.06) - -
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.97) (1.07) (1.09) (1.04) (.97) (1.01) (.93) (.83) (.82)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year........ $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $14.90 $14.98
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(2) 7.01%(3) 12.57% 6.67% 11.89% 9.45% 11.96% 2.08% 7.14% 6.11%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... - - - .20% .53% .69% .80% .90% .90%
Ratio of net investment income
to average net assets 7.79%(3) 7.66% 7.25% 7.19% 6.53% 6.13% 5.61% 5.68% 5.41%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.16% .79% .41% .24% .11% .01% ._
Portfolio Turnover Rate 70.26%(4) 31.64% 23.48% 14.04% 12.32% 23.42% 12.21% 51.95% 35.47%
Net Assets, end of year
(000's omitted).... $4,331 $13,019 $46,428 $85,066 $122,782 $148,765 $155,657 $145,444 $138,058
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
MINNESOTA SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
Net asset value, beginning of year.. $14.86 $15.32 $14.74 $14.92 $14.96
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .24 .78 .75 .74 .50
Net realized and unrealized gain (loss)
on investments...................... .46 (.52) .18 .09 .05
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .70 .26 .93 .83 .55
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.24) (.78) (.75) (.74) (.50)
Dividends from net realized gain on investments - (.06) - - -
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.24) (.84) (.75) (.74) (.50)
------- ------- ------- ------- -------
Net asset value, end of year........ $15.32 $14.74 $14.92 $15.01 $15.01
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.32%(4) 1.55% 6.57% 5.62% 5.15%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.16%(4) 1.38% 1.44% 1.43% 1.42%(4)
Ratio of net investment income to
average net assets.................. 4.83%(4) 4.91% 5.13% 4.87% 4.00%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. .14%(4) .09% .01% ._ ._
Portfolio Turnover Rate............. 23.42% 12.21% 51.95% 35.47% 35.47%
Net Assets, end of year (000's omitted) $4,633 $21,004 $23,217 $25,617 $373
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
NORTH CAROLINA SERIES
----------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------------- ------------------------------------ -----------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
---------------------------------- ------------------------------------ -----------------
PER SHARE DATA: 1992(1) 1993 1994 1995 1996 1993(2) 1994 1995 1 996 1996(3)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, beginning of year $12.00 $12.39 $13.40 $12.73 $12.72 $12.90 $13.39 $12.72 $12.71 $12.76
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net.. .62 .78 .74 .70 .67 .20 .66 .64 .60 .40
Net realized and unrealized gain
(loss) on investments.. .39 1.02 (.67) (.01) .19 .49 (.67) (.01) .19 .14
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS. 1.01 1.80 .07 .69 .86 .69 (.01) .63 .79 .54
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net.................... (.62) (.78) (.74) (.70) (.67) (.20) (.66) (.64) (.60) (.40)
Dividends from net realized
gain on investments......... - (.01) - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS............. (.62) (.79) (.74) (.70) (.67) (.20) (.66) (.64) (.60) (.40)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year...... $12.39 $13.40 $12.73 $12.72 $12.91 $13.39 $12.72 $12.71 $12.90 $12.90
======= ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(4). 11.36%(5) 14.97% .29% 5.70% 6.79% 18.53%(5) (.27%) 5.12% 6.25% 5.92%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................. - .29% .44% .65% .98% .79%(5) 1.00% 1.18% 1.49% 1.73%(5)
Ratio of net investment income
to average net assets.... 6.35%(5) 5.94% 5.38% 5.63% 5.11% 4.47%(5) 4.78% 5.08% 4.59% 4.31%(5)
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement)........ 1.14%(5) .76% .50% .31% .02% .56%(5) .48% .30% .02% ._
Portfolio Turnover Rate..........15.01%(6) 5.76% 11.62% 12.02% 47.15% 5.76% 11.62% 12.02% 47.15% 47.15%
Net Assets, end of year
(000's omitted).... $26,387 $56,284 $68,074 $50,205 $47,042 $13,145 $38,968 $42,310 $42,668 $1
(1)From August 1, 1991 (commencement of operations ) to April 30, 1992.
(2)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(3)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(4)Exclusive of sales load.
(5)Annualized.
(6)Not annualized.
OHIO SERIES
-------------------------------------------------------------------------------------
Class A Shares
-------------------------------------------------------------------------------------
Year Ended April 30,
------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
beginning of year... $14.50 $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.62
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .80 .89 .88 .86 .80 .77 .74 .73 .71
Net realized and unrealized gain
(loss) on investments (3.32) .48 (.08) .46 .36 .81 (.36) (.05) .14
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS.......... (2.52) 1.37 .80 1.32 1.16 1.58 .38 .68 .85
------- ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net.......... (.80) (.89) (.88) (.86) (.80) (.77) (.74) (.73) (.71)
Dividends from net realized
gain on investments. - - (.04) - (.01) (.07) (.03) (.03) (.18)
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS. (.80) (.89) (.92) (.86) (.81) (.84) (.77) (.76) (.89)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.62 $12.58
======== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) (18.49%)(3) 12.72% 6.95% 11.84% 9.97% 13.24% 2.78% 5.63% 6.77%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.......... - - - .21% .52% .70% .81% .92% .89%
Ratio of net investment
income to average net assets 7.79%(3) 7.57% 7.30% 7.20% 6.53% 6.03% 5.57% 5.84% 5.49%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.12% .78% .41% .23% .12% .01% ._
Portfolio Turnover Rate 11.10%(4) 14.49% 14.58% 3.00% 13.68% 6.08% 7.73% 39.53% 43.90%
Net Assets, end of year
(000's omitted)..... $8,043 $31,420 $92,864 $176,223 $243,074 $295,564 $293,706 $273,225 $257,639
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
<TABLE>
<CAPTION>
OHIO SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
--------------------------------- -------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $12.69 $13.09 $12.71 $12.63 $12.68
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .20 .66 .66 .64 .43
Net realized and unrealized gain (loss)
on investments...................... .40 (.35) (.05) .14 .09
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .60 .31 .61 .78 .52
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.20) (.66) (.66) (.64) (.43)
Dividends from net realized gain on investments - (.03) (.03) (.18) (.18)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.20) (.69) (.69) (.82) (.61)
------- ------- ------- ------- -------
Net asset value, end of year........ $13.09 $12.71 $12.63 $12.59 $12.59
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.36%(4) 2.24% 5.06% 6.19% 5.66%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.17%(4) 1.38% 1.44% 1.42% 1.63%(4)
Ratio of net investment income to
average net assets.................. 4.62%(4) 4.89% 5.29% 4.94% 4.66%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. .13%(4) .10% .01% ._ ._
Portfolio Turnover Rate............. 6.08% 7.73% 39.53% 43.90% 43.90%
Net Assets, end of year (000's omitted) $8,482 $27,657 $32,797 $40,476 $1
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA SERIES
-----------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------
Year Ended April 30,
-----------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $15.00 $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.12
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .85 1.13 1.13 1.12 1.06 1.02 .95 .91 .87
Net realized and unrealized gain
(loss) on investments (.77) .55 (.08) .55 .56 .99 (.57) .11 .32
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... .08 1.68 1.05 1.67 1.62 2.01 .38 1.02 1.19
------- ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.85) (1.13) (1.13) (1.12) (1.06) (1.02) (.95) (.91) (.87)
Dividends from net realized gain
on investments... - - (.02) (.02) (.04) (.11) (.03) - (.27)
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.85) (1.13) (1.15) (1.14) (1.10) (1.13) (.98) (.91) (1.14)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.12 $16.17
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(2) .87%(3) 12.21% 7.20% 11.74% 10.97% 13.19% 2.17% 6.65% 7.46%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... - - - .22% .56% .69% .81% .92% .92%
Ratio of net investment income
to average net assets 7.08%(3) 7.46% 7.38% 7.32% 6.75% 6.24% 5.61% 5.77% 5.28%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.24% .79% .41% .25% .12% .01% ._
Portfolio Turnover Rate 67.48%(4) 25.10% 59.15% 25.74% 38.97% 8.64% 7.21% 55.19% 52.69%
Net Assets, end of year
(000's omitted).... $2,870 $12,083 $51,418 $113,439 $158,437 $220,920 $235,619 $219,949 $216,802
(1)From July 30, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
PENNSYLVANIA SERIES (CONTINUED)
----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
------------------------------------ --------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
Net asset value, beginning of year.. $12.69 $13.09 $12.71 $12.63 $12.68
------- ------- ------- ------- -------
Net asset value, beginning of year.. $16.10 $16.60 $16.01 $16.11 $16.18
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .26 .85 .83 .79 .53
Net realized and unrealized gain (loss)
on investments...................... .50 (.56) .10 .32 .25
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .76 .29 .93 1.11 .78
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.26) (.85) (.83) (.79) (.53)
Dividends from net realized gain on investments - (.03) - (.27) (.27)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.26) (.88) (.83) (1.06) (.80)
------- ------- ------- ------- -------
Net asset value, end of year........ $16.60 $16.01 $16.11 $16.16 $16.16
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.39%(4) 1.65% 6.02% 6.92% 6.71%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.14%(4) 1.38% 1.44% 1.43% 1.70%(4)
Ratio of net investment income to
average net assets.................. 4.90%(4) 4.95% 5.22% 4.76% 4.46%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. .15%(4) .10% .01% ._ ._
Portfolio Turnover Rate............. 8.64% 7.21% 55.19% 52.69% 52.69%
Net Assets, end of year (000's omitted) $14,631 $59,057 $70,062 $72,610 $21
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
TEXAS SERIES
-----------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------
Year Ended April 30,
-----------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
beginning of year.. $15.50 $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.69
------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net 1.33 1.45 1.44 1.40 1.36 1.29 1.25 1.22 1.20
Net realized and unrealized gain
(loss) on investments 2.39 .75 (.05) .67 .69 1.37 (.66) .28 .45
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... 3.72 2.20 1.39 2.07 2.05 2.66 .59 1.50 1.65
------- ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (1.33) (1.45) (1.44) (1.40) (1.36) (1.29) (1.25) (1.22) (1.20)
Dividends from net realized gain
on investments..... - - (.01) - (.05) (.03) (.13) - (.30)
Dividends in excess of net realized
gain on investments - - - - - - (.03) - -
------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.33) (1.45) (1.45) (1.40) (1.41) (1.32) (1.41) (1.22) (1.50)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.69 $20.84
======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 26.23%(3) 12.79% 7.55% 11.54% 10.97% 13.80% 2.62% 7.63% 8.06%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... - - - - .15% .36% .39% .37% .37%
Ratio of net investment income to
average net assets. 7.94%(3) 7.90% 7.50% 7.29% 6.78% 6.18% 5.78% 6.01% 5.64%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.50% 1.27% .88% .62% .55% .55% .55%
Portfolio Turnover Rate 47.85%(4) 6.84% 2.62% 1.95% 7.49% 14.94% 9.68% 38.68% 49.24%
Net Assets, end of year
(000's omitted).... $1,553 $2,902 $5,642 $15,139 $37,208 $72,037 $76,277 $68,103 $62,864
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
TEXAS SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
--------------------------------- -------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
Net asset value, beginning of year.. $20.52 $21.23 $20.41 $20.69 $20.78
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .33 1.13 1.10 1.09 .73
Net realized and unrealized gain (loss)
on investments...................... .71 (.66) .28 .45 .35
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... 1.04 .47 1.38 1.54 1.08
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.33) (1.13) (1.10) (1.09) (.73)
Dividends from net realized gain on investments - (.13) - (.30) (.30)
Dividends in excess of net realized gain
on investments...................... - (.03) - - -
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.33) (1.29) (1.10) (1.39) (1.03)
------- ------- ------- ------- -------
Net asset value, end of year........ $21.23 $20.41 $20.69 $20.84 $20.83
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 17.60%(4) 2.05% 7.05% 7.51% 7.29%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .82%(4) .94% .89% .88% 1.18%(4)
Ratio of net investment income to
average net assets.................. 4.81%(4) 5.15% 5.46% 5.13 4.77%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. .49%(4) .54% .55% .55% .58%(4)
Portfolio Turnover Rate............. 14.94% 9.68% 38.68% 49.24% 49.24%
Net Assets, end of year (000's omitted) $6,373 $15,878 $16,818 $17,461 $1
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
VIRGINIA SERIES
------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
----------------------------------- ------------------------------- -------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------- ------------------------------- -------------------
PER SHARE DATA: 1992(1) 1993 1994 1995 1996 1993(2) 1994 1995 1996 1996(3)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
beginning of year. $15.00 $15.50 $16.80 $16.02 $16.03 $16.25 $16.80 $16.02 $16.03 $16.17
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net..... .78 1.00 .97 .94 .93 .26 .88 .85 .84 .57
Net realized and unrealized gain
(loss) on investments.. .50 1.31 (.75) .04 .24 .55 (.75) .04 .24 .09
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.28 2.31 .22 .98 1.17 .81 .13 .89 1.08 .66
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net.................... (.78) (1.00) (.97) (.94) (.93) (.26) (.88) (.85) (.84) (.57)
Dividends from net realized
gain on investments......... - (.01) (.01) (.03) - - (.01) - - -
Dividends in excess of net
realized gain on investments. - - (.02) - - - (.02) (.03) - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS....... (.78) (1.01) (1.00) (.97) (.93) (.26) (.91) (.88) (.84) (.57)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.... $15.50 $16.80 $16.02 $16.03 $16.27 $16.80 $16.02 $16.03 $16.27 $16.26
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(4).... 11.54%(5) 15.32% 1.10% 6.39% 7.32% 17.22%(5) .54% 5.83% 6.77% 5.64%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................. - .27% .46% .39% .50% .83%(5) 1.01% .90% 1.01% 1.21%(5)
Ratio of net investment income
to average net assets.... 6.42%(5) 6.02% 5.64% 5.93% 5.58% 4.62%(5) 5.02% 5.40% 5.06% 4.55%(5)
Decrease reflected in above
expense ratios due to undertakings
by The Dreyfus Corporation
(limited to the expense
limitation provision of the
Management Agreement)... 1.22%(5) .76% .55% .55% .55% .54%(5) .54% .55% .55% .52%(5)
Portfolio Turnover Rate..... 5.96%(6) 9.32% 30.69% 21.60% 50.06% 9.32% 30.69% 21.60% 50.06% 50.06%
Net Assets, end of year
(000's omitted)..... $23,096 $55,627 $65,279 $62,428 $61,149 $8,402. $25,254 $28,813 $33,120 $166
(1)From August 1, 1991 (commencement of operations) to April 30, 1992.
(2)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(3)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(4)Exclusive of sales load.
(5)Annualized.
(6)Not annualized.
</TABLE>
Further information about each Series' performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you three methods of purchasing each Series' shares; you
may choose the Class of shares that best suits your needs, given the amount of
your purchase, the length of time you expect to hold your shares and any other
relevant circumstances. Each Series' share represents an identical pro rata
interest in the Series' investment portfolio.
As to each Series, Class A shares are sold at net asset value per share
plus a maximum initial sales charge of 4.50% of the public offering price
imposed at the time of purchase. The initial sales charge may be reduced or
waived for certain purchases. See "How to Buy Shares Class A Shares." These
shares are subject to an annual service fee at the rate of .25 of 1% of the
value of the average daily net assets of Class A. See "Distribution Plan and
Shareholder Services Plan Shareholder Services Plan."
As to each Series, Class B shares are sold at net asset value per share
with no initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are subject
to a maximum 3% contingent deferred sales charge ("CDSC"), which is assessed
only if you redeem Class B shares within the first five years of their purchase.
See "How to Buy Shares - Class B Shares" and "How to Redeem Shares - Contingent
Deferred Sales Charge _ Class B Shares." These shares also are subject to an
annual service fee at the rate of .25 of 1% of the value of the average daily
net assets of Class B. In addition, Class B shares are subject to an annual
distribution fee at the rate of .50 of 1% of the value of the average daily net
assets of Class B. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class B will cause such Class to have a higher expense
ratio and to pay lower dividends than Class A. Approximately six years after the
date of purchase, Class B shares of a Series automatically will convert to Class
A shares of such Series, based on the relative net asset values for shares of
each such Class, and will no longer be subject to the distribution fee. Class B
shares that have been acquired through the reinvestment of dividends and
distributions will be converted on a pro rata basis together with other Class B
shares, in the proportion that a shareholder's Class B shares converting to
Class A shares bears to the total Class B shares not acquired through the
reinvestment of dividends and distributions.
As to each Series, Class C shares are sold at net asset value per share
with no initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Series. Class C shares are subject
to a 1% CDSC, which is assessed only if you redeem Class C shares within one
year of purchase. See "How to Buy Shares -- Class C Shares" and "How to Redeem
Shares -- Contingent Deferred Sales Charge -- Class C Shares." These shares also
are subject to an annual service fee at the rate of .25 of 1%, and an annual
distribution fee at the rate of .75 of 1%, of the value of the average daily net
assets of Class C. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class C will cause such Class to have a higher expense
ratio and to pay lower dividends than Class A.
The decision as to which Class of shares is more beneficial to you depends
on the amount and the intended length of your investment. You should consider
whether, during the anticipated life of your investment in the Fund, the
accumulated distribution fee and CDSC, if any, on Class B or Class C shares
would be less than the initial sales charge on Class A shares purchased at the
same time, and to what extent, if any, such differential would be offset by the
return of Class A. Additionally, investors qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A shares because the accumulated continuing
distribution fees on Class B or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment. Finally, you should
consider the effect of the CDSC period and any conversion rights of the Classes
in the context of your own investment time frame. For example, while Class C
shares have a shorter CDSC period than Class B shares, Class C shares do not
have a conversion feature and, therefore, are subject to an ongoing distribution
fee. Thus, Class B shares may be more attractive than Class C shares to
investors with long-term investment outlooks. Generally, Class A shares may be
more appropriate for investors who invest $1,000,000 or more in Fund shares, and
for investors who invest between $250,000 and $999,999 in Fund shares with
long-term investment outlooks. Class A shares will not be appropriate for
investors who invest less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
GENERAL
The Fund is a "series fund," which is a mutual fund divided into separate
portfolios. Each portfolio is treated as a separate entity for certain matters
under the Investment Company Act of 1940, as amended (the "1940 Act"), and for
other purposes, and a shareholder of one Series is not deemed to be a
shareholder of any other Series. As described below, for certain matters Fund
shareholders vote together as a group; as to others they vote separately by
Series. When used herein, the term "State" refers to the State after which a
Series is named.
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize current income exempt from
Federal income tax and, where applicable, from State income taxes for residents
of the States of Connecticut, Florida, Georgia, Maryland, Massachusetts,
Michigan, Minnesota, North Carolina, Ohio, Pennsylvania, Texas and Virginia,
without undue risk. To accomplish the Fund's investment objective, each Series
invests primarily in the debt securities of the State after which it is named,
such State's political subdivisions, authorities and corporations, the interest
from which is, in the opinion of bond counsel to the issuer, exempt from Federal
and such State's personal income taxes (collectively, "State Municipal
Obligations" or when the context so requires, "Connecticut Municipal
Obligations," "Florida Municipal Obligations," "Georgia Municipal Obligations,"
"Maryland Municipal Obligations," etc.). To the extent acceptable State
Municipal Obligations are at any time unavailable for investment, such Series
will invest temporarily in other debt securities the interest from which is, in
the opinion of bond counsel to the issuer, exempt from Federal income tax. Each
Series' investment objective cannot be changed without approval by the holders
of a majority (as defined in the 1940 Act) of such Series' outstanding voting
shares. There can be no assurance that the Series' investment objective will be
achieved.
MUNICIPAL OBLIGATIONS
Debt securities the interest from which is, in the opinion of bond counsel
to the issuer, exempt from Federal income tax ("Municipal Obligations")
generally include debt obligations issued to obtain funds for various public
purposes as well as certain industrial development bonds issued by or on behalf
of public authorities. Municipal Obligations are classified as general
obligation bonds, revenue bonds and notes. General obligation bonds are secured
by the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from the
general taxing power. Tax exempt industrial development bonds, in most cases,
are revenue bonds that do not carry the pledge of the credit of the issuing
municipality, but generally are guaranteed by the corporate entity on whose
behalf they are issued. Notes are short-term instruments which are obligations
of the issuing municipalities or agencies and are sold in anticipation of a bond
sale, collection of taxes or receipt of other revenues. Municipal Obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities. Municipal
Obligations bear fixed, floating or variable rates of interest, which are
determined in some instances by formulas under which the Municipal Obligation's
interest rate will change directly or inversely to changes in interest rates or
an index, or multiples thereof, in many cases subject to a maximum and minimum.
Certain Municipal Obligations are subject to redemption at a date earlier than
their stated maturity pursuant to call options, which may be separated from the
related Municipal Obligation and purchased and sold separately.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that at least 80% of the value of
each Series' net assets (except when maintaining a temporary defensive position)
will be invested in Municipal Obligations and at least 65% of the value of each
Series' net assets (except when maintaining a temporary defensive position) will
be invested in bonds, debentures and other debt instruments. At least 65% of the
value of each Series' net assets will be invested in Municipal Obligations
issued by issuers in such State, as defined above, and the remainder may be
invested in securities that are not State Municipal Obligations and therefore
may be subject to State income taxes. See "Investment Considerations and Risks _
Investing in State Municipal Obligations" below, and "Dividends, Distributions
and Taxes."
At least 70% of the value of each Series' net assets must consist of
Municipal Obligations which, in the case of bonds, are rated no lower than Baa
by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group, a division of The McGraw-Hill Companies, Inc. ("S&P"), or Fitch
Investors Service, L.P. ("Fitch"). Each Series may invest up to 30% of the value
of its net assets in Municipal Obligations which, in the case of bonds, are
rated lower than Baa by Moody's and BBB by S&P and Fitch and as low as the
lowest rating assigned by Moody's, S&P or Fitch. Each Series may invest in
short-term Municipal Obligations which are rated in the two highest rating
categories by Moody's, S&P or Fitch. See "Appendix B" in the Statement of
Additional Information. Municipal Obligations rated Baa by Moody's or BBB by S&P
or Fitch are considered investment grade obligations; those rated Baa by Moody's
are considered medium grade obligations which lack outstanding investment
characteristics and have speculative characteristics while those rated BBB by
S&P and Fitch are regarded as having an adequate capacity to pay principal and
interest. Investments rated Ba or lower by Moody's and BB or lower by S&P and
Fitch ordinarily provide higher yields but involve greater risk because of their
speculative characteristics. Each Series may invest in Municipal Obligations
rated C by Moody's or D by S&P or Fitch, which is the lowest rating assigned by
such rating organizations and indicates that the Municipal Obligation is in
default and interest and/or repayment of principal is in arrears. See
"Investment Considerations and Risks _ Lower Rated Bonds" below for a further
discussion of certain risks. Each Series also may invest in securities which,
while not rated, are determined by The Dreyfus Corporation to be of comparable
quality to the rated securities in which the Series may invest; for purposes of
the 70% requirement described in this paragraph, such unrated securities shall
be deemed to have the rating so determined. Each Series also may invest in
Taxable Investments of the quality described under "Appendix-Certain Portfolio
Securities-Taxable Investments." Under normal market conditions, the weighted
average maturity of each Series' portfolio is expected to exceed ten years.
From time to time, a Series may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), issued after August 7, 1986, while exempt from Federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a
regulated investment company receives such interest, a proportionate share of
any exempt-interest dividend paid by the investment company may be treated as
such a preference item to shareholders. Each Series may invest without
limitation in such Municipal Obligations if The Dreyfus Corporation determines
that their purchase is consistent with the Fund's investment objective.
Each Series' annual portfolio turnover rate is not expected to exceed 100%.
Each Series may engage in various investment techniques, such as options and
futures transactions, lending portfolio securities and short-selling. Use of
certain of these techniques may give rise to taxable income. For a discussion of
the investment techniques and their related risks, see "Investment
Considerations and Risks," "Appendix-Investment Techniques" and "Dividends,
Distributions and Taxes" below and "Investment Objective and Management Policies
_ Management Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments which
promise a stable stream of income, the prices of such securities are inversely
affected by changes in interest rates and, therefore, are subject to the risk of
market price fluctuations. Certain securities that may be purchased by each
Series of the Fund, such as those with interest rates that fluctuate directly or
indirectly based upon multiples of a stated index, are designed to be highly
sensitive to changes in interest rates and can subject the holders thereof to
extreme reductions of yield and possibly loss of principal. The values of
fixed-income securities also may be affected by changes in the credit rating or
financial condition of the issuing entities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances deemed
relevant in determining whether to hold the security. Each Series' net asset
value generally will not be stable and should fluctuate based upon changes in
the value of the Fund's portfolio securities. Securities in which the Series
invests may earn a higher level of current income than certain shorter-term or
higher quality securities which generally have greater liquidity, less market
risk and less fluctuation in market value.
INVESTING IN STATE MUNICIPAL OBLIGATIONS -- You should consider carefully
the special risks inherent in the purchase of shares of each Series resulting
from its purchase of the respective State's Municipal Obligations. Certain of
the States have experienced financial difficulties, the recurrence of which
could result in defaults or declines in the market values of various Municipal
Obligations in which such Series invests. If there should be a default or other
financial crisis relating to a State or an agency or municipality thereof, the
market value and marketability of outstanding State Municipal Obligations in a
Series' portfolio and the interest income to the Series could be adversely
affected. You should obtain and review a copy of the Statement of Additional
Information which more fully sets forth these and other risk factors.
CONNECTICUT SERIES -- Connecticut's economy relies in part on activities
that may be adversely affected by cyclical change, and recent declines in
defense spending have had a significant impact on unemployment levels. Although
the State recorded General Fund surpluses in the fiscal years 1985 through 1987,
and 1992 through 1995, Connecticut reported deficits from its General Fund
operations for the fiscal years 1988 through 1991. Together with the deficit
carried forward from the State's 1990 fiscal year, the total General Fund
deficit for the 1991 fiscal year was $965.7 million. The total deficit was
funded by the issuance of General Obligation Economic Recovery Notes. Moreover,
as of June 30, 1995, the General Fund had a cumulative deficit under GAAP of
$576.9 million. As a result of the recurring budgetary problems, S&P downgraded
the State's general obligation bonds from AA+ to AA in April 1990 and to AA- in
September 1991. Fitch downgraded the State's general obligation bonds from AA+
to AA in March 1995. Moody's currently rates Connecticut's bonds Aa.
FLORIDA SERIES -- The Florida Constitution and Statutes mandate that the
State budget as a whole, and each separate fund within the State budget, be kept
in balance from currently available revenues each fiscal year. Florida's
Constitution permits issuance of Florida Municipal Obligations pledging the full
faith and credit of the State, with a vote of the electors, to finance or
refinance fixed capital outlay projects authorized by the Legislature, provided
that the outstanding principal does not exceed 50% of the total tax revenues of
the State for the two preceding years. Florida's Constitution also provides that
the Legislature shall appropriate monies sufficient to pay debt service on State
bonds pledging the full faith and credit of the State as the same becomes due.
All State tax revenues, other than trust funds dedicated by Florida's
Constitution for other purposes, would be available for such an appropriation,
if required. Revenue bonds may be issued by the State or its agencies without a
vote of Florida's electors only to finance or refinance the cost of State fixed
capital outlay projects which may be payable solely from funds derived directly
from sources other than State tax revenues. Fiscal year 1994-95 total General
Revenue and Working Capital Funds available are estimated to have been $15.635
billion, which resulted in estimated unencumbered reserves of $319.5 million at
the end of fiscal 1994-95. The General Revenue and Working Capital Funds ended
the 1993-94 fiscal year with unencumbered reserves of $351.8 million.
GEORGIA SERIES -- Georgia's Constitution limits appropriation of funds for
any given fiscal year to the sum of the amount of unappropriated surplus
expected to have accrued at the beginning of the fiscal year and the amount not
greater than the total receipts anticipated, less refunds, as estimated. The
State Constitution provides for supplementary appropriations in accordance with
its provisions as well. Georgia's economy grew rapidly in the 1980's resulting
in a general fund reserve. As a result of a slowdown in the State's economy in
the early 1990's, the general fund reserve was effectively eliminated. Beginning
in fiscal 1993, however, revenues once again began to exceed appropriations. The
State's revenue shortfall reserve at the end of fiscal 1995 was approximately
$288 million. Revenues are estimated to slightly exceed expenditures for fiscal
1996.
MARYLAND SERIES -- The public indebtedness of the State of Maryland and its
instrumentalities is divided into three basic types: general obligation bonds
for capital improvements and for various State-sponsored projects to the payment
of which the State ad valorem property tax is exclusively pledged; limited,
special obligation bonds issued by the Maryland Department of Transportation for
transportation purposes, payable primarily from specific, fixed-rate excise
taxes and other revenues related mainly to highway use; and obligations issued
by certain authorities payable solely from specific non-tax, enterprise fund
revenues for which the State has no liability and has given no moral obligation
assurance.
Since at least the end of the Civil War, the State has paid the principal
of and interest on its general obligation bonds when due. There is no general
debt limit imposed by the State Constitution or public general laws, but the
Constitution does require the annual operating budget to be in balance with
estimated revenues. When the fiscal year 1996 budget was enacted, it was
estimated that the General Fund surplus on a budgetary basis at June 30, 1996,
would be approximately $7.8 million. As of February, 1996, it was estimated that
the General Fund surplus on a budgetary basis at June 30, 1996, will be $1
million. When the 1997 budget was submitted by the Governor to the General
Assembly, it was estimated that the General Fund surplus on a budgetary basis at
June 30, 1997 would be approximately $500 thousand, and that the balance in the
Revenue Stabilization Account of the State Reserve Fund would be $538 million.
MASSACHUSETTS SERIES -- Massachusetts' economic and fiscal difficulties of
recent years appear to have abated. While the Commonwealth's expenditures for
state programs and services in each of the fiscal years 1987 through 1991
exceeded each year's current revenues, Massachusetts ended each of the fiscal
years 1991 through 1996 with a positive fiscal balance in its general operating
funds.
MICHIGAN SERIES -- Michigan's economy has been undergoing certain basic
changes in its underlying structure. These changes reflect a diversifying
economy which is less reliant on the automobile industry. As a result, it is
anticipated that the State's economy in the future will be less susceptible to
cyclical swings and more resilient when national downturns occur. The principal
sectors of Michigan's diversifying economy are manufacturing of durable goods
(including automobile and office equipment manufacturing), tourism and
agriculture. Michigan's unemployment rate averaged 9.9% in 1985 and averaged
5.3% in 1995.
Michigan's Annual Financial Reports for the fiscal years ended September
30, 1987, 1988 and 1989 showed positive balances in the State's general cash
position representing an improvement from the negative cash position of 1982.
Michigan ended fiscal years 1989-90 and 1990-91 with negative balances of $310
million and $169 million, respectively. This cumulative deficit was eliminated
as of the fiscal year ended September 30, 1992. Michigan ended fiscal years
1992-93, 1993-94 and 1994 -95 with surpluses of approximately $308 million, $460
million and 67.4 million respectively.
MINNESOTA SERIES -- The structure of Minnesota's economy parallels the
structure of the United States' economy as a whole when viewed at a highly
aggregated level of detail. Diversity and a significant natural resource base
are two important characteristics of the State's economy. However, the State of
Minnesota experienced financial difficulties in the early 1980s because of a
downturn in the State's economy resulting from the national recession. More
recently, real growth has been equal to or greater than national growth.
There can be no assurance that the financial problems referred to or
similar future problems will not affect the market value or marketability of the
Minnesota Municipal Obligations or the ability of the issuer thereof to pay
interest or principal thereon. NORTH CAROLINA SERIES -- The economic profile of
the State of North Carolina consists of a combination of agriculture, industry
and tourism, with agriculture as the basic element in the economy. Tobacco
production is the leading source of agricultural income in the State, accounting
for 20% of gross agricultural income. The poultry and pork industries also are
significant sources of gross agricultural income.
The North Carolina Constitution requires a balanced budget. While North
Carolina's Governor lacks the power to veto budget or other legislative actions,
the Governor does have the power as ex office Director of the Budget, after
first making adequate provision for the prompt payment of the principal of and
interest on bonds and notes of the State according to their terms, to reduce all
appropriations for a particular fiscal period on a pro rata basis to prevent an
overdraft or deficit for such fiscal period. The Governor also may take less
drastic action to reduce expenditures to maintain a balanced budget before the
need for across the board appropriations reductions arises.
OHIO SERIES -- Nonmanufacturing industries now employ more than 78.9% of
all payroll employees in Ohio. However, due to the continued importance of
manufacturing industries (including auto-related manufacturing), economic
activity in Ohio tends to be more cyclical than in some other states and in the
nation as a whole. Although Ohio's economy has improved since the 1980-82
national recession, the State experienced an economic slow-down during its
1990-91 fiscal year, consistent with national economic conditions during that
period. For Ohio's fiscal year ended June 30, 1996, the Ohio Office of Budget
and Management reported positive $781.3 million and $1,138.5 million ending fund
and cash balances, respectively. Each of the foregoing factors could have an
effect on the market for issuers generally or may have the effect of impairing
the ability of issuers to pay interest on, or repay principal of, Ohio Municipal
Obligations.
PENNSYLVANIA SERIES -- Pennsylvania has been historically identified as a
heavy industry state although that reputation has recently changed as the coal,
steel and railroad industries declined. A more diversified economy has developed
in Pennsylvania as a long-term shift in jobs, investment and workers away from
the northeast part of the nation took place. The major new sources of growth are
in the service sector, including trade, medical and health services, education
and financial institutions. Pennsylvania is highly urbanized, with approximately
50% of the Commonwealth's total population contained in the metropolitan areas
which include the cities of Philadelphia and Pittsburgh. The Commonwealth's
adopted fiscal 1996-97 General Fund budget provided for no new taxes. As of June
30, 1996, the General Fund had a surplus of $69.8 million or 0.4% above the
official estimate for the prior fiscal year.
TEXAS SERIES -- Economically and financially the State of Texas suffered
during the 1980s significant damage from the continued depressed price of oil
and gas and the overbuilding in the real estate market. The decline in oil
prices, particularly since 1986, and the recession that followed have had a
severe effect on the Texas banking and savings and loan industries, resulting in
a number of closings among banks and savings and loans through the early 1990s.
In recent years, the State's overall financial situation has improved
significantly, as Texas' economic growth has been outpacing that of the United
States as a whole. In fiscal years 1991, 1992, 1993, 1994 and 1995, Texas'
General Revenue Fund ended with cash surpluses of $1.005 billion, $615 million,
$1.630 billion, $2.225 billion and $2.101 billion, respectively.
VIRGINIA SERIES -- Because of Northern Virginia, with its proximity to
Washington, D.C., and Hampton Roads, which has the nation's largest
concentration of military installations, the Federal government has a greater
impact on Virginia relative to its size than any states other than Alaska and
Hawaii. Virginia's economy has continued to grow over the last decade, and while
per capita income has grown both faster and slower than the U.S. average from
year to year during that period, per capita income continues to be above the
national average. Virginia's unreserved General Fund balances have continued to
grow in recent years from a low in 1991. The Virginia Constitution requires a
balanced budget and, since 1993, the funding of a Revenue Stabilization Fund.
Current debt levels are well below limits established by the Constitution.
INVESTING IN MUNICIPAL OBLIGATIONS -- Each Series 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, each Series 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 Series may invest
may contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase obligation that is
unrated, The Dreyfus Corporation will consider, on an ongoing basis, a number of
factors including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Series and thus
reduce the available yield. Shareholders should consult their tax advisers
concerning the effect of these provisions on an investment in a Series.
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.
ZERO COUPON SECURITIES -- Federal income tax law requires the holder of a
zero coupon security or of certain pay-in-kind bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To maintain
its qualification as a regulated investment company, and avoid liability for
Federal income taxes, a Series may be required to distribute such income accrued
with respect to these securities and may have to dispose of portfolio securi
under disadvantageous circumstances in order to generate cash to satisfy
these distribution requirements.
LOWER RATED BONDS -- Each Series may invest up to 30% of its net assets in
higher yielding (and, therefore, higher risk) debt securities, such as those
rated Ba by Moody's or BB by S&P or Fitch or as low as the lowest rating
assigned by Moody's, S&P or Fitch. They generally are not meant for short-term
investing and may be subject to certain risks with respect to the issuing entity
and to greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. The retail secondary market for these securities may be
less liquid than that of higher rated securities; adverse market conditions
could make it difficult at times for the Fund to sell certain securities or
could result in lower prices than those used in calculating the Series' net
asset value. See "Appendix _ Certain Portfolio Securities _ Ratings."
USE OF DERIVATIVES _ Each Series may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Series may use include options and
futures. While Derivatives can be used effectively in furtherance of a Series,
investment objective, under certain market conditions, they can increase the
volatility of the Series' net asset value, can decrease the liquidity of the
Series' portfolio and make more difficult the accurate pricing of the Series'
portfolio. See "Appendix-Investment Techniques-Use of Derivatives" below and
"Investment Objective and Management Policies-Management Policies-Derivatives"
in the Statement of Additional Information.
NON-DIVERSIFIED STATUS -- The classification of the Fund as a
"non-diversified" investment company means that the proportion of each Series'
assets that may be invested in the securities of a single issuer is not limited
by the 1940 Act. A "diversified" investment company is required by the 1940 Act
generally, with respect to 75% of its total assets, to invest not more than 5%
of such assets in the securities of a single issuer. Since a relatively high
percentage of a Series' assets may be invested in the securities of a limited
number of issuers, the Series' portfolio may be more sensitive to changes in the
market value of a single issuer. However, to meet Federal tax requirements, at
the close of each quarter the Series may not have more than 25% of its total
assets invested in anyone issuer and, with respect to 50% of total assets, not
more than 5% of its total assets invested in any one issuer. These limitations
do not apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest in,
or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment company.
In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Fund or the price paid or received by the
Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's investment
adviser. The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of June 28, 1996, The Dreyfus Corporation managed or administered
approximately $79 billion in assets for more than 1.7 million investor accounts
nationwide.
The Dreyfus Corporation supervises and assists in the overall management of
the Fund's affairs under a Management Agreement with the Fund, subject to the
authority of the Fund's Board in accordance with Massachusetts law. The primary
portfolio manager for each of the Florida Series and the Georgia Series is
Stephen C. Kris, who has held that position since February 1996 with respect to
the Florida Series and September 1992 with respect to the Georgia Series, and
has been employed by The Dreyfus Corporation since February 1988. The primary
portfolio manager for each of the Connecticut Series, the Massachusetts Series,
the North Carolina Series and the Virginia Series is Samuel J. Weinstock, who
has held that position with respect to the Connecticut Series and the
Massachusetts Series since August 1987 and with respect to the North Carolina
Series and Virginia Series since August 1991, and has been employed by The
Dreyfus Corporation since March 1987. The primary portfolio manager for each of
the Maryland Series, the Pennsylvania Series and the Texas Series is Douglas J.
Gaylor, who has held that position since January 1996 and has been employed by
The Dreyfus Corporation since January 1996. Prior to joining The Dreyfus
Corporation, Mr. Gaylor was a Municipal Portfolio Manager at PNC Bank since 1993
and from 1989 to September 1993 was a Municipal Portfolio Manager at Wilmington
Trust Company. The primary portfolio manager for each of the Michigan Series,
the Minnesota Series and the Ohio Series is Joseph P. Darcy, who has held that
position and has been employed by The Dreyfus Corporation since May 1994. For
more than five years prior to joining The Dreyfus Corporation, Mr. Darcy was a
Vice President and Portfolio Manager for Merrill Lynch Asset Management. The
Fund's other portfolio managers are identified in the Statement of Additional
Information. The Dreyfus Corporation also provides research services for the
Fund and for other funds advised by The Dreyfus Corporation through a
professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Bank Holding Company Act of
1956, as amended. Mellon provides a comprehensive range of financial products
and services in domestic and selected international markets. Mellon is among the
twenty-five largest bank holding companies in the United States based on total
assets. Mellon's principal wholly-owned subsidiaries are Mellon Bank, N.A.,
Mellon Bank (DE) National Association, Mellon Bank (MD), The Boston Company,
Inc., AFCO Credit Corporation and a number of companies known as Mellon
Financial Services Corporations. Through its subsidiaries, including The Dreyfus
Corporation, Mellon managed more than $237 billion in assets as of March 31,
1996, including approximately $83 billion in proprietary mutual fund assets. As
of March 31, 1996, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than $886
billion in assets including approximately $61 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to pay The
Dreyfus Corporation a monthly fee at the annual rate of .55 of 1% of the value
of each Series' average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of a Series which would have the effect of lowering the expense ratio
of that Series and increasing yield to investors. The Fund will not pay The
Dreyfus Corporation at a later time for any amounts it may waive, nor will the
Fund reimburse The Dreyfus Corporation for any amounts it may assume.
For the fiscal year ended April 30, 1996, the Fund paid The Dreyfus
Corporation a management fee at the effective annual rate set forth below with
respect to each Series pursuant to undertakings in effect:
EFFECTIVE ANNUAL RATE
AS A PERCENTAGE OF
SERIES AVERAGE DAILY NET ASSETS
-------------------- --------------------------
Connecticut .55 of 1%
Florida .55 of 1%
Georgia .35 of 1%
Maryland .55 of 1%
Massachusetts .55 of 1%
Michigan .55 of 1%
Minnesota .55 of 1%
North Carolina .53 of 1%
Ohio .55 of 1%
Pennsylvania .55 of 1%
Texas .0
Virginia .0
In allocating brokerage transactions for the Fund, The Dreyfus Corporation
seeks to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among other
things, the receipt of research services and/or the sale of shares of the Fund
or other funds managed, advised or administered by The Dreyfus Corporation as
factors in the selection of broker-dealers to execute portfolio transactions for
the Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation may pay the Fund's distributor for shareholder
services from The Dreyfus Corporation's own assets, including past profits but
not including the management fee paid by the Fund. The Fund's distributor may
use part or all of such payments to pay Service Agents in respect of these
services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor' ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
GENERAL -- Class A shares, Class B shares and Class C shares may be
purchased only by clients of certain financial institutions (which may include
banks), securities dealers ("Selected Dealers") and other industry professionals
(collectively, "Service Agents"), except that full-time or part-time employees
of The Dreyfus Corporation or any of its affiliates or subsidiaries, directors
of The Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, including members of the Fund's Board, or the spouse or minor child
of any of the foregoing may purchase Class A shares directly through the
Distributor. Subsequent purchases may be sent directly to the Transfer Agent or
your Service Agent.
When purchasing Fund shares, you must specify which Class is being
purchased. 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 retirement plans.
The Fund reserves the right to reject any purchase order.
Service Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution Plan or
Shareholder Services Plan. You should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must be at
least $100. The initial investment must be accompanied by the Account
Application. The Fund reserves the right to vary the initial and subsequent
investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the TELETRANSFER
Privilege described below. Checks should be made payable to "Premier State
Municipal Bond Fund," and should specify the Series in which you are investing.
Payments to open new accounts which are mailed should be sent to Premier State
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587,
together with your Account Application indicating which Class of shares is being
purchased. For subsequent investments, your Fund account number should appear on
the check and an investment slip should be enclosed and sent to Premier State
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. Neither
initial nor subsequent investments should be made by third party check.
Wire payments may be made if your bank account is in a commercial bank that
is a member of the Federal Reserve System or in any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York as shown below, for purchase of Fund
shares in your name:
DDA #8900119489/Premier State Municipal Bond Fund/Connecticut Series
DDA #8900119381/Premier State Municipal Bond Fund/Florida Series
DDA #8900117087/Premier State Municipal Bond Fund/Georgia Series
DDA #8900119403/Premier State Municipal Bond Fund/Maryland Series
DDA #8900119470/Premier State Municipal Bond Fund/Massachusetts Series
DDA #8900119411/Premier State Municipal Bond Fund/Michigan Series
DDA #8900119438/Premier State Municipal Bond Fund/Minnesota Series
DDA #8900208635/Premier State Municipal Bond Fund/North Carolina Series
DDA #8900119446/Premier State Municipal Bond Fund/Ohio Series
DDA #8900119454/Premier State Municipal Bond Fund/Pennsylvania Series
DDA #8900119462/Premier State Municipal Bond Fund/Texas Series
DDA #8900208678/Premier State Municipal Bond Fund/Virginia Series
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of Fund
shares is by wire, please call 1-800-645-6561 after completing your wire payment
to obtain your Fund account number. Please include your Fund account number on
the Account Application and promptly mail the Account Application to the Fund,
as no redemptions will be permitted until the Account Application is received.
You may obtain further information about remitting funds in this manner from
your bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark and the Government Direct Deposit Privilege described
under "Shareholder Services." These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House member. You must direct the institution to
transmit immediately available funds through the Automated Clearing House to The
Bank of New York with instructions to credit your Fund account. The instructions
must specify your Fund account registration and your Fund account number
PRECEDED BY THE DIGITS "1111."
Each Series' shares are sold on a continuous basis. Net asset value per
share is determined as of the close of trading on the floor of the New York
Stock Exchange (currently, 4:00 p.m., New York time), on each day the New York
Stock Exchange is open for business. For purposes of determining net asset
value, 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 of each Class is computed by dividing the value of the net assets of each
Series represented by such Class (i.e., the value of its assets less
liabilities) by the total number of shares of such Class outstanding. Each
Series' 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 Series' investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
If an order is received by the Transfer Agent by the close of trading on
the floor of the New York Stock Exchange (currently, 4:00 p.m., New York time)
on any business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, Fund shares will be purchased at the public
offering price determined as of the close of trading on the floor of the New
York Stock Exchange on the next business day, except where shares are purchased
through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the New York Stock Exchange on a business day and
transmitted to the Distributor or its designee by the close of its business day
(normally 5:15 p.m., New York time) will be based on the public offering price
per share determined as of the close of trading on the floor of the New York
Stock Exchange on that day. Otherwise, the orders will be based on the next
determined public offering price. It is the dealers' responsibility to transmit
orders so that they will be received by the Distributor or its designee before
the close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may be
transmitted, and must be received by the Transfer Agent, within three business
days after the order is placed. If such payment is not received within three
business days after the order is placed, the order may be cancelled and the
institution could be held liable for resulting fees and/or losses.
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Distributions and Taxes" and the
Account Application for further information concerning this requirement. Failure
to furnish a certified TIN to the Fund could subject you to a $50 penalty
imposed by the Internal Revenue Service (the "IRS").
CLASS A SHARES -- The public offering price for Class A
shares is the net asset value per share of that Class plus a sales load
as shown below:
<TABLE>
<CAPTION>
SALES LOAD
-----------------------------------------
AS A % OF AS A % OF DEALERS' REALLOWANCE
OFFERING PRICE NET ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION PER SHARE PER SHARE OFFERING PRICE
--------------------------- ---------------- ----------------- ------------------------
<S> <C> <C> <C>
Less than $50,000...... 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more..... -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of Class A shares
purchased without an initial sales charge as part of an investment of at least
$1,000,000 and redeemed within one year of purchase. The terms contained in the
section of the Prospectus entitled "How to Redeem Shares -- Contingent Deferred
Sales Charge" (other than the amount of the CDSC and time periods) are
applicable to the Class A shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of Fund shares) may purchase Class A shares
for themselves, directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at net asset value, provided
that they have furnished the Distributor with such information as it may request
from time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible to
purchase Class A shares at net asset value. In addition, Class A shares are
offered at net asset value to full-time or part-time employees of The Dreyfus
Corporation or any of its affiliates or subsidiaries, directors of The Dreyfus
Corporation, Board members of a fund advised by The Dreyfus Corporation,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing.
Class A shares also may be purchased at net asset value without a sales
load through certain broker-dealers and other financial institutions which have
entered into an agreement with the Distributor, which includes a requirement
that such shares be sold for the benefit of clients participating in a "wrap
account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a registered
open-end management investment company not managed by The Dreyfus Corporation or
its affiliates. The purchase of Class A shares of the Fund must be made within
60 days of such redemption and the shareholder must have either (i) paid an
initial sales charge or a contingent deferred sales charge or (ii) been
obligated to pay at any time during the holding period, but did not actually pay
on redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by (i) qualified separate accounts maintained by an
insurance company pursuant to the laws of any State or territory of the United
States, (ii) a State, county or city or instrumentality thereof, (iii) a
charitable organization (as defined in Section 501(c) (3) of the Internal
Revenue Code of 1986, as amended (the "Code") investing $50,000 or more in Fund
shares, and (iv) a charitable remainder trust (as defined in Section 501(c)(3)
of the Code).
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. The Distributor, at its expense, may provide additional
promotional incentives to dealers that sell shares of funds advised by The
Dreyfus Corporation which are sold with a sales load, such as Class A shares. In
some instances, these incentives may be offered only to certain dealers who have
sold or may sell significant amounts of such shares.
CLASS B SHARES -- The public offering price for Class B shares is the net
asset value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described under "How to Redeem Shares." The Distributor compensates
certain Service Agents for selling Class B and Class C shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES -- The public offering price for Class C shares is the net
asset value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How to
Redeem Shares."
RIGHT OF ACCUMULATION -- CLASS A SHARES -- Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Premier Family of
Funds, shares of certain other funds advised by The Dreyfus Corporation which
are sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the Statement of Additional Information, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A shares of the Fund, or
of any other Eligible Fund or combination thereof, with an aggregate current
market value of $40,000 and subsequently purchase Class A shares of the Fund or
an Eligible Fund having a current value of $20,000, the sales load applicable to
the subsequent purchase would be reduced to 4% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Service Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
TELETRANSFER PRIVILEGE -- You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Account Application or have filed
a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of shares by calling 1-800-645-6561 or, if you are calling
from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Service Agent in this
regard.
FUND EXCHANGES
You may purchase, in exchange for a Class of a Series, shares of the same
Class of one of the other Series, or of the same Class in certain other funds
managed or administered by The Dreyfus Corporation, to the extent such shares
are offered for sale in your state of residence. These funds have different
investment objectives which may be of interest to you. You also may exchange
your Fund shares that are subject to a CDSC for shares of Dreyfus Worldwide
Dollar Money Market Fund, Inc. The shares so purchased will be held in a special
account created solely for this purpose ("Exchange Account"). Exchanges of
shares from an Exchange Account only can be made into certain other funds
managed or administered by The Dreyfus Corporation. No CDSC is charged when an
investor exchanges into an Exchange Account; however, the applicable CDSC will
be imposed when shares are redeemed from an Exchange Account or other applicable
Fund account. Upon redemption, the applicable CDSC will be calculated without
regard to the time such shares were held in an Exchange Account. See "How to
Redeem Shares." Redemption proceeds for Exchange Account Shares are paid by
Federal wire or check only. Exchange Account shares also are eligible for the
Auto-Exchange Privilege, Dividend Sweep and the Automatic Withdrawal Plan. To
use this service, you should consult your Service Agent or call 1-800-645-6561
to determine if it is available and whether any other conditions are imposed on
its use.
To request an exchange, your Service Agent acting on your behalf must give
exchange instructions to the Transfer Agent in writing or by telephone. Before
any exchange, you must obtain and should review a copy of the current prospectus
of the fund into which the exchange is being made. Prospectuses may be obtained
by calling 1-800-645-6561. Except in the case of personal retirement plans, the
shares being exchanged must have a current value of at least $500; furthermore,
when establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the fund
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. The Telephone Exchange Privilege
may be established for an existing account by written request, signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
also available by calling 1-800-645-6561, or, by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. If you
have established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-645-6561 or, if you are calling from overseas,
call 516-794-5452. See "How to Redeem Shares _ Procedures." Upon an exchange
into a new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the fund
into which the exchange is being made: Telephone Exchange Privilege, Check
Redemption Privilege, TELETRANSFER Privilege, and the dividend/capital gain
distribution option (except for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value; however, a
sales load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or Class C shares at
the time of an exchange; however, Class B or Class C shares acquired through an
exchange will be subject on redemption to the higher CDSC applicable to the
exchanged or acquired shares. The CDSC applicable on redemption of the acquired
Class B or Class C shares will be calculated from the date of the initial
purchase of the Class B or Class C shares exchanged, as the case may be. If you
are exchanging Class A shares into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect a
reduced sales load, if the shares you are exchanging were: (a) purchased with a
sales load, (b) acquired by a previous exchange from shares purchased with a
sales load, or (c) acquired through reinvestment of dividends or distributions
paid with respect to the foregoing categories of shares. To qualify, at the time
of the exchange your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of Additional
Information. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance with
rules promulgated by the Securities and Exchange Commission. The Fund reserves
the right to reject any exchange request in whole or in part. The availability
of Fund Exchanges may be modified or terminated at any time upon notice to
shareholders. See "Dividends, Distributions and Taxes."
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a semi-monthly,
monthly, quarterly or annual basis) in exchange for shares of a Series, in
shares of the same Class of one of the other Series, or the same Class of other
funds in the Premier Family of Funds or certain other funds in the Dreyfus
Family of Funds of which you are a shareholder. The amount you designate, which
can be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth of the
month according to the schedule you have selected. Shares will be exchanged at
the then-current net asset value; however, a sales load may be charged with
respect to exchanges of Class A shares into funds sold with a sales load. No
CDSC will be imposed on Class B or Class C shares at the time of an exchange;
however, Class B or Class C shares acquired through an exchange will be subject
on redemption to the higher CDSC applicable to the exchanged or acquired shares.
The CDSC applicable on redemption of the acquired Class B or Class C shares will
be calculated from the date of the initial purchase of the Class B or Class C
shares exchanged, as the case may be. See "Shareholder Services" in the
Statement of Additional Information. The right to exercise this Privilege may be
modified or cancelled by the Fund or the Transfer Agent. You may modify or
cancel your exercise of this Privilege at any time by mailing written
notification to Premier State Municipal Bond Fund, P.O. Box 6587, Providence,
Rhode Island 02940-6587. The Fund may charge a service fee for the use of this
Privilege. No such fee currently is contemplated. For more information
concerning this Privilege and the funds in the Premier Family of Funds or the
Dreyfus Family of Funds eligible to participate in this Privilege, or to obtain
an Auto-Exchange Authorization Form, please call toll free 1-800-645-6561. See
"Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular intervals
selected by you. Fund shares are purchased by transferring funds from the bank
account designated by you. At your option, the bank account designated by you
will be debited in the specified amount, and Fund shares will be purchased, once
a month, on either the first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish a
Dreyfus-AUTOMATIC Asset Builder account, you must file an authorization form
with the Transfer Agent. You may obtain the necessary authorization form by
calling 1-800-645-6561. You may cancel your participation in this Privilege or
change the amount of purchase at any time by mailing written notification to
Premier State Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587, and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase Fund shares
(minimum of $100 and maximum of $50,000 per transaction) by having Federal
salary, Social Security, or certain veterans', military or other payments from
the Federal government automatically deposited into your Fund account. You may
deposit as much of such payments as you elect. To enroll in Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained by calling 1-800-645-6561. Death
or legal incapacity will terminate your participation in this Privilege. You may
elect at any time to terminate your participation by notifying in writing the
appropriate Federal agency. Further, the Fund may terminate your participation
upon 30 days' notice to you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends or dividends
and capital gain distributions, if any, paid by the Fund in shares of the same
class of another fund in the Premier Family of Funds or the Dreyfus Family of
Funds of which you are a shareholder. Shares of the other fund will be purchased
at the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load. If
you are investing in a fund or class that charges a CDSC, the shares purchased
will be subject on redemption to the CDSC, if any, applicable to the purchased
shares. See "Shareholder Services" in the Statement of Additional Information.
Dividend ACH permits you to transfer electronically dividends or dividends and
capital gain distributions, if any, from the Fund to a designated bank account.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. Banks may charge a fee for
this service.
For more information concerning these privileges, or to request a Dividend
Options Form, please call toll free 1-800-645-6561. You may cancel these
privileges by mailing written notification to Premier State Municipal Bond Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dividend Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. The Automatic Withdrawal Plan may be ended at any time by
you, the Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Class B or Class C shares withdrawn pursuant to the Automatic Withdrawal
Plan will be subject to any applicable CDSC. Purchases of additional Class A
shares where the sales load is imposed concurrently with withdrawals of Class A
shares generally are undesirable.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form, which can be obtained by calling
1-800-645-6561, you become eligible for the reduced sales load applicable to the
total number of Eligible Fund shares purchased in a 13-month period pursuant to
the terms and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter of
Intent) in any Eligible Fund that may be used toward "Right of Accumulation"
benefits described above may be used as a credit toward completion of the Letter
of Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares held in escrow to realize the difference.
Signing a Letter of Intent does not bind you to purchase, or the Fund to sell,
the full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales load. At
the time you purchase Class A shares, you must indicate your intention to do so
under a Letter of Intent. Purchases pursuant to a Letter of Intent will be made
at the then-current net asset value plus the applicable sales load in effect at
the time such Letter of Intent was executed.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption requests
should be transmitted to the Transfer Agent as described below. When a request
is received in proper form, the Fund will redeem the shares at the next
determined net asset value as described below. If you hold Fund shares of more
than one Class, any request for redemption must specify the Class of shares
being redeemed. If you fail to specify the Class of shares to be redeemed or if
you own fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further instructions
from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Service Agents or other institutions may charge their clients a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Series' then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER
PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND
SUBSEQUENTLY SUBMIT A WRITTEN REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER,
WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT
HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A PERIOD
OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK, THE TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER
AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF
YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer Agent
has received your Account Application.
The Fund reserves the right to redeem your account at its option upon not
less than 30 days' written notice if your account's net asset value is $500 or
less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE
CLASS B SHARES -- A CDSC payable to the Distributor is imposed on any
redemption of Class B shares of a Series which reduces the current net asset
value of your Class B shares to an amount which is lower than the dollar amount
of all payments by you for the purchase of Class B shares of such Series held by
you at the time of redemption. No CDSC will be imposed to the extent that the
net asset value of the Class B shares redeemed does not exceed (i) the current
net asset value of Class B shares acquired through reinvestment of dividends or
capital gain distributions, plus (ii) increases in the net asset value of Class
B shares above the dollar amount of all your payments for the purchase of Class
B shares of such Series held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined below
their original cost as a result of the Series' performance, a CDSC may be
applied to the then-current net asset value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month. The following table sets forth the rates of
the CDSC:
YEAR SINCE PURCHASE CDSC AS A % OF AMOUNT
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
----------------------- ---------------------------------------
First....................... 3.00
Second...................... 3.00
Third....................... 2.00
Fourth...................... 2.00
Fifth....................... 1.00
Sixth....................... 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in net asset value of Class B shares
above the total amount of payments for the purchase of Class B shares made
during the preceding five years; then of amounts representing the cost of shares
purchased five years prior to the redemption; and finally, of amounts
representing the cost of shares held for the longest period of time within the
applicable five-year period.
For example, assume an investor purchased 100 shares at $10 per share for a
cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the net asset value had appreciated to $12 per share, the
value of the investor's shares would be $1,260 (105 shares at $12 per share).
The CDSC would not be applied to the value of the reinvested dividend shares and
the amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 3% (the
applicable rate in the second year after purchase) for a total CDSC of $7.20.
CLASS C SHARES -- A CDSC of 1% payable to the Distributor is imposed on any
redemption of Class C shares within one year of the date of purchase. The basis
for calculating the payment of any such CDSC will be the method used in
calculating the CDSC for Class B shares. See "Contingent Deferred Sales Charge
- -- Class B Shares" above. WAIVER OF CDSC -- The CDSC applicable to Class B and
Class C may be waived in connection with (a) redemptions made within one year
after the death or disability, as defined in Section 72(m)(7) of the Code, of
the shareholder, (b) redemptions by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs, or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor exceeds $1,000,000, (c)
redemptions as a result of a combination of any investment company with the
relevant Series by merger, acquisition of assets or otherwise, and (d) a
distribution following retirement under a tax-deferred retirement plan or upon
attaining age 70-1/2 in the case of an IRA or Keogh plan or custodial account
pursuant to Section 403(b) of the Code. If the Fund's Board determines to
discontinue the waiver of the CDSC, the disclosure in the Fund's Prospectus will
be revised appropriately. Any Fund shares subject to a CDSC which were purchased
prior to the termination of such waiver will have the CDSC waived as provided in
the Fund's Prospectus at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Service Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
PROCEDURES
You may redeem shares by using the regular redemption procedure through the
Transfer Agent, or, if you have checked the appropriate box and supplied the
necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent, through the Check Redemption Privilege
with respect to Class A shares only, or the TELETRANSFER Privilege. If you are a
client of a Selected Dealer, you may redeem shares through the Selected Dealer.
If you have given your Service Agent authority to instruct the Transfer Agent to
redeem shares and to credit the proceeds of such redemptions to a designated
account at your Service Agent, you may redeem shares only in this manner and in
accordance with the regular redemption procedure described below. If you wish to
use the other redemption methods described below, you must arrange with your
Service Agent for delivery of the required application(s) to the Transfer Agent.
Other redemption procedures may be in effect for clients of certain Service
Agents. The Fund makes available to certain large institutions the ability to
issue redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate any redemption
Privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares for which certificates have been
issued are not eligible for the Check Redemption or TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked the appropriate
box on the Account Application or have filed a Shareholder Services Form with
the Transfer Agent. If you select the TELETRANSFER redemption privilege or
telephone exchange privilege (which is granted automatically unless you refuse
it), you authorize the Transfer Agent to act on telephone instructions from any
person representing himself or herself to be you, or a representative of your
Service Agent, and reasonably believed by the Transfer Agent to be genuine. The
Fund will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or exchange of Series shares. In such cases, you should consider using the other
redemption procedures described herein. Use of these other redemption procedures
may result in your redemption request being processed at a later time than it
would have been if telephone redemption had been used. During the delay, the
Series' net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may
redeem shares by written request mailed to Premier State Municipal Bond Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP"), and the Stock Exchanges Medallion Program. If you have any
questions with respect to signature guarantees, please contact your Service
Agent or call the telephone number listed on the cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any member bank of
the Federal Reserve System in accordance with a written signature-guaranteed
request.
CHECK REDEMPTION PRIVILEGE -- CLASS A SHARES -- You may write Redemption
Checks drawn on your Fund account. Redemption Checks may be made payable to the
order of any person in the amount of $500 or more. Potential fluctuations in the
net asset value of the Class A shares should be considered in determining the
amount of the check. Redemption Checks should not be used to close your account.
Redemption Checks are free, but the Transfer Agent will impose a fee for
stopping payment of a Redemption Check upon your request or if the Transfer
Agent cannot honor the Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not postdate your Redemption Checks. If you do the
Transfer Agent will honor, upon presentment, even if presented before the date
of the check, all postdated Redemption Checks which are dated within six months
of presentment for payment, if they are otherwise in good order. This Privilege
will be terminated immediately, without notice, with respect to any account
which is, or becomes, subject to backup withholding on redemptions (See
"Dividends, Distributions and Taxes"). Any Redemption Check written on an
account which has become subject to backup withholding on redemptions will not
be honored by the Transfer Agent.
TELETRANSFER PRIVILEGE -- You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be designated.
Redemption proceeds will be on deposit in your account at an Automated Clearing
House member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to your
address. Holders of jointly registered Fund or bank accounts may redeem through
the TELETRANSFER Privilege for transfer to their bank account not more than
$250,000 within any 30-day period.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER redemption of shares by calling 1-800-645-6561 or, if you are
calling from overseas, call 516-794-5252.
REDEMPTION THROUGH A SELECTED DEALER -- If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer Agent
after the close of trading on the floor of the New York Stock Exchange, the
redemption request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to your
account with the Selected Dealer. See "How to Buy Shares" for a discussion of
additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by dealers
by the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to the Distributor or its designee by the close of
its business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the dealer to transmit
orders on a timely basis. The dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.
REINVESTMENT PRIVILEGE -- CLASS A SHARES
Upon written request, you may reinvest up to the number of Class A shares
you have redeemed, within 30 days of redemption, at the then-prevailing net
asset value without a sales load, or reinstate your account for the purpose of
exercising the Exchange Privilege. The Reinvestment Privilege may be exercised
only once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class B and Class C shares are subject to a Distribution Plan and Class A,
Class B and Class C shares are subject to a Shareholder Services Plan.
DISTRIBUTION PLAN -- Under the Distribution Plan, adopted pursuant to Rule
12b-1 under the 1940 Act, the Fund pays the Distributor for distributing the
Fund's Class B and Class C shares of each Series at an annual rate of .50 of 1%
of the value of the average daily net assets of Class B and .75 of 1% of the
value of the average daily net assets of Class C.
SHAREHOLDER SERVICES PLAN -- Under the Shareholder Services Plan, the Fund
pays the Distributor for the provision of certain services to the holders of
Class A, Class B and Class C shares a fee at the annual rate of .25 of 1% of the
value of the average daily net assets of each such Class. 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. The Distributor may make payments to Service Agents in respect of
these services. The Distributor determines the amounts to be paid to Service
Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS -- Under the code, each Series of the Fund is
treated as a separate entity for purposes of qualification and taxation as a
regulated investment company. Each Series of 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
immediately available funds ("Federal Funds" (monies of member banks within the
Federal Reserve System which are held on deposit at a Federal Reserve Bank)) are
received by the Transfer Agent in written or telegraphic form. If a purchase
order is not accompanied by remittance in Federal Funds, there may be a delay
between the time the purchase order becomes effective and the time the shares
purchased start earning dividends. If your payment is not made in Federal Funds,
it must be converted into Federal Funds. This usually occurs within one business
day of receipt of a bank wire and within two business days of receipt of a check
drawn on a member bank of the Federal Reserve System. Checks drawn on banks
which are not members of the Federal Reserve System may take considerably longer
to convert into Federal Funds.
Dividends usually are paid on the last calendar day of each month and are
automatically reinvested in additional shares of the Series and the same Class
from which they were paid at net asset value without a sales load or, at your
option, paid in cash. Each Series' earnings for Saturdays, Sundays and holidays
are declared as dividends on the preceding business day. If you redeem all
shares in your account at any time during the month, all dividends to which you
are entitled will be paid to you along with the proceeds of the redemption. If
you are an omnibus accountholder and indicate in a partial redemption request
that a portion of any accrued dividends to which such account is entitled
belongs to an underlying account-holder who has redeemed all shares in his or
her account, such portion of the accrued dividends will be paid to you along
with the proceeds of the redemption. Distributions by each Series from its net
realized securities gains, if any, generally are declared and paid once a year,
but the Series may make distributions on a more frequent basis to comply with
distribution requirements of the Code, in all events in a manner consistent with
the provisions of the 1940 Act. No Series will make distributions from its net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive dividends and
distributions in cash or to reinvest in additional shares of the Series and the
same Class from which they were paid at net asset value. All expenses are
accrued daily and deducted before declaration of dividends to investors.
Dividends paid by each Class will be calculated at the same time and in the same
manner and will be of the same amount, except that the expenses attributable
solely to a particular Class will be borne exclusively by such Class. Class B
and Class C shares will receive lower per share dividends than Class A shares
because of the higher expenses borne by the relevant Class. See "Fee Table."
FEDERAL TAX TREATMENT -- Except for dividends from Taxable Investments, the
Fund anticipates that substantially all dividends paid by a Series from net
investment income will not be subject to Federal income tax. Dividends derived
from Taxable Investments, together with distributions from any net realized
short-term securities gains and all or a portion of any gains realized from the
sale or other disposition of certain market discount bonds, paid by the Fund are
subject to Federal income tax as ordinary income whether received in cash or
reinvested in additional shares. Distributions from net realized long-term
securities gains of a Series generally are subject to Federal income tax as
long-term capital gains if you are a citizen or resident of the United States.
Dividends and distributions attributable to income or gain derived from
securities transactions and from the use of certain of the investment techniques
described under "Appendix _ Investment Techniques," will be subject to Federal
income tax. No dividend paid by any Series will qualify for the dividends
received deduction allowable to certain U.S. corporations. The Code provides
that the net capital gain of an individual generally will not be subject to
Federal income tax at a rate in excess of 28%. Under the Code, interest on
indebtedness incurred or continued to purchase or carry shares of any Series
which is deemed to relate to exempt-interest dividends is not deductible.
Although all or a substantial portion of the dividends paid by each Series
may be excluded by shareholders of the Series from their gross income for
Federal income tax purposes, each Series may purchase specified private activity
bonds, the interest from which may be (i) a preference item for purposes of the
alternative minimum tax, (ii) a component of the "adjusted current earnings"
preference item for purposes of the corporate alternative minimum tax as well as
a component in computing the corporate environmental tax or (iii) a factor in
determining the extent to which a shareholder's Social Security benefits are
taxable. If a Series purchases such securities, the portion of the Series'
dividends related thereto will not necessarily be tax exempt to an investor who
is subject to the alternative minimum tax and/or tax on Social Security benefits
and may cause an investor to be subject to such taxes.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares of a Series if you exchange your Class A shares for
shares of another Series or fund advised or administered by The Dreyfus
Corporation within 91 days of purchase and such other Series or other fund
reduces or eliminates its otherwise applicable sales load charge for the purpose
of the exchange. In this case, the amount of your sales load charge for Class A
shares, up to the amount of the reduction of the sales load charge on the
exchange, is not included in the basis of your Class A shares for purposes of
computing gain or loss on the exchange, and instead is added to the basis of the
other Series or fund shares received on the exchange.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your account
which will include information as to dividends and distributions from securities
gains, if any, paid during the year. These statements set forth the dollar
amount of income exempt from Federal tax and the dollar amount, if any, subject
to Federal tax. These dollar amounts will vary depending on the size and length
of time of your investment in a Series. If a Series pays dividends derived from
taxable income, it intends to designate as taxable the same percentage of the
day's dividends as the actual taxable income earned on that day bears to total
income earned on that day. Thus, the percentage of the dividend designated as
taxable, if any, may vary from day to day.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized, paid
to a shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may notify
the Fund to institute backup withholding if the IRS determines a shareholder's
TIN is incorrect or if a shareholder has failed to properly report taxable
dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account, and may be claimed as a credit on the record owner's
Federal income tax return.
Management of the Fund believes that each Series has qualified for the
fiscal year ended April 30, 1996 as a "regulated investment company" under the
Code. Each Series intends to continue to so qualify, if such qualification is in
the best interests of its shareholders. Such qualification relieves the Series
of any liability for Federal income taxes to the extent its earnings are
distributed in accordance with applicable provisions of the Code. Each Series of
the Fund is subject to a non-deductible 4% excise tax, measured with respect to
certain undistributed amounts of taxable investment income and capital gains, if
any.
STATE AND LOCAL TAX TREATMENT -- Each Series will invest primarily in
Municipal Obligations of the State after which the Series is named. Except to
the extent specifically noted below, dividends by a Series are not subject to an
income tax by such State to the extent that the dividends are attributable to
interest on such Municipal Obligations. However, some or all of the other
dividends or distributions by a Series may be taxable by those States that have
income taxes, even if the dividends or distributions are attributable to income
of the Series derived from obligations of the United States or its agencies or
instrumentalities.
The Fund anticipates that a substantial portion of the dividends paid by
each Series will not be subject to income tax of the State after which the
Series is named. However, to the extent that you are obligated to pay State or
local taxes outside of such State, dividends earned by an investment in such
Series may represent taxable income. Also, all or a portion of the dividends
paid by a Series that are not subject to income tax of the State after which the
Series is named may be a preference item for such State's alternative minimum
tax (where imposed). Finally, you should be aware that State and local taxes,
other than those described above, may apply to the dividends, distributions or
shares of a Series.
The paragraphs below discuss the State tax treatment of dividends and
distributions by each Series to residents of the State after which the Series is
named. Investors should consult their own tax advisers regarding specific
questions as to Federal, State and local taxes.
CONNECTICUT SERIES -- Dividends by the Series that qualify as
exempt-interest dividends for Federal income tax purposes are not subject to the
Connecticut income tax imposed on individuals, trusts and estates, to the extent
that such dividends are derived from income received by the Series as interest
from Connecticut Municipal Obligations or obligations the interest with respect
to which Connecticut is prohibited by Federal law from taxing. Dividends that
qualify as capital gain dividends for Federal income tax purposes are not
subject to the Connecticut income tax to the extent they are derived from
Connecticut Municipal Obligations. Dividends derived from other sources are
subject to the Connecticut income tax. In the case of a shareholder subject to
the Connecticut income tax and required to pay the Federal alternative minimum
tax, the portion of exempt-interest dividends paid by the Series that is derived
from income received by the Series as interest from Connecticut Municipal
Obligations or obligations the interest with respect to which Connecticut is
prohibited by Federal law from taxing is not subject to the net Connecticut
minimum tax even though treated as a preference item for purposes of the Federal
alternative minimum tax.
Dividends qualifying as exempt-interest dividends for Federal income tax
purposes that are distributed by the Series to entities taxed as corporations
under the Connecticut corporation business tax are not exempt from that tax.
The shares of the Series are not subject to property taxation by the State
of Connecticut or its political subdivisions.
FLORIDA SERIES -- Dividends or distributions by the Fund to a Florida
individual resident are not taxable by Florida. However, Florida imposes an
intangible personal property tax on shares of the Series owned by a Florida
resident on January 1 of each year unless such shares qualify for an exemption
from the tax.
Dividends qualifying as exempt-interest dividends for Federal income tax
purposes as well as other Federally taxable dividends and distributions that are
distributed by the Series to entities taxed as corporations under Florida law
may not be exempt from the Florida corporate income tax.
The Fund has received a Technical Assistance Advisement from the State of
Florida, Department of Revenue, to the effect that Florida Series' shares owned
by a Florida resident will be exempt from the intangible personal property tax
so long as the Series' portfolio includes only assets, such as notes, bonds, and
other obligations issued by the State of Florida or its municipalities,
counties, and other taxing districts, the United States Government, and its
agencies, Puerto Rico, Guam, and the U.S. Virgin Islands, and other assets which
are exempt from that tax.
GEORGIA SERIES -- Dividends and distributions by the Georgia Series to a
Georgia resident that are attributable to interest on Georgia Municipal
Obligations or direct obligations of the United States and its territories and
possessions are not subject to the State of Georgia income tax. Dividends or
other distributions by the Series which are attributable to other sources,
including all distributions that qualify as capital gains dividends for Federal
income tax purposes, are subject to the State of Georgia income tax at the
applicable rate.
The Georgia intangibles tax previously imposed upon certain intangible
personal property has been repealed, effective as of January 1, 1996.
Accordingly, shares of the Georgia Series will not be subject to an intangibles
tax in Georgia.
MARYLAND SERIES -- Dividends and distributions by the Series to a Maryland
resident (including individuals, corporations, estates or trusts who are subject
to Maryland state and local income tax) will not be subject to income tax in
Maryland to the extent that such dividends or distributions (a) qualify, for
Federal income tax purposes, as exempt-interest dividends of a regulated
investment company and are attributable to (i) interest on Maryland Municipal
Obligations or (ii) interest on obligations of the United States or an
authority, commission, instrumentality, possession or territory of the United
States, or (b) are attributable to gain realized by the Series from the sale or
exchange of Maryland Municipal Obligations or obligations of the United States
or an authority, commission or instrumentality thereof. To the extent that
distributions by the Series are attributable to sources other than those
described above, such as (x) interest on obligations issued by states other than
Maryland or (y) income from repurchase agreements, such distributions will not
be exempt from Maryland state and local income taxes. In addition, any gain
realized by a shareholder upon a redemption or exchange of Series shares will be
subject to Maryland taxation.
Maryland presently includes in taxable net income items of tax preferences
as defined in the Code. Interest paid on certain private activity bonds
constitutes a tax preference. Accordingly, subject to a threshold amount, 50% of
any distributions by the Series attributable to such private activity bonds will
not be exempt from Maryland state and local income taxes. Interest on
indebtedness incurred (directly or indirectly) by a shareholder of the Series to
purchase or carry shares of the Series will not be deductible for Maryland state
and local income tax purposes to the extent such interest is allocable to
exempt-interest dividends.
In the event the Series fails to qualify as a regulated investment company,
the Series would be subject to corporate Maryland income tax and distributions
generally would be taxable as ordinary income to the shareholders.
Individuals will not be subject to personal property tax on their shares of
the Maryland Series.
MASSACHUSETTS SERIES -- Dividends by the Series to a Massachusetts resident
are not subject to the Massachusetts personal income tax to the extent that the
dividends are attributable to income received by the Series from Massachusetts
Municipal Obligations or direct U.S. Government obligations, and are properly
designated as such. Distributions of capital gain dividends by the Series to a
Massachusetts resident are not subject to the Massachusetts personal income tax
to the extent such distributions are attributable to gain from the sale of
certain Massachusetts Municipal Obligations the gain from which is exempt from
the Massachusetts personal income tax, and the distributions are properly
designated as such. Dividends or distributions by the Series to a Massachusetts
resident that are attributable to most other sources are subject to the
Massachusetts personal income tax. In addition, distributions from the Series
may be included in the net income measure of the corporate excise tax for
corporate shareholders who are subject to the Massachusetts corporate excise
tax. The Series believes that distributions from net realized long-term
securities gains that are taxable by Massachusetts are reportable as long-term
capital gains, irrespective of how long the resident has held shares in the
Series. In 1994, the Massachusetts personal income tax statute was modified to
provide for graduated rates of tax (with some exceptions) on long-term capital
gains based on the length of time the asset has been held since January 1, 1995.
There is as yet no official guidance concerning the treatment under the revised
statute of mutual fund shareholders that receive capital gain distributions.
However, the state Department of Revenue has released "working" draft
regulations providing that the holding period of the mutual fund (rather than
that of its shareholders) will be determinative for purposes of applying the
revised statute to shareholders that receive capital gain distributions, so long
as the mutual fund separately designates each portion of such distributions in a
notice provided to shareholders within 30 days of year-end. A challenge to the
new law is currently pending before the Massachusetts Supreme Judicial Court.
Shareholders should consult their tax advisers with respect to the Massachusetts
personal income tax treatment of capital gain distributions from the Series.
The shares of the Series are not subject to property taxation by
Massachusetts or its political subdivisions.
MICHIGAN SERIES -- Dividends by the Series to a Michigan resident
individual are not subject to the Michigan personal income tax and are excluded
from the taxable income base of the Michigan intangibles tax to the extent that
the dividends are attributable to income received by the Series as interest from
the Series' investment in Michigan Municipal Obligations, obligations of U.S.
possessions, as well as direct U.S. Government obligations. Dividends or
distributions by the Series to a Michigan resident that are attributable to most
other sources are subject to both the Michigan personal income tax and are
included in the taxable income base of the Michigan intangibles tax.
For Michigan personal income and intangibles tax purposes, the
proportionate share of dividends from the Series' net investment income from
other than Michigan Municipal Obligations and from distributions from any
short-term or long-term capital gains will be included in Michigan taxable
income and will be included in the taxable income base of the Michigan
intangibles tax, except that dividends from net investment income or
distributions from capital gains reinvested in Series' shares are exempt from
such tax. Additionally, for Michigan personal income tax purposes, any gain or
loss realized when the shareholder sells or exchanges Series' shares will be
included in Michigan taxable income.
Persons engaging in business activities in Michigan may be subject to the
Michigan Single Business Tax and should consult their tax advisers with respect
to the application of such tax in connection with an investment in the Series.
MINNESOTA SERIES -- Dividends paid by the Series to a Minnesota resident
are not subject to the Minnesota personal income tax to the extent that the
dividends are attributable to income received by the Series as interest from
Minnesota Municipal Obligations, provided such attributable dividends represent
95% or more of the exempt-interest dividends that are paid by the Series.
Moreover, dividends paid by the Series to a Minnesota resident are not subject
to the Minnesota personal income tax to the extent that the dividends are
attributable to income received by the Series as interest from a Series'
investment in direct U.S. Government obligations. Dividends and distributions by
the Series to a Minnesota resident that are attributable to most other sources
are subject to the Minnesota personal income tax. Dividends and distributions
from the Series will be included in the determination of taxable net income of
corporate shareholders who are subject to Minnesota income (franchise) taxes. In
addition, dividends attributable to interest received by the Series that is a
preference item for Federal income tax purposes, whether or not such interest is
from a Minnesota Municipal Obligation, may be subject to the Minnesota
alternative minimum tax.
The shares of the Series are not subject to property taxation by Minnesota
or its political subdivisions.
NORTH CAROLINA SERIES -- Dividends paid by the North Carolina Series to a
North Carolina resident that are attributable to interest on North Carolina
Municipal Obligations or direct U.S. Government obligations are not subject to
the North Carolina income tax. Dividends or distributions attributable to gain
realized by the Series from the sale or exchange of certain North Carolina
Municipal Obligations issued before July 1, 1995 will not be included in the
North Carolina taxable income of a resident individual, trust or estate. Other
dividends or distributions which are attributable to net realized securities
gains and most other sources are subject to the North Carolina income tax at the
applicable rate. Gain realized by a North Carolina resident shareholder from the
sale or exchange of an interest held in the North Carolina Series also will be
subject to the North Carolina income tax at the applicable rate.
The North Carolina intangibles tax previously imposed upon certain
intangible personal property has been repealed, effective as of January 1, 1995.
Accordingly, shares of the North Carolina Series will not be subject to an
intangibles tax in North Carolina.
To the extent that dividends or distributions from the North Carolina
Series increase the surplus of a corporate shareholder required to file a North
Carolina franchise tax return, such increase in the surplus will be subject to
the North Carolina franchise tax.
OHIO SERIES -- Dividends paid by the Series to an Ohio resident, or to a
corporation subject to the Ohio Corporation Franchise Tax, are not subject to
Ohio state and local income taxes or the net income basis of the Ohio
Corporation Franchise Tax to the extent that such dividends are attributable to
income received by the Series as interest from Ohio Municipal Obligations and
direct obligations of the United States, certain Federal agencies and certain
U.S. territories. Dividends or distributions paid by the Series to an Ohio
resident, or to a corporation subject to the Ohio Corporation Franchise Tax,
that are attributable to most other sources are subject to Ohio state and local
income taxes and are includable in the net income basis of the Ohio Corporation
Franchise Tax. The shares of the Series are not subject to property taxation by
the State of Ohio or its political subdivisions, except when held by a "dealer
in intangibles" (generally, a person in the lending or brokerage business), a
decedent's estate, an Ohio insurance company, or a corporation taxed on the net
worth basis of the Ohio Corporation Franchise Tax.
PENNSYLVANIA SERIES -- Dividends by the Series will not be subject to the
Pennsylvania personal income tax to the extent that the dividends are
attributable to interest received by the Series from its investments in
Pennsylvania Municipal Obligations and U.S. Government obligations, including
obligations issued by U.S. possessions. Dividends by the Series will not be
subject to the Philadelphia School District investment income tax to the extent
that the dividends are attributable to interest received by the Series from its
investments in Pennsylvania Municipal Obligations and U.S. obligations,
including obligations issued by U.S. possessions. Dividends or distributions by
the Series to a Pennsylvania resident that are attributable to most other
sources may be subject to the Pennsylvania personal income tax and (for
residents of Philadelphia) to the Philadelphia School District investment net
income tax.
Dividends paid by the Series which are considered "exempt-interest
dividends" for Federal income tax purposes are not subject to the Pennsylvania
Corporate Net Income Tax, but other dividends or distributions paid by the
Series may be subject to that tax. An additional deduction from Pennsylvania
taxable income is permitted for dividends or distributions paid by the Series
attributable to interest received by the Series from its investments in
Pennsylvania Municipal Obligations and U.S. Government obligations to the extent
included in Federal taxable income, but such a deduction is reduced by any
interest on indebtedness incurred to carry the securities and other expenses
incurred in the production of such interest income, including expenses deducted
on the Federal income tax return that would not have been allowed under the Code
if the interest were exempt from Federal income tax. It is the current position
of the Department of Revenue of the Commonwealth of Pennsylvania that Series
shares are considered exempt assets (with a pro rata exclusion based on the
value of the Series attributable to its investments in Pennsylvania Municipal
Obligations and U.S. Government obligations, including obligations issued by
U.S. possessions) for purposes of determining a corporation's capital stock
value subject to the Pennsylvania Capital Stock/Franchise Tax.
Shares of the Series are exempt from Pennsylvania county personal property
taxes to the extent that the portfolio of the Series consists of Pennsylvania
Municipal Obligations and U.S. Government obligations, including obligations
issued by U.S. possessions.
TEXAS SERIES -- All dividends and distributions by the Series to Texas
resident individuals are not subject to taxation by Texas. However, Texas
enacted significant changes to its corporate franchise tax law for reporting
years beginning January 1, 1992 and thereafter. These changes include the
imposition of a tax measured by earned surplus, in addition to the previously
existing tax on a corporation's capital. The earned surplus component of the
Texas franchise tax is applicable only to the extent that it exceeds the taxable
capital component of the franchise tax. For Texas franchise tax purposes, earned
surplus is computed by reference to Federal taxable income. Thus, any amounts
subject to Federal income tax that are payable by the Series to corporations
doing business in or incorporated in Texas generally will be included in the
earned surplus component of the Texas franchise tax, to the extent such earned
surplus is apportioned to Texas. Dividends and other distributions not subject
to Federal income tax generally will be excluded from the calculation of the
earned surplus component of the franchise tax.
Both the capital tax and earned surplus tax components of the Texas
franchise tax are computed by reference to the portion of the corporation's
capital or earned surplus, respectively, based on the corporation's gross
receipts derived from Texas. To the extent dividend and interest payments are
made by a corporation not incorporated in Texas, or another type of entity not
legally domiciled in Texas, such dividends and payments are not considered to be
Texas sourced receipts for franchise tax apportionment purposes.
Effective with franchise tax reports originally due after January 1, 1994
(which are based upon accounting years ending in 1993), other taxable
distributions from the Series to corporations doing business in or incorporated
in Texas (such as the proceeds resulting from net gain upon the sale of Series
bonds) may be allocable to Texas as Texas sourced gross receipts for the earned
surplus component of the franchise tax if: (1) the activities of the recipient
corporation do not have a sufficient unitary connection with that corporation's
other activities conducted within the state giving rise to the underlying sale
of such assets; and (2) the recipient corporation has its commercial domicile in
Texas.
The shares of the Series are not subject to property taxation by Texas or
its political subdivisions.
VIRGINIA SERIES -- Subject to the provisions discussed below, dividends
paid to shareholders and derived from interest on obligations of the
Commonwealth of Virginia or of any political subdivision or instrumentality of
the Commonwealth or derived from interest or dividends on obligations of the
United States excludable from Virginia taxable income under the laws of the
United States, which obligations are issued in the exercise of the borrowing
power of the Commonwealth or the United States and are backed by the full faith
and credit of the Commonwealth or the United States, will be exempt from
Virginia income tax. Dividends paid to shareholders by the Fund and derived from
interest on debt obligations of certain territories and possessions of the
United States (those issued by Puerto Rico, the Virgin Islands and Guam) will be
exempt from Virginia income tax. To the extent any portion of the dividends are
derived from interest on debt obligations other than those described above, such
portion will be subject to Virginia income tax even though it may be excludable
from gross income for Federal income tax purposes.
Generally, dividends distributed to shareholders by the Fund and derived
from capital gains will be taxable to the shareholders. To the extent any
portion of the dividends are derived from taxable interest for Virginia purposes
or from net short-term capital gains, such portion will be taxable to the
shareholders as ordinary income. The character of long-term capital gains
realized and distributed by the Fund will flow through to its shareholders
regardless of how long the shareholders have held their shares. Capital gains
distributed to shareholders derived from Virginia obligations issued pursuant to
special Virginia enabling legislation that provides a specific exemption for
such gains will be exempt from Virginia income tax. Generally, interest on
indebtedness incurred by shareholders to purchase or carry shares of the Fund
will not be deductible for Virginia income tax purposes.
As a regulated investment company, the Fund may distribute dividends that
are exempt from Virginia income tax to its shareholders if the Fund satisfies
all requirements for conduit treatment under Federal law and, at the close of
each quarter of its taxable year, at least 50% of the value of its total assets
consists of obligations the interest on which is exempt from taxation under
Federal law. If the Fund fails to qualify, no part of its dividends will be
exempt from Virginia income tax.
When taxable income of a regulated investment company is commingled with
exempt income, all distributions of the income are presumed taxable to the
shareholders unless the portion of income that is exempt from Virginia income
tax can be determined with reasonable certainty and substantiated. Generally,
this determination must be made for each distribution to each shareholder. The
Virginia Department of Taxation has adopted a policy, however, of allowing
shareholders to exclude from Virginia taxable income the exempt portion of
distributions from a regulated investment company even though the shareholders
receive distributions monthly but receive reports substantiating the exempt
portion of such distributions at less frequent intervals. Accordingly, if the
Fund receives taxable income, the Fund must determine the portion of income that
is exempt from Virginia income tax and provide such information to the
shareholders in accordance with the foregoing so that the shareholders may
exclude from Virginia taxable income the exempt portion of the distribution from
the Fund.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of shares may be
calculated on several bases, including current yield, tax equivalent yield,
average annual total return and/or total return.
These total return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made by the
Fund during the measuring period were reinvested in shares of the same Class.
These figures also take into account any applicable service and distribution
fees. As a result, at any given time, the performance of Class B and Class C
should be expected to be lower than that of Class A. Performance for each Class
will be calculated separately.
Current yield refers to each Series' annualized net investment income per
share over a 30-day period, expressed as a percentage of the maximum offering
price per share in the case of Class A or the net asset value in the case of
Class B or Class C at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day period,
computed in accordance with regulatory requirements, is compounded by assuming
that it is reinvested at a constant rate over a six-month period. An identical
result is then assumed to have occurred during a second six-month period which,
when added to the result for the first six months, provides an "annualized"
yield for an entire one-year period. Calculations of each Series' current yield
may reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield which,
after being taxed at a stated rate, would be equivalent to a stated current
yield calculated as described above.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in a Series of the Fund was purchased
with an initial payment of $1,000 and that the investment was redeemed at the
end of a stated period of time, after giving effect to the reinvestment of
dividends and distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis, would result in
the redeemable value of the investment at the end of the period. Advertisements
of each Series' performance will include each Series' average annual total
return for one, five and ten year periods, or for shorter periods depending upon
the length of time during which each Series has operated.
Total return is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Total return generally is expressed as a
percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value (maximum
offering price in the case of Class A) per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may include
the value of a hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return. Total return also may be
calculated by using the net asset value per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the period
for Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or Class C shares. Calculations based on the net asset
value per share do not reflect the deduction of the applicable sales charge on
Class A shares which, if reflected, would reduce the performance quoted.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc., Moody's Bond Survey Bond Index, Lehman Brothers Municipal Bond Index,
Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Trust Agreement") dated September 19, 1986. Prior to July 2, 1990,
the Fund's name was Premier State Tax Exempt Bond Fund. The Fund is authorized
to issue an unlimited number of shares of beneficial interest, par value $.001
per share. The Fund's shares are classified into three classes _ Class A, Class
B and Class C. Each share has one vote and shareholders will vote in the
aggregate and not by class except as otherwise required by law or when class
voting is permitted by the Fund's Board. Only holders of Class B or Class C
shares, as the case may be, will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Fund, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Fund intends to conduct its operations
in such a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund. As discussed under "Management of the
Fund" in the Statement of Additional Information, the Fund ordinarily will not
hold shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
To date, the Trustees have authorized the creation of twelve Series of
shares. All consideration received by the Fund for shares of one of the Series
and all assets in which such consideration is invested, will belong to that
Series (subject only to the rights of creditors of the Fund) and will be subject
to the liabilities related thereto. The income attributable to, and the expenses
of, one Series would be treated separately from those of the other Series. The
Fund has the ability to create, from time to time, new series without
shareholder approval.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144.
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- Each Series is permitted to borrow to the extent
permitted under 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. However, each Series
currently intends to borrow money only for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of such Series' total
assets (including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the value of a Series' total assets, such
Series will not make any additional investments.
SHORT-SELLING -- Each Series may make short sales of securities. In these
transactions, a Series sells a security it does not own in anticipation of a
decline in the market value of that security. To complete the transaction, the
Series must borrow the security to make delivery to the buyer. The Series is
obligated to replace the security borrowed by purchasing it 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 Series, 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 a Series' net assets. A Series 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 such Series' net assets. A Series may not make a
short sale which results in the Series having sold short in the aggregate more
than 5% of the outstanding securities of any class of an issuer.
Each Series also may make short sales "against the box," in which such
Series enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will a Series have more than 15% of
the value of its net assets in deposits on short sales against the box.
USE OF DERIVATIVES -- Each Series may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and Risks
- -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management Policies
- -- Management Policies -- Derivatives" in the Statement of Additional
Information.
Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in Derivatives could have a
large potential impact on the Series' performance.
If a Series invests in Derivatives at inappropriate times or judges the
market conditions incorrectly, such investments may lower the Series' return or
result in a loss. A Series also could experience losses if it 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 neither the Fund nor any Series is a commodity pool, Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which a Series can invest in certain Derivatives. Each
Series may invest in futures contracts and options with respect thereto for
hedging purposes without limit. However, each Series may 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 bona fide hedging purposes, exceed 5% of the liquidation
value of the Series' 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.
Each Series may invest up to 5% of its assets, represented by the premium
paid, in the purchase of call and put options. Each Series may write (i.e.,
sell) covered call and put option contracts to the extent of 20% of the value of
its net assets at the time such option contracts are written. When required by
the Securities and Exchange Commission, a Series will set aside permissible
liquid assets in a segregated account to cover its obligations relating to its
transactions in Derivatives. To maintain this required cover, the Series may
have to sell portfolio securities at disadvantageous prices or times since it
may not be possible to liquidate a Derivative position at a reasonable price.
LENDING PORTFOLIO SECURITIES -- Each Series may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Series continues to be entitled
to payments in amounts equal to the interest or other distributions payable on
the loaned securities which affords the Series 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 such Series' total
assets, and the Series 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 at any time upon specified
notice. The Series might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with the
Series.
FORWARD COMMITMENTS -- Each Series may purchase Municipal Obligations and
other securities on a forward commitment or when-issued basis, which means
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such securities
only with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. A
segregated account of the Fund consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the commitments will be established and
maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- Each Series 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 Series to invest fluctuating amounts at varying rates of
interest, pursuant to direct arrangements between the Series, 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
will meet the quality criteria established for the purchase of Municipal
Obligations.
TAX EXEMPT PARTICIPATION INTERESTS -- Each Series 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 Series an undivided interest in the Municipal
Obligation in the proportion that the Series' 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 Series' Board has determined meets the prescribed
quality standards for banks set forth below, or the payment obligation otherwise
will be collateralized by U.S. Government securities. For certain participation
interests, the Series will have the right to demand payment, on not more than
seven days' notice, for all or any part of the Series' participation interest in
the Municipal Obligation, plus accrued interest. As to these instruments, each
Series intends to exercise its right to demand payment only upon a default under
the terms of the Municipal Obligation, as needed to provide liquidity to meet
redemptions, or to maintain or improve the quality of its investment portfolio.
TENDER OPTION BONDS -- Each Series may purchase tender option bonds. A
tender option bond is a Municipal Obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax exempt rate. The
Dreyfus Corporation, on behalf of the Fund, will consider on an ongoing basis
the creditworthiness of the issuer of the underlying Municipal 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.
CUSTODIAL RECEIPTS -- Each Series may purchase custodial receipts
representing the right to receive certain future principal and interest payments
on Municipal Obligations which underlie the custodial receipts. A number of
different arrangements are possible. In a typical custodial receipt arrangement,
an issuer or a third party owner of Municipal Obligations deposits such
obligations with a custodian in exchange for two classes of custodial receipts.
The two classes have different characteristics, but, in each case, payments on
the two classes are based on payments received on the underlying Municipal
Obligations. One class has the characteristics of a typical auction rate
security, where at specified intervals its interest rate is adjusted, and
ownership changes, based on an auction mechanism. This class's interest rate
generally is expected to be below the coupon rate of the underlying Municipal
Obligations and generally is at a level comparable to that of a Municipal
Obligation of similar quality and having a maturity equal to the period between
interest rate adjustments. The second class bears interest at a rate that
exceeds the interest rate typically borne by a security of comparable quality
and maturity; this rate also is adjusted, but in this case inversely to changes
in the rate of interest of the first class. If the interest rate on the first
class exceeds the coupon rate of the underlying Municipal Obligations, its
interest rate will exceed the rate paid on the second class. In no event will
the aggregate interest paid with respect to the two classes exceed the interest
paid by the underlying Municipal Obligations. The value of the second class and
similar securities should be expected to fluctuate more than the value of a
Municipal Obligation of comparable quality and maturity and their purchase by a
Series should increase the volatility of its net asset value and, thus, its
price per share. These custodial receipts are sold in private placements. Each
Series 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
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with stand-by commitments will be
taxable. Each Series also may acquire call options on specific Municipal
Obligations. A Series generally would purchase these call options to protect the
Series 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 Series of a call option that it owns on a specific
Municipal Obligation could result in the receipt of taxable income by the
Series.
ZERO COUPON SECURITIES -- Each Series 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 -- Each Series may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
Such securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, and repurchase agreements providing for settlement in more than seven
days after notice. As to these securities, the Series is subject to a risk that
should the Series desire to sell them when a ready buyer is not available at a
price the Fund deems representative of their value, the value of the Series' net
assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other than
for temporary defensive purposes (but not to exceed 20% of the value of a
Series' net assets) or for temporary defensive purposes, each Series may invest
in taxable short-term investments ("Taxable Investments") consisting of: notes
of issuers having, at the time of purchase, a quality rating within the two
highest grades of Moody's, S&P or Fitch; obligations of the U.S. Government, its
agencies or instrumentalities; commercial paper rated not lower than P-1 by
Moody's, A-1 by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic
banks, including foreign branches of domestic banks, with assets of one billion
dollars or more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the foregoing.
Dividends paid by a Series that are attributable to income earned by the Series
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 a Series' net assets be invested in Taxable
Investments. When a Series has adopted a temporary defensive position, including
when acceptable State Municipal Obligations are unavailable for investment by a
Series, in excess of 35% of a Series' net assets may be invested in securities
that are not exempt from Federal and, where applicable, State personal income
taxes. Under normal market conditions, each Series anticipates that not more
than 5% of the value of its total assets will be invested in any one category of
Taxable Investments. Taxable Investments are more fully described in the
Statement of Additional Information, to which reference hereby is made. RATINGS
- -- Bonds rated Ba by Moody's are judged to have speculative elements; their
future cannot be considered as well assured and often the protection of interest
and principal payments may be very moderate. Bonds rated BB by S&P are regarded
as having predominantly speculative characteristics and, while such obligations
have less near-term vulnerability to default than other speculative grade debt,
they face major ongoing uncertainties or exposure to adverse business, financial
or economic conditions which could lead to inadequate capacity to meet timely
interest and principal payments. Bonds rated BB by Fitch are considered
speculative and the payment of principal and interest may be affected at any
time by adverse economic changes. Bonds rated C by Moody's are regarded as
having extremely poor prospects of ever attaining any real investment standing.
Bonds rated D by S&P are in default and the payment of interest and/or repayment
of principal is in arrears. Bonds rated DDD, DD or D by Fitch are in actual or
imminent default, are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the issuer;
DDD represents the highest potential for recovery of such bonds; and D
represents the lowest potential for recovery. Such bonds, though high yielding,
are characterized by great risk. See "Appendix B" in the Statement of Additional
Information for a general description of Moody's, S&P and Fitch ratings of
Municipal Obligations.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these bonds. Therefore,
although these ratings may be an initial criterion for selection of portfolio
investments, The Dreyfus Corporation also will evaluate these securities and the
ability of the issuers of such securities to pay interest and principal. The
Fund's ability to achieve its investment objective may be more dependent on The
Dreyfus Corporation's credit analysis than might be the case for a series that
invested in higher rated securities.
The average distribution of investments (at value) in Municipal Obligations
by ratings for the fiscal year ended April 30, 1996, computed on a monthly
basis, for each Series indicated was as follows:
<TABLE>
<CAPTION>
OHIO PENNSYLVANIA
FITCH OR MOODY'S OR S & P SERIES SERIES
------------- ------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
AAA Aaa AAA 38.8% 43.1%
AA Aa AA 8.3 9.1
A A A 23.4 13.6
BBB Baa BBB 18.3 19.8
BB Ba BB 6.7 .8
F-1 MIG1/P-1 SP-1/A-1 1.0 1.8
Not Rated Not Rated Not Rated 3.5(1) 11.8(2)
-------- --------
100.0% 100.0%
======== ========
- -----------------------------
(1) Included under the Not Rated category are securities
comprising 3.5% of the Ohio Series' market value which, while not rated,
have been determined by The Dreyfus Corporation to be of comparable
quality to securities in the following rating categories: Aaa/A AA (1.1%),
A/A (.3%), Baa/BBB (1.8%) and B (.3%).
(2) Included under the Not Rated category are securities
comprising 11.8% of the Pennsylvania Series' market value which, while
not rated, have been determined by The Dreyfus Corporation to be of
comparable quality to securities in the following rating categories:
Aaa/AAA (.9%), A/A (1.7%), Baa/BBB (4.0%), Ba/BB (3.1%) and B (2.1%).
</TABLE>
The actual distribution of the Series' investments by ratings on any given
date will vary. In addition, the distribution of the Series' investments by
ratings as set forth above should not be considered as representative of the
Series' future portfolio composition.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
SERIES'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE SERIES'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SERIES. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
PSTEBP090396
<PAGE>
- -----------------------------------------------------------------------------
PREMIER NEW YORK MUNICIPAL BOND FUND
PROSPECTUS APRIL 1, 1996
AS REVISED DECEMBER 1, 1996
Registration Mark
- -----------------------------------------------------------------------------
Premier New York Municipal Bond Fund (the "Fund") is an open-end,
non-diversified, management investment company, known as a mutual fund. The
Fund's investment objective is to maximize current income exempt from Federal,
New York State and New York City income taxes to the extent consistent with the
preservation of capital.
By this Prospectus, the Fund is offering three Classes of shares -- Class
A, Class B and Class C -- which are described herein. See "Alternative Purchase
Methods."
The Fund provides free redemption checks with respect to Class A, which you
can use in amounts of $500 or more for cash or to pay bills. You continue to
earn income on the amount of the check until it clears. You can purchase or
redeem all Classes of shares by telephone using the TELETRANSFER Privilege.
The Dreyfus Corporation professionally manages the Fund's portfolio.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information, dated April 1, 1996, which may be
revised from time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to some investors. It
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Securities and Exchange Commission maintains a Web site
(http://www.sec. gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
For a free copy of the Statement of Additional Information, write to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
1-800-554-4611. When telephoning, ask for Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Fee Table.......................................... 3
Condensed Financial Information.................... 4
Alternative Purchase Methods....................... 5
Description of the Fund............................ 6
Management of the Fund............................. 11
How to Buy Shares.................................. 12
Shareholder Services............................... 16
How to Redeem Shares............................... 20
Distribution Plan and Shareholder Services Plan.... 25
Dividends, Distributions and Taxes................. 25
Performance Information............................ 27
General Information................................ 29
Appendix........................................... 30
<TABLE>
<CAPTION>
FEE TABLE
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)....................... 4.50% .None .None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)........ None* 4.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees......................... .55% .55% .55%
12b-1 Fees.............................. .None .50% .75%
Other Expenses........................... .39% .41% .44%
Total Fund Operating Expenses........... .94% 1.46% 1.74%
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) except where noted, redemption
at the end of each time period: CLASS A CLASS B CLASS C
1 Year............................ $ 54 $55/$15** $28/$18**
3 Years........................... $ 74 $76/$46** $ 55
5 Years........................... $ 95 $100/$80** $ 94
10 Years.......................... $155 $148*** $205
* A contingent deferred sales charge of 1.00%
may be assessed on certain redemptions of Class A shares purchased
without an initial sales charge as part of an investment of $1 million
or more.
** Assuming no redemption of shares.
*** Ten year figure assumes conversion of Class B shares to Class A shares
at the end of the sixth year following the date of purchase.
</TABLE>
- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS
THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding the costs
and expenses borne by the Fund and investors, the payment of which will reduce
investors' annual return. Other Expenses for Class C are based on estimated
amounts for the current fiscal year. Long-term investors in Class B or Class C
shares could pay more in 12b-1 fees than the economic equivalent of paying a
front-end sales charge. The information in the foregoing table does not reflect
any fee waivers or expense reimbursement arrangements that may be in effect.
Certain Service Agents (as defined below) may charge their clients direct fees
for effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Shares" and
"Distribution Plan and Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and related notes
are included in the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES
----------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------------------------------
PER SHARE DATA: 1987(1) 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.50 $11.88 $12.54 $13.08 $12.88 $13.56 $13.97 $14.97 $13.01
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .85 .91 .95 .94 .89 .86 .80 .75 .75
Net realized and unrealized gain
(loss) on investments (1.62) .66 .54 (.20) .68 .56 1.00 (1.86) 1.92
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
Investment Operations (.77) 1.57 1.49 .74 1.57 1.42 1.80 (1.11) 2.67
------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions:
Dividends from investment
income-net......... (.85) (.91) (.95) (.94) (.89) (.86) (.80) (.75) (.75)
------ ------ ------ ------ ------ ------ ------ ------ ------
Dividends from net realized gain
on investments..... -- -- -- -- (.15) -- (.10) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (.85) (.91) (.95) (.94) (.89) (1.01) (.80) (.85) (.75)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $11.88 $12.54 $13.08 $12.88 $13.56 $13.97 $14.97 $13.01 $14.93
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) (6.28%)(3) 13.52% 12.23% 5.93% 12.63% 10.79% 13.16% (7.76%) 20.93%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets. -- -- -- .06% .52% .72% .78% .89% .94%
Ratio of net investment income
to average net assets 7.42%(3) 7.18% 7.11% 7.19% 6.69% 6.16% 5.41% 5.25% 5.27%
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation 1.50%(3) 1.50% 1.50% 1.34% .60% .34% .18% .04% ._
Portfolio Turnover Rate 17.00%(4) 47.00% 21.67% 7.02% 12.45% 12.55% 19.55% 31.76% 74.11%
Net Assets, end of year
(000's omitted).... $963 $2,202 $11,800 $39,748 $70,333 $108,247 $164,046 $137,978 $146,207
(1) From December 31, 1986 (commencement of operations) to November 30, 1987.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
--------------------------------- ---------------------------
Year Ended Period Ended
November 30, November 30,
--------------------------------- ---------------------------
1993(1) 1994 1995 1995(2)
------- ----- ----- --------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year. $14.04 $14.97 $13.02 $14.61
------- ----- ----- --------
INVESTMENT OPERATIONS:
Investment income-net.............. .62 .67 .67 .14
Net realized and unrealized gain (loss) on investments .93 (1.85) 1.91 .32
------- ----- ----- --------
TOTAL FROM INVESTMENT OPERATIONS... 1.55 (1.18) 2.58 .46
------- ----- ----- --------
DISTRIBUTIONS:
Dividends from investment income-net (.62) (.67) (.67) (.14)
Dividends from net realized gain on investments -- (.10) -- --
------- ----- ----- --------
TOTAL DISTRIBUTIONS................ (.62) (.77) (.67) (.14)
------- ----- ----- --------
Net Asset Value, end of year....... $14.97 $13.02 $14.93 $14.93
========= ======== ======== ==============
TOTAL INVESTMENT RETURN(3)........... 12.78%(4) (8.20)% 20.20% 14.19%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.34%(4) 1.44% 1.46% 1.74%(4)
Ratio of net investment income
to average net assets.............. 4.41%(4) 4.70% 4.72% 4.00%(4)
Decrease reflected in above expense ratios
due to undertakings by
The Dreyfus Corporation............ .16%(4) .04% -- --
Portfolio Turnover Rate............ 19.55%(5) 31.76% 74.11% 74.11%(5)
Net Assets, end of year (000's omitted) $45,101 $52,970 $66,873 $1
(1) From January 15, 1993 (commencement of initial offering) to November 30, 1993.
(2) From September 11, 1995 (commencement of initial offering)to November 30, 1995.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
Further information about the Fund's performance is contained in its annual
report, which may be obtained without charge by writing to the address or
calling the number set forth on the cover page of this Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you three methods of purchasing Fund shares. You may choose
the Class of shares that best suits your needs, given the amount of your
purchase, the length of time you expect to hold your shares and any other
relevant circumstances. Each Fund share represents an identical pro rata
interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a maximum initial
sales charge of 4.50% of the public offering price imposed at the time of
purchase. The initial sales charge may be reduced or waived for certain
purchases. See "How to Buy Shares _ Class A Shares." These shares are subject to
an annual service fee at the rate of .25 of 1% of the value of the average daily
net assets of Class A. See "Distribution Plan and Shareholder Services Plan _
Shareholder Services Plan."
Class B shares are sold at net asset value per share with no initial sales
charge at the time of purchase; as a result, the entire purchase price is
immediately invested in the Fund. Class B shares are subject to a maximum 4%
contingent deferred sales charge ("CDSC"), which is assessed if you redeem Class
B shares within the first six years of their purchase. See "How to Buy Shares _
Class B Shares" and "How to Redeem Shares _ Contingent Deferred Sales Charge --
Class B Shares." These shares also are subject to an annual service fee at the
rate of .25 of 1% of the value of the average daily net assets of Class B. In
addition, Class B shares are subject to an annual distribution fee at the rate
of .50 of 1% of the value of the average daily net assets of Class B. See
"Distribution Plan and Shareholder Services Plan." The distribution fee paid by
Class B will cause such Class to have a higher expense ratio and to pay lower
dividends than Class A. Approximately six years after the date of purchase,
Class B shares automatically will convert to Class A shares, based on the
relative net asset values for shares of each such Class, and will no longer be
subject to the distribution fee. Class B shares that have been acquired through
the reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total Class B shares
not acquired through the reinvestment of dividends and distributions.
Class C shares are sold at net asset value per share with no initial sales
charge at the time of purchase; as a result, the entire purchase price is
immediately invested in the Fund. Class C shares are subject to a 1% CDSC, which
is assessed only if you redeem Class C shares within one year of purchase. See
"How to Buy Shares -- Class C Shares" and "How to Redeem Shares -- Contingent
Deferred Sales Charge." These shares also are subject to an annual service fee
at the rate of .25 of 1%, and an annual distribution fee at the rate of .75 of
1%, of the value of the average daily net assets of Class C. See "Distribution
Plan and Shareholder Services Plan." The distribution fee paid by Class C will
cause such Class to have a higher expense ratio and to pay lower dividends than
Class A.
The decision as to which Class of shares is more beneficial to you depends
on the amount and the intended length of your investment. You should consider
whether, during the anticipated life of your investment in the Fund, the
accumulated distribution fee and CDSC, if any, on Class B or Class C shares
would be less than the initial shares charge on Class A shares purchased at the
same time, and to what extent, if any, such differential would be offset by the
return of Class A. Additionally, investors qualifying for reduced initial sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A shares because the accumulated continuing
distribution fees on Class B or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment. Finally, you should
consider the effect of the CDSC period and any conversion rights of the Classes
in the context of your own investment time frame. For example, while Class C
shares have a shorter CDSC period than Class B shares, Class C shares do not
have a conversion feature and, therefore, are subject to an ongoing distribution
fee. Thus, Class B shares may be more attractive than Class C shares to
investors with long term investment outlooks. Generally, Class A shares may be
more appropriate for investors who invest $1,000,000 or more in Fund shares, and
for investors who invest between $100,000 and $999,999 in Fund shares with long
term investment outlooks. Class A shares will not be appropriate for investors
who invest less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize current income exempt from
Federal, New York State and New York City income taxes to the extent consistent
with the preservation of capital. To accomplish its investment objective, the
Fund invests primarily in the debt securities of the State of New York, its
political subdivisions, authorities and corporations, the interest from which
is, in the opinion of bond counsel to the issuer, exempt from Federal, New York
State and New York City income taxes (collectively, "New York Municipal
Obligations"). To the extent acceptable New York Municipal Obligations are at
any time unavailable for investment by the Fund, the Fund will invest, for
temporary defensive purposes, primarily in other debt securities the interest
from which is, in the opinion of bond counsel to the issuer, exempt from
Federal, but not New York State and New York City, income tax. The Fund's
investment objective cannot be changed without approval by the holders of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Fund's outstanding voting shares. There can be no assurance
that the Fund's investment objective will be achieved.
MUNICIPAL OBLIGATIONS
Debt securities the interest from which is, in the opinion of bond counsel
to the issuer, exempt from Federal income tax ("Municipal Obligations")
generally include debt obligations issued to obtain funds for various public
purposes as well as certain industrial development bonds issued by or on behalf
of public authorities. Municipal Obligations are classified as general
obligation bonds, revenue bonds and notes. General obligation bonds are secured
by the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from the
general taxing power. Tax exempt industrial development bonds, in most cases,
are revenue bonds that do not carry the pledge of the credit of the issuing
municipality, but generally are guaranteed by the corporate entity on whose
behalf they are issued. Notes are short-term instruments which are obligations
of the issuing municipalities or agencies and are sold in anticipation of a bond
sale, collection of taxes or receipt of other revenues. Municipal Obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities. Municipal
Obligations bear fixed, floating or variable rates of interest, which are
determined in some instances by formulas under which the Municipal Obligation's
interest rate will change directly or inversely to changes in interest rates or
an index, or multiples thereof, in many cases subject to a maximum and minimum.
Certain Municipal Obligations are subject to redemption at a date earlier than
their stated maturity pursuant to call options, which may be separated from the
related Municipal Obligation and purchased and sold separately.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least 80% of
the value of its net assets (except when maintaining a temporary defensive
position) in Municipal Obligations. At least 65% of the value of the Fund's net
assets (except when maintaining a temporary defensive position) will be invested
in bonds, debentures and other debt instruments. At least 65% of the value of
the Fund's net assets will be invested in New York Municipal Obligations and the
remainder may be invested in securities that are not New York Municipal
Obligations and therefore may be subject to New York State and New York City
income taxes. See "Investment Considerations and Risks _ Investing in New York
Municipal Obligations" below, and "Dividends, Distributions and Taxes."
At least 70% of the value of the Fund's net assets must consist of
Municipal Obligations which, in the case of bonds, are rated no lower than Baa
by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group, a division of The McGraw-HIll Companies, Inc. ("S&P"), or Fitch
Investors Service, L.P. ("Fitch"). The Fund may invest up to 30% of the value of
its net assets in Municipal Obligations which, in the case of bonds, are rated
lower than Baa by Moody's and BBB by S&P and Fitch and as low as the lowest
rating assigned by Moody's, S&P or Fitch. The Fund may invest in short-term
Municipal Obligations which are rated in the two highest rating categories by
Moody's, S&P or Fitch. See "Appendix B" in the Statement of Additional
Information. Municipal Obligations rated Baa by Moody's or BBB by S&P or Fitch
are considered investment grade obligations; those rated Baa by Moody's are
considered medium grade obligations which lack outstanding investment
characteristics and have speculative characteristics, while those rated BBB by
S&P and Fitch are regarded as having an adequate capacity to pay principal and
interest. Investments rated Ba or lower by Moody's and BB or lower by S&P and
Fitch ordinarily provide higher yields but involve greater risk because of their
speculative characteristics. The Fund may invest in Municipal Obligations rated
C by Moody's or D by S&P or Fitch, which is the lowest rating assigned by such
rating organizations and indicates that the Municipal Obligation is in default
and interest and/or repayment of principal is in arrears. See "Investment
Considerations and Risks _ Lower Rated Bonds" below for a further discussion of
certain risks. The Fund also may invest in securities which, while not rated,
are determined by The Dreyfus Corporation to be of comparable quality to the
rated securities in which the Fund may invest; for purposes of the 70%
requirement described in this paragraph, such unrated securities shall be deemed
to have the rating so determined. The Fund also may invest in Taxable
Investments of the quality described under "Appendix -- Certain Portfolio
Securities -- Taxable Investments." Under normal market conditions, the weighted
average maturity of the Fund's portfolio is expected to exceed ten years.
From time to time, the Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), issued after August 7, 1986, while exempt from Federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a
regulated investment company receives such interest, a proportionate share of
any exempt-interest dividend paid by the investment company may be treated as
such a preference item to shareholders. The Fund may invest without limitation
in such Municipal Obligations if The Dreyfus Corporation determines that their
purchase is consistent with the Fund's investment objective. See "Investment
Considerations and Risks" below.
The Fund's annual portfolio turnover rate is not expected to exceed 100%.
The Fund may engage in various investment techniques, such as options and
futures transactions, lending portfolio securities and short-selling. Use of
certain of these techniques may give rise to taxable income. See also
"Investment Considerations and Risks," "Appendix _ Investment Techniques" and
"Dividends, Distributions and Taxes" below and "Investment Objective and
Management Policies _ Management Policies" in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments which
promise a stable stream of income, the prices of such securities are inversely
affected by changes in interest rates and, therefore, are subject to the risk of
market price fluctuations. Certain securities that may be purchased by the Fund,
such as those with interest rates that fluctuate directly or indirectly based
upon multiples of a stated index, are designed to be highly sensitive to changes
in interest rates and can subject the holders thereof to extreme reductions of
yield and possibly loss of principal. The values of fixed-income securities also
may be affected by changes in the credit rating or financial condition of the
issuing entities. Once the rating of a portfolio security has been changed, the
Fund will consider all circumstances deemed relevant in determining whether to
hold the security. The Fund's net asset value generally will not be stable and
should fluctuate based upon changes in the value of the Fund's portfolio
securities. Securities in which the Fund invests may earn a higher level of
current income than certain shorter-term or higher quality securities which
generally have greater liquidity, less market risk and less fluctuation in
market value.
INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS -- You should consider
carefully the special risks inherent in the Fund's investment in New York
Municipal Obligations. These risks result from the financial condition of New
York State, certain of its public bodies and municipalities, and New York City.
Beginning in early 1975, New York State, New York City and other State entities
faced serious financial difficulties which jeopardized the credit standing and
impaired the borrowing abilities of such entities and contributed to high
interest rates on, and lower market prices for, debt obligations issued by them.
A recurrence of such financial difficulties or a failure of certain financial
recovery programs could result in defaults or declines in the market values of
various New York Municipal Obligations in which the Fund may invest. If there
should be a default or other financial crisis relating to New York State, New
York City, a State or City agency, or a State municipality, the market value and
marketability of outstanding New York Municipal Obligations in the Fund's
portfolio and the interest income to the Fund could be adversely affected.
Moreover, the national recession and the significant slowdown in the New York
and regional economy in the early 1990's added substantial uncertainty to
estimates of the State's tax revenues, which, in part, caused the State to incur
cash-basis operating deficits in the General Fund and issue deficit notes during
the fiscal periods 1989 through 1992. The State's financial operations improved,
however, during the 1993 and 1994 fiscal years. After reflecting a 1993 year-end
deposit to the refund reserve account of $671 million, reported 1993 General
Fund receipts were $45 million higher than originally projected in April 1992.
The State completed the 1994 fiscal year with an operating surplus of $914
million. The State reported a General Fund operating deficit of $1.426 billion
for the 1995 fiscal year. There can be no assurance that New York will not face
substantial potential budget gaps in future years. In January 1992, Moody's
lowered from A to Baa1 the ratings on certain appropriation-backed debt of New
York State and its agencies. The State's general obligation, State-guaranteed
and New York State Local Government Assistance Corporation bonds continue to be
rated A by Moody's. In January 1992, S&P lowered from A to A- its ratings of New
York State general obligation bonds and stated that it continued to assess the
ratings outlook as negative. The ratings of various agency debt, State moral
obligations, contractual obligations, lease purchase obligations and State
guarantees also were lowered. In February 1991, Moody's lowered its rating on
New York City's general obligation bonds from A to Baa1 and in July 1995, S&P
lowered its rating on such bonds from A- to BBB+. The rating changes reflected
the rating agencies' concerns about the financial condition of New York State
and City, the heavy debt load of the State and City, and economic uncertainties
in the region. You should obtain and review a copy of the Statement of
Additional Information which more fully sets forth these and other risk factors.
INVESTING IN MUNICIPAL OBLIGATIONS -- The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in such
a way that an economic, business or political development or change affecting
one such security also would affect the other securities; for example,
securities the interest upon which is paid from revenues of similar types of
projects. As a result, the Fund may be subject to greater risk as compared to a
fund that does not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may invest
may contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase obligation that is
unrated, The Dreyfus Corporation will consider, on an ongoing basis, a number of
factors including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Fund and thus
reduce available yield. Shareholders should consult their tax advisers
concerning the effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax exemption for interest
on Municipal Obligations may be introduced in the future. If any such proposal
were enacted that would reduce the availability of Municipal Obligations for
investment by the Fund so as to adversely affect Fund shareholders, the Fund
would reevaluate its investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal Obligation as
taxable, the Fund would treat such security as a permissible Taxable Investment
within the applicable limits set forth herein.
ZERO-COUPON SECURITIES -- Federal income tax law requires the holder of a
zero coupon security or of certain pay-in-kind bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To maintain
its qualification as a regulated investment company and avoid liability for
Federal income taxes, the Fund may be required to distribute such income accrued
with respect to these securities and may have to dispose of portfolio securities
under disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.
LOWER RATED BONDS -- The Fund may invest up to 30% of its net assets in
higher yielding (and, therefore, higher risk) debt securities, such as those
rated Ba by Moody's or BB by S&P or Fitch or as low as the lowest rating
assigned by Moody's, S&P or Fitch (commonly known as junk bonds). They may be
subject to certain risks with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher rated fixed-income
securities. The retail secondary market for these securities may be less liquid
than that of higher rated securities; adverse conditions could make it difficult
at times for the Fund to sell certain securities or could result in lower prices
than those used in calculating the Fund's net asset value. See "Appendix --
Certain Portfolio Securities -- Ratings."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Fund may use include options and
futures. While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix_Investment Techniques_Use of Derivatives" below and
"Investment Objective and Management Policies_Management Policies_Derivatives"
in the Statement of Additional Information.
NON-DIVERSIFIED STATUS -- The classification of the Fund as a
"non-diversified" investment company means that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not limited
by the 1940 Act. A "diversified" investment company is required by the 1940 Act
generally, with respect to 75% of its total assets, to invest not more than 5%
of such assets in the securities of a single issuer. Since a relatively high
percentage of the Fund's assets may be invested in the obligations of a limited
number of issuers, the Fund's portfolio may be more sensitive to changes in the
market value of a single issuer. However, to meet Federal tax requirements, at
the close of each quarter the Fund may not have more than 25% of its total
assets invested in any one issuer and, with respect to 50% of total assets, not
more than 5% of its total assets invested in any one issuer. These limitations
do not apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. However, if such other investment companies desire to invest in, or
dispose of, the same securities as the Fund, avail able investments or
opportunities for sales will be allocated equitably to each investment company.
In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Fund or the price paid or received by the
Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's investment
adviser. The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of September 30, 1996, The Dreyfus Corporation managed or administered
approximately $81 billion in assets for more than 1.7 million investor accounts
nationwide.
The Dreyfus Corporation supervises and assists in the overall management of
the Fund's affairs under a Management Agreement with the Fund, subject to the
authority of the Fund's Board in accordance with Massachusetts law. The Fund's
primary portfolio manager is Monica S. Wieboldt. She has held that position
since January 1996 and has been employed by The Dreyfus Corporation since
November 1983. The Fund's other portfolio managers are identified in the
Statement of Additional Information. The Dreyfus Corporation also provides
research services for the Fund and for other funds advised by The Dreyfus
Corporation through a professional staff of portfolio managers and securities
analysts.
Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Federal Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon is
among the twenty-five largest bank holding companies in the United States based
on total assets. Mellon's principal wholly-owned subsidiaries are Mellon Bank,
N.A., Mellon Bank (DE) National Association, Mellon Bank (MD), The Boston
Company, Inc. AFCO Credit Corporation and a number of companies known as Mellon
Financial Services Corporations. Through its subsidiaries, including The Dreyfus
Corporation, Mellon managed more than $220 billion in assets as of June 30,
1996, including approximately $83 billion in proprietary mutual fund assets. As
of June 30, 1996, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for more than $876
billion in assets including approximately $57 billion in mutual fund assets.
For the fiscal year ended November 30, 1995, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of .55 of 1% of the
value of the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the overall
expense ratio of the Fund and increasing yield to investors. The Fund will not
pay The Dreyfus Corporation at a later time for any amounts it may waive, nor
will the Fund reimburse The Dreyfus Corporation for any amounts it may assume.
In allocating brokerage transactions for the Fund, The Dreyfus Corporation
seeks to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among other
things, the receipt of research services and/or the sale of shares of the Fund
or other funds managed, advised or administered by The Dreyfus Corporation as
factors in the selection of broker-dealers to execute portfolio transactions for
the Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation may pay the Fund's distributor for shareholder
services from The Dreyfus Corporation's own assets, including past profits but
not including the management fee paid by the Fund. The Fund's distributor may
use part or all of such payments to pay Service Agents in respect of these
services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
GENERAL -- Fund shares may be purchased only by clients of certain
financial institutions (which may include banks), securities dealers ("Selected
Dealers") and other industry professionals (collectively, "Service Agents"),
except that full-time or part-time employees of The Dreyfus Corporation or any
of its affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of the
Fund's Board, or the spouse or minor child of any of the foregoing may purchase
Class A shares directly through the Distributor. Subsequent purchases may be
sent directly to the Transfer Agent or your Service Agent.
When purchasing Fund shares, you must specify which Class is being
purchased. 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 retirement plans.
The Fund reserves the right to reject any purchase order.
Service Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Shareholder Services
Plan. You should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must be at
least $100. The initial investment must be accompanied by the Account
Application. The Fund reserves the right to vary the initial and subsequent
investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the TELETRANSFER
Privilege described below. Checks should be made payable to "The Dreyfus Family
of Funds." Payments which are mailed should be sent to Premier New York
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. If you
are opening a new account, please enclose your Account Application indicating
which Class of shares is being purchased. For subsequent investments, your Fund
account number should appear on the check and an investment slip should be
enclosed. Neither initial nor subsequent investments should be made by third
party check.
Wire payments may be made if your bank account is in a commercial bank that
is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the Fund's DDA
#8900119284/Premier New York Municipal Bond Fund, for purchase of Fund shares in
your name. The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable, and must indicate the Class of
shares being purchased. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to obtain your
Fund account number. Please include your Fund account number on the Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. You may
obtain further information about remitting funds in this manner from your bank.
All payments should be made in U.S. dollars and, to avoid fees and delays,
should be drawn only on U.S. banks. A charge will be imposed if any check used
for investment in your account does not clear. The Fund makes available to
certain large institutions the ability to issue purchase instructions through
compatible computer facilities.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark and the Government Direct Deposit Privilege described
under "Shareholder Services." These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House member. You must direct the institution to
transmit immediately available funds through the Automated Clearing House to The
Bank of New York with instructions to credit your Fund account. The instructions
must specify your Fund account registration and your Fund account number
PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis. Net asset value per share is
determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), on each day the New York Stock
Exchange is open for business. For purposes of determining net asset value,
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
of each Class is computed by dividing the value of the Fund's net assets
represented by such Class (i.e., the value of its assets less liabilities) by
the total number of shares of such Class outstanding. The Fund's investments are
valued each business day by an independent pricing service approved by the
Fund's Board and are valued at fair value as determined by the pricing service.
The pricing service's procedures are reviewed under the general supervision of
the Fund's Board. For further information regarding the methods employed in
valuing Fund investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
If an order is received in proper form by the Transfer Agent by the close
of trading on the floor of the New York Stock Exchange (currently 4:00 p.m., New
York time) on any business day, Fund shares will be purchased at the public
offering price determined as of the close of trading on the floor of the New
York Stock Exchange on that day. Otherwise, Fund shares will be purchased at the
public offering price determined as of the close of trading on the floor of the
New York Stock Exchange on the next business day, except where shares are
purchased through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the New York Stock Exchange on a business day and
transmitted to the Distributor or its designee by the close of its business day
(normally 5:15 p.m., New York time) will be based on the public offering price
per share determined as of the close of trading on the floor of the New York
Stock Exchange on that day. Otherwise, the orders will be based on the next
determined public offering price. It is the dealer's responsibility to transmit
orders so that they will be received by the Distributor or its designee before
the close of its business day.
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Distributions and Taxes" and the
Account Application for further information concerning this requirement. Failure
to furnish a certified TIN to the Fund could subject you to a $50 penalty
imposed by the Internal Revenue Service (the "IRS").
CLASS A SHARES -- The public offering price for Class A shares is the net
asset value per share of that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
----------------------------------------------------------
As a % of As a % of Dealers' Reallowance
offering price net asset value as a % of
Amount of Transaction per share per share offering price
----------------------- ------------------------- ---------------------- ----------------
<S> <C> <C> <C>
Less than $50,000................ 4.50 4.70 4.25
$50,000 to less than $100,000.... 4.00 4.20 3.75
$100,000 to less than $250,000... 3.00 3.10 2.75
$250,000 to less than $500,000... 2.50 2.60 2.25
$500,000 to less than $1,000,000. 2.00 2.00 1.75
$1,000,000 or more............... -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of Class A shares
purchased without an initial sales charge as part of an investment of at least
$1,000,000 and redeemed within one year of purchase. The terms contained in the
section of the Prospectus entitled "How to Redeem Shares -- Contingent Deferred
Sales Charge" (other than the amount of the CDSC and its time periods) are
applicable to the Class A shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a
brokerage-related or clearing arrangement with an NASD member firm or other
financial institution with respect to sales of Fund shares) may purchase Class A
shares for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at net asset value, provided
that they have furnished the Distributor with such information as it may request
from time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible to
purchase Class A shares at net asset value. In addition, Class A shares are
offered at net asset value to full-time or part-time employees of The Dreyfus
Corporation or any of its affiliates or subsidiaries, directors of The Dreyfus
Corporation, Board members of a fund advised by The Dreyfus Corporation,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing.
Class A shares may be purchased at net asset value through certain
brokers-dealers and other financial institutions which have entered into an
agreement with the Distributor, which includes a requirement that such shares be
sold for the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a registered
open-end management investment company not managed by The Dreyfus Corporation or
its affiliates. The purchase of Class A shares of the Fund must be made within
60 days of such redemption and the shareholder must have either (i) paid an
initial sales charge or a contingent deferred sales charge or (ii) been
obligated to pay at any time during the holding period, but did not actually pay
on redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by (i)qualified separate accounts maintained by an
insurance company pursuant to the laws of any State or territory of the United
States, (ii) a State, county or city or instrumentality thereof, (iii) a
charitable organization (as defined in Section 501(c)(3) of the Code investing
$50,000 or more in Fund shares, and (iv) a charitable remainder trust (as
defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds advised
by The Dreyfus Corporation which are sold with a sales load, such as the Fund.
In some instances, those incentives may be offered only to certain dealers who
have sold or may sell significant amounts of such shares.
CLASS B SHARES -- The public offering price for Class B shares is the net
asset value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on certain redemptions of Class B
shares as described under "How to Redeem Shares." The Distributor compensates
certain Service Agents for selling Class B and Class C shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES -- The public offering price for Class C shares is the net
asset value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on redemptions of Class C shares
made within the first year of purchase. See "Class B Shares" above and "How to
Redeem Shares."
RIGHT OF ACCUMULATION -- CLASS A SHARES -- Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Premier Family of
Funds, shares of certain other funds advised by The Dreyfus Corporation which
are sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the Statement of Additional Information, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you have previously purchased and still hold Class A shares of the
Fund, or of any other Eligible Fund or combination thereof, with an aggregate
current market value of $40,000 and subsequently purchase Class A shares of the
Fund or an Eligible Fund having a current value of $20,000, the sales load
applicable to the subsequent purchase would be reduced to 4% of the offering
price. All present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the sales
load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Service Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500, maximum
$150,000 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of shares by calling 1-800-645-6561 or, if you are calling
from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus. You should consult your Service Agent in this
regard.
FUND EXCHANGES
Clients of certain Service Agents may purchase, in exchange for Class A,
Class B or Class C shares of the Fund, shares of the same Class in certain other
funds managed or administered by The Dreyfus Corporation, to the extent such
shares are offered for sale in your state of residence. These funds have
different investment objectives which may be of interest to you. You also may
exchange your Fund shares that are subject to a CDSC for shares of Dreyfus
Worldwide Dollar Money Market Fund, Inc. The shares so purchased will be held in
a special account created solely for this purpose ("Exchange Account"). Exchange
of shares from an Exchange Account only can be made into certain other funds
managed or administered by The Dreyfus Corporation. No CDSC is charged when an
investor exchanges into an Exchange Account; however, the applicable CDSC will
be imposed when shares are redeemed from an Exchange Account or other applicable
Fund account. Upon redemption, the applicable CDSC will be calculated without
regard to the time such shares were held in an Exchange Account. See "How to
Redeem Shares." Redemption proceeds for Exchange Account shares are paid by
Federal wire or check only. Exchange Account shares also are eligible for the
Auto-Exchange Privilege, Dividend Sweep and the Automatic Withdrawal Plan. To
use this service, you should consult your Service Agent or call 1-800-645-6561
to determine if it is available and whether any conditions are imposed on its
use.
To request an exchange, your Service Agent acting on your behalf must give
exchange instructions to the Transfer Agent in writing or by telephone. Before
any exchange, you must obtain and should review a copy of the current prospectus
of the fund into which the exchange is being made. Prospectuses may be obtained
by calling 1-800-645-6561. Except in the case of personal retirement plans, the
shares being exchanged must have a current value of at least $500; furthermore,
when establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the fund
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable"No" box on the Account Application, indicating
that you specifically refuse this Privilege. The Telephone Exchange Privilege
may be established for an existing account by written request, signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories, by calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions (including
over The Dreyfus TouchRegistration Mark Automated Telephone System) by calling
1-800-645-6561. If you are calling from overseas, call 516-794-5452. See "How to
Redeem Shares -- Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will be
automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Check Redemption Privilege, TELETRANSFER
Privilege, and the dividend/ capital gain distribution option (except for
Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value; however, a
sales load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or Class C shares at
the time of an exchange; however, Class B or Class C shares acquired through an
exchange will be subject on redemption to the higher CDSC applicable to the
exchanged or acquired shares. The CDSC applicable on redemption of the acquired
Class B or Class C shares will be calculated from the date of the initial
purchase of the Class B shares or Class C shares exchanged. If you are
exchanging Class A shares into a fund that charges a sales load, you may qualify
for share prices which do not include the sales load or which reflect a reduced
sales load, if the shares you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or distributions paid
with respect to the foregoing categories of shares. To qualify, at the time of
the exchange your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of Additional
Information. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance with
rules promulgated by the Securities and Exchange Commission. The Fund reserves
the right to reject any exchange request in whole or in part. The availability
of Fund Exchanges may be modified or terminated at any time upon notice to
shareholders. See "Dividends, Distributions and Taxes."
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a semi-monthly,
monthly, quarterly or annual basis), in exchange for shares of the Fund, in
shares of the same class of other funds in the Premier Family of Funds or
certain other funds in the Dreyfus Family of Funds of which you are a
shareholder. The amount you designate, which can be expressed either in terms of
a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth of the month according to the
schedule you have selected. Shares will be exchanged at the then-current net
asset value; however, a sales load may be charged with respect to exchanges of
Class A shares into funds sold with a sales load. No CDSC will be imposed on
Class B or Class C shares at the time of an exchange; however, Class B or Class
C shares acquired through an exchange will be subject on redemption to the
higher CDSC applicable to the exchanged or acquired shares. The CDSC applicable
on redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged. See
"Shareholder Services" in the Statement of Additional Information. The right to
exercise this Privilege may be modified or cancelled by the Fund or the Transfer
Agent. You may modify or cancel your exercise of this Privilege at any time by
mailing written notification to Premier New York Municipal Bond Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. For more
information concerning this Privilege and the funds in the Premier Family of
Funds or the Dreyfus Family of Funds eligible to participate in this Privilege,
or to obtain an Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular intervals
selected by you. Fund shares are purchased by transferring funds from the bank
account designated by you. At your option, the bank account designated by you
will be debited in the specified amount, and Fund shares will be purchased, once
a month, on either the first or fifteenth day, or twice a month, on both days .
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish a
Dreyfus-AUTOMATIC Asset Builder account, you must file an authorization form
with the Transfer Agent. You may obtain the necessary authorization form by
calling 1-800-645-6561. You may cancel your participation in this Privilege or
change the amount of purchase at any time by mailing written notification to
Premier New York Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587, and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase Fund shares
(minimum of $100 and maximum of $50,000 per transaction) by having Federal
salary, Social Security, or certain veterans', military or other payments from
the Federal government automatically deposited into your Fund account. You may
deposit as much of such payments as you elect. To enroll in Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in this
Privilege. The appropriate form may be obtained from your Service Agent or by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. Further,
the Fund may terminate your participation upon 30 days' notice to you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends or dividends
and capital gain distributions, if any, paid by the Fund in shares of the same
Class of another fund in the Premier Family of Funds or the Dreyfus Family of
Funds of which you are a shareholder. Shares of the other fund will be purchased
at the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load. If
you are investing in a fund that charges a CDSC, the shares purchased will be
subject on redemption to the CDSC, if any, applicable to the purchased shares.
See "Shareholder Services" in the Statement of Additional Information. Dividend
ACH permits you to transfer electronically dividends or dividends and capital
gain distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
For more information concerning these privileges or to request a Dividend
Options Form, please call toll free 1-800-645-6561. You may cancel these
privileges by mailing written notification to Premier New York Municipal Bond
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dividend Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly basis
if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through the
Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares withdrawn pursuant to the Automatic Withdrawal Plan will
be subject to any applicable CDSC. Purchases of additional Class A shares where
the sales load is imposed concurrently with withdrawals of Class A shares
generally are undesirable.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form, which can be obtained by calling
1-800-645-6561, you become eligible for the reduced sales load applicable to the
total number of Eligible Fund shares purchased in a 13-month period pursuant to
the terms and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter of
Intent) in any Eligible Fund that may be used toward "Right of Accumulation"
benefits described above may be used as a credit toward completion of the Letter
of Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares held in escrow to realize the difference.
Signing a Letter of Intent does not bind you to purchase, or the Fund to sell,
the full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales load. At
the time you purchase Class A shares, you must indicate your intention to do so
under a Letter of Intent. Purchases pursuant to a Letter of Intent will be made
at the then-current net asset value plus the applicable sales load in effect at
the time such Letter of Intent was executed.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption requests
should be transmitted to the Transfer Agent as described below. When a request
is received in proper form, the Fund will redeem the shares at the next
determined net asset value as described below. If you hold Fund shares of more
than one Class, any request for redemption must specify the Class of shares
being redeemed. If you fail to specify the Class of shares to be redeemed or if
you own fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further instructions
from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Service Agents may charge their clients a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund shares
being redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon the
Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER
PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A
WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL
BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE
UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS
TO REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT
BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH
SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES
WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED
BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY
REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE,
AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP.
Fund shares will not be redeemed until the Transfer Agent has received your
Account Application.
The Fund reserves the right to redeem your account at its option upon not
less than 30 days' written notice if your account's net asset value is $500 or
less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE
CLASS B SHARES -- A CDSC payable to the Distributor is imposed on any
redemption of Class B shares which reduces the current net asset value of your
Class B shares to an amount which is lower than the dollar amount of all
payments by you for the purchase of Class B shares of the Fund held by you at
the time of redemption. No CDSC will be imposed to the extent that the net asset
value of the Class B shares redeemed does not exceed (i) the current net asset
value of Class B shares acquired through reinvestment of dividends or capital
gain distributions, plus (ii) increases in the net asset value of Class B shares
above the dollar amount of all your payments for the purchase of Class B shares
of the Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has declined below
their original cost as a result of the Fund's performance, a CDSC may be applied
to the then-current net asset value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment for
the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month.
The following table sets forth the rates of the CDSC for Class B shares,
except as set forth below:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
First.......................... 4.00
Second......................... 4.00
Third.......................... 3.00
Fourth......................... 3.00
Fifth.......................... 2.00
Sixth.......................... 1.00
The following table sets forth the rates of the CDSC for Class B
shares purchased by shareholders who beneficially owned Class B shares on
November 30, 1996:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
First.......................... 3.00
Second......................... 3.00
Third.......................... 2.00
Fourth......................... 2.00
Fifth.......................... 1.00
Sixth.......................... 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in net asset value of Class B shares
above the total amount of payments for the purchase of Class B shares made
during the preceding six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996); then of amounts representing the cost of
shares purchased six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996) prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period (five-year period for shareholders
beneficially owning Class B shares on November 30, 1996).
For example, assume an investor purchased 100 shares at $10 per share for a
cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the net asset value had appreciated to $12 per share, the
value of the investor's shares would be $1,260 (105 shares at $12 per share).
The CDSC would not be applied to the value of the reinvested dividend shares and
the amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4% (the
applicable rate in the second year after purchase) for a total CDSC of $9.60.
CLASS C SHARES -- A CDSC of 1% payable to the Distributor is imposed on any
redemption of Class C shares within one year of the date of purchase. The basis
for calculating the payment of any such CDSC will be the method used in
calculating the CDSC for Class B shares. See "Contingent Deferred Sales Charge
- -- Class B Shares" above.
WAIVER OF CDSC -- The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined in
Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in qualified or non-qualified employee benefit plans or other
programs where (i) the employers or affiliated employers maintaining such plans
or programs have a minimum of 250 employees eligible for participation in such
plans or programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor exceeds $1,000,000, (c) redemptions as a result of a combination of
any investment company with the Fund by merger, acquisition of assets or
otherwise, (d) a distribution following retirement under a tax-deferred
retirement plan or upon attaining age 70 1/2 in the case of an IRA or Keogh plan
or custodial account pursuant to Section 403(b) of the Code and (e) redemptions
pursuant to the Automatic Withdrawal Plan, as described in the Fund's
Prospectus. If the Fund's Board determines to discontinue the waiver of the
CDSC, the disclosure in the Fund's Prospectus will be revised appropriately. Any
Fund shares subject to a CDSC which were purchased prior to the termination of
such waiver will have the CDSC waived as provided in the Fund's Prospectus at
the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Service Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
PROCEDURES
You may redeem Fund shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Check Redemption
Privilege with respect to Class A shares only, or the TELETRANSFER Privilege. If
you are a client of a Selected Dealer, you may redeem shares through the
Selected Dealer. If you have given your Service Agent authority to instruct the
Transfer Agent to redeem shares and to credit the proceeds of such redemptions
to a designated account at your Service Agent, you may redeem shares only in
this manner and in accordance with the regular redemption procedure described
below. If you wish to use the other redemption methods described below, you must
arrange with your Service Agent for delivery of the required application(s) to
the Transfer Agent. Other redemption procedures may be in effect for clients of
certain Service Agents. The Fund makes available to certain large institutions
the ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by telephone,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. The Fund may modify or terminate
any redemption Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated. Shares for which
certificates have been issued are not eligible for the Check Redemption or
TELETRANSFER Privilege.
Your redemption request may direct that the redemption proceeds be used to
purchase shares of other funds advised or administered by The Dreyfus
Corporation that are not available through the Exchange Privilege. The
applicable CDSC will be charged upon the redemption of Class B or Class C
shares. Your redemption proceeds will be invested in shares of the other fund on
the next business day. Before you make such a request, you must obtain and
should review a copy of the current prospectus of the fund being purchased.
Prospectuses may be obtained by calling 1-800-645-6561. The prospectus will
contain information concerning minimum investment requirements and other
conditions that may apply to your purchase.
You may redeem Fund shares by telephone if you have checked the appropriate
box on the Account Application or have filed a Shareholder Services Form with
the Transfer Agent. If you select the TELETRANSFER redemption privilege or
telephone exchange privilege (which is granted automatically unless you refuse
it), you authorize the Transfer Agent to act on telephone instructions
(including over The Dreyfus TouchRegistration Mark Automated Telephone System)
from any person representing himself or herself to be you, or a representative
of your Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Fund or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be liable
for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a
TELETRANSFER redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if TELETRANSFER redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may
redeem shares by written request mailed to Premier New York Municipal Bond Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587. Written redemption requests
must specify the Class of shares being redeemed. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. If you have any
questions with respect to signature-guarantees, please contact your Service
Agent or call the telephone number listed on the cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any member bank of
the Federal Reserve System in accordance with a written signature-guaranteed
request.
CHECK REDEMPTION PRIVILEGE -- CLASS A SHARES -- You may write Redemption
Checks drawn on your Fund account. Redemption Checks may be made payable to the
order of any person in the amount of $500 or more. Potential fluctuations in the
net asset value of Class A shares should be considered in determining the amount
of the check. Redemption Checks should not be used to close your account.
Redemption Checks are free, but the Transfer Agent will impose a fee for
stopping payment of a Redemption Check upon your request or if the Transfer
Agent cannot honor the Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not postdate your Redemption Checks. If you do, the
Transfer Agent will honor, upon presentment, even if presented before the date
of the check, all postdated Redemption Checks which are dated within six months
of presentment for payment, if they are otherwise in good order. This Privilege
will be terminated immediately, without notice, with respect to any account
which is, or becomes, subject to backup withholding on redemptions (See
"Dividends, Distributions and Taxes"). Any Redemption Check written on an
account which has become subject to backup withholding on redemptions will not
be honored by the Transfer Agent.
TELETRANSFER PRIVILEGE -- You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be designated.
Redemption proceeds will be on deposit in your account at an Automated Clearing
House member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to your
address. Holders of jointly registered Fund or bank accounts may redeem through
the TELETRANSFER Privilege for transfer to their bank account not more than
$250,000 within any 30-day period.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER redemption of shares by calling 1-800-645-6561 or, if you are
calling from overseas, call 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER -- If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer Agent
after the close of trading on the floor of the New York Stock Exchange, the
redemption request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to your
account with the Selected Dealer. See "How to Buy Fund Shares" for a discussion
of additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by dealers
by the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to the Distributor or its designee by the close of
its business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
REINVESTMENT PRIVILEGE -- Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing net asset value without a sales load, or
reinstate your account for the purpose of exercising the Exchange Privilege.
Upon reinvestment, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, the shareholder's account will be credited with
an amount equal to the CDSC previously paid upon redemption of the Class A or
Class B shares reinvested. The Reinvestment Privilege may be exercised only
once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class B and Class C shares are subject to a Distribution Plan and Class A,
Class B and Class C shares are subject to a Shareholder Services Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1 under the 1940
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B and .75 of 1% of the value of the average daily net assets of
Class C.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays the Distributor for the
provision of certain services to the holders of Class A, Class B and Class C
shares a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of each such Class. 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. The Distributor may
make payments to Service Agents in respect of these services. The Distributor
determines the amounts to be paid to Service Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income on
each day the New York Stock Exchange is open for business. Fund shares begin
earning income dividends on the day immediately available funds ("Federal Funds"
(monies of member banks within the Federal Reserve System which are held on
deposit at a Federal Reserve Bank)) are received by the Transfer Agent in
written or telegraphic form. If a purchase order is not accompanied by
remittance in Federal Funds, there may be a delay between the time the purchase
order becomes effective and the time the shares purchased start earning
dividends. If your payment is not made in Federal Funds, it must be converted
into Federal Funds. This usually occurs within one business day of receipt of a
bank wire and within two business days of receipt of a check drawn on a member
bank of the Federal Reserve System. Checks drawn on banks which are not members
of the Federal Reserve System may take considerably longer to convert into
Federal Funds.
Dividends usually are paid on the last calendar day of each month and are
automatically reinvested in additional shares of the Class from which they were
paid at net asset value without a sales load or, at your option, paid in cash.
The Fund's earnings for Saturdays, Sundays and holidays are declared as
dividends on the preceding business day. If you redeem all shares in your
account at any time during the month, all dividends to which you are entitled
will be paid to you along with the proceeds of the redemption. If you are an
omnibus accountholder and indicate in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her account, such
portion of the accrued dividends will be paid to you along with the proceeds of
the redemption. Distributions from net realized securities gains, if any,
generally are declared and paid once a year, but the Fund may make distributions
on a more frequent basis to comply with the distribution requirements of the
Code, in all events in a manner consistent with the provisions of the 1940 Act.
The Fund will not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. You may
choose whether to receive dividends and distributions in cash or to reinvest in
additional Fund shares of the same Class from which they were paid at net asset
value without a sales load. All expenses are accrued daily and deducted before
declaration of dividends to investors. Dividends paid by each Class will be
calculated at the same time and in the same manner and will be of the same
amount, except that the expenses attributable solely to a particular Class will
be borne exclusively by such Class. Class B and Class C shares will receive
lower per share dividends than Class A shares because of the higher expenses
borne by the relevant Class. See "Fee Table."
Except for dividends from Taxable Investments, the Fund anticipates that
substantially all dividends paid by the Fund will not be subject to Federal
income tax. Dividends and distributions derived from Taxable Investments, from
income or gain derived from securities transactions and from the use of certain
of the investment techniques described under "Appendix -- Investment
Techniques," will be subject to Federal income tax. The Fund anticipates that a
substantial portion of the dividends paid by it will not be subject to Federal,
New York State or New York City personal income taxes. To the extent that you
are obligated to pay state or local taxes outside of the State of New York,
dividends earned by an investment in the Fund may represent taxable income.
Dividends derived from Taxable Investments, together with distributions from any
net realized short-term securities gains and gains from the sale or other
disposition of certain market discount bonds, paid by the Fund are subject to
Federal income tax as ordinary income whether or not reinvested. No dividend
paid by the Fund will qualify for the dividends received deduction allowable to
certain U.S. corporations. Distributions from net realized long-term securities
gains of the Fund generally are subject to Federal income tax as long-term
capital gains if you are a citizen or resident of the United States. The Code
provides that the net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. Under the Code,
interest on indebtedness incurred or continued to purchase or carry Fund shares
which is deemed to relate to exempt-interest dividends is not deductible.
Although all or a substantial portion of the dividends paid by the Fund may
be excluded by shareholders of the Fund from their gross income for Federal
income tax purposes, the Fund may purchase specified private activity bonds, the
interest from which may be (i) a preference item for purposes of the alternative
minimum tax, (ii) a component of the "adjusted current earnings" preference item
for purposes of the corporate alternative minimum tax as well as a component in
computing the corporate environmental tax or (iii) a factor in determining the
extent to which a shareholder's Social Security benefits are taxable. If the
Fund purchases such securities, the portion of the Fund's dividends related
thereto will not necessarily be tax exempt to an investor who is subject to the
alternative minimum tax and/or tax on Social Security benefits and may cause an
investor to be subject to such taxes.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if you exchange your Class A shares for shares of
another fund advised by The Dreyfus Corporation within 91 days of purchase and
such other fund reduces or eliminates its otherwise applicable sales load for
the purpose of the exchange. In this case, the amount of the sales load charge
for Class A shares, up to the amount of the reduction of the sales load charged
in the exchange, is not included in the basis of your Class A shares for
purposes of computing gain or loss on the exchange, and instead is added to the
basis of the fund shares received on the exchange.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your account
which will include information as to dividends and distributions from securities
gains, if any, paid during the year. These statements set forth the dollar
amount of income exempt from Federal tax and the dollar amount, if any, subject
to Federal tax. These dollar amounts will vary depending on the size and length
of time of your investment in the Fund. If the Fund pays dividends derived from
taxable income, it intends to designate as taxable the same percentage of the
day's dividends as the actual taxable income earned on that day bears to total
income earned on that day. Thus, the percentage of the dividend designated as
taxable, if any, may vary from day to day.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized, paid
to a shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may notify
the Fund to institute backup withholding if the IRS determines a shareholder's
TIN is incorrect or if a shareholder has failed to properly report taxable
dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account, and may be claimed as a credit on the record owner's
Federal income tax return.
Management of the Fund believes that the Fund has qualified for the fiscal
year ended November 30, 1995 as a "regulated investment company" under the Code.
The Fund intends to continue to so qualify if such qualification is in the best
interests of its shareholders. Such qualification relieves the Fund of any
liability for Federal income tax to the extent its earnings are distributed in
accordance with applicable provisions of the Code. The Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as to
Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of shares may be
calculated on several bases, including current yield, tax equivalent yield,
average annual total return and/or total return. These total return figures
reflect changes in the price of the shares and assume that any income dividends
and/or capital gain distributions made by the Fund during the measuring period
were reinvested in shares of the same Class. Class A total return figures
include the maximum initial sales charge and Class B and Class C total return
figures include any applicable CDSC. These figures also take into account any
applicable service and distribution fees. As a result, at any given time, the
performance of Class B and Class C should be expected to be lower than that of
Class A. Performance for each Class will be calculated separately.
Current yield refers to the Fund's annualized net investment income per
share over a 30-day period, expressed as a percentage of the net asset value (or
maximum offering price in the case of Class A) per share at the end of the
period. For purposes of calculating current yield, the amount of net investment
income per share during that 30-day period, computed in accordance with
regulatory requirements, is compounded by assuming that it is reinvested at a
constant rate over a six-month period. An identical result is then assumed to
have occurred during a second six-month period which, when added to the result
for the first six months, provides an "annualized" yield for an entire one-year
period. Calculations of the Fund's current yield may reflect absorbed expenses
pursuant to any undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield which,
after being taxed at a stated rate, would be equivalent to a stated current
yield calculated as described above.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the redeemable
value of the investment at the end of the period. Advertisements of the Fund's
performance will include the average annual total return for one, five and ten
year periods, or for shorter periods depending upon the length of time during
which the Fund has operated.
Total return is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Total return generally is expressed as a
percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value (maximum
offering price in the case of Class A) per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may include
the value of a hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return. Total return also may be
calculated by using the net asset value per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the period
for Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or Class C shares. Calculations based on the net asset
value per share do not reflect the deduction of the applicable sales charge on
Class A shares, which, if reflected, would reduce the performance quoted.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman Brothers
Municipal Bond Index, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Trust Agreement") dated June 4, 1986, and commenced operations on
December 31, 1986. Prior to July 2, 1990, the Fund's name was Premier New York
Tax Exempt Bond Fund. The Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per share. The Fund's shares are
classified into three classes _ Class A, Class B and Class C. Each share has one
vote and shareholders will vote in the aggregate and not by class except as
otherwise required by law. Only holders of Class B or Class C shares, as the
case may be, will be entitled to vote on matters submitted to shareholders
pertaining to the Distribution Plan.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility which
manage ment believes is remote. Upon payment of any liability incurred by the
Fund, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Fund intends to conduct its operations
in such a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund. As discussed under "Management of the
Fund" in the Statement of Additional Information, the Fund ordinarily will not
hold shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by writing to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund may borrow money from banks, but only for
temporary or emergency (not leveraging) purposes in an amount up to 15% of the
value of the Fund's total assets (including the amount borrowed) valued at the
lesser of cost or market, less liabilities (not including the amount borrowed)
at the time the borrowing is made. While borrowings exceed 5% of the value of
the Fund's total assets, the Fund will not make any additional investments.
SHORT-SELLING -- In these transactions, the Fund sells a security it does
not own in anticipation of a decline in the market value of that 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 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 a 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 in order to hedge an unrealized
gain on the security. At no time will the Fund have more than 15% of the value
of its net assets in deposits on short sales against the box.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and Risks
- -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management Policies
- -- Management Policies -- Derivatives" in the Statement of Additional
Information.
Derivatives 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.
Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in Derivatives could have a
large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges the
market conditions incorrectly, such investments may lower the Fund's return or
result in a loss. The Fund also could experience losses if it 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 is not a commodity pool, Derivatives subject the Fund to
the rules of the Commodity Futures Trading Commission which the limit the extent
to which the Fund can invest in certain Derivatives. The Fund may invest in
futures contracts and options with respect thereto for hedging purposes without
limit. However, the Fund may not invest in such contracts and options for other
purposes if the sum of the amount of initial margin deposits and premiums paid
for unexpired options with respect to such contracts, other than bona fide
hedging purposes, exceed 5% of the liquidation value of the Fund's assets, after
taking into account unrealized profits and unrealized losses on such contracts
and options; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation.
The Fund may invest up to 5% of its assets, represented by the premium
paid, in the purchase of call and put options. The Fund may write (i.e., sell)
covered call and put option contracts to the extent of 20% of the value of its
net assets at the time of such option contracts are written. When required by
the Securities and Exchange Commission, The Fund will set aside permissible
liquid assets in a segregated account to cover its obligations relating to its
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.
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 distribu tions payable on
the loaned securities which affords the Fund an opportunity to earn interest on
the amount of the loan and on the loaned securities' collateral. Loans of
portfolio securities may not exceed 331/3 % of the value of the Fund's total
assets, and the Fund will receive collateral consisting 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 at any time upon specified
notice. The Fund might experience risk of loss if the institution with which it
has engaged in a portfolio loan transaction breaches its agreement with the
Fund.
FORWARD COMMITMENTS -- The Fund may purchase Municipal Obligations and
other securities on a forward commitment or when-issued basis, which means
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such securities
only with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. A
segregated account of the Fund consisting of permissible liquid assets at least
equal at all times to the amount of the commitments will be established and
maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- The Fund may purchase floating and
variable rate demand notes and bonds, which are tax exempt obligations
ordinarily having stated maturities in excess of 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.
TENDER OPTION BONDS -- The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a fixed
rate substantially higher than prevailing short-term tax exempt rates, that has
been coupled with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal to
the difference between the Municipal Obligation's fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate. The Dreyfus
Corporation, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying Municipal 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.
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
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with Stand-by commitments will be
taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund generally would purchase these call options to protect the
Fund from the issuer of the related Municipal Obligation redeeming, or other
holder of the call option from calling away, the Municipal Obligation before
maturity. The sale by the Fund of a call option that it owns on a specific
Municipal Obligation could result in the receipt of taxable income by the Fund.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon securities
which are debt securities issued or sold at a discount from their face value
which do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date). The amount of
the discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and perceived
credit quality of the issuer. Zero coupon securities also may take the form of
debt securities that have been stripped of their unmatured interest coupons, the
coupons themselves and receipts or certificates representing interests in such
stripped debt obligations and coupons. The market prices of zero coupon
securities generally are more volatile than the market prices of
interest-bearing securities and are likely to respond to a greater degree to
changes in interest rates than interest-bearing securities having similar
maturities and credit qualities.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
Such securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, and repurchase agreements providing for settlement in more than seven
days after notice. As to these securities, the Fund is subject to a risk that
should the Fund desire to sell them when a ready buyer is not available at a
price the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other than
for temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest in
taxable short-term investments ("Taxable Investments") consisting of: notes of
issuers having, at the time of purchase, a quality rating within the two highest
grades of Moody's, S&P or Fitch; obligations of the U.S. Government, its
agencies or instrumentalities; commercial paper rated not lower than P-1 by
Moody's, A-1 by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic
banks, including foreign branches of domestic banks, with assets of one billion
dollars or more; time deposits; 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 New York 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 New York State and New York City income
taxes. Under normal market conditions, the Fund anticipates that not more than
5% of the value of its total assets will be invested in any one category of
Taxable Investments. Taxable Investments are more fully described in the
Statement of Additional Information, to which reference hereby is made.
RATINGS -- Bonds rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate. Bonds rated
BB by S&P are regarded as having predominantly speculative characteristics and,
while such obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. Bonds rated
BB by Fitch are considered speculative and the payment of principal and interest
may be affected at any time by adverse economic changes. Bonds rated C by
Moody's are regarded as having extremely poor prospects of ever attaining any
real investment standing. Bonds rated D by S&P are in default and the payment of
interest and/or repayment of principal is in arrears. Bonds rated DDD, DD or D
by Fitch are in actual or imminent default, are extremely speculative and should
be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the issuer; DDD represents the highest potential for recovery
of such bonds; and D represents the lowest potential for recovery. Such bonds,
though high yielding, are characterized by great risk. See "Appendix B" in the
Statement of Additional Information for a general description of Moody's, S&P
and Fitch ratings of Municipal Obligations.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these bonds. Although
these ratings may be an initial criterion for selection of portfolio
investments, The Dreyfus Corporation also will evaluate these securities and the
ability of the issuers of such securities to pay interest and principal. The
Fund's ability to achieve its investment objective may be more dependent on The
Dreyfus Corporation's credit analysis than might be the case for a fund that
invested in higher rated securities.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
PTNp120196
[This Page Intentionally Left Blank]
PREMIER INSURED MUNICIPAL BOND FUND
PROSPECTUS DECEMBER 2, 1996
Premier Insured Municipal Bond Fund (the "Fund") is an open-end, management
investment company, known as a mutual fund. The Fund's investment objective is
to maximize current income exempt from Federal and, where applicable, from State
personal income taxes to the extent consistent with the preservation of capital.
The Fund permits you to invest in any of six separate non-diversified
portfolios (each, a "Series"): the National Series, the California Series, the
Connecticut Series, the Florida Series, the New Jersey Series and the New York
Series. Each Series invests primarily in a portfolio of Municipal Obligations
(as defined below) that are insured as to the timely payment of principal and
interest by recognized insurers of Municipal Obligations. Each Series other than
the National Series will invest primarily in Municipal Obligations issued by
issuers in the State after which it is named. It is anticipated that
substantially all dividends paid by each Series will be exempt from Federal
income tax and also, where applicable, will be exempt from the personal income
tax of the State after which the Series is named.
By this Prospectus, each Series is offering three Classes of shares --
Class A, Class B and Class C -- which are described herein. See "Alternative
Purchase Methods."
The Fund provides free redemption checks with respect to Class A shares,
which you can use in amounts of $500 or more for cash or to pay bills. You can
purchase or redeem all Classes of shares by telephone using the TELETRANSFER
Privilege.
The Dreyfus Corporation professionally manages the Fund's portfolio.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information, dated December 2, 1996, which may
be revised from time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to some investors. It
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, a nd other information regarding the Fund.
For a free copy of the Statement of Additional Information, write to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
1-800-554-4611. When telephoning, ask for Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. MUTUAL
FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Fee Table.................................. 3
Condensed Financial Information............ 6
Alternative Purchase Methods............... 11
Description of the Fund.................... 12
Management of the Fund..................... 19
How to Buy Shares.......................... 21
Shareholder Services....................... 24
How to Redeem Shares....................... 28
Distribution Plan and Shareholder Services Plan 32
Dividends, Distributions and Taxes......... 33
Performance Information.................... 37
General Information........................ 38
Appendix................................... 40
<TABLE>
<CAPTION>
FEE TABLE
CALIFORNIA CONNECTICUT
SERIES SERIES
---------------------------------- --------------------------------
Class A Class B Class C Class A Class B Class C
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge
Imposed on Redemption (as a percentage
of the amount subject to charge) None* 4.00% 1.00% None* 4.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fees....... .55% .55% .55% .55% .55% .55%
12b-1 Fees............ None .50% .75% None .50% .75%
Other Expenses........ .89% .92% 1.95% .61% .61% .68%
Total Series Operating Expenses 1.44% 1.97% 3.25% 1.16% 1.66% 1.98%
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) except where noted, redemption at the end
of each time period:
Class A Class B Class C Class A Class B Class C
--------- --------- --------- --------- ---------- ---------
1 Year................. $ 59 $60/$20** $43/$33** $ 56 $57/$17** $30/$20**
3 Years................ $ 89 $92/$62** $100 $ 80 $82/$52** $ 62
5 YEARS................ $120 $126/$106** $170 $106 $110/$90** $107
10 YEARS............... $210 $203*** $355 $180 $171*** $231
* A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
** Assuming no redemption of shares.
*** Ten-year figure assumes conversion of Class B shares to Class A
shares at the end of the sixth year following the date of purchase.
FLORIDA NATIONAL
SERIES SERIES
---------------------------------- --------------------------------
Class A Class B Class C Class A Class B Class C
--------- --------- --------- --------- --------- ---------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge
Imposed on Redemption(as a percentage of
the amount subject to charge) None* 4.00% 1.00% None* 4.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fees....... .55% .55% .55% .55% .55% .55%
12b-1 Fees............ None .50% .75% None .50% .75%
Other Expenses........ .63% .62% .56% .75% .76% 1.20%
Total Series Operating Expenses 1.18% 1.67% 1.86% 1.30% 1.81% 2.50%
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) except where noted, redemption at the end
of each time period:
Class A Class B Class C Class A Class B Class C
--------- --------- --------- --------- --------- ---------
1 Year................. $ 56 $57/$17** $29/$19** $58 $58/$18** $35/$21**
3 Years................ $ 81 $83/$53** $58 $84 $87/$57** $78
5 YEARS................ $107 $111/$91** $101 $113 $118/$98** $133
10 YEARS............... $182 $173*** $218 $195 $187*** $284
* A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
** Assuming no redemption of shares.
*** Ten-year figure assumes conversion of Class B shares to Class A
shares at the end of the sixth year following the date of purchase.
NEW JERSEY NEW YORK
SERIES SERIES
---------------------------------- --------------------------------
Class A Class B Class C Class A Class B Class C
--------- --------- --------- --------- --------- ---------
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge
Imposed on Redemption
..(as a percentage of the
..amount subject to charge) None* 4.00% 1.00% None* 4.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fees....... .55% .55% .55% .55% .55% .55%
12b-1 Fees............ None .50% .75% None .50% .75%
Other Expenses........ .67% .66% .67% .69% .69% 1.03%
Total Series Operating Expenses 1.22% 1.71% 1.97% 1.24% 1.74% 2.33%
Example
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) except where noted, redemption at the end
of each time period:
Class A Class B Class C Class A Class B Class C
--------- --------- --------- --------- --------- ---------
1 Year................. $ 57 $57/$17** $30/$20** $ 57 $58/$18** $34/$24**
3 Years................ $ 82 $84/$54** $62 $ 83 $85/$55** $73
5 YEARS................ $109 $113/$93** $106 $110 $114/$94** $125
10 YEARS............... $186 $177*** $230 $188 $180*** $267
* A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
** Assuming no redemption of shares.
*** Ten-year figure assumes conversion of Class B shares to Class A
shares at the end of the sixth year following the date of purchase.
</TABLE>
- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5%
ANNUAL RETURN, EACH SERIES' ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN
AN ACTUAL RETURN GREATER OR LESS THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding the
costs and expenses borne by the Fund and investors, the payment of which will
reduce investors' annual return. Long-term investors in Class B or Class C
shares could pay more in 12b-1 fees than the economic equivalent of paying a
front-end sales charge. The information in the foregoing table does not reflect
any fee waivers or expense reimbursement arrangements that may be in effect.
Certain Service Agents (as defined below) may charge their clients direct fees
for effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Shares," "How to
Redeem Shares" and "Distribution Plan and Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and related notes
are included in the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each Series for each year indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CALIFORNIA SERIES
----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------- ----------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED
------------------------------ ------------------------------
PER SHARE DATA 1994(1) 1995 1996 1994(1) 1995 1996 JULY 31, 1996(2)
------- ------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.50 $11.56 $11.56 $12.50 $11.57 $11.57 $12.24
------- ------- ------- ------- ------- ------- ------
INVESTMENT OPERATIONS:
Investment income_net. .62 .64 .50 .56 .58 .44 .26
Net realized and unrealized gain (loss)
on investments........ (.94) ._- .39 (.93) ._- .40 (.27)
------- ------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS (.32) .64 .89 (.37) .58 .84 (.01)
------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from investment
income--net........... (.62) (.64) (.50) (.56) (.58) (.44) (.26)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of year $11.56 $11.56 $11.95 $11.57 $11.57 $11.97 $11.97
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN (3) (2.79%)(4) 5.80% 7.77% (3.20%)(4) 5.27% 7.30% (.11%)(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ._- .08% 1.18% .50%(4) .57% 1.70% 2.04%(4)
Ratio of net investment income to
average net assets.... 5.30%(4) 5.56% 4.20% 4.78%(4) 5.10% 3.66% 3.19%(4)
Decrease reflected in
above ratios due to
undertakings by The Dreyfus
Corporation (limited to the expense
limitation provision of the
Management Agreement)..... 2.50%(4) 1.49% .26% 2.50%(4) 1.55% .27% 1.21%(4)
Portfolio Turnover Rate ._- 3.86% 58.47% ._- 3.86% 58.47% 58.47%
Net Assets, end of year (000's omitted) $1,473 $3,525 $3,156 $2,658 $3,793 $4,135 $1
(1).From August 19, 1993 (commencement of operations) to July 31, 1994.
(2).From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3).Exclusive of sales load.
(4) Annualized.
CONNECTICUT SERIES
----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------- ----------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED
------------------------------ ------------------------------
PER SHARE DATA 1994(1) 1995 1996 1994(1) 1995 1996 JULY 31, 1996(2)
------- ------- ------- ------- ------- ------- -------------
Net asset value, beginning of year $12.50 $12.76 $12.95 $12.50 $12.76 $12.96 $13.43
------- ------- ------- ------- ------- ------- ------
INVESTMENT OPERATIONS:
Investment income--net .19 .72 .61 .17 .65 .55 .33
Net realized and unrealized gain
(loss) on investments .26 .19 .03 .26 .20 .02 (.45)
------- ------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS .45 .91 .64 .43 .85 .57 (.12)
------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from investment income_net (.19) (.72) (.61) (.17) (.65) (.55) (.33)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of year $12.76 $12.95 $12.98 $12.76 $12.96 $12.98 $12.98
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3) 3.61%(4) 7.43% 5.01% 3.49%(4) 6.95% 4.40% (1.32%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ._- .07% 1.03% .50%(5) .58% 1.54% 1.98%(5)
Ratio of net investment income to
average net assets.... 5.17%(5) 5.66% 4.66% 4.77%(5) 5.11% 4.15% 3.94%(5)
Decrease reflected in
above ratios due to
undertakings by The Dreyfus
Corporation (limited to the expense
limitation provision of the
Management Agreement)..... 2.50%(5) 1.10% .13% 2.50%(5) 1.09% .12% ._-
Portfolio Turnover Rate ._- 5.33% 30.21% ._- 5.33% 30.21% 30.21%
Net Assets, end of year
(000's omitted) $8,438 $12,451 $11,117 $6,916 $16,612 $17,333 $173
(1).From May 5, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4).Not annualized.
(5).Annualized.
FLORIDA SERIES
----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------- ----------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED
------------------------------ ------------------------------
PER SHARE DATA 1994(1) 1995 1996 1994(1) 1995 1996 JULY 31, 1996(2)
------- ------- ------- ------- ------- ------- -------------
Net asset value, beginning of year $12.50 $12.79 $13.07 $12.50 $12.78 $13.08 $13.76
------- ------- ------- ------- ------- ------- ------
Investment Operations:
Investment income_net. .19 .73 .63 .17 .67 .56 .34
Net realized and unrealized gain
(loss) on investments. .29 .28 .21 .28 .30 .20 (.48)
------- ------- ------- ------- ------- ------- ------
Total from Investment Operations .48 1.01 .84 .45 .97 .76 (.14)
------- ------- ------- ------- ------- ------- ------
Distributions:
Dividends from investment income_net (.19) (.73) .63 (.17) (.67) (.56) (.34)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of year $12.79 $13.07 $13.28 $12.78 $13.08 $13.28 $13.28
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3) 3.83%(4) 8.24% 6.48% 3.62%(4) 7.86% 5.89% (1.51%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ._- .09% 1.04% .50%(5) .59% 1.52% 1.86%(5)
Ratio of net investment
income to average net assets....... 5.11%(5) 5.72% 4.70% 4.62%(5) 5.20% 4.23% 3.78%(5)
Decrease reflected in
above ratios due to
undertakings by
The Dreyfus Corporation 2.06%(5) 1.02% .14% 2.02%(5) 1.00% .15% _-
Portfolio Turnover Rate .-- .78% 12.70% ._- .78% 12.70% 12.70%
Net Assets, end of year
(000's omitted) $10,405 $19,541 $16,515 $12,320 $21,275 $18,210 $1
(1).From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4).Not annualized.
(5).Annualized.
NATIONAL SERIES
----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------- ----------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED
------------------------------ ------------------------------
PER SHARE DATA 1994(1) 1995 1996 1994(1) 1995 1996 JULY 31, 1996(2)
------- ------- ------- ------- ------- ------- -------------
Net asset value, beginning of year $12.50 $12.94 $13.01 $12.50 $12.95 $13.01 $13.53
------- ------- ------- ------- ------- ------- ------
INVESTMENT OPERATIONS:
Investment income_net. .18 .77 .63 .16 .71 .57 .34
Net realized and unrealized gain
(loss) on investments. .44 .07 .08 .45 .06 .09 (.43)
------- ------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS .62 .84 .71 .61 .77 .66 (.09)
------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from investment income--net (.18) (.77) (.63) (.16) (.71) (.57) (.34)
Dividends from net realized gain
on investments........ ._- ._- (.03) ._- ._- (.03) (.03)
------- ------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS... (.18) (.77) (.66) (.16) (.71) (.60) (.37)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of year $12.94 $13.01 $13.06 $12.95 $13.01 $13.07 $13.07
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3) 4.99%(4) 6.86% 5.56% 4.94%(4) 6.24% 5.09% (.94%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ._- .08% 1.17% .50%(5) .59% 1.68% 2.08%(5)
Ratio of net investment income to average
net assets ........... 5.44%(5) 6.02% 4.80% 4.90%(5) 5.51% 4.28% 3.84%(5)
Decrease reflected in above ratios due to undertakings by The Dreyfus
Corporation (limited to the expense limitation provision
of the Management Agreement) 2.50%(5) 1.25% .13% 2.50%(5) 1.27% 13% 1.17%(5)
Portfolio Turnover Rate ._- 9.17% 29.73% .-_ 9.17% 29.73% 29.73%
Net Assets, end of year (000's omitted) $2,525 $8,272 $8,409 $3,343 $9,739 $10,860 $1
(1).From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3).Exclusive of sales load.
(4).Not annualized.
(5).Annualized.
NEW JERSEY SERIES
----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------- ----------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED
------------------------------ ------------------------------
PER SHARE DATA 1994(1) 1995 1996 1994(1) 1995 1996 JULY 31, 1996(2)
------- ------- ------- ------- ------- ------- -------------
Net asset value, beginning of year $12.50 $12.58 $12.71 $12.50 $12.58 $12.71 $13.21
------- ------- ------- ------- ------- ------- ------
INVESTMENT OPERATIONS:
Investment income_net. .18 .71 .59 .16 .65 .52 .32
Net realized and unrealized gain
(loss) on investments. .08 .13 .08 .08 .13 .08 (.43)
------- ------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS .26 .84 .67 .24 .78 .60 (.11)
------- ------- ------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from investment income--net (.18) (.71) (.59) (.16) (.65) (.52) (.32)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of year $12.58 $12.71 $12.79 $12.58 $12.71 $12.79 $12.78
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3) 2.07%(4) 7.01% 5.31% 1.94%(4) 6.48% 4.79% (1.21%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ._- .10% 1.14% .50%(5) .61% 1.63% 1.95%(5)
Ratio of net investment income to
average net assets.... 5.25%(5) 5.60% 4.55% 4.69%(5) 5.00% 4.04% 3.68%(5)
Decrease reflected in above ratios due to
undertakings by The Dreyfus Corporation
(limited to the expense limitation provision of
the Management Agreement). 2.50%(5) 1.35% .08% 2.50%(5) 1.29% .08% .02%(5)
Portfolio Turnover Rate ._- 43.48% 28.14% ._- 43.48% 28.14% 28.14%
Net Assets, end of year (000's omitted) $2,318 $4,981 $5,212 $2,373 $6,852 $8,910 $6
(1).From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3).Exclusive of sales load.
(4).Not annualized.
(5) Annualized.
NEW YORK SERIES
----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------------------ ------------------------------- ----------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED
------- ------- ------- ------- ------- ------- -------------
PER SHARE DATA 1994(1) 1995 1996 1994(1) 1995 1996 JULY 31, 1996(2)
------- ------- ------- ------- ------- ------- -------------
Net asset value, beginning of year $12.50 $12.79 $12.75 $12.50 $12.80 $12.77 $13.39
------- ------- ------- ------- ------- ------- ------
Investment Operations:
Investment income_net. .18 .71 .59 .16 .64 .53 .33
Net realized and unrealized gain (loss)
on investments...... . .29 (.04) .16 .30 (.03) .15 (.46)
------- ------- ------- ------- ------- ------- ------
Total from Investment Operations .47 .67 .75 .46 .61 .68 (.13)
------- ------- ------- ------- ------- ------- ------
Distributions:
Dividends from investment income_net (.18) (.71) (.59) (.16) (.64) (.53) (.33)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of year $12.79 $12.75 $12.91 $12.80 $12.77 $12.92 $12.93
======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3) 3.76%(4) 5.53% 5.97% 3.72%(4) 5.08% 5.35% (1.51%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ._- .09% 1.17% .50%(5) .60% 1.68% 1.99%(5)
Ratio of net investment income to
average net assets.... 5.28%(5) 5.64% 4.56% 4.87%(5) 5.02% 4.03% 2.99%(5)
Decrease reflected in above ratios due to
undertakings by The Dreyfus Corporation
(limited to the expense limitation provision of
the Management Agreement). 2.50%(5) 1.45% .07% 2.50%(5) 1.39% .06% .34%(5)
Portfolio Turnover Rate ._- 2.76% 26.18% ._- 2.76% 26.18% 26.18%
Net Assets, end of year (000's omitted) $2,054 $4,791 $4,768 $2,199 $6,611 $10,197 $103
(1) From May 6, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4) Not annualized.
(5) Annualized.
</TABLE>
Further information about each Series' performance is contained in its
annual report which may be obtained without charge by writing to the address or
calling the number set forth on the cover page of this Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you three methods of purchasing each Series' shares; you
may choose the Class of shares that best suits your needs, given the amount of
your purchase, the length of time you expect to hold your shares and any other
relevant circumstances. Each Series' share represents an identical pro rata
interest in that Series' investment portfolio.
As to each Series, Class A shares are sold at net asset value per share
plus a maximum initial sales charge of 4.50% of the public offering price
imposed at the time of purchase. The initial sales charge may be reduced or
waived for certain purchases. See "How to Buy Shares--Class A Shares." These
shares are subject to an annual service fee at the rate of .25 of 1% of the
value of the average daily net assets of Class A. See "Distribution Plan and
Shareholder Services Plan_Shareholder Services Plan."
As to each Series, Class B shares are sold at net asset value per share
with no initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Series. Class B shares are subject
to a maximum 4% contingent deferred sales charge ("CDSC"), which is assessed if
you redeem Class B shares within six years of purchase. See "How to Buy
Shares_Class B Shares" and "How to Redeem Shares_Contingent Deferred Sales
Charge_Class B Shares." These shares also are subject to an annual service fee
at the rate of .25 of 1% of the value of the average daily net assets of Class
B. In addition, Class B shares are subject to an annual distribution fee at the
rate of .50 of 1% of the value of the average daily net assets of Class B. See
"Distribution Plan and Shareholder Services Plan." The distribution fee paid by
Class B will cause such Class to have a higher expense ratio and to pay lower
dividends than Class A. Approximately six years after the date of purchase,
Class B shares of a Series automatically will convert to Class A shares of such
Series, based on the relative net asset values for shares of each such Class,
and will no longer be subject to the distribution fee. Class B shares that have
been acquired through the reinvestment of dividends and distributions will be
converted on a pro rata basis together with other Class B shares, in the
proportion that a shareholder's Class B shares converting to Class A shares
bears to the total Class B shares not acquired through the reinvestment of
dividends and distributions.
As to each Series, Class C shares are sold at net asset value per share
with no initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Series. Class C shares are subject
to a 1% CDSC, which is assessed only if you redeem Class C shares within one
year of purchase. See "How to Buy Shares -- Class C Shares" and "How to Redeem
Shares -- Contingent Deferred Sales Charge -- Class C Shares." These shares also
are subject to an annual service fee at the rate of .25 of 1%, and an annual
distribution fee at the rate of .75 of 1%, of the value of the average daily net
assets of Class C. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class C will cause such Class to have a higher expense
ratio and to pay lower dividends than Class A.
The decision as to which Class of shares is more beneficial to you depends
on the amount and intended length of time of your investment. You should
consider whether, during the anticipated life of your investment in the Fund,
the accumulated distribution fee and CDSC on Class B or Class C shares would be
less than the initial sales charge on Class A shares purchased at the same time,
and to what extent, if any, such differential would be offset by the return of
Class A. Additionally, investors qualifying for reduced initial sales charges
who expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution fees on Class B or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment. Finally, you should
consider the effect of the CDSC period and any conversion rights of the Classes
in the context of your own investment time frame. For example, while Class C
shares have a shorter CDSC period than Class B shares, Class C shares do not
have a conversion feature and, therefore, are subject to an ongoing distribution
fee. Thus, Class B shares may be more attractive than Class C shares to
investors with long-term investment outlooks. Generally, Class A shares may be
more appropriate for investors who invest $1,000,000 or more in Fund shares, and
for investors who invest between $100,000 and $999,999 in Fund shares with long
term investment outlooks. Class A shares will not be appropriate for investors
who invest less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize current income exempt from
Federal income tax and, where applicable, from State personal income taxes for
residents of the States of California, Connecticut, Florida, New Jersey and New
York, to the extent consistent with the preservation of capital. To accomplish
its investment objective, each Series invests primarily in debt securities
issued by States, territories and possessions of the United States and the
District of Columbia and their political subdivisions, authorities and
corporations, the interest from which is, in the opinion of bond counsel to the
issuer, exempt from Federal income taxes ("Municipal Obligations") that are
insured as to the timely payment of principal and interest by recognized
insurers of Municipal Obligations. In addition, the California Series, the
Connecticut Series, the Florida Series, the New Jersey Series and the New York
Series (collectively, the "State Series") invest primarily in such Municipal
Obligations of the State after which the relevant Series is named the interest
from which is, in the opinion of bond counsel to the issuer, exempt from Federal
and, if applicable, such State's personal income taxes (collectively, "State
Municipal Obligations" or when the context so requires, "California Municipal
Obligations," "Connecticut Municipal Obligations," "Florida Municipal
Obligations," etc.). To the extent acceptable insured State Municipal
Obligations at any time are unavailable for investment, a State Series will
invest temporarily in State Municipal Obligations that are not subject to
insurance, insured Municipal Obligations and/or other debt securities the
interest from which is, in the opinion of bond counsel to the issuer, exempt
from Federal, but not State, income tax. With respect to the National Series, to
the extent acceptable insured Municipal Obligations at any time are unavailable
for investment, such Series will invest temporarily in Municipal Obligations
that are not subject to insurance and/or other debt securities the interest from
which is, in the opinion of bond counsel to the issuer, exempt from Federal
income tax. When used herein, the term "State" refers to the State after which a
Series is named. Each Series' investment objective cannot be changed without
approval by the holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")) of such Series' outstanding voting shares.
There can be no assurance that the Series' investment objective will be
achieved.
MUNICIPAL OBLIGATIONS
Municipal Obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that do not carry
the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities. Municipal Obligations bear
fixed, floating or variable rates of interest which are determined in some
instances by formulas under which the Municipal Obligation's interest rate will
change directly or inversely to changes in interest rates or an index, or
multiples thereof, in many cases subject to a maximum and minimum. Certain
Municipal Obligations are subject to redemption at a date earlier than their
stated maturity pursuant to call options, which may be separated from the
related Municipal Obligation and purchased and sold separately.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least 80% of
the value of each Series' net assets (except when maintaining a temporary
defensive position) in Municipal Obligations. Generally, at least 65% of the
value of each Series' net assets (except when maintaining a temporary defensive
position) will be invested in bonds, debentures and other debt instruments that
are insured Municipal Obligations which, with respect to the State Series, are
issued by issuers in the State after which such Series is named. See "Insurance
Feature" and "Investment Considerations and Risks_Investing in State Municipal
Obligations" below, and "Dividends, Distributions and Taxes."
Municipal Obligations purchased by each Series will be rated no lower than
Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's
Ratings Group, a division of The McGraw Hill Companies, Inc. ("S&P") or Fitch
Investors Service, L.P. ("Fitch"). Municipal Obligations rated Baa by Moody's or
BBB by S&P or Fitch are considered investment grade obligations; those rated Baa
by Moody's are considered medium grade obligations which lack outstanding
investment characteristics and have speculative characteristics, while those
rated BBB by S&P or Fitch are regarded as having an adequate capacity to pay
principal and interest. Each Series also may invest in securities which, while
not rated, are determined by The Dreyfus Corporation to be of comparable quality
to the rated securities in which the Series may invest. Each Series also may
invest in Taxable Investments of the quality described under "Appendix --
Certain Portfolio Securities -- Taxable Investments." Under normal market
conditions, the weighted average maturity of each Series' portfolio is expected
to exceed ten years.
From time to time, a Series may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), issued after August 7, 1986, while exempt from Federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a
regulated investment company receives such interest, a proportionate share of
any exempt-interest dividend paid by the investment company may be treated as
such a preference item to shareholders. Each Series may invest without
limitation in such Municipal Obligations if The Dreyfus Corporation determines
that their purchase is consistent with the Fund's investment objective. See
"Investment Considerations and Risks" below.
Each Series' annual portfolio turnover rate is not expected to exceed 100%.
Each Series may engage in various investment techniques, such as options and
futures transactions, lending portfolio securities and short-selling. Use of
certain of these techniques may give rise to taxable income. For a discussion of
the investment techniques and their related risks, see "Investment
Considerations and Risks," "Appendix -- Investment Techniques" and "Dividends,
Distributions and Taxes" below and "Investment Objective and Management Policies
_ Management Policies" in the Statement of Additional Information.
INSURANCE FEATURE
At the time they are purchased by a Series, the Municipal Obligations held
in such Series' portfolio that are subject to insurance will be insured as to
timely payment of principal and interest under an insurance policy (i) purchased
by the Series or by a previous owner of the Municipal Obligation ("Mutual Fund
Insurance") or (ii) obtained by the issuer or underwriter of the Municipal
Obligation ("New Issue Insurance"). The insurance of principal refers to the
face or par value of the Municipal Obligation and is not affected by nor does it
insure the price paid therefor by the Series or the market value thereof. The
value of each Series' shares is not insured.
New Issue Insurance is obtained by the issuer of the Municipal Obligations
and all premiums respecting such securities are paid in advance by such issuer.
Such policies are non-cancelable and continue in force so long as the Municipal
Obligations are outstanding and the insurer remains in business.
Certain types of Mutual Fund Insurance obtained by the Fund are effective
only so long as the Fund is in existence, the insurer remains in business and
the Municipal Obligations described in the policy continue to be held by the
Series. The Fund, on behalf of the Series, will pay the premiums with respect to
such insurance. Depending upon the terms of the policy, in the event of a sale
of any Municipal Obligation so insured by a Series, the Mutual Fund Insurance
may terminate as to such Municipal Obligation on the date of sale and in such
event the insurer may be liable only for those payments of principal and
interest which then are due and owing. Other types of Mutual Fund Insurance may
not have this termination feature. Each Series may purchase Municipal
Obligations with this type of insurance from parties other than the issuer and
the insurance would continue for the Series' benefit.
Typically, the insurer may not withdraw coverage on insured securities held
by a Series, nor may the insurer cancel the policy for any reason except failure
to pay premiums when due. The insurer may reserve the right at any time upon 90
days' written notice to the Fund to refuse to insure any additional Municipal
Obligations purchased by a Series after the effective date of such notice. The
Fund's Board has reserved the right to terminate the Mutual Fund Insurance
policy for any Series if it determines that the benefits to such Series of
having its portfolio insured are not justified by the expense involved. See
"Investment Considerations and Risks -- Investing in Insured Municipal
Obligations" below.
Mutual Fund Insurance and New Issue Insurance may be obtained from
Financial Guaranty Insurance Company ("Financial Guaranty"),MBIA Insurance
Corporation ("MBIA"), AMBAC Indemnity Corporation ("AMBAC Indemnity") and
Financial Security Assurance, Inc. ("FSA"), although the Fund may purchase
insurance from, or each Series may purchase Municipal Obligations insured by,
other insurers.
The following information regarding these insurers has been derived from
information furnished by the insurers. The Fund has not independently verified
any of the information, but the Fund is not aware of facts which would render
such information inaccurate.
Financial Guaranty is a New York stock insurance company regulated by the
New York State Department of Insurance and authorized to provide insurance in 50
states and the District of Columbia. Financial Guaranty is a subsidiary of FGIC
Corporation, a Delaware holding company, which is a subsidiary of General
Electric Capital Corporation. Financial Guaranty, in addition to providing
insurance for the payment of interest on and principal of Municipal Obligations
held in unit investment trust and mutual fund portfolios, provides New Issue
Insurance and insurance for secondary market issues of Municipal Obligations and
for portions of new and secondary market issues of Municipal Obligations. As of
December 31, 1995, Financial Guaranty reported total capital and surplus of
approximately $1 billion and admitted assets of approximately $2.3 billion. The
claims-paying ability of Financial Guaranty is rated "AAA" by S&P and Fitch and
"Aaa" by Moody's.
MBIA, formerly known as Municipal Bond Investors Assurance Corporation, is
the principal operating subsidiary of MBIA Inc., a New York Stock Exchange
listed company.MBIA Inc. is not obligated to pay the debts of or claims against
MBIA. MBIA is domiciled in the State of New York and licensed to do business in
all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United
States and the Territory of Guam. As of December 31, 1995, MBIA had admitted
assets of $3.8 billion, total liabilities of $2.5 billion, and total capital and
surplus of $1.3 billion, determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities. The
claims-paying ability of MBIA is rated "AAA" by S&P and Fitch and "Aaa" by
Moody's.
AMBAC Indemnity is a Wisconsin-domiciled stock insurance company, regulated
by the Office of the Commissioner of Insurance of the State of Wisconsin and
licensed to do business in 50 states, the District of Columbia, the Commonwealth
of Puerto Rico and the territory of Guam. AMBAC Indemnity is a wholly-owned
subsidiary of AMBAC Inc., a publicly held company. AMBAC Indemnity had admitted
assets of approximately $2.4 billion and statutory capital of approximately $1.4
billion as of December 31, 1995. Statutory capital consists of AMBAC Indemnity's
statutory contingency reserve and policyholders' surplus. The claims-paying
ability of AMBAC Indemnity is rated "AAA" by S&P and Fitch and "Aaa" by Moody's.
FSA, which acquired Capital Guaranty Insurance Company in December 1995, is
a wholly-owned subsidiary of Financial Security Assurance Holdings, Ltd., a New
York Stock Exchange listed company. FSA is authorized to provide insurance in 50
states, the District of Columbia and three U.S. territories. As of December 31
1995, FSA's statutory capital was approximately $650 million (unaudited) and
total assets were approximately $1.5 billion (unaudited). The claims-paying
ability of FSA is rated "AAA" by S&P and "Aaa" by Moody's.
Additional information concerning the insurance feature appears in the
Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments which
promise a stable stream of income, the prices of such securities are inversely
affected by changes in interest rates and, therefore, are subject to the risk of
market price fluctuations. Certain securities that may be purchased by the
Series, such as those with interest rates that fluctuate directly or indirectly
based on multiples of a stated index, are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and possibly loss of principal. The values of fixed-income
securities also may be affected by changes in the credit rating or financial
condition of the issuing entities. Certain securities purchased by the Series,
such as those rated Baa by Moody's and BBB by S&P and Fitch, may be subject to
such risk with respect to the issuing entity and to greater market fluctuations
than certain lower yielding, higher rated fixed-income securities. Once the
rating of a portfolio security has been changed, the Fund will consider all
circumstances deemed relevant in determining whether to continue to hold the
security. Each Series' net asset value generally will not be stable and should
fluctuate based upon changes in the value of such Series' portfolio securities.
See "Appendix _ Certain Portfolio Securities _ Ratings" below and "Appendix B"
in the Statement of Additional Information.
INVESTING IN STATE MUNICIPAL OBLIGATIONS (STATE SERIES ONLY) -- You should
consider carefully the special risks inherent in each State Series' investment
in its respective State's Municipal Obligations. Certain of the States have
experienced financial difficulties, the recurrence of which could result in
defaults or declines in the market values of various Municipal Obligations in
which such Series invests. If there should be a default or other financial
crises relating to a State or an agency or municipality thereof, the market
value and marketability of outstanding State Municipal Obligations in a State
Series' portfolio and interest income to such Series could be adversely
affected. You should obtain and review a copy of the Statement of Additional
Information which more fully sets forth these and other risk factors.
CALIFORNIA SERIES. The special risks inherent in an investment in
California Municipal Obligations result from certain amendments to the
California Constitution and other statutes that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial condition of the State of California. From mid-1990 to late 1993, the
State suffered a recession with the worst economic, fiscal and budget conditions
since the 1930s. As a result, the State experienced recurring budget deficits
for four of its five fiscal years ended June 30, 1992. The State had operating
surpluses of approximately $109 million in 1992-93 and $917 million in 1993-94.
However, at June 30, 1994, according to California's Department of Finance, the
State's Special Fund for Economic Uncertainties had an accumulated deficit, on a
budget basis, of approximately $1.8 billion. A further consequence of the large
budget imbalances has been that the State depleted its available cash resources
and has had to use a series of external borrowings to meet its cash needs. To
meet its cash flow needs in the 1994-95 fiscal year, the State issued, in July
and August 1994, $4.0 billion in revenue anticipation warrants and $3.0 billion
of revenue anticipation notes. The 1994-95 Budget Act contained a plan to retire
a projected $1.025 billion deficit in the 1995-96 fiscal year. As a result of
the deterioration in the State's budget and cash situation, between October 1991
and July 1994, the rating on the State's general obligation bonds was reduced by
S&P from AAA to A, by Moody's from Aaa to A1 and by Fitch from AAA to A. These
and other factors may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay principal of, such
California Municipal Obligations.
CONNECTICUT SERIES. Connecticut's economy relies in part on activities that
may be adversely affected by cyclical change, and recent declines in defense
spending have had a significant impact on unemployment levels. Although the
State recorded General Fund surpluses in the fiscal years 1985 through 1987, and
1992 through 1995, Connecticut reported deficits from its General Fund
operations for the fiscal years 1988 through 1991. Together with the deficit
carried forward from the State's 1990 fiscal year, the total General Fund
deficit for the 1991 fiscal year was $965.7 million. The total deficit was
funded by the issuance of General Obligation Economic Recovery Notes. Moreover,
as of June 30, 1995, the General Fund had a cumulative deficit under GAAP of
$576.9 million. As a result of recurring budgetary problems, S&P downgraded the
State's general obligation bonds from AA+ to AA in April 1990 and to AA- in
September 1991. Fitch downgraded the State's general obligation bonds from AA+
to AA in March 1995. Moody's currently rates Connecticut's bonds Aa.
FLORIDA SERIES. The Florida Constitution and Statutes mandate that the
State budget as a whole, and each separate fund within the State budget, be kept
in balance from currently available revenues each fiscal year. Florida's
Constitution permits issuance of Florida Municipal Obligations pledging the full
faith and credit of the State, with a vote of the electors, to finance or
refinance fixed capital outlay projects authorized by the Legislature, provided
that the outstanding principal does not exceed 50% of the total tax revenues of
the State for the two preceding years. Florida's Constitution also provides that
the Legislature shall appropriate monies sufficient to pay debt service on State
bonds pledging the full faith and credit of the State as the same becomes due.
All State tax revenues, other than trust funds dedicated by Florida's
Constitution for other purposes, would be available for such an appropriation,
if required. Revenue bonds may be issued by the State or its agencies without a
vote of Florida's electors only to finance or refinance the cost of State fixed
capital outlay projects which may be payable solely from funds derived directly
from sources other than State tax revenues. Fiscal year 1995-96 total General
Revenue, Working Capital and Budget Stabilization funds available are estimated
to be $15.149 billion, which would result in unencumbered reserves of
approximately $325.1 million at the end of fiscal 1995-96. The General Revenue,
Working Capital and Budget Stabilization funds ended the 1994-95 fiscal year
with unencumbered reserves of $290.3 million.
NEW JERSEY SERIES. Although New Jersey enjoyed a period of economic growth
with unemployment levels below the national average during the mid-1980's, its
economy slowed down well before the onset of the national recession in July
1990. Reflecting the economic downturn, New Jersey's unemployment rate rose from
a low of 3.6% in the first quarter of 1989 to a recessionary peak of 9.3% during
1992. As a result of New Jersey's fiscal weakness, in July 1991, S&P lowered its
rating of the State's general obligation debt from AAA to AA+.
NEW YORK SERIES. The special risks inherent in investing in New York
Municipal Obligations result from the financial condition of New York State, and
certain of its public bodies and municipalities, including New York City.
Beginning in early 1975, New York State, New York City and other State entities
faced serious financial difficulties which jeopardized the credit standing and
impaired the borrowing abilities of such entities and contributed to high
interest rates on, and lower market prices for, debt obligations issued by them.
A recurrence of such financial difficulties or a failure of certain financial
recovery programs could result in defaults or declines in the market values of
various New York Municipal Obligations in which the New York Series may invest.
If there should be a default or other financial crisis relating to New York
State, New York City, a State or City agency, or a State municipality, the
market value and marketability of outstanding New York Municipal Obligations in
the New York Series' portfolio and the interest income to such Series could be
adversely affected. Moreover, the national recession and the significant
slowdown in the New York regional economy in the early 1990's added substantial
uncertainty to estimates of the State's tax revenues, which, in part, caused New
York State to incur cash-basis operating deficits in the General Fund and issue
deficit notes during the fiscal periods 1989 through 1992. The State's financial
operations have improved, however, during recent fiscal years. For its fiscal
periods 1993 through 1995, the State recorded balanced budgets on a cash basis,
with substantial fund balances in the General Fund in fiscal 1992-93 and 1993-94
and smaller fund balances in fiscal 1994-95 and 1995 -96. There can be no
assurance that New York will not face substantial potential budget gaps in
future years. In January 1992, Moody's lowered from A to Baa1 the ratings on
certain appropriation-backed debt of New York State and its agencies. The
State's general obligation, State-guaranteed and New York State Local Government
Assistance Corporation bonds continued to be rated A by Moody's. In January
1992, S&P lowered from A to A- its ratings of New York State general obligation
bonds and stated that it continues to assess the ratings outlook as negative.
The ratings of various agency debt, State moral obligations, contractual
obligations, lease purchase obligations and State guarantees also were lowered.
In February 1991, Moody's lowered its rating on New York City's general
obligation bonds from A to Baa1 and in July 1995, S&P lowered its ratings on
such bonds from A- to BBB+. The rating changes reflected the rating agencies'
concerns about the financial condition of New York State and City, the heavy
debt load of the State and City, and economic uncertainties in the region.
INVESTING IN INSURED MUNICIPAL OBLIGATIONS -- The insurance feature is
intended to reduce financial risk, but the cost thereof and the restrictions on
investments imposed by the guidelines in the insurance policy will result in a
reduction in the yield on the Municipal Obligations purchased by a Series.
Because coverage under certain Mutual Fund Insurance policies may terminate
upon sale of a security from a Series' portfolio, insurance with this
termination feature should not be viewed as assisting the marketability of
securities in the Series' portfolio, whether or not the securities are in
default or subject to a serious risk of default. The Dreyfus Corporation intends
to retain any Municipal Obligations subject to such insurance which are in
default or, in the view of The Dreyfus Corporation, in significant risk of
default and to recommend to the Fund's Board that the Fund place a value on the
insurance which will be equal to the difference between the market value of the
defaulted security and the market value of similar securities of minimum
investment grade (i.e., rated Baa by Moody's or BBB by S&P or Fitch) which are
not in default. To the extent a Series holds defaulted securities subject to
Mutual Fund Insurance with this termination feature, it may be limited in its
ability in certain circumstances to purchase other Municipal Obligations. While
a defaulted Municipal Obligation is held in a Series' portfolio, such Series
continues to pay the insurance premium thereon but also is entitled to collect
interest payments from the insurer and retains the right to collect the full
amount of principal from the insurer when the security comes due.
INVESTING IN MUNICIPAL OBLIGATIONS -- Each Series 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 or, with respect to the National Series, securities whose issuers are
located in the same state. As a result, each Series 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 Series may invest
may contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase obligation that is
unrated, The Dreyfus Corporation will consider, on an ongoing basis, a number of
factors including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Fund and thus
reduce the 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.
ZERO COUPON SECURITIES -- Federal income tax law requires the holder of a
zero coupon security or of certain pay-in- kind bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To maintain
its qualification as a regulated investment company and avoid liability for
Federal income taxes, a Series may be required to distribute such income accrued
with respect to these securities and may have to dispose of portfolio securities
under disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.
USE OF DERIVATIVES -- Each Series may invest in derivatives
("Derivatives"). These are financial instruments which derive their performance,
at least in part, from the performance of an underlying asset, index or interest
rate. The Derivatives the Series may use include options and futures. While
Derivatives can be used effectively in furtherance of the Series' investment
objective, under certain market conditions, they can increase the volatility of
the Series' net asset value, can decrease the liquidity of the Series'
investments and make more difficult the accurate pricing of the Series'
portfolio. See "Appendix-- Investment Techniques -- Use of Derivatives"below,
and "Investment Objective and Management Policies -- Management Policies --
Derivatives" in the Statement of Additional Information.
NON-DIVERSIFIED STATUS -- The classification of each Series as a
"non-diversified" investment company means that the proportion of such Series'
assets that may be invested in the securities of a single issuer is not limited
by the 1940 Act. A "diversified" investment company is required by the 1940 Act
generally, with respect to 75% of its total assets, to invest not more than 5%
of such assets in the securities of a single issuer. Since a relatively high
percentage of each Series' assets may be invested in the securities of a limited
number of issuers, the Series' portfolio may be more sensitive to changes in the
market value of a single issuer. However, to meet Federal tax requirements, at
the close of each quarter no Series may have more than 25% of its total assets
invested in any one issuer and, with respect to 50% of total assets, more than
5% of its total assets invested in any one issuer. These limitations do not
apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest in,
or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment company.
In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Fund or the price paid or received by the
Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's investment
adviser. The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
As of September 30, 1996, The Dreyfus Corporation managed or administered
approximately $81 billion in assets for more than 1.7 million investor accounts
nationwide.
The Dreyfus Corporation supervises and assists in the overall management of
the Fund's affairs under a Management Agreement with the Fund, subject to the
authority of the Fund's Board in accordance with Massachusetts law. The primary
portfolio manager for each of the California Series, the Connecticut Series and
the Florida Series is Stephen C. Kris. He has held that position with respect to
the California Series since August 1993, and with respect to the Connecticut
Series and the Florida Series since October 1996, and has been an employee of
The Dreyfus Corporation since 1988. The primary portfolio manager for the
National Series is Joseph P. Darcy. He has held that position since October
1996, and has been an employee of The Dreyfus Corporation since May 1994. For
more than five years prior to joining The Dreyfus Corporation, Mr. Darcy was a
Vice President and Portfolio Manager for Merrill Lynch Asset Management. The
primary portfolio manager for the New Jersey Series is Samuel J. Weinstock. He
has held that position since October 1996, and has been an employee of The
Dreyfus Corporation since March 1987. The primary portfolio manager for the New
York Series is Richard J. Moynihan. He has held that position since October
1996, and has been an employee of The Dreyfus Corporation since 1973. The Fund's
other portfolio managers are identified in the Statement of Additional
Information. The Dreyfus Corporation also provides research services for the
Fund and for other funds advised by The Dreyfus Corporation through a
professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Federal Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon is
among the twenty-five largest bank holding companies in the United States based
on total assets. Mellon's principal wholly-owned subsidiaries are Mellon Bank,
N.A., Mellon Bank (DE) National Association, Mellon Bank (MD), The Boston
Company, Inc., AFCO Credit Corporation and a number of companies known as Mellon
Financial Services Corporations. Through its subsidiaries, including The Dreyfus
Corporation, Mellon managed more than $226 billion in assets as of September 30,
1996, including approximately $85 billion in proprietary mutual fund assets. As
of September 30, 1996, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for more
than $905 billion in assets including approximately $60 billion in mutual fund
assets.
Under the terms of the Management Agreement, the Fund has agreed to pay The
Dreyfus Corporation a monthly fee at the annual rate of .55 of 1% of the value
of each Series' average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of a Series, which would have the effect of lowering the expense ratio
of that Series and increasing yield to investors. The Fund will not pay The
Dreyfus Corporation at a later time for any amounts it may waive, nor will the
Fund reimburse The Dreyfus Corporation for any amounts it may assume.
For the fiscal year ended July 31, 1996, the Fund paid The Dreyfus
Corporation a monthly management fee pursuant to undertakings in effect at the
effective annual rate set forth below as a percentage of the relevant Series'
average daily net assets:
EFFECTIVE ANNUAL RATE
NAME OF SERIES OF MANAGEMENT FEE PAID
California .28 of 1%
Connecticut .43 of 1%
Florida .41 of 1%
National .42 of 1%
New Jersey .47 of 1%
New York .49 of 1%
In allocating brokerage transactions for the Fund, The Dreyfus Corporation
seeks to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among other
things, the receipt of research services and/or the sale of shares of the Fund
or other funds managed, advised or administered by The Dreyfus Corporation as
factors in the selection of broker-dealers to execute portfolio transactions for
the Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation may pay the Fund's distributor for shareholder
services from The Dreyfus Corporation's own assets, including past profits but
not including the management fee paid by the Fund. The Fund's distributor may
use part or all of such payments to pay Service Agents in respect of these
services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
GENERAL -- Fund shares may be purchased only by clients of certain
financial institutions (which may include banks), securities dealers ("Selected
Dealers") and other industry professionals (collectively, "Service Agents"),
except that full-time or part-time employees of The Dreyfus Corporation or any
of its affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of the
Fund's Board, or the spouse or minor child of any of the foregoing may purchase
Class A shares directly through the Distributor. Subsequent purchases may be
sent directly to the Transfer Agent or your Service Agent.
When purchasing Series' shares, you must specify which Class is being
purchased. 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 retirement plans.
The Fund reserves the right to reject any purchase order.
Service Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Service Agents may
impose certain conditions on their clients which are different from those
described in this Prospectus, and to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Shareholder Services
Plan. You should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent investments must be at
least $100. The initial investment must be accompanied by the Account
Application.
You may purchase Series' shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," and should specify the Series in which you are
investing. Payments which are mailed should be sent to Premier Insured Municipal
Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. If you are
opening a new account, please enclose your Account Application indicating which
Class of shares is being purchased. For subsequent investments, your Fund
account number should appear on the check and an investment slip should be
enclosed. Neither initial nor subsequent investments should be made by third
party check.
Wire payments may be made if your bank account is in a commercial bank that
is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable Series
DDA # as shown below, for purchase of Fund shares in your name:
DDA# 8900088311/Premier Insured Municipal Bond Fund/National Series DDA#
8900118172/Premier Insured Municipal Bond Fund/California Series DDA#
8900088346/Premier Insured Municipal Bond Fund/Connecticut Series DDA#
8900088362/Premier Insured Municipal Bond Fund/Florida Series DDA#
8900088389/Premier Insured Municipal Bond Fund/New Jersey Series DDA#
8900088400/Premier Insured Municipal Bond Fund/New York Series The wire
must include your Fund account number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account registration
and dealer number, if applicable, and must indicate the Class of shares being
purchased. If your initial purchase of Fund shares is by wire, please call
1-800-645-6561 after completing your wire payment to obtain your Fund account
number. Please include your Fund account number on the Account Application and
promptly mail the Account Application to the Fund, as no redemptions will be
permitted until the Account Application is received. You may obtain further
information about remitting funds in this manner from your bank. All payments
should be made in U.S. dollars and, to avoid fees and delays, should be drawn
only on U.S. banks. A charge will be imposed if any check used for investment in
your account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Fund shares also may be purchased through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark and the Government Direct Deposit Privilege described
under "Shareholder Services." These services enable you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House member. You must direct the institution to
transmit immediately available funds through the Automated Clearing House to The
Bank of New York with instructions to credit your Fund account. The instructions
must specify your Fund account registration and your Fund account number
PRECEDED BY THE DIGITS "1111."
Each Series' shares are sold on a continuous basis. Net asset value per
share is determined as of the close of trading on the floor of the New York
Stock Exchange (currently 4:00 p.m. New York time), on each day the New York
Stock Exchange is open for business. For purposes of determining net asset
value, 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 of each Class is computed by dividing the value of the net assets of each
Series represented by such Class (i.e., the value of its assets less
liabilities) by the total number of Series' shares of such Class outstanding.
Each Series' investments are valued each business day 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 Series' investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
If an order is received in proper form by the Transfer Agent or other agent
by the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time) on any business day, Fund shares will be purchased at
the public offering price determined as of the close of trading on the floor of
the New York Stock Exchange on that day. Otherwise, Fund shares will be
purchased at the public offering price determined as of the close of trading on
the floor of the New York Stock Exchange on the next business day, except where
shares are purchased through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the New York Stock Exchange on any business day and
transmitted to the Distributor or its designee by the close of its business day
(normally 5:15 p.m., New York time) will be based on the public offering price
per share determined as of the close of trading on the floor of the New York
Stock Exchange on that day. Otherwise, the orders will be based on the next
determined public offering price. It is the dealer's responsibility to transmit
orders so that they will be received by the Distributor or its designee before
the close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may be
transmitted, and must be received by the Transfer Agent, within three business
days after the order is placed. If such payment is not received within three
business days after the order is placed, the order may be cancelled and the
institution could be held liable for resulting fees and/or losses.
Federal regulations require that you provide a certified TIN upon opening
or reopening an account. See "Dividends, Distributions and Taxes" and the
Account Application for further information concerning this requirement. Failure
to furnish a certified TIN to the Fund could subject you to a $50 penalty
imposed by the Internal Revenue Service (the "IRS").
CLASS A SHARES--The public offering price for Class A shares of each Series
is the net asset value per share of that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
TOTAL SALES LOAD
-----------------------------------------
AS A % OF AS A % OF DEALERS' REALLOWANCE
OFFERING PRICE NET ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION PER SHARE PER SHARE OFFERING PRICE
--------------------------- ---------------- ----------------- -------------------------
<S> <C> <C> <C>
Less than $50,000... 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more.. -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of Class A shares
purchased without an initial sales charge as part of an investment of at least
$1,000,000 and redeemed within one year of purchase. The terms contained in the
section of the Prospectus entitled "How to Redeem Shares -- Contingent Deferred
Sales Charge" (other than the amount of the CDSC and its time periods) are
applicable to the Class A shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions that have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of Fund shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children, at net asset value, provided
that they have furnished the Distributor with such information as it may request
from time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible to
purchase Class A shares at net asset value. In addition, Class A shares are
offered at net asset value to full-time or part-time employees of The Dreyfus
Corporation or any of its affiliates or subsidiaries, directors of The Dreyfus
Corporation, Board members of a fund advised by The Dreyfus Corporation,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing.
Class A shares also may be purchased at net asset value through certain
broker-dealers and other financial institutions which have entered into an
agreement with the Distributor, which includes a requirement that such shares be
sold for the benefit of clients participating in a "wrap account" or a similar
program under which such clients pay a fee to such broker-dealer or other
financial institution.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a registered
open-end management investment company not managed by The Dreyfus Corporation or
its affiliates. The purchase of Class A shares of the Fund must be made within
60 days of such redemption and the shareholder must have either (i) paid an
initial sales charge or a contingent deferred sales charge or (ii)been obligated
to pay at any time during the holding period, but did not actually pay on
redemption, a deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value, subject to
appropriate documentation, by (i) qualified separate accounts maintained by an
insurance company pursuant to the laws of any State or territory of the United
States, (ii) a State, county or city or instrumen- tality thereof, (iii) a
charitable organization (as defined in Section 501(c)(3) of the Code investing
$50,000 or more in Fund shares, and (iv) a charitable remainder trust (as
defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds advised
by The Dreyfus Corporation which are sold with a sales load, such as Class A
shares. In some instances, those incentives may be offered only to certain
dealers who have sold or may sell significant amounts of shares.
CLASS B SHARES -- The public offering price for Class B shares of each
Series is the net asset value per share of that Class. No initial sales charge
is imposed at the time of purchase. A CDSC is imposed, however, on certain
redemptions of Class B shares as described under "How to Redeem Shares." The
Distributor compensates certain Service Agents for selling Class B and Class C
shares at the time of purchase from the Distributor's own assets. The proceeds
of the CDSC and the distribution fee, in part, are used to defray these
expenses.
CLASS C SHARES -- The public offering price for Class C shares of each
Series is the net asset value per share of that Class. No initial sales charge
is imposed at the time of purchase. A CDSC is imposed, however, on redemptions
of Class C shares made within the first year of purchase. See "Class B Shares"
above and "How to Redeem Shares."
RIGHT OF ACCUMULATION--CLASS A SHARES -- Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Premier Family of
Funds, shares of certain other funds advised by The Dreyfus Corporation which
are sold with a sales load and shares acquired by a previous exchange of such
shares (hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined in the Statement of Additional Information, where the
aggregate investment, including such purchase, is $50,000 or more. If, for
example, you previously purchased and still hold Class A shares of the Fund, or
of any other Eligible Fund or combination thereof, with an aggregate current
market value of $40,000 and subsequently purchase Class A shares of the Fund or
an Eligible Fund having a current value of $20,000, the sales load applicable to
the subsequent purchase would be reduced to 4% of the offering price. All
present holdings of Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase you or your
Service Agent must notify the Distributor if orders are made by wire, or the
Transfer Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.
TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500, maximum
$150,000 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase of shares by calling 1-800-645-6561 or, if you are calling
from overseas, call 516-794-5452. SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Service Agents and some Service Agents may
impose certain conditions on their clients which are different from those in
this Prospectus. You should consult your Service Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class of a Series, shares of
the same Class of one of the other Series or of certain other funds managed or
administered by The Dreyfus Corporation, to the extent such shares are offered
for sale in your state of residence. These funds have different investment
objectives which may be of interest to you. You also may exchange your Fund
shares that are subject to a CDSC for shares of Dreyfus Worldwide Dollar Money
Market Fund, Inc. The shares so purchased will be held in a special account
created solely for this purpose ("Exchange Account"). Exchanges of shares from
an Exchange Account only can be made into certain other funds managed or
administered by The Dreyfus Corporation. No CDSC is charged when an investor
exchanges into an Exchange Account; however, the applicable CDSC will be imposed
when shares are redeemed from an Exchange Account or other applicable Fund
account. Upon redemption, the applicable CDSC will be calculated without regard
to the time such shares were held in an Exchange Account. See "How to Redeem
Shares." Redemption proceeds for Exchange Account shares are paid by Federal
wire or check only. Exchange Account shares also are eligible for Dividend Sweep
and the Automatic Withdrawal Plan. To use this service, you should consult your
Service Agent or call 1-800-645-6561 to determine if it is available and whether
any conditions are imposed on its use.
To request an exchange, your Service Agent acting on your behalf must give
exchange instructions to the Transfer Agent in writing or by telephone. Before
any exchange, you must obtain and should review a copy of the current prospectus
of the fund into which the exchange is being made. Prospectuses may be obtained
by calling 1-800-645-6561. Except in the case of personal retirement plans, the
shares being exchanged must have a current value of at least $500; furthermore,
when establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the fund
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. The Telephone Exchange Privilege
may be established for an existing account by written request, signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark Automated
Telephone System) by calling 1-800-645-6561. If you are calling from overseas,
call 516-794-5452. See "How to Redeem Shares_Procedures." Upon an exchange into
a new account, the following shareholder services and privileges, as applicable
and where available, will be automatically carried over to the fund into which
the exchange is made: Telephone Exchange Privilege, Check Redemption Privilege,
TELETRANSFER Privilege and the dividend/capital gain distribution option (except
for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value; however, a
sales load may be charged with respect to exchanges of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B or Class C shares at
the time of an exchange; however, Class B or Class C shares acquired through an
exchange will be subject on redemption to the higher CDSC applicable to the
exchanged or acquired shares. The CDSC applicable on redemption of the acquired
Class B or Class C shares will be calculated from the date of the initial
purchase of the Class B or Class C shares exchanged, as the case may be. If you
are exchanging Class A shares into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect a
reduced sales load, if the shares you are exchanging were: (a) purchased with a
sales load, (b) acquired by a previous exchange from shares purchased with a
sales load, or (c) acquired through reinvestment of dividends or distributions
paid with respect to the foregoing categories of shares. To qualify, at the time
of the exchange your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of Additional
Information. No fees currently are charged shareholders directly in connection
with exchanges, although the Fund reserves the right, upon not less than 60
days' written notice, to charge shareholders a nominal fee in accordance with
rules promulgated by the Securities and Exchange Commission. The Fund reserves
the right to reject any exchange request in whole or in part. The availability
of Fund Exchanges may be modified or terminated at any time upon notice to
shareholders. See "Dividends, Distributions and Taxes."
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a semi-monthly,
monthly, quarterly or annual basis), in exchange for shares of a Series, in
shares of the same Class of one of the other Series or of other funds in the
Premier Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are a shareholder. The amount you designate, which can be expressed
either in terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth day of the month according
to the schedule you have selected. Shares will be exchanged at the then-current
net asset value; however, a sales load may be charged with respect to exchanges
of Class A shares into funds sold with a sales load. No CDSC will be imposed on
Class B or Class C shares at the time of an exchange; however, Class B or Class
C shares acquired through an exchange will be subject on redemption to the
higher CDSC applicable to the exchanged or acquired shares. The CDSC applicable
on redemption of the acquired Class B or Class C shares will be calculated from
the date of the initial purchase of the Class B or Class C shares exchanged, as
the case may be. See "Shareholder Services" in the Statement of Additional
Information. The right to exercise this Privilege may be modified or canceled by
the Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Premier Insured
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The
Fund may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. For more information concerning this Privilege and
the funds in the Premier Family of Funds or Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain an Auto-Exchange Authorization Form,
please call toll free 1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular intervals
selected by you. Fund shares are purchased by transferring funds from the bank
account designated by you. At your option, the bank account designated by you
will be debited in the specified amount, and Fund shares will be purchased, once
a month, on either the first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish a
Dreyfus-AUTOMATIC Asset Builder account, you must file an authorization form
with the Transfer Agent. You may obtain the necessary authorization form by
calling 1-800-645-6561. You may cancel your participation in this Privilege or
change the amount of purchase at any time by mailing written notification to
Premier Insured Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587, and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase Fund shares
(minimum of $100 and maximum of $50,000 per transaction) by having Federal
salary, Social Security, or certain veterans', military or other payments from
the Federal government automatically deposited into your Fund account. You may
deposit as much of such payments as you elect. To enroll in Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in the
Privilege. The appropriate form may be obtained from your Service Agent or by
calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. Further,
the Fund may terminate your participation upon 30 days' notice to you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends or dividends
and capital gain distributions, if any, paid by the Fund in shares of the same
Class of another fund in the Premier Family of Funds or the Dreyfus Family of
Funds of which you are a shareholder. Shares of the other fund will be purchased
at the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load. If
you are investing in a fund that charges a CDSC, the shares purchased will be
subject on redemption to the CDSC, if any, applicable to the purchased shares.
See "Shareholder Services" in the Statement of Additional Information. Dividend
ACH permits you to transfer electronically dividends or dividends and capital
gain distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
For more information concerning these privileges, or to request a Dividend
Options Form, please call toll free 1-800-645-6561. You may cancel these
privileges by mailing written notification to Premier Insured Municipal Bond
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dividend Sweep. The Fund may modify or terminate these privileges at any time or
charge a service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly basis
if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through the
Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares withdrawn pursuant to the Automatic Withdrawal Plan will
be subject to any applicable CDSC. Purchases of additional Class A shares where
the sales load is imposed concurrently with withdrawals of Class A shares
generally are undesirable.
LETTER OF INTENT--CLASS A SHARES
By signing a Letter of Intent form, which can be obtained by calling
1-800-645-6561, you become eligible for the reduced sales load applicable to the
total number of Eligible Fund shares purchased in a 13-month period pursuant to
the terms and conditions set forth in the Letter of Intent. A minimum initial
purchase of $5,000 is required. To compute the applicable sales load, the
offering price of shares you hold (on the date of submission of the Letter of
Intent) in any Eligible Fund that may be used toward "Right of Accumulation"
benefits described above may be used as a credit toward completion of the Letter
of Intent. However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares held in escrow to realize the difference.
Signing a Letter of Intent does not bind you to purchase, or the Fund to sell,
the full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales load. At
the time you purchase Class A shares, you must indicate your intention to do so
under a Letter of Intent. Purchases pursuant to a Letter of Intent will be made
at the then-current net asset value plus the applicable sales load in effect at
the time such Letter of Intent was executed.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption requests
should be transmitted to the Transfer Agent as described below. When a request
is received in proper form, the Fund will redeem the shares at the next
determined net asset value as described below. If you hold Fund shares of more
than one Class, any request for redemption must specify the Class of shares
being redeemed. If you fail to specify the Class of shares to be redeemed or if
you own fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further instructions
from you or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Service Agents may charge their clients a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund shares
being redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon the
Series' then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within seven
days after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY THE TELETRANSFER
PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF
YOUR PURCHASE CHECK, TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER
ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND
WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL
REJECT REQUESTS TO REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER
ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT
APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A
SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST.
PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer Agent
has received your Account Application.
The Fund reserves the right to redeem your account at its option upon not
less than 30 days' written notice if your account's net asset value is $500 or
less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE
CLASS B SHARES -- A CDSC payable to the Distributor is imposed on any
redemption of Class B shares of a Series which reduces the current net asset
value of your Class B shares to an amount which is lower than the dollar amount
of all payments by you for the purchase of Class B shares of such Series held by
you at the time of redemption. No CDSC will be imposed to the extent that the
net asset value of the Class B shares redeemed does not exceed (i) the current
net asset value of Class B shares acquired through reinvestment of dividends or
capital gain distributions, plus (ii) increases in the net asset value of your
Class B shares above the dollar amount of all your payments for the purchase of
Class B shares of such Series held by you at the time of redemption.
If the aggregate value of Class B shares redeemed has declined
below their original cost as a result of the Series' performance, a CDSC may
be applied to the then-current net asset value rather than the purchase
price.
In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
The following table sets forth the rates of the CDSC for Class B
shares, except as set forth below:
YEAR SINCE CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE PROCEEDS
------------------ ------------------------
First............................... 4.00
Second.............................. 4.00
Third............................... 3.00
Fourth.............................. 3.00
Fifth............................... 2.00
Sixth............................... 1.00
The following table sets forth the rates of the CDSC for Class B shares
purchased by shareholders who beneficially owned Class B shares on November 30,
1996:
YEAR SINCE CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE PROCEEDS
------------------- ------------------------
First................................ 3.00
Second............................... 3.00
Third................................ 2.00
Fourth............................... 2.00
Fifth................................ 1.00
Sixth................................ 0.00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in net asset value of Class B shares
above the total amount of payments for the purchase of Class B shares made
during the preceding six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996); then of amounts representing the cost of
shares purchased six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996) prior to the redemption; and finally, of
amounts representing the cost of shares held for the longest period of time
within the applicable six-year period (five-year period for shareholders
beneficially owning Class B shares on November 30, 1996).
For example, assume an investor purchased 100 shares at $10 per share for a
cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the net asset value had appreciated to $12 per share, the
value of the investor's shares would be $1,260 (105 shares at $12 per share).
The CDSC would not be applied to the value of the reinvested dividend shares and
the amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4% (the
applicable rate in the second year after purchase) for a total CDSC of $9.60.
CLASS C SHARES -- A CDSC of 1% payable to the Distributor is imposed on any
redemption of Class C shares within one year of the date of purchase. The basis
for calculating the payment of any such CDSC will be the method used in
calculating the CDSC for Class B shares. See "Contingent Deferred Sales Charge
- -- Class B Shares" above.
WAIVER OF CDSC -- The CDSC may be waived in connection with (a) redemptions
made within one year after the death or disability, as defined in Section
72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in qualified or non-qualified employee benefit plans or other
programs where (i) the employers or affiliated employers maintaining such plans
or programs have a minimum of 250 employees eligible for participation in such
plans or programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or other products made available by the Distributor
exceeds $1,000,000, (c) redemptions as a result of a combination of any
investment company with one or more Series by merger, acquisition of assets or
otherwise, (d) a distribution following retirement under a tax-deferred
retirement plan or upon attaining age 701\2 in the case of an IRA or Keogh plan
or custodial account pursuant to Section 403(b) of the Code, and (e) redemptions
made pursuant to the Automatic Withdrawal Plan, as described in the Fund's
Prospectus. If the Fund's Board determines to discontinue the waiver of the
CDSC, the disclosure in the Fund's Prospectus will be revised appropriately. Any
Fund shares subject to a CDSC which were purchased prior to the termination of
such waiver will have the CDSC waived as provided in the Fund's Prospectus at
the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Service Agent must notify the Distributor. Any
such qualification is subject to confirmation of your entitlement.
PROCEDURES
You may redeem shares by using the regular redemption procedure through the
Transfer Agent, or, if you have checked the appropriate box and supplied the
necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent, through the Check Redemption Privilege
with respect to Class A shares only, or the TELETRANSFER Privilege. If you are a
client of a Selected Dealer, you may redeem shares through the Selected Dealer.
If you have given your Service Agent authority to instruct the Transfer Agent to
redeem shares and to credit the proceeds of such redemptions to a designated
account at your Service Agent, you may redeem shares only in this manner and in
accordance with the regular redemption procedure described below. If you wish to
use the other redemption methods described below, you must arrange with your
Service Agent for delivery of the required application(s) to the Transfer Agent.
Other redemption procedures may be in effect for clients of certain Service
Agents. The Fund makes available to certain large institutions the ability to
issue redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate any redemption
Privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares for which certificates have been
issued are not eligible for the Check Redemption or TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked the appropriate
box on the Account Application or have filed a Shareholder Services Form with
the Transfer Agent. If you select the TELETRANSFER redemption privilege or
telephone exchange privilege (which is granted automatically unless you refuse
it), you authorize the Transfer Agent to act on telephone instructions
(including over The Dreyfus TouchRegistration Mark Automated Telephone System)
from any person representing himself or herself to be you, or a representative
of your Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Fund or
the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be liable
for following telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or exchange of Series shares. In such cases, you should consider using the other
redemption procedures described herein. Use of these other redemption procedures
may result in your redemption request being processed at a later time than it
would have been if telephone redemption had been used. During the delay, the
Series' net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may
redeem shares by written request mailed to Premier Insured Municipal Bond Fund,
P.O. Box 6587, Providence, Rhode Island 02940-6587. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. If you have any
questions with respect to signature-guarantees, please contact your Service
Agent or call the telephone number listed on the cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any member bank of
the Federal Reserve System in accordance with a written signature-guaranteed
request.
CHECK REDEMPTION PRIVILEGE -- CLASS A SHARES -- You may write Redemption
Checks drawn on your Fund account. Redemption Checks may be made payable to the
order of any person in the amount of $500 or more. Potential fluctuations in the
net asset value of Class A shares should be considered in determining the amount
of the check. Redemption Checks should not be used to close your account.
Redemption Checks are free, but the Transfer Agent will impose a fee for
stopping payment of a Redemption Check upon your request or if the Transfer
Agent cannot honor the Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not postdate your Redemption Checks. If you do, the
Transfer Agent will honor, upon presentment, even if presented before the date
of the check, all postdated Redemption Checks which are dated within six months
of presentment for payment, if they are otherwise in good order. This Privilege
will be terminated immediately, without notice, with respect to any account
which is, or becomes, subject to backup withholding on redemptions (see
"Dividends, Distributions and Taxes"). Any Redemption Check written on an
account which has become subject to backup withholding on redemptions will not
be honored by the Transfer Agent.
TELETRANSFER PRIVILEGE -- You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
Redemption proceeds will be on deposit in your account at an Automated Clearing
House member bank ordinarily two days after receipt of the redemption request
or, at your request, paid by check (maximum $150,000 per day) and mailed to your
address. Holders of jointly registered Fund or bank accounts may redeem through
the TELETRANSFER Privilege for transfer to their bank account not more than
$250,000 within any 30-day period.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER redemption of shares by calling 1-800-645-6561 or, if you are
calling from overseas, call 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER -- If you are a customer of a Selected
Dealer, you may make redemption requests to your Selected Dealer. If the
Selected Dealer transmits the redemption request so that it is received by the
Transfer Agent prior to the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), the redemption request will be
effective on that day. If a redemption request is received by the Transfer Agent
after the close of trading on the floor of the New York Stock Exchange, the
redemption request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited to your
account with the Selected Dealer. See "How to Buy Shares" for a discussion of
additional conditions or fees that may be imposed upon redemption.
In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of shares held by shareholders. Repurchase orders received by dealers
by the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to the Distributor or its designee by the close of
its business day (normally 5:15 p.m. New York time) are effected at the price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the dealer to transmit
orders on a timely basis. The dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.
REINVESTMENT PRIVILEGE
Upon written request, you may reinvest up to the number of Class A or Class
B shares you have redeemed, within 45 days of redemption, at the then-prevailing
net asset value without a sales load, or reinstate your account for the purpose
of exercising the Exchange Privilege. Upon reinvestment, with respect to Class B
shares or Class A shares if such shares were subject to a CDSC, the
shareholder's account will be credited with an amount equal to the CDSC
previously paid upon redemption of the Class A or Class B shares reinvested. The
Reinvestment Privilege may be exercised only once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class B and Class C shares are subject to a Distribution Plan and Class A,
Class B and Class C shares are subject to a Shareholder Services Plan.
DISTRIBUTION PLAN -- Under the Distribution Plan, adopted pursuant to Rule
12b-1 under the 1940 Act, the Fund pays the Distributor for distributing the
Fund's Class B and Class C shares at an annual rate of .50 of 1% of the value of
the average daily net assets of Class B and .75 of 1% of the value of the
average daily net assets of Class C.
SHAREHOLDER SERVICES PLAN -- Under the Shareholder Services Plan, the Fund
pays the Distributor for the provision of certain services to the holders of
Class A, Class B and Class C shares a fee at the annual rate of .25 of 1% of the
value of the average daily net assets of each such Class. 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. The Distributor may make payments to Service Agents in respect of
these services. The Distributor determines the amounts to be paid to Service
Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS -- Each Series 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 immediately
available funds ("Federal Funds" (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank)) are
received by the Transfer Agent in written or telegraphic form. If a purchase
order is not accompanied by remittance in Federal Funds, there may be a delay
between the time the purchase order becomes effective and the time the shares
purchased start earning dividends. If your payment is not made in Federal Funds,
it must be converted into Federal Funds. This usually occurs within one business
day of receipt of a bank wire and within two business days of receipt of a check
drawn on a member bank of the Federal Reserve System. Checks drawn on banks
which are not members of the Federal Reserve System may take considerably longer
to convert into Federal Funds.
Dividends usually are paid on the last calendar day of each month and are
automatically reinvested in additional shares of the Series and the Class from
which they were paid at net asset value without a sales load or, at your option,
paid in cash. Each Series' earnings for Saturdays, Sundays and holidays are
declared as dividends on the preceding business day. If you redeem all shares in
your account at any time during the month, all dividends to which you are
entitled will be paid to you along with the proceeds of the redemption. If you
are an omnibus account-holder and indicate in a partial redemption request that
a portion of any accrued dividends to which such account is entitled belongs to
an underlying accountholder who has redeemed all shares in his or her account,
such portion of the accrued dividends will be paid to you along with the
proceeds of the redemption. Distributions by each Series from net realized
securities gains, if any, generally are declared and paid once a year, but the
Series may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent with
the provisions of 1940 Act. No Series will make distributions from its net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive dividends and
distributions in cash or to reinvest in additional shares of the Series and the
Class from which they were paid at net asset value. All expenses are accrued
daily and deducted before declaration of dividends to investors. Dividends paid
by each Class will be calculated at the same time and in the same manner and
will be of the same amount, except that the expenses attributable solely to a
particular Class will be borne exclusively by such Class. Class B and Class C
shares will receive lower per share dividends than Class A shares because of the
higher expenses borne by the relevant Class. See "Fee Table."
FEDERAL TAX TREATMENT -- Under the Code, each Series is treated as a
separate entity for purposes of qualification and taxation as a regulated
investment company. Except for dividends from Taxable Investments, the Fund
anticipates that substantially all dividends paid by a Series from net
investment income will not be subject to Federal income tax. Dividends derived
from Taxable Investments, together with distributions from any net realized
short-term securities gains and all or a portion of any gains realized from the
sale or other disposition of certain market discount bonds, paid by the Fund are
subject to Federal income tax as ordinary income whether received in cash or
reinvested in additional shares. Distributions from net realized long-term
securities gains of a Series generally are subject to Federal income tax as
long-term capital gains if you are a citizen or resident of the United States.
Dividends and distributions attributable to income or gain derived from
securities transactions and from the use of certain of the investment techniques
described under "Appendix_Investment Techniques," will be subject to Federal
income tax. No dividend paid by any Series will qualify for the dividends
received deduction allowable to certain U.S. corporations. The Code provides
that the net capital gain of an individual generally will not be subject to
Federal income tax at a rate in excess of 28%. Under the Code, interest on
indebtedness incurred or continued to purchase or carry shares of any Series
which is deemed to relate to exempt-interest dividends is not deductible.
Although all or a substantial portion of the dividends paid by each Series
may be excluded by shareholders of the Series from their gross income for
Federal income tax purposes, each Series may purchase specified private activity
bonds, the interest from which may be (i) a preference item for purposes of the
alternative minimum tax, (ii) a component of the "adjusted current earnings"
preference item for purposes of the corporate alternative minimum tax as well as
a component in computing the corporate environmental tax or (iii) a factor in
determining the extent to which a shareholder's Social Security benefits are
taxable. If a Series purchases such securities, the portion of the Series'
dividends related thereto will not necessarily be tax exempt to an investor who
is subject to the alternative minimum tax and/or tax on Social Security benefits
and may cause an investor to be subject to such taxes.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares of a Series if you exchange your Class A shares for
shares of another Series or fund advised or administered by The Dreyfus
Corporation within 91 days of purchase and such other Series or fund reduces or
eliminates its otherwise applicable sales load for the purpose of the exchange.
In this case, the amount of your sales load charge for Class A shares, up to the
amount of the reduction of the sales load charge on the exchange, is not
included in the basis of your Class A shares for purposes of computing gain or
loss on the exchange, and instead is added to the basis of the other Series or
fund shares received on the exchange.
The exchange of shares of one fund or Series for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your account
which will include information as to dividends and distributions from securities
gains, if any, paid during the year. These statements set forth the dollar
amount of income exempt from Federal tax and the dollar amount, if any, subject
to Federal tax. These dollar amounts will vary depending on the size and length
of time of your investment. If a Series pays dividends derived from taxable
income, it intends to designate as taxable the same percentage of the day's
dividend as the actual taxable income earned on that day bears to total income
earned on that day. Thus, the percentage of the dividend designated as taxable,
if any, may vary from day to day.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized, paid
to a shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may notify
the Fund to institute backup withholding if the IRS determines a shareholder's
TIN is incorrect or if a shareholder has failed to properly report taxable
dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account, and may be claimed as a credit on the record owner's
Federal income tax return.
Management of the Fund believes that each Series has qualified for the
fiscal year ended July 31, 1996 as a "regulated investment company" under the
Code. Each Series intends to continue to so qualify so long as such
qualification is in the best interests of its shareholders. Such qualification
relieves the Series of any liability for Federal income taxes to the extent its
earnings are distributed in accordance with applicable provisions of the Code.
Each Series of the Fund is subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment income and
capital gains, if any.
STATE AND LOCAL TAX TREATMENT -- Each State Series will invest primarily in
Municipal Obligations of the State after which the Series is named. Except to
the extent specifically noted below, dividends by a State Series are not subject
to an income tax by such State to the extent that the dividends are attributable
to interest on such Municipal Obligations. However, some or all of the other
dividends or distributions by a Series may be taxable by those States that have
income taxes, even if the dividends or distributions are attributable to income
of the Series derived from obligations of the United States or its agencies or
instrumentalities.
The Fund anticipates that a substantial portion of the dividends paid by
each State Series will not be subject to income tax of the State after which the
Series is named. However, to the extent that you are obligated to pay State or
local taxes outside of such State, dividends earned by an investment in such
Series may represent taxable income. Also, all or a portion of the dividends
paid by a Series that are not subject to income tax of the State after which the
Series is named may be a preference item for such State's alternative minimum
tax (where imposed). Finally, you should be aware that State and local taxes,
other than those described above, may apply to the dividends, distributions or
shares of a Series.
The paragraphs below discuss the State tax treatment of dividends and
distributions by each State Series to residents of the State after which such
Series is named. Investors should consult their own tax advisers regarding
specific questions as to Federal, State and local taxes.
CALIFORNIA SERIES -- Except for dividends from Taxable Investments, the
Fund anticipates that substantially all dividends paid by the California Series
will not be subject to Federal or State of California personal income taxes.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the California Series' total assets consists of Federal tax exempt
obligations, then the California Series 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 California Series from their gross income for Federal income tax purposes.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the California Series' total assets consists of obligations which, when
held by an individual, the interest therefrom is exempt from California personal
income tax, and if the California Series qualifies as a management company under
the California Revenue and Taxation Code, and sends written notice to its
shareholders not later than 60 days following the end of its taxable year
designating the dividend as exempt from California personal income tax, then the
California Series will be qualified to pay dividends to its shareholders that
are exempt from California personal income tax (but not from California
franchise tax) ("California exempt-interest dividends"). However, the total
amount of California exempt-interest dividends paid by the California Series to
a noncorporate shareholder with respect to any taxable year cannot exceed such
shareholder's pro-rata share of interest received by the California Series
during such year that is exempt from California taxation less any expenses and
expenditures deemed to have been paid from such interest.
Unlike under Federal tax law, the California Series' shareholders will not
be subject to California personal income tax, or receive a credit for California
taxes paid by the California Series, on undistributed capital gains. In
addition, California tax law does not consider any portion of the
exempt-interest dividends paid an item of tax preference for the purposes of
computing the California alternative minimum tax.
CONNECTICUT SERIES -- Dividends paid by the Connecticut Series that qualify
as exempt-interest dividends for Federal income tax purposes are not subject to
the Connecticut income tax imposed on individuals, trusts and estates, to the
extent that such dividends are derived from income received by the Series as
interest from Connecticut Municipal Obligations or obligations the interest with
respect to which Connecticut is prohibited by Federal law from taxing. Dividends
that qualify as capital gain dividends for Federal income tax purposes are not
subject to the Connecticut income tax to the extent they are derived from
Connecticut Municipal Obligations. Dividends derived from other sources are
subject to the Connecticut income tax. In the case of a shareholder subject to
the Connecticut income tax and required to pay the Federal alternative minimum
tax, the portion of exempt-interest dividends paid by the Series that is derived
from income received by the Series as interest from Connecticut Municipal
Obligations or obligations the interest with respect to which Connecticut is
prohibited by Federal law from taxing is not subject to the net Connecticut
minimum tax even though treated as a preference item for purposes of the Federal
alternative minimum tax.
Dividends qualifying as exempt-interest dividends for Federal income tax
purposes that are distributed by the Series to entities taxed as corporations
under the Connecticut corporation business tax are not exempt from that tax.
The shares of the Series are not subject to property taxation by the State
of Connecticut or its political subdivisions.
FLORIDA SERIES -- Dividends or distributions paid by the Florida Series to
a Florida individual resident are not taxable by Florida. However, Florida
imposes an intangible personal property tax on shares of the Series owned by a
Florida resident on January 1 of each year unless such shares qualify for an
exemption from the tax.
Dividends qualifying as exempt-interest dividends for Federal income tax
purposes as well as other Federally taxable dividends and distributions that are
distributed by the Series to entities taxed as corporations under Florida law
may not be exempt from the Florida corporate income tax.
The Fund has received a Technical Assistance Advisement from the State of
Florida, Department of Revenue to the effect that Florida Series' shares owned
by a Florida resident will be exempt from the intangible personal property tax
so long as the Series' portfolio includes only assets, such as notes, bonds, and
other obligations issued by the State of Florida or its municipalities,
counties, and other taxing districts, the United States Government, and its
agencies, Puerto Rico, Guam, and the U.S. Virgin Islands, and other assets which
are exempt from that tax.
NEW JERSEY SERIES -- The New Jersey Series intends to be a "qualified
investment fund" within the meaning of the New Jersey gross income tax. The
primary criteria for constituting a "qualified investment fund" are that (i)
such Series is an investment company registered with the Securities and Exchange
Commission, which for the calendar year in which the dividends and distributions
(if any) are paid, has no investments other than interest-bearing obligations,
obligations issued at a discount, and cash and cash items, including
receivables, and financial options, futures and forward contracts, or other
similar financial instruments relating to interest-bearing obligations,
obligations issued at a discount or bond indices related thereto and (ii) at the
close of each quarter of the taxable year, the Series has not less than 80% of
the aggregate principal amount of all of its investments, excluding financial
options, futures and forward contracts, or other similar financial instruments
related to interest-bearing obligations, obligations issued at a discount or
bond indices related thereto, cash and cash items, which cash items shall
include receivables, in New Jersey Municipal Obligations, including obligations
of Puerto Rico, the Virgin Islands and other territories and possessions of the
United States, and certain other specified securities exempt from Federal and
New Jersey income taxes. Additionally, a qualified investment fund must comply
with certain continuing reporting requirements.
If the New Jersey Series qualifies as a qualified investment fund and the
New Jersey Series complies with its reporting obligations, (a) dividends and
distributions paid by the Series to a New Jersey resident individual shareholder
will not be subject to New Jersey gross income tax to the extent that the
dividends and distributions are respectively attributable to income earned by
the Series as interest on or gain from New Jersey Municipal Obligations or
certain other specified securities, and (b) gain from the sale of shares in the
Series by a New Jersey resident individual shareholder will not be subject to
the New Jersey gross income tax.
Shares of the New Jersey Series are not subject to property taxation by New
Jersey or its political subdivisions.
NEW YORK SERIES -- Except for dividends from Taxable Investments, the Fund
anticipates that substantially all dividends paid by the New York Series will
not be subject to Federal, New York State or New York City personal income
taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of shares may be
calculated on several bases, including current yield, tax equivalent yield,
average annual total return and/or total return. These total return figures
reflect changes in the price of the shares and assume that any income dividends
and/or capital gains distributions made by the Fund during the measuring period
were reinvested in shares of the same Class. These figures also take into
account any applicable service and distribution fees. As a result, at any given
time, the performance of Class B and Class C should be expected to be lower than
that of Class A. Performance for each Class will be calculated separately.
Current yield refers to the Series' annualized net investment income per
share over a 30-day period, expressed as a percentage of the net asset value (or
maximum offering price in the case of Class A) per share at the end of the
period. For purposes of calculating current yield, the amount of net investment
income per share during that 30-day period, computed in accordance with
regulatory requirements, is compounded by assuming that it is reinvested at a
constant rate over a six-month period. An identical result is then assumed to
have occurred during a second six-month period which, when added to the result
for the first six months, provides an "annualized" yield for an entire one-year
period. Calculations of the Series' current yield may reflect absorbed expenses
pursuant to any undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield which,
after being taxed at a stated rate, would be equivalent to a stated current
yield calculated as described above.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in a Series was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the redeemable
value of the investment at the end of the period. Advertisements of the Series'
performance will include the Series' average annual total return for one, five
and ten year periods, or for shorter periods depending upon the length of time
during which the Series has operated.
Total return is computed on a per share basis and assumes the reinvestment
of dividends and distributions. Total return generally is expressed as a
percentage rate which is calculated by combining the income and principal
changes for a specified period and dividing by the net asset value (maximum
offering price in the case of Class A) per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may include
the value of a hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return. Total return also may be
calculated by using the net asset value per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the period
for Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or Class C shares. Calculations based on the net asset
value per share do not reflect the deduction of the applicable sales charge on
Class A shares which, if reflected, would reduce the performance quoted.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a basis
for comparison with other investments or other investment companies using a
different method of calculating performance.
Comparative performance information may be used from time to time in
advertising the Fund's shares, including data from Lipper Analytical Services,
Inc., Moody's Bond Survey Bond Index, Lehman Brothers Municipal Bond Index,
Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Trust Agreement") dated March 12, 1992. Before December 8, 1993, the
Fund's name was Premier California Insured Municipal Bond Fund. The Fund is
authorized to issue an unlimited number of shares of beneficial interest, par
value $.001 per share. Each Series' shares are classified into three
classes_Class A, Class B and Class C. Each share has one vote and shareholders
will vote in the aggregate and not by class except as otherwise required by law.
Only holders of Class B or Class C shares, as the case may be, will be entitled
to vote on matters submitted to shareholders pertaining to the Distribution
Plan.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Fund, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Fund intends to conduct its operations
in such a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund. As discussed under "Management of the
Fund" in the Statement of Additional Information, the Fund ordinarily will not
hold shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Fund is a "series fund," which is a mutual fund divided into separate
portfolios, each of which portfolio is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one Series
is not deemed to be a shareholder of any other Series. For certain matters Fund
shareholders vote together as a group; as to others they vote separately by
Series.
To date, the Trustees have authorized the creation of six Series of shares.
All consideration received by the Fund for shares of one of the Series and all
assets in which such consideration is invested, will belong to that Series
(subject only to the rights of creditors of the Fund) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one Series are treated separately from those of the other Series. The Fund has
the ability to create, from time to time, new series without shareholder
approval.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by writing to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- Each Series is permitted to borrow to the extent
permitted under the 1940 Act, which permits an investment company to borrow in
an amount up to 331/3% of the value of its total assets. Each Series currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes in an amount up to 15% of the value of the Series' total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the value of a Series' total assets, such
Series will not make any additional investments.
SHORT-SELLING -- Each Series may make short sales of securities. In these
transactions, a Series sells a security it does not own in anticipation of a
decline in the market value of the security. To complete the transaction, the
Series must borrow the security to make delivery to the buyer. The Series 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 Series, 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 a Series' net assets. A Series 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 Series' net assets. A Series may not make a
short sale which results in the Series having sold short in the aggregate more
than 5% of the outstanding securities of any class of an issuer.
Each Series also may make short sales "against the box," in which the
Series enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will a Series have more than 15% of
the value of its net assets in deposits on short sales against the box.
USE OF DERIVATIVES -- Each Series may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and Risks
- -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management Policies
- -- Management Policies -- Derivatives" in the Statement of Additional
Information.
Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in Derivatives could have a
large potential impact on the Series' performance.
If a Series invests in Derivatives at inappropriate times or judges the
market conditions incorrectly, such investments may lower the Series' return or
result in a loss. A Series also could experience losses if its Derivatives were
poorly correlated with its other investments, or if the Series was 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 neither the Fund nor any Series is a commodity pool, Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which a Series can invest in certain Derivatives. Each
Series may invest in futures contracts and options with respect thereto for
hedging purposes without limit. However, no Series may 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 bona fide hedging purposes, exceed 5% of the liquidation value of the
Series' 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.
Each Series may invest up to 5% of its assets, represented by the premium
paid, in the purchase of call and put options. Each Series may write (i.e.,
sell) covered call and put option contracts to the extent of 20% of the value of
its net assets at the time such option contracts are written. When required by
the Securities and Exchange Commission, a Series will set aside permissible
liquid assets in a segregated account to cover its obligations relating to its
transactions in Derivatives. To maintain this required cover, the Series may
have to sell portfolio securities at disadvantageous prices or times since it
may not be possible to liquidate a Derivative position at a reasonable price.
LENDING PORTFOLIO SECURITIES -- Each Series may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Series continues to be entitled
to payments in amounts equal to the interest or other distributions payable on
the loaned securities which affords the Series an opportunity to earn interest
on the amount of the loan and on the loaned securities' collateral. Loans of
portfolio securities may not exceed 331\3% of the value of such Series' total
assets, and the Series 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 at any time upon specified
notice. The Series might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with the
Series.
FORWARD COMMITMENTS -- Each Series may purchase Municipal Obligations and
other securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Series enters
into the commitment, but the Series does not make payment until it receives
delivery from the counterparty. The Series will commit to purchase such
securities only with the intention of actually acquiring the securities, but the
Series may sell these securities before the settlement date if it is deemed
advisable. A segregated account of the Series consisting of permissible liquid
assets at least equal at all times to the amount of the commitments will be
established and maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- Each Series 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 Series to invest fluctuating amounts at varying rates of
interest, pursuant to direct arrangements between the Series, 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
will meet the quality criteria established for the purchase of Municipal
Obligations.
TAX EXEMPT PARTICIPATION INTERESTS --Each Series 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 Series an undivided interest in the Municipal
Obligation in the proportion that the Series' 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, or has been given a rating below that which otherwise is
permissible for purchase by the Series, 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 Series will have the right to demand payment, on
not more than seven days' notice, for all or any part of the Series'
participation interest in the Municipal Obligation, plus accrued interest. As to
these instruments, each Series intends to exercise its right to demand payment
only upon a default under the terms of the Municipal Obligation, as needed to
provide liquidity to meet redemptions, or to maintain or improve the quality of
its investment portfolio.
TENDER OPTIONS BONDS -- Each Series may purchase tender option bonds. A
tender option bond is a Municipal Obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax exempt rate. The
Dreyfus Corporation, on behalf of the Fund, will consider on an ongoing basis
the creditworthiness of the issuer of the underlying Municipal 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.
CUSTODIAL RECEIPTS -- Each Series 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 Series
should increase the volatility of its net asset value and, thus, its price per
share. These custodial receipts are sold in private placements. Each Series 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 -- Each Series 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. A Series will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with stand-by commitments will be
taxable. Each Series also may acquire call options on specific Municipal
Obligations. A Series generally would purchase these call options to protect the
Series 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 Series of a call option that it owns on a specific
Municipal Obligation could result in the receipt of taxable income by the
Series.
ZERO COUPON SECURITIES -- Each Series 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 -- Each Series may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
Such securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, and repurchase agreements providing for settlement in more than seven
days after notice. As to these securities, the Series is subject to a risk that
should the Series desire to sell them when a ready buyer is not available at a
price the Fund deems representative of their value, the value of the Series' net
assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other than
for temporary defensive purposes (but not to exceed 20% of the value of a
Series' net assets) or for temporary defensive purposes, each Series may invest
in taxable short-term investments ("Taxable Investments") consisting of: notes
of issuers having, at the time of purchase, a quality rating within the two
highest grades of Moody's, S&P or Fitch; obligations of the U.S. Government, its
agencies or instrumentalities; commercial paper rated not lower than P-1 by
Moody's, A-1 by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic
banks, including foreign branches of domestic banks, with assets of one billion
dollars or more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the foregoing.
Dividends paid by a Series that are attributable to income earned by the Series
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 a Series' net assets be invested in Taxable
Investments. When a State Series has adopted a temporary defensive position,
including when acceptable State Municipal Obligations are unavailable for
investment by a State Series, in excess of 35% of such Series' net assets may be
invested in securities that are not exempt from State personal income taxes, if
applicable. Under normal market conditions, each Series anticipates that not
more than 5% of the value of its total assets will be invested in any one
category of Taxable Investments. In certain states, dividends and distributions
paid by a Series that are attributable to interest income earned by the Series
from direct obligations of the United States may not be subject to state income
tax. Taxable Investments are more fully described in the Statement of Additional
Information, to which reference hereby is made.
RATINGS -- Obligations which are rated Baa are considered medium grade
obligations; they are neither highly protected nor poorly secured, and are
considered by Moody's to have speculative characteristics. Bonds rated BBB by
S&P are regarded as having adequate capacity to pay interest and repay
principal, and while such bonds normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for bonds in this
category than in higher rated categories. Bonds rated BBB by Fitch 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. See "Appendix B" in the Statement of Additional Information for
a general description of Moody's, S&P and Fitch ratings of Municipal Obligations
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and, although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these bonds. Therefore,
although these ratings may be an initial criterion for selection of portfolio
investments, The Dreyfus Corporation also will evaluate these securities and the
ability of the issuers of such securities to pay interest and principal. The
Fund's ability to achieve its investment objective may be more dependent on The
Dreyfus Corporation's credit analysis than might be the case for a series that
invested in higher rated securities.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
PIMBFP120296
PREMIER CALIFORNIA MUNICIPAL BOND FUND
PREMIER STATE MUNICIPAL BOND FUND
(Connecticut Series)
(Florida Series)
(New Jersey Series)
PREMIER NEW YORK MUNICIPAL BOND FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
January __, 1997
Acquisition of the Assets of
PREMIER INSURED MUNICIPAL BOND FUND
(California Series)
(Connecticut Series)
(Florida Series)
(New Jersey Series)
(New York Series)
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
1-800-554-4611
By and in Exchange for Shares of
PREMIER CALIFORNIA MUNICIPAL BOND FUND
PREMIER STATE MUNICIPAL BOND FUND
(Connecticut Series)
(Florida Series)
(New Jersey Series)
PREMIER NEW YORK MUNICIPAL BOND FUND
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
1-800-554-4611
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus/Proxy
Statement dated ______________ __, 1996, relating specifically to the proposed
transfer of all or substantially all of the assets and liabilities of the
California Series, Connecticut Series, Florida Series, New Jersey Series and New
York Series of Premier Insured Municipal Bond Fund attributable to its Class A,
Class B and Class C shares in exchange for Class A, Class B and Class C shares
of a corresponding fund, namely, Premier California Municipal Bond Fund, the
Connecticut Series, Florida Series and New Jersey Series of Premier State
Municipal Bond Fund, and Premier New York Municipal Bond Fund. The transfer is
to occur pursuant to an Agreement and Plan of Exchange. This Statement of
Additional Information consists of the following described documents, each of
which is attached hereto and incorporated herein by reference:
1. The Statement of Additional Information of Premier California Municipal
Bond Fund dated June 3, 1996.
2. The Statement of Additional Information of Premier State Municipal Bond
Fund dated _______________, 1996.
3. The Statement of Additional Information of Premier New York Municipal
Bond Fund dated April 1, 1996.
4. Annual Report of Premier California Municipal Bond Fund for the fiscal
year ended January 31, 1996.
5. Semi-Annual Report of Premier California Municipal Bond Fund for the
six-month period ended July 31, 1996.
6. Annual Report of the Connecticut Series of Premier State Municipal Bond
Fund for the fiscal year ended April 30, 1996.
7. Annual Report of the Florida Series of Premier State Municipal Bond Fund
for the fiscal year ended April 30, 1996.
8. Annual Report of the Premier New York Municipal Bond Fund for the fiscal
year ended November 30, 1995.
9. Semi-Annual Report of Premier New York Municipal Bond Fund for the
six-month period ended May 31, 1996.
10. Annual Report of the California Series of Premier Insured Municipal
Bond Fund for the fiscal year ended July 31, 1996.
11. Annual Report of the Connecticut Series of Premier Insured Municipal
Bond Fund for the fiscal year ended July 31, 1996.
12. Annual Report of the Florida Series of Premier Insured Municipal Bond
Fund for the fiscal year ended July 31, 1996.
13. Annual Report of the New Jersey Series of Premier Insured Municipal
Bond Fund for the fiscal year ended July 31, 1996.
14. Annual Report of the New York Series of Premier Insured Municipal Bond
Fund for the fiscal year ended July 31, 1996.
15. Pro Forma Statements. The Prospectus/Proxy Statement dated
________________, 1996 may be obtained by writing to relevant Fund at 200 Park
Avenue, New York, New York 10166.
<PAGE>
__________________________________________________________________________
PREMIER CALIFORNIA MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
JUNE 3, 1996
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Premier California Municipal Bond Fund (the "Fund"), dated June 3, 1996, as it
may be revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . B-12
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . B-15
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . B-17
Distribution Plan and Shareholder Services Plan . . . . . . . . . B-19
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . B-21
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value. . . . . . . . . . . . . . . . . B-25
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . B-25
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . B-27
Performance Information . . . . . . . . . . . . . . . . . . . . . B-28
Information About the Fund. . . . . . . . . . . . . . . . . . . . B-30
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors. . . . . . . . . . . . . . . B-30
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-44
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . B-52
Report of Independent Auditors. . . . . . . . . . . . . . . . . . B-63
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the Fund"
and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal Obligations
by ratings for the fiscal year ended January 31, 1996, computed on a monthly
basis, was as follows:
Fitch Moody's Standard
Investors Investors & Poor's
Service, L.P. Service, Inc. Ratings Group Percentage
("Fitch") or ("Moody's") or ("S&P") of Value
AAA Aaa AAA 32.3%
AA Aa AA 11.1
A A A 33.3
BBB Baa BBB 9.1
D D D .2
F-1+\F-1 VMIG1\MIG1, SP-1+, SP-1, 2.4
P-1 A1+\A1
Not Rated Not Rated Not Rated 11.6*
------
100.0%
======
____________________________________________________
* Included under the Not Rated category are securities comprising 11.6%
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: AAA/Aaa (3.2%), A/A (1.4%) and
Baa/BBB (7.0%).
Municipal Obligations. The term "Municipal Obligations" generally includes
debt obligations issued to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other public purposes for which Municipal Obligations may be
issued include refunding outstanding obligations, obtaining funds for general
operating expenses and lending such funds to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, industrial, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal; the interest paid on such
obligations may be exempt from Federal income tax, although current tax laws
place substantial limitations on the size of such issues. Such obligations are
considered to be Municipal Obligations if the interest paid thereon qualifies as
exempt from Federal income tax in the opinion of bond counsel to the issuer.
There are, of course, variations in the security of Municipal Obligations, both
within a particular classification and between classifications.
Floating and variable rate demand obligations are tax exempt obligations
ordinarily having stated maturities in excess of one year, but which permit the
holder to demand payment of principal at any time or at specified intervals. The
issuer of such obligations ordinarily has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders thereof. The interest rate on a floating rate demand obligation is based
on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a variable
rate demand obligation is adjusted automatically at specified intervals.
The yields on Municipal Obligations are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions in the Municipal Obligations market, size of a particular offering,
maturity of the obligation, and rating of the issue. The imposition of the
Fund's management fee, as well as other operating expenses, including fees paid
under the Fund's Shareholder Services Plan and, with respect to Class B and
Class C shares, the Distribution Plan, will have the effect of reducing the
yield to investors.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation ordinarily is backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. The staff of the Securities and Exchange Commission
currently considers certain lease obligations to be illiquid. Determination as
to the liquidity of such securities is made in accordance with guidelines
established by the Fund's Board. Pursuant to such guidelines, the Board has
directed the Manager to monitor carefully the Fund's investment in such
securities with particular regard to (1) the frequency of trades and quotes for
the lease obligation; (2) the number of dealers willing to purchase or sell the
lease obligation and the number of other potential buyers; (3) the willingness
of dealers to undertake to make a market in the lease obligation; (4) the nature
of the marketplace trades including the time needed to dispose of the lease
obligation, the method of soliciting offers and the mechanics of transfer; and
(5) such other factors concerning the trading market for the lease obligation as
the Manager may deem relevant. In addition, in evaluating the liquidity and
credit quality of a lease obligation that is unrated, the Fund's Board has
directed the Manager to consider (a) whether the lease can be cancelled; (b)
what assurance there is that the assets represented by the lease can be sold;
(c) the strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (d) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of nonappropriation"); (e) the
legal recourse in the event of failure to appropriate; and (f) such other
factors concerning credit quality as the Manager may deem relevant. The Fund
will not invest more than 15% of the value of its net assets in lease
obligations that are illiquid and in other illiquid securities.
The Fund will purchase tender option bonds only when it is satisfied that
the custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the underlying
Municipal Obligations and that payment of any tender fees will not have the
effect of creating taxable income for the Fund. Based on the tender option bond
agreement, the Fund expects to be able to value the tender option bond at par;
however, the value of the instrument will be monitored to assure that it is
valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the Fund,
an issue of rated Municipal Obligations may cease to be rated or its rating may
be reduced below the minimum required for purchase by the Fund. Neither event
will require the sale of such Municipal Obligations by the Fund, but the Manager
will consider such event in determining whether the Fund should continue to hold
the Municipal Obligations. To the extent that the ratings given by Moody's, S&P
or Fitch for Municipal Obligations may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use comparable
ratings as standards for its investments in accordance with the investment
policies contained in the Fund's Prospectus and this Statement of Additional
Information. The ratings of Moody's, S&P and Fitch represent their opinions as
to the quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and are
not absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Manager also will evaluate
these securities.
Illiquid Securities. Where a substantial market of qualified institutional
buyers develops for certain restricted securities purchased by the Fund pursuant
to Rule 144A under the Securities Act of 1933, as amended, the Fund intends to
treat such securities as liquid securities in accordance with procedures
approved by the Fund's Board. Because it is not possible to predict with
assurance how the market for restricted securities pursuant to Rule 144A will
develop, the Fund's Board has directed the Manager to monitor carefully the
Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified institutional
buyers cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in its portfolio during such period.
Taxable Investments. Securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities include U.S. Treasury securities, which
differ in their interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S. Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
interest rates. While the U.S. Government provides financial support to such
U.S. Government sponsored agencies or instrumentalities, no assurance can be
given that it will always do so, since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes issued
to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate. Investments in time deposits generally are limited to
London branches of domestic banks that have total assets in excess of one
billion dollars. Time deposits which may be held by the Fund will not benefit
from insurance from the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating and variable interest
rates.
In a repurchase agreement, the Fund buys a security, and at the time of
sale, the seller agrees to repurchase the obligation at a mutually agreed upon
time and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the seller's
obligation to repurchase is secured by the value of the underlying security. The
Fund's custodian or subcustodian will have custody of, and will hold in a
segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the Securities
and Exchange Commission to be loans by the Fund. In an attempt to reduce the
risk of incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements only with domestic banks with total assets in excess of $1
billion, or primary government securities dealers reporting to the Federal
Reserve Bank of New York, with respect to securities of the type in which the
Fund may invest, and will require that additional securities be deposited with
it if the value of the securities purchased should decrease below resale price.
Repurchase agreements could involve risks in the event of a default or
insolvency of the other party to the agreement, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
Management Policies
Short-Selling. Until the Fund closes its short position or replaces the
borrowed security, it will: (a) maintain a segregated account, containing cash
or U.S. Government securities, at such a level that the amount deposited in the
account plus 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.
Lending Portfolio Securities. In connection with its securities lending
transactions, the Fund may return to the borrower or a third party which is
unaffiliated with the Fund, and which is acting as a "placing broker," a part of
the interest earned from the investment of collateral received for securities
loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable interest
on the loan, as well as any interest or other distributions payable on the
loaned securities, and any increase in market value; and (5) the Fund may pay
only reasonable custodian fees in connection with the loan.
Derivatives. The Fund may invest in Derivatives (as defined in the Fund's
Prospectus) for a variety of reasons, including to hedge certain market risks,
to provide a substitute for purchasing or selling particular securities or to
increase potential income gain. Derivatives may provide a cheaper, quicker or
more specifically focused way for the Fund to invest than "traditional"
securities would.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with Derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
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, such as the Chicago Board of Trade. Engaging in these
transactions involves risk of loss to the Fund which could adversely affect the
value of the Fund's net assets. Although the Fund intends to purchase or sell
futures contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market,
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate cash or high quality
money market instruments in connection with its commodities transactions in an
amount generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability otherwise to
invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase or
sell an amount of a specific debt security at a future date at a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to interest rate futures contracts. 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.
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.
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.
Futures Developments. The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and any
other Derivatives which are not presently contemplated for use by the Fund or
which are not currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
Forward Commitments. Municipal Obligations and other securities purchased
on a forward commitment or when-issued basis are subject to changes in value
(generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a forward
commitment or when-issued basis may expose the Fund to risks because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be higher
than that obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully invested
may result in greater potential fluctuation in the value of the Fund's net
assets and its net asset value per share.
Investment Consideration and Risks
Investing in California Municipal Obligations. Investors should consider
carefully the special risks inherent in the Fund's investment in California
Municipal Obligations. These risks result from certain amendments to the
California Constitution and other statues that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial condition of the State of California. From mid-1990 to late 1993, the
State suffered a recession with the worst economic, fiscal and budget conditions
since the 1930s. As a result, the State experienced recurring budget deficits
for four of its five fiscal years ended June 30, 1992. The State had operating
surpluses of approximately $109 million in fiscal 1992-93 and $917 million in
1993-94. However, at June 30, 1994, according to California's Department of
Finance, the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further consequence
of the large budget imbalances over the last three fiscal years has been that
the State depleted its available cash resources and has had to use a series of
external borrowings to meet its cash needs. To meet its cash flow needs in the
1994-95 fiscal year, the State issued, in July and August 1994, $4.0 billion of
revenue anticipation warrants and $3.0 billion of revenue anticipation notes.
The 1994-95 Budget Act contained a plan to retire a projected $1.025 billion
deficit in the 1995- 96 fiscal year. The Department of Finance projects that,
after repaying the last of the carryover budget deficit, there will be a
positive balance of $28 million in the Special Fund for Economic Uncertainties
at June 30, 1996. As a result of the deterioration of the State's budget and
cash situation between October 1991 and July 1994, the rating on the State's
general obligation bonds was reduced by S&P from AAA to A, by Moody's from Aaa
to A1 and by Fitch AAA to A. These and other factors may have the effect of
impairing the ability of the issuers of California Municipal Obligations to pay
interest on, or repay principal of, such California Municipal Obligations.
Investors should review "Appendix A" which sets forth additional information
relating to investing in California Municipal Obligations.
Lower Rated Bonds. The Fund is permitted to invest in securities rated Ba
by Moody's or BB by S&P or Fitch and as low as the lowest rating assigned by
Moody's, S&P or Fitch. Such bonds, though higher yielding, are characterized by
risk. See "Description of the Fund--Investment Consideration and Risks--Lower
Rated Bonds" in the Prospectus for a discussion of certain risks and "Appendix
B" for a general description of Moody's, S&P and Fitch ratings of Municipal
Obligations. Although ratings may be useful in evaluating the safety of interest
and principal payments, they do not evaluate the market value risk of these
bonds. The Fund will rely on the Manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by Moody's, S&P and Fitch to
be, 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 could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any persons concerning the acquisition of such securities,
and the Manager will review carefully the credit and other characteristics
pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon bonds and pay-in-kind bonds, in which the Fund may
invest up to 5% of its net assets. Zero coupon securities and pay-in-kind or
delayed interest bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Fund will realize no cash until
the cash payment date unless a portion of such securities are sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment. See
"Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 10 as
fundamental policies, which cannot be changed without approval by the holders of
a majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Fund's outstanding voting shares. Investment restrictions
numbered 11 and 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. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Prospectus and those
arising out of transactions in futures and options.
2. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund's
total assets). Transactions in futures and options and the entry into short
sales transactions do not involve any borrowing for purposes of this
restriction.
3. Purchase securities on margin, but the Fund may make margin deposits in
connection with transactions in futures, including those related to indices, and
options on futures or indices.
4. Underwrite the securities of other issuers, except that the Fund may bid
separately or as part of a group for the purchase of Municipal Obligations
directly from an issuer for its own portfolio to take advantage of the lower
purchase price available, 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.
5. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this shall not
prevent the Fund from investing in Municipal Obligations secured by real estate
or interests therein, or prevent the Fund from purchasing and selling futures
contracts, including those related to indices, and options on futures contracts
or indices.
6. Make loans to others except through the purchase of qualified debt
obligations and the entry into repurchase agreements referred to above and in
the Fund's Prospectus; 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 Trustees.
7. Invest more than 15% of its assets in the obligations of any one bank
for temporary defensive purposes, or invest more than 5% of its assets in the
obligations of any other issuer, except that up to 25% of the value of the
Fund's total assets may be invested, and securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities may be purchased, without
regard to any such limitations. Notwithstanding the foregoing, to the extent
required by the rules of the Securities and Exchange Commission, the Fund will
not invest more than 5% of its assets in the obligations of any one bank, except
that up to 25% of the value of the Fund's total assets may be invested without
regard to such limitation.
8. Invest more than 25% of its total assets in the securities of issuers in
any single industry; provided that there shall be no such limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
11. Pledge, mortgage, hypothecate or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings. The deposit of assets in
escrow in connection with the writing of covered put and call options and the
purchase of securities on a when-issued or delayed-delivery basis and collateral
arrangements with respect to initial or variation margin for futures contracts
and options on futures contracts or indices will not be deemed to be pledges of
the Fund's assets.
12. 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 that are not subject to the
demand feature described in the Fund's Prospectus and floating and variable rate
demand obligations as to which no secondary market exists and the Fund cannot
exercise the demand feature described in the Fund's Prospectus on less than
seven days' notice), if, in the aggregate, more than 15% of the value of its net
assets would be so invested.
For purposes of Investment Restriction No. 8, industrial development bonds,
where the payment of principal and interest is the ultimate responsibility of
companies within the same industry, are grouped together as an "industry."
If a percentage restriction is adhered to at the time of investment, a
later increase in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of Fund shares in certain states. Should the Fund
determine that a commitment is no longer in the best interests of the Fund and
its shareholders, the Fund reserves the right to revoke the commitment by
terminating the sale of Fund shares in the state involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Board member who is deemed to be an "interested person" of the
Fund (as defined in the 1940 Act) is indicated by an asterisk.
Board Members of the Fund
CLIFFORD L. ALEXANDER, JR., Board Member. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to 1981,
Mr. Alexander served as Secretary of the Army and Chairman of the
Board of the Panama Canal Company, and from 1975 to 1977 he was a
member of the Washington, D.C. law firm of Verner, Liipfert,
Bernhard, McPherson and Alexander. He is a director of American Home
Products Corporation, The Dun & Bradstreet Corporation, MCI
Communications Corporation and Mutual of America Life Insurance
Company. He is 62 years old and his address is 400 C Street, N.E.,
Washington, D.C. 20002.
PEGGY C. DAVIS, Board Member. Shad Professor of Law, New York University
School of Law. Professor Davis has been a member of the New York
University law faculty since 1983. Prior to that time, she served
for three years as a judge in the courts of New York State; was
engaged for eight years in the practice of law, working in both
corporate and non-profit sectors; and served for two years as a
criminal justice administrator in the government of the City of New
York. She writes and teaches in the fields of evidence,
constitutional theory, family law, social sciences and the law, legal
process and professional methodology and training. She is 53 years
old and her address is c/o New York University School of Law, 249
Sullivan Street, New York, New York 10011.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. He
is Chairman of the Board of Noel Group, Inc., a venture capital
company; a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway, Inc., a manufacturer of industrial threads,
specialty yarns, home furnishings and fabrics, Curtis Industries,
Inc., a national distributor of securities products, chemicals, and
automotive and other hardware and Staffing Resources, Inc. He is 52
years old and his address is 200 Park Avenue, New York, New York
10166.
ERNEST KAFKA, Board Member. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents. Since
1981, he has served as an Instructor at the New York Psychoanalytic
Institute and, prior thereto, held other teaching positions. He is
Associate Clinical Professor of Psychiatry at Cornell Medical School.
For more than the past five years, Dr. Kafka has held numerous
administrative positions and has published many articles on subjects
in the field of psychoanalysis. He is 63 years old and his address
is 23 East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, Board Member. Chairman and Chief Executive Officer of SBK
Associates, which provides research and consulting services to
financial institutions. Dr. Klaman was President of the National
Association of Mutual Savings Banks until November 1983, President of
the National Council of Savings Institutions until June 1985, Vice
Chairman of Golembe Associates and BEI Golembe, Inc. until 1989 and
Chairman Emeritus of BEI Golembe, Inc. until November 1992. He also
served as an Economist to the Board of Governors of the Federal
Reserve System and on several Presidential Commissions and has held
numerous consulting and advisory positions in the fields of economics
and housing finance. He is 76 years old and his address is 431-B
Dedham Street, The Gables, Newton Center, Massachusetts 02159.
NATHAN LEVENTHAL, Board Member. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for Operations
of New York City from September 1979 to March 1984 and Commissioner
of the Department of Housing Preservation and Development of New York
City from February 1978 to September 1979. Mr. Leventhal was an
associate and then a member of the New York law firm of Poletti
Freidin Prashker Feldman and Gartner from 1974 to 1978. He was
Commissioner of Rent and Housing Maintenance for New York City from
1972 to 1973. Mr. Leventhal also serves as Chairman of Citizens
Union, an organization which strives to reform and modernize city and
state governments. He is 53 years old and his address is 70 Lincoln
Center Plaza, New York, New York 10023-6583.
Ordinarily, no meetings of shareholders will be held for the purpose of
electing Board members unless and until such time as less than a majority of the
Board members holding office have been elected by shareholders at which time the
Board members then in office will call a shareholders' meeting for the election
of Board members. Under the 1940 Act, shareholders of record of not less than
two-thirds of the outstanding shares of the Fund may remove a Board member
through a declaration in writing or by vote cast in person or by proxy at a
meeting called for that purpose. The Board members are required to call a
meeting of shareholders for the purpose of voting upon the question of removal
of any such Board member when requested in writing to do so by the shareholders
of record of not less than 10% of the Fund's outstanding shares.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the Board
members of the Fund who are not "interested persons" of the Fund, as defined in
the 1940 Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund for the fiscal year ended January 31, 1996, and
by all other funds in the Dreyfus Family of Funds for which such person is a
Board member (the number of which is set forth in parenthesis next to each Board
member's total compensation) for the year ended December 31, 1995, were as
follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
Clifford L. Alexander, Jr. $5,000 $94,386 (17)
Peggy C. Davis $5,000 $81,636 (15)
Joseph S. DiMartino $6,250 $448,618 (94)
Ernest Kafka $5,000 $81,136 (15)
Saul B. Klaman $5,000 $81,886 (15)
Nathan Leventhal $5,000 $81,636 (15)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $774 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she served
as Vice President and Controller, and later as Senior Vice President,
of The Boston Company Advisors. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an Associate at Ropes & Gray. He is 31 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September
1992 to August 1994, he was an attorney with the Board of Governors
of the Federal Reserve System. He is 31 years old.
ELIZABETH A. BACHMAN, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years
old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to
August 1994, he was manager of the High Performance Fabric Division
of Springs Industries Inc. He is 34 years old.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in
the Corporate Finance and Treasury areas. He is 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From 1984 to July 1994, he was
Assistant Vice President in the Mutual Fund Accounting Department of
the Manager. He is 60 years old.
MARGARET M. PARDO, Assistant Secretary. Legal Assistant with the
Distributor and an officer of other investment companies advised or
administered by the Manager. From June 1992 to April 1995, she was a
Medical Coordination Officer at ORBIS International. Prior to June
1992, she worked as Program Coordinator at Physicians World
Communications Group. She is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on May 7, 1996.
As of May 7, 1996, the following persons owned 5% or more of the
outstanding shares of beneficial interest of the Fund: Class B shares - Merrill
Lynch Pierce Fenner & Smith Inc. House A/C, 4800 Deer Lake Drive E,
Jacksonville, Florida 32246-6484 - 7.7%: Class C shares - Merrill Lynch Pierce
Fenner & Smith Inc. House A/C, 4800 Deer Lake Drive E, Jacksonville, Florida
32246-6484 - 71.3%; Premier Mutual Fund Services, Inc., 1 Exchange Pl., Boston,
MA 02109-2809 - 28.7%. A shareholder who beneficially owns, directly or
indirectly, 25% or more of the Fund's voting securities may be deemed to be a
"control person" (as defined in the 1940 Act) of the Fund.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was approved by shareholders
on August 3, 1994 and was last approved by the Fund's Board, including a
majority of the Board members who are not "interested persons" of any party to
the Agreement, at a meeting held on July 19, 1995. The Agreement is terminable
without penalty, on 60 days' notice, by the Fund's Board or by vote of the
holders of a majority of the Fund's shares, or, on not less than 90 days'
notice, by the Manager. The Agreement will terminate automatically in the event
of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith, Vice
Chairman of the Board; Christopher M. Condron, President, Chief Operating
Officer and a director; Stephen E. Canter, Vice Chairman, Chief Investment
Officer and a director; Lawrence S. Kash, Vice Chairman-Distribution and a
director; Philip L. Toia, Vice Chairman-Operations and Administration and a
director; William T. Sandalls, Jr., Senior Vice President and Chief Financial
Officer; Barbara E. Casey, Vice President- Dreyfus Retirement Services; Elie M.
Genadry, Vice President-Institutional Sales; William F. Glavin, Jr., Vice
President-Corporate Development; Mark N. Jacobs, Vice President, General Counsel
and Secretary; Patrice M. Kozlowski, Vice President-Corporate Communications;
Mary Beth Leibig, Vice President-Human Resources; Jeffrey N. Nachman, Vice
President-Mutual Fund Accounting; Andrew S. Wasser, Vice President-Information
Services; Maurice Bendrihem, Controller; Elvira Oslapas, Assistant Secretary;
and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene
and Julian M. Smerling, directors.
The Manager manages the Fund's portfolio of investments in accordance with
the stated policies of the Fund, subject to the approval of the Fund's Board.
The Manager is responsible for investment decisions, and provides the Fund with
portfolio managers who are authorized by the Fund's Board to execute purchases
and sales of securities. The Fund's portfolio managers are Joseph P. Darcy, A.
Paul Disdier, Douglas J. Gaylor, Karen M. Hand, Stephen C. Kris, Richard J.
Moynihan, Jill C. Shaffro, L. Lawrence Troutman, Samuel J. Weinstock and Monica
S. Wieboldt. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for the Fund as well as for other funds advised by the
Manager. All purchases and sales are reported for the Board's review at the
meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund and furnishes
statistical and research data, clerical help, accounting, data processing,
bookkeeping and internal auditing and certain other required services to the
Fund. The Manager also may make such advertising and promotional expenditures,
using its own resources, as it from time to time deems appropriate.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses borne by
the Fund include without limitation, the following: taxes, interest, brokerage
fees and commissions, if any, fees of Board members who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Manager, Securities and Exchange Commission fees, state Blue
Sky qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Fund's existence, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders, costs of shareholders' reports and meetings and any extraordinary
expenses. In addition, shares of each Class are subject to an annual service fee
and Class B and Class C shares are subject to an annual distribution fee. See
"Distribution Plan and Shareholder Services Plan."
As compensation for the Manager's services to the Fund, the Fund has agreed
to pay the Manager a monthly management fee at the annual rate of .55 of 1% of
the value of the Fund's average daily net assets. For the fiscal years ended
January 31, 1994, 1995 and 1996, the management fees payable by the Fund
amounted to $1,365,438, $1,264,646 and $1,152,436, respectively, which amounts
were reduced by $362,893, $51,429 and $0, respectively, pursuant to undertakings
in effect in 1994 and 1995, resulting in net fees paid to the Manager of
$1,002,545 in fiscal 1994, $1,213,217 in fiscal 1995 and $1,152,436 in fiscal
1996.
The Manager has agreed that if in any fiscal year the aggregate expenses of
the Fund, exclusive of taxes, brokerage fees, interest on borrowings and (with
the prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed the expense
limitation of any state having jurisdiction over the Fund, the Fund may deduct
from the payment to be made to the Manager under the Agreement, or the Manager
will bear, such excess expense to the extent required by state law. Such
deduction or payment, if any, will be estimated daily, and reconciled and
effected or paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a best
efforts basis pursuant to an agreement dated August 24, 1994. The Distributor
also acts as distributor for the other funds in the Premier Family of Funds, for
funds in the Dreyfus Family of Funds and for certain other investment companies.
In some states, certain financial institutions effecting transactions in Fund
shares may be required to register as dealers pursuant to state law.
For the fiscal year ended January 31, 1996, the Distributor retained $8,546
from sales loads on Class A shares and $36,352 from contingent deferred sales
charges ("CDSC") on Class B shares. For the period August 24, 1994 through
January 31, 1995, the Distributor retained $7,754 from the sales loads on Class
A shares and $30,616 from the CDSC on Class B shares. For the period February 1,
1994 through August 23, 1994 and for the fiscal year ended January 31, 1994,
Dreyfus Service Corporation, as the Fund's distributor during such periods,
retained $17,596 and $60,338, respectively, from sales loads on Class A shares,
and $33,555 and $17,606, respectively from CDSCs on Class B shares. For the
period from June 2, 1995 through January 31, 1996, no amount was retained from
CDSCs on Class C shares.
Sales Loads--Class A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code"), although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering price
of the Fund's Class A shares. The example assumes a purchase of Class A shares
of the Fund aggregating less than $50,000 subject to the schedule of sales
changes set forth in the Fund's Prospectus at a price based upon the net asset
value of the Class A shares on January 31, 1996.
Net Asset Value per Share. . . . . . . . . . . . . . . . . $ 12.97
Per Share Sales Charge - 4.5% of offering price
(4.7% of net asset value per share). . . . . . . . . . . $ .61
-------
Per Share Offering Price to Public . . . . . . . . . . . . $ 13.58
=======
Using Federal Funds. Dreyfus Transfer, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund may attempt to
notify the investor upon receipt of checks drawn on banks that are not members
of the Federal Reserve System as to the possible delay in conversion into
Federal Funds and may attempt to arrange for a better means of transmitting the
money. If the investor is a customer of a securities dealer ("Selected Dealer")
and his order to purchase Fund shares is paid for other than in Federal Funds,
the Selected Dealer, acting on behalf of its customer, will complete the
conversion into, or itself advance, Federal Funds generally on the business day
following receipt of the customer's order. The order is effective only when so
converted and received by the Transfer Agent. An order for the purchase of Fund
shares placed by an investor with sufficient Federal Funds or a cash balance in
his brokerage account with a Selected Dealer will become effective on the day
that the order, including Federal Funds, is received by the Transfer Agent.
TeleTransfer Privilege. TeleTransfer purchase orders may be made at any
time. Purchase orders received by 4:00 p.m., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business will be
credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New York
time, on any business day the Transfer Agent and the New York Stock Exchange are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the New York Stock Exchange is not open for business), will be credited to
the shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the TeleTransfer Privilege, the initial
payment for purchase of Fund shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account Application
or Shareholder Services Form on file. If the proceeds of a particular redemption
are to be wired to an account at any other bank, the request must be in writing
and signature-guaranteed. See "Redemption of Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan and
Shareholder Services Plan."
Class B and Class C shares are subject to a Distribution Plan and Class A,
Class B and Class C shares are subject to a Shareholder Services Plan.
Distribution Plan. Rule l2b-1 (the "Rule") adopted by the Securities and
Exchange Commission under the 1940 Act provides, among other things, that an
investment company may bear expenses of distributing its shares only pursuant to
a plan adopted in accordance with the Rule. The Fund's Board has adopted such a
plan (the "Distribution Plan") with respect to Class B and Class C shares,
pursuant to which the Fund pays the Distributor for distributing Class B and
Class C shares. The Fund's Board believes that there is a reasonable likelihood
that the Distribution Plan will benefit the Fund and holders of Class B and
Class C shares.
A quarterly report of the amounts expended under the Distribution Plan, and
the purposes for which such expenditures were incurred, must be made to the
Board for its review. In addition, the Distribution Plan provides that it may
not be amended to increase materially the costs which holders of Class B or
Class C shares may bear for distribution pursuant to the Distribution Plan
without the approval of such shareholders and that other material amendments of
the Distribution Plan must be approved by the Board, and by the Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund or the
Manager and have no direct or indirect financial interest in the operation of
the Distribution Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. The Distribution 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 Distribution Plan. The Distribution Plan
was last so approved at a meeting held on July 19, 1995. As to each such Class,
the Distribution Plan may be terminated 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 Distribution Plan, or by vote of
holders of a majority of such Class of shares.
For the fiscal year ended January 31, 1996, the Fund paid the Distributor
$102,032 with respect to Class B, and $5 with respect to Class C, under the
Distribution Plan.
Shareholder Services Plan. The Fund has adopted a Shareholder Services
Plan, pursuant to which the Fund pays the Distributor for the provision of
certain services to the holders of Class A, Class B and Class C shares. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquires regarding the Fund and
providing reports and other information, and services related to the maintenance
of such shareholder accounts. Under the Shareholder Services Plan, the
Distributor may make payments to certain financial institutions (which may
include banks), Selected Dealers and other financial industry professionals
(collectively, "Service Agents") in respect of these services.
A quarterly report of the amounts expended under the Shareholder Services
Plan, and the purposes for which such expenditures were incurred, must be made
to the Board for its review. In addition, the Shareholder Services Plan provides
that material amendments must be approved by the Fund's Board and by the Board
members who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
the Shareholder Services Plan or in any agreements entered into in connection
with the Shareholder Services Plan, by vote cast in person at a meeting called
for the purpose of considering such amendments. The Shareholder Services Plan is
subject to annual approval by such vote of the Board members cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was last so approved on July 19, 1995. As to each
Class of shares, the Shareholder Services Plan is terminable at any time by vote
of a majority of the Board members who are not "interested persons" and who have
no direct or indirect financial interest in the operation of the Shareholder
Services Plan or in any agreements entered into in connection with the
Shareholder Services Plan.
For the fiscal year ended January 31, 1996, the Fund paid the Distributor
$472,817 with respect to Class A, $51,016 with respect to Class B, and $2 with
respect to Class C, under the Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Check Redemption Privilege - Class A. An investor may indicate on the
Account Application, Shareholder Services Form or by later written request that
the Fund provide Redemption Checks ("Checks") drawn on the investor's Fund
account. Checks will be sent only to the registered owner(s) of the account and
only to the address of record. The Account Application, Shareholder Services
Form or later written request must be manually signed by the registered
owner(s). Checks may be made payable to the order of any person in an amount of
$500 or more. When a Check is presented to the Transfer Agent for payment, the
Transfer Agent, as the investor's agent, will cause the Fund to redeem a
sufficient number of full and fractional Class A shares in the investor's
account to cover the amount of the Check. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the investor.
Investors generally will be subject to the same rules and regulations that apply
to checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in an
investor's account, the Check will be returned marked insufficient funds. Checks
should not be used to close an account.
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a TeleTransfer transaction
will be effected through the Automated Clearing House ("ACH") system unless more
prompt transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two business
days after receipt of the redemption request. See "Purchase of
Shares--TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each owner 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.
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 (which may include
non-marketable securities) or other assets in case of an emergency or any time a
cash distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closings), (b) when trading
in the markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission so that disposal
of the Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Class A, Class B and Class C shares of the Fund may be
exchanged for shares of the respective Class of certain other funds advised or
administered by the Manager. Shares of the same Class of such funds purchased by
exchange will be purchased on the basis of relative net asset value per share as
follows:
A. Class A shares of funds purchased without a sales load may be
exchanged for Class A shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales load
may be exchanged without a sales load for Class A shares of
other funds sold without a sales load.
C. Class A shares of funds purchased with a sales load, Class A
shares of funds acquired by a previous exchange from Class A
shares purchased with a sales load, and additional Class A
shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein
as "Purchased Shares") may be exchanged for Class A shares of
other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at
the time the Purchased Shares were acquired), without giving
effect to any reduced loads, the difference will be deducted.
D. Class B or Class C shares of any fund may be exchanged for the
same Class of shares of other funds without a sales load. Class
B or Class C shares of any fund exchanged for the same Class of
shares of another fund will be subject to the higher applicable
CDSC of the two exchanged funds and, for purposes of calculating
CDSC rates and conversion periods, will be deemed to have been
held since the date the Class B or Class C shares being
exchanged were initially purchased.
To accomplish an exchange under item C above, an investor's Service Agent
must notify the Transfer Agent of the investor's prior ownership of such Class A
shares and the investor's account number.
To request an exchange, the investor's Service Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all shareholders automatically, unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. By using the Telephone Exchange Privilege,
the investor authorizes the Transfer Agent to act on telephonic exchange
instructions from any person representing himself or herself to be the investor
or a representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
being required for the shares of the same Class of the fund into which the
exchange is being made. For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up
under a Simplified Employee Pension Plan ("SEP-IRAs") with only one participant,
the minimum initial investment is $750. To exchange shares held in corporate
plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among shares
of the same Class of the funds in the Dreyfus Family of Funds. To exchange
shares held in personal retirement plans, the shares exchanged must have a
current value of at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an investor to
purchase, in exchange for Class A, Class B or Class C shares of the Fund, shares
of the same Class of another fund in the Premier Family of Funds or the Dreyfus
Family of Funds. This Privilege is available only for existing accounts. Shares
will be exchanged on the basis of relative net asset value as described above
under "Fund Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if his account falls below the amount
designated to be exchanged under this Privilege. In this case, an investor's
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Auto-Exchange transaction. Shares held
under IRA and other retirement plans are eligible for this Privilege. Exchanges
of IRA shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to all
other retirement accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchanges service or the
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the investor,
the Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan. Class B or Class C
shares withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC.
Dividend Sweep. Dividend Sweep allows investors to invest dividends or
dividends and capital gain distributions, if any, from the Fund in shares of the
same Class of another fund in the Premier Family of Funds or the Dreyfus Family
of Funds of which the investor is a shareholder. Shares of the same Class 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 with respect to Class A shares
by a fund may be invested without imposition of a sales load in
Class A shares of other funds that are offered without a sales
load.
B. Dividends and distributions paid with respect to Class A shares
by a fund which does not charge a sales load may be invested in
Class A shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and distributions paid with respect to Class A shares
by a fund which charges a sales load may be invested in Class A
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load
charged by the fund from which dividends or distributions are
being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and distributions paid by a fund with respect to Class
B or Class C shares may be invested without imposition of any
applicable CDSC in the same Class of shares of other funds and
the relevant Class of shares of such other funds will be subject
on redemption to any applicable CDSC.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. The Fund's investments are valued 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) and fees pursuant to the Shareholder
Services Plan, with respect to Class A, Class B and Class C shares, and fees
pursuant to the Distribution Plan, with respect to Class B and Class C shares
only, are accrued daily and are taken into account for the purpose of
determining the net asset value of the relevant Class of shares. Because of the
difference in operating expenses incurred by each Class, the per share net asset
value of each Class will differ.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions and
Taxes."
Management believes that the Fund qualified as a "regulated investment
company" under the Code for the fiscal year ended January 31, 1996, and the Fund
intends to continue to so qualify so long as such qualification is in the best
interests of its shareholders. As a regulated investment company, the Fund will
pay no Federal income tax on net investment income and net realized capital
gains to the extent that such income and gains are distributed to shareholders
in accordance with applicable provisions of the Code. To qualify as a regulated
investment company, the Fund must pay out to its shareholders at least 90% of
its net income (consisting of net investment income from tax exempt obligations
and taxable obligations, if any, and net short-term capital gains), must derive
less than 30% of its annual gross income from gain on the sale of securities
held for less than three months, and must meet certain asset diversification and
other requirements. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the Fund's total assets consists of Federal tax exempt obligations,
then the Fund may designate and pay Federal exempt-interest dividends from
interest earned on all such tax exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of the Fund from their gross income
for Federal income tax purposes.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the Fund's total assets consists of obligations which, when held by an
individual, the interest therefrom is exempt from California personal income
tax, and if the Fund qualifies as a management company under the California
Revenue and Taxation Code, then the Fund will be qualified to pay dividends to
its shareholders that are exempt from California personal income tax (but not
from California franchise tax) ("California exempt-interest dividends").
However, the total amount of California exempt-interest dividends paid by the
Fund to a non-corporate shareholder with respect to any taxable year cannot
exceed such shareholder's pro-rata share of interest received by the Fund during
such year that is exempt from California taxation less any expenses and
expenditures deemed to have been paid from such interest.
For shareholders subject to the California personal income tax,
exempt-interest dividends derived from California Municipal Obligations will not
be subject to the California personal income tax. Distributions from net
realized short-term capital gains to California resident shareholders will be
subject to the California personal income tax as ordinary income. Distributions
from net realized long-term capital gains may constitute long-term capital gains
for individual California resident shareholders. Unlike under Federal tax law,
the Fund's shareholders will not be subject to California personal income tax,
or receive a credit for California taxes paid by the Fund, on undistributed
capital gains. In addition, California tax law does not consider any portion of
the exempt- interest dividends paid an item of tax preference for the purposes
of computing the California alternative minimum tax.
Any dividend or distribution paid shortly after an investor's purchase may
have the effect of reducing the net asset value of his shares below the cost of
his investment. Such a distribution would be a return on investment in an
economic sense although taxable as stated in the Prospectus. In addition, the
Code provides that if a shareholder has not held his Fund shares for more than
six months (or such shorter period as the Internal Revenue Service may prescribe
by regulation) and has received an exempt-interest dividend with respect to such
shares, any loss incurred on the sale of such shares will be disallowed to the
extent of the exempt- interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of any gains realized
from the sale or other disposition of certain market discount bonds will be
treated as ordinary income under Section 1276 of the Code. In addition, all or a
portion of the gain realized from engaging in "conversion transactions" may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, options and
"straddle" transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss the Fund realizes from certain
financial futures and options transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss will
arise upon exercise or lapse of such futures and options as well as from closing
transactions. In addition, any such futures and options remaining unexercised at
the end of the Fund's taxable year will be treated as sold for their then fair
market value, resulting in additional gain or loss to the Fund characterized in
the manner described above.
Offsetting positions held by the Fund involving financial futures and
options transactions may be considered, for tax purposes, to constitute
"straddles." "Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of "straddles" is governed
by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256 of the Code. As such, all
or a portion of any short- or long-term capital gain from certain "straddle"
and/or conversion transactions may be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain futures or options transactions, such "straddles" would be
characterized as "mixed straddles" if the futures or options transactions
comprising a part of such "straddles" were governed by Section 1256 of the Code.
The Fund may make one or more elections with respect to "mixed straddles."
Depending on which election is made, if any, the results to the Fund may differ.
If no election is made to the extent the "straddle" rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result of
the "straddle" and the conversion transaction rules, short-term capital losses
on "straddle" positions may be recharacterized as long-term capital losses, and
long-term capital gains may be treated as short-term capital gains or ordinary
income.
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.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Usually no brokerage commissions, as such,
are paid by the Fund for such purchases and sales, although the price paid
usually includes an undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter, and purchases of after-market
securities from dealers ordinarily are executed at a price between the bid and
asked price. No brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of the Manager that the receipt and study of such
services should not reduce the overall expenses of its research department.
The Fund's portfolio turnover rate for the fiscal years ended January 31,
1995 and 1996 was 37.39% and 92.42%, respectively. The Fund anticipates that its
annual portfolio turnover rate will not be a limiting factor when the Fund deems
it desirable to sell or purchase securities. Therefore, depending upon market
conditions, the Fund's annual portfolio turnover rate may exceed 100% in
particular years.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
Current yield for the 30-day period ended January 31, 1996 for Class A was
4.32%, for Class B was 3.99% and for Class C was 3.85%. Current yield is
computed pursuant to a formula which operates as follows: The amount of the
Fund's expenses accrued for the 30-day period (net of reimbursements) is
subtracted from the amount of the dividends and interest earned (computed in
accordance with regulatory requirements) by the Fund during the period. That
result is then divided by the product of: (a) the average daily number of shares
outstanding during the period that were entitled to receive dividends, and (b)
the maximum offering price per share in the case of Class A or the net asset
value per share in the case of Class B or Class C on the last day of the period
less any undistributed earned income per share reasonably expected to be
declared as a dividend shortly thereafter. The quotient is then added to 1, and
that sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.
Based upon a combined 1995 Federal and State of California personal income
tax rate of 46.24%, the tax equivalent yield for the 30-day period ended January
31, 1996 for Class A was 8.04%, for Class B was 7.42% and for Class C was 7.16%.
Tax equivalent yield is computed by dividing that portion of the current yield
(calculated as described above) which is tax exempt by 1 minus a stated tax rate
and adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt.
The tax equivalent yield noted above represents the application of the
highest Federal and State of California marginal personal income tax rates
presently in effect. For Federal personal income tax purposes, a 39.60% rate has
been used. For California personal income tax purposes, an 11.00% tax rate has
been used. The tax equivalent yield figure, however, does not reflect the
potential effect of any local (including, but not limited to, county, district
or city) taxes, including applicable surcharges. In addition, there may be
pending legislation which could affect such stated tax rates or yields. Each
investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant tax
equivalent yield.
The average annual total return for the 1, 5 and 9.227 year periods ended
January 31, 1996 for Class A was 8.98%, 7.41% and 7.26%, respectively. The
average annual total return for the 1 and 3.047 year periods ended January 31,
1996 for Class B was 10.55% and 6.62%, respectively. The average annual total
return for the period from June 2, 1995 (commencement of initial offering of
Class C) through January 31, 1996 for Class C was 6.47%. Average annual total
return is calculated by determining the ending redeemable value of an investment
purchased at net asset value (maximum offering price in the case of Class A) per
share 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. A
Class's average total return figures calculated in accordance with such formula
assume that in the case of Class A the maximum sales load had been deducted from
the hypothetical initial investment at the time of purchase or in the case of
Class B or Class C the maximum applicable CDSC has been paid upon redemption at
the end of the period.
The total return for Class A for the period November 10, 1986 (commencement
of operations) through January 31, 1996 was 91.03%. Based on net asset value per
share, the total return for Class A was 100.06% for this period. The total
return for Class B for the period January 15, 1993 (commencement of initial
offering of Class B shares) through January 31, 1996 was 21.57%. Without giving
effect to the applicable CDSC, the total return for Class B was 23.57% for this
period. The total return for Class C for the period June 2, 1995 (commencement
of initial offering of Class C shares) through January 31, 1996 was 4.28%.
Without giving effect to the applicable CDSC, the total return for Class C was
5.28% for this period. Total return is calculated by subtracting the amount of
the Fund's net asset value (maximum offering price in the case of Class A) per
share at the beginning of a stated period from the net asset value per share at
the end of the period (after giving effect to the reinvestment of dividends and
distributions during the period and any applicable CDSC), and dividing the
result by the net asset value (maximum offering price in the case of Class A)
per share at the beginning of the period. Total return also may be calculated
based on the net asset value per share at the beginning of the period instead of
the maximum offering price per share at the beginning of the period for Class A
shares or without giving effect to any applicable CDSC at the end of the period
for Class B or Class C shares. In such cases, the calculation would not reflect
the deduction of the sales load with respect to Class A shares or any applicable
CDSC with respect to Class B or Class C shares, which, if reflected, would
reduce the performance quoted.
From time to time, the Fund may use hypothetical tax equivalent yields or
charts in its advertising. These hypothetical yields or charts will be used for
illustrative purposes only and are not indicative of the Fund's past or future
performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or events,
including those relating to or arising from actual or proposed tax legislation.
From time to time, advertising materials for the Fund may also refer to
statistical or other information concerning trends relating to investment
companies, as compiled by industry associations such as the Investment Company
Institute. From time to time, advertising materials for the Fund also may refer
to Morningstar ratings and related analysis supporting such ratings.
From time to time, advertising materials for the Fund may include
biographical information relating to its portfolio managers and may refer to, or
include commentary by a portfolio manager relating to investment strategy, asset
growth, current or past business, political, economic or financial conditions
and other matters of general interest of investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Shares have no
preemptive or subscription rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
The Manager's legislative efforts led to the 1976 Congressional Amendment
to the Code permitting an incorporated mutual fund to pass through tax exempt
income to its shareholders. The Manager offered to the public the first
incorporated tax exempt fund and currently manages or administers over $25
billion in tax exempt assets.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses. For the period December 1, 1995
(effective date of transfer agency agreement) through January 31, 1996, the Fund
paid the Transfer Agent $11,891.
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Fund's custodian. Neither the Transfer Agent nor The Bank of New York has
any part in determining the investment policies of the Fund or which securities
are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
as counsel for the Fund, has rendered its opinion as to certain legal matters
regarding the due authorization and valid issuance of the shares being sold
pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
Certain California (the "State") constitutional amendments, legislative
measures, executive orders, civil actions and voter initiatives, as well as the
general financial condition of the State, could adversely affect the ability of
issuers of California Municipal Obligations to pay interest and principal on
such obligations. The following information constitutes only a brief summary,
does not purport to be a complete description, and is based on information drawn
from official statements relating to securities offerings of the State of
California and various local agencies, available as of the date of this
Statement of Additional Information. While the Fund has not independently
verified such information, it has no reason to believe that such information is
not correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the 1930s.
Construction, manufacturing (especially aerospace), exports and financial
services, among others, were all severely affected. Job losses have been the
worst of any post-war recession. Unemployment reached 10.1% in January 1994, but
fell sharply to 7.7% in October and November 1994. According to the State's
Department of Finance, recovery from the recession in California began in 1994.
The recession seriously affected State tax revenues, which basically mirror
economic conditions. It also has caused increased expenditures for health and
welfare programs. The State also has been facing a structural imbalance in its
budget with the largest programs supported by the General Fund (K-12 schools and
community colleges, health and welfare, and corrections) growing at rates higher
than the growth rates for the principal revenue sources of the General Fund. As
a result, the State experienced recurring budget deficits in the late 1980s and
early 1990s. The State Controller reported that expenditures exceeded revenues
for four of the five fiscal years ending with 1991-92. The State had an
operating surplus of approximately $109 million in 1992-93 and $836 million in
1993- 94. However, at June 30, 1994, according to the Department of Finance, the
State's Special Fund for Economic Uncertainties ("SFEU") still had a deficit, on
a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together with
expenditures for school funding which have not been reflected in the budget, and
reduction of available internal borrowable funds, have combined to significantly
deplete the State's cash resources to pay its ongoing expenses. In order to meet
its cash needs, the State has had to rely for several years on a series of
external borrowings, including borrowings past the end of a fiscal year. Such
borrowings are expected to continue in future fiscal years. To meet its cash
flow needs in the 1994- 95 fiscal year the State issued, in July and August
1994, $4.0 billion of revenue anticipation warrants which mature on April 25,
1996, and $3.0 billion of revenue anticipation notes which matured on June 28,
1995.
As a result of the deterioration in the State's budget and cash situation,
the rating agencies reduced the State's credit ratings. Between October 1991 and
July 1994, the rating on the State's general obligation bonds was reduced by S&P
from "AAA" to "A," by Moody's from "Aaa" to "A1" and by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) projected $42.4 billion of General Fund revenues and
transfers and $41.7 billion of budgeted expenditures. In addition, the 1994-95
Budget Act anticipated deferring retirement of about $1 billion of the
accumulated budget deficit to the 1995-96 fiscal year when it is intended to be
fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposed General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which would leave
a balance of approximately $92 million in the budget reserve, the SFEU, at June
30, 1996 after repayment of the accumulated budget deficits. The Budget proposal
was based on a number of assumptions, including receipt of $830 million from the
Federal government to offset costs of undocumented and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "County Funds") filed for protection under
Chapter 9 of the Federal Bankruptcy Code, after reports that the County Funds
had suffered significant market losses in their investments, causing a liquidity
crisis for the County Funds and the County. More than 180 other public entities,
most of which, but not all, are located in the County, were also depositors in
the County Funds. As of mid-January 1995, following a restructuring of most of
the County Funds' assets to increase their liquidity and reduce their exposure
to interest rate increases, the County estimated the County Funds' loss at about
$1.69 billion, or about 23% of their initial deposits of approximately $7.5
billion. Many of the entities which deposited monies in the County Funds,
including the County, are facing cash flow difficulties because of the
bankruptcy filing and may be required to reduce programs or capital projects.
This also may effect their ability to meet their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently predict
what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated 6.8 on
the Richter Scale struck Los Angeles causing significant damage to public and
private structures and facilities. Although some individuals and businesses
suffered losses totaling in the billions of dollars, the overall effect of the
earthquake on the regional and State economy is not expected to be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which are
not required by law to be credited to any other fund. The General Fund is the
principal operating fund for the majority of governmental activities and is the
depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be transferred by
the Controller as necessary to meet cash needs of the General Fund. The
Controller is required to return moneys so transferred without payment of
interest as soon as there are sufficient moneys in the General Fund. For
budgeting and accounting purposes, any appropriation made from the SFEU is
deemed an appropriation from the General Fund. For year-end reporting purposes,
the Controller is required to add the balance in the SFEU to the balance in the
General Fund so as to show the total monies then available for General Fund
purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June 30,
1994, the General Fund had outstanding loans in the aggregate principal amount
of $43 million to the General Fund from the SFEU and outstanding loans in the
aggregate principal amount of $5.2 billion, which consisted of $4.0 billion of
internal loans to the General Fund from the SFEU and other Special Funds and
$1.2 billion of external loans represented by the 1994 revenue anticipation
warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue Law
Changes. Prior to 1977, revenues of the State government experienced significant
growth primarily as a result of inflation and continuous expansion of the tax
base of the State. In 1978, State voters approved an amendment to the State
Constitution known as Proposition 13, which added Article XIIIA to the State
Constitution, reducing ad valorem local property taxes by more than 50%. In
addition, Article XIIIA provides that additional taxes may be levied by cities,
counties and special districts only upon approval of not less than a two-thirds
vote of the "qualified electors" of such district, and requires not less than a
two-thirds vote of each of the two houses of the State Legislature to enact any
changes in State taxes for the purpose of increasing revenues, whether by
increased rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by substantially
increasing expenditures from the General Fund for that purpose beginning in the
1978-79 fiscal year. In recent years, in addition to such increased
expenditures, the indexing of personal income tax rates (to adjust such rates
for the effects of inflation), the elimination of certain inheritance and gift
taxes and the increase of exemption levels for certain other such taxes had a
moderating impact on the growth in State revenues. In addition, the State has
increased expenditures by providing a variety of tax credits, including renters'
and senior citizens' credits and energy credits.
The State is subject to an annual "appropriations limit" imposed by Article
XIIIB of the State Constitution adopted in 1979. Article XIIIB prohibits the
State from spending "appropriations subject to limitation" in excess of the
appropriations limit imposed. "Appropriations subject to limitations" are
authorizations to spend "proceeds of taxes," which consist of tax revenues, and
certain other funds, including proceeds from regulatory licenses, user charges
or other fees to the extent that such proceeds exceed "the cost reasonably borne
by such entity in providing the regulation, product or service." One of the
exclusions from these limitations is "debt service" (defined as "appropriations
required to pay the cost of interest and redemption charges, including the
funding of any reserve or sinking fund required in connection therewith, on
indebtedness existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition, appropriations
required to comply with mandates of courts or the Federal government and,
pursuant to Proposition 111 enacted in June 1990, appropriations for qualified
capital outlay projects and appropriations of revenues derived from any increase
in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels are
not included as appropriations subject to limitation. In addition, a number of
recent initiatives were structured or proposed to create new tax revenues
dedicated to certain specific uses, with such new taxes expressly exempted from
the Article XIIIB limits (e.g., increased cigarette and tobacco taxes enacted by
Proposition 99 in 1988). The appropriations limit also may be exceeded in cases
of emergency. However, unless the emergency arises from civil disturbance or
natural disaster declared by the Governor, and the appropriations are approved
by two-thirds of the Legislature, the appropriations limit for the next three
years must be reduced by the amount of the excess.
The State's appropriations limit in each year is based on the limit for the
prior year, adjusted annually for changes in California per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. The measurement of change in population is a blended average
of statewide overall population growth, and change in attendance at local school
and community college ("K-14") districts. As amended by Proposition 111, the
appropriations limit is tested over consecutive two-year periods. Any excess of
the aggregate "proceeds of taxes" received over such two-year periods above the
combined appropriations limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was based
on its 1978-79 fiscal year authorizations to expend proceeds of taxes and was
adjusted annually to reflect changes in cost of living and population (using
different definitions, which were modified by Proposition 111). Commencing with
the 1991-92 fiscal year, the State's appropriations limit is adjusted annually
based on the actual 1986-87 limit, and as if Proposition 111 had been in effect.
The State Legislature has enacted legislation to implement Article XIIIB which
defines certain terms used in Article XIIIB and sets forth the methods for
determining the State's appropriations limit. Government Code Section 7912
requires an estimate of the State's appropriations limit to be included in the
Governor's Budget, and thereafter to be subject to the budget process and
established in the Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under the
limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit. The
limit for the 1992-93 fiscal year was $35.01 billion, and the appropriations
subject to limitation were $7.53 billion under the limit. The limit for the
1993-94 fiscal year was $36.060 billion, and the appropriations subject to
limitation were $6.55 billion under the limit. The estimated limit for the
1994-95 fiscal year was $37.55 billion, and the appropriations subject to
limitations were estimated to be $6.05 billion under the limit.
In November 1988, State voters approved Proposition 98, which changed State
funding of public education below the university level and the operation of the
State's appropriations limit, primarily by guaranteeing K-14 schools a minimum
share of General Fund revenues. Under Proposition 98 (as modified by Proposition
111, which was enacted in June 1990), K-14 schools are guaranteed the greater of
(a) 40.3% of General Fund revenues ("Test 1"), (b) the amount appropriated to
K-14 schools in the prior year, adjusted for changes in the cost of living
(measured as in Article XIIIB by reference to California per capita personal
income) and enrollment ("Test 2"), or (c) a third test, which would replace the
second test in any year when the percentage growth in per capita General Fund
revenues from the prior year plus .5% is less than the percentage growth in
California per capita personal income ("Test 3"). Under "Test 3," schools would
receive the amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an additional small
adjustment factor. If "Test 3" is used in any year, the difference between "Test
3" and "Test 2" would become a "credit" to schools which would be the basis of
payments in future years when per capita General Fund revenue growth exceeds per
capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both houses,
with the Governor's concurrence, to suspend the K-14 schools' minimum funding
formula for a one-year period. In the fall of 1989, the Legislature and the
Governor utilized this provision to avoid having 40.3% of revenues generated by
a special supplemental sales tax enacted for earthquake relief go to K-14
schools. Proposition 98 also contains provisions transferring certain State tax
revenues in excess of the Article XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98, appropriated
approximately $18.5 billion for K-14 schools pursuant to Proposition 98. During
the course of the fiscal year, revenues proved to be substantially below
expectations. By the time the Governor's Budget was introduced in January 1992,
it became clear that per capita growth in General Fund revenues for 1991-92
would be far smaller than the growth in California per capita personal income
and the Governor's Budget therefore reflected a reduction in Proposition 98
funding in 1991-92 by applying "Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years without
exceeding it, the Legislature enacted several bills as part of the 1992-93
budget package which responded to the fiscal crisis in education funding. Fiscal
year 1991-92 Proposition 98 appropriations for K-14 schools were reduced by
$1.083 billion. In order to not adversely impact cash received by school
districts, however, a short-term loan was appropriated from the non-Proposition
98 State General Fund. The Legislature then appropriated $16.6 billion to K-14
schools for 1992-93 (the minimum guaranteed by Proposition 98), but designated
$1.083 billion of this amount to "repay" the prior year loan, thereby reducing
cash outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and converting the
amount to a loan (the "inter-year adjustment"), Chapter 703, Statutes of 1992
also made an adjustment to "Test 1," based on the additional $1.2 billion of
local property taxes that were shifted to schools and community colleges. The
"Test 1" percentage changed from 40% to 37%. Additionally, Chapter 703 contained
a provision that if an appellate court should determine that the "Test 1"
recalculation or the inter-year adjustment is unconstitutional, unenforceable or
invalid, Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93 Budget
Act compromise.
The State Controller stated in October 1992 that, because of a drafting
error in Chapter 703, he could not implement the $1.083 billion reduction of the
1991-92 school funding appropriation, which was part of the inter-year
adjustment. The Legislature untimely enacted corrective legislation as part of
the 1993-94 Budget package to implement the $1.083 billion inter-year adjustment
as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K- 12
schools in order to maintain per-average daily attendance ("ADA") funding at the
same level as 1991-92, at $4,187. An additional loan of $241 million was made to
community college districts. These loans are to be repaid from future
Proposition 98 entitlements. (The teachers' organization lawsuit discussed above
also seeks to declare invalid the provision making the $732 million a loan
"repayable" from future years' Proposition 98 funds. Including both State and
local funds, and adjusting for the loans and repayments, on a cash basis, total
Proposition 98 K-12 funding in 1992-93 increased to $21.5 billion, 2.4% more
than the amount in 1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported pupil
enrollment, the 1993-94 Budget Act projected that the 1992-93 Proposition 98
Budget Act appropriations of $16.6 billion exceeded a revised minimum guarantee
by $313 million. As a result, the 1993-94 Budget Act reverted $25 million in
1992-93 appropriations to the General Fund. Limiting the reversion to this
amount ensures that per ADA funding for general purposes will remain at the
prior year level of $4,217 per pupil. The 1993-94 Governor's Budget subsequently
proposed deficiency funding of $121 million for school apportionments and
special education, increasing funding per pupil in 1992-93 to $4,244. The
1993-94 Budget Act also designated $98 million in 1992-93 appropriations toward
satisfying prior years' guarantee levels, an obligation that resulted primarily
from updating State tax revenues for 1991-92, and designates $190 million as a
loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding level
at $13.5 billion based on the "Test 3" calculation where the guarantee is
determined by the change in per capita growth in General Fund revenues, which
are projected to decrease on a year-over-year basis. This amount also takes into
account increased property taxes transferred to school districts from other
local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93) provided a
new loan of $609 million to K-12 schools in order to maintain per ADA funding at
$4,217 and a loan of $178 million to community colleges. These loans have been
combined with the K-14 1992-93 loans into one loan totalling $1.760 billion.
Repayment of this loan would be from future years' Proposition 98 entitlements,
and would be conditioned on maintaining current funding levels per pupil for
K-12 schools. Chapter 66 also reduced the "Test 1" percentage to 35% to reflect
the property tax shift among local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98 funds
for K14 schools based on Test 2. This exceeded the minimum Proposition 98
guarantee by $8 million to maintain K-12 funding per pupil at $4,217. Based upon
updated State revenues, growth rates and inflation factors, the 1994-95 Budget
Act appropriated an additional $286 million within Proposition 98 for the
1993-94 fiscal year, to reflect a need in appropriations for school districts
and county offices of education, as well as an anticipated deficiency in special
education fundings. These and other minor appropriation adjustments increased
the 1993-94 Proposition 98 guarantee to $13.8 billion, which exceeded the
minimum guarantee in that year by $272 million and provided per pupil funding of
$4,225.
The 1995-96 Governor's Budget adjusted the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect changes in
the statutory continuous appropriation for apportionments. The revised
appropriations exceeded the minimum guarantee by $32 million. This appropriation
level still provided per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted for
changes in factors described above, and was calculated to be $14.9 billion.
Within the minimum guarantee, the dollars per pupil were maintained at the prior
year's level; consequently, the 1994-95 minimum guarantee included a loan
repayment of $135 million, and the per-pupil funding increased to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within the
guarantee is a loan repayment of $379 million for the combined outstanding loans
of $1.76 billion. Funding per pupil is estimated to increase by $61 over 1994-95
to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1992-93 contributed about 44% of General Fund revenues, is closely modeled after
the Federal income tax law. It is imposed on net taxable income (gross income
less exclusions and deductions). The tax is progressive with rates ranging from
1% to 11%. Personal, dependent, and other credits are allowed against the gross
tax liability. In addition, taxpayers may be subject to an alternative minimum
tax ("AMT") which is much like the Federal AMT. This is designed to ensure that
excessive use of tax preferences does not reduce taxpayers' liabilities below
some minimum level. Legislation enacted in July 1991 added two new marginal tax
rates, at 10% and 11%, effective for tax years 1991 through 1995. After 1995,
the maximum personal income tax rate is scheduled to return to 9.3%, and the AMT
rate is scheduled to drop from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the consumer
price index to prevent taxpayers from being pushed into higher tax brackets
without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 38% of General Fund revenue
in 1992-93. Bank and corporation tax revenues comprised about 11% of General
Fund revenue in 1992-93. In 1989, Proposition 99 added a 25 cents per pack
excise tax on cigarettes, and a new equivalent excise tax on other tobacco
products. Legislation enacted in 1993 added an additional 2 cents per pack for
the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following enactment
of the Federal Tax Reform Act of 1986, and conforming changes to the State's tax
laws, taxpayer behavior became more difficult to predict, and the State
experienced a series of fiscal years in which revenue came in significantly
higher or lower than original estimates. The 1989-90 fiscal year ended with
revenues below estimates and the SFEU was fully depleted by June 30, 1990. This
date essentially coincided with the date of the most recent recession, and the
State subsequently accumulated a budget deficit in the SFEU approaching $2.8
billion at its peak. The State's budget problems in recent years also have been
caused by a structural imbalance which has been identified by the current and
previous Administrations. The largest General Fund programs -- K-14 education,
health, welfare and corrections -- were increasing faster than the revenue base,
driven by the State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance and to
close large "budget gaps" which were identified. The Legislature and Governor
eventually agreed on significant cuts in program expenditures, some transfers of
program responsibilities and funding from the State to local governments,
revenue increases (particularly in the 1991-92 fiscal year budget), and various
one-time adjustments and accounting changes. However, as the recession took hold
and deepened after the summer of 1990, revenues dropped sharply and expenditures
for health and welfare programs increased as job losses mounted, so that the
State ended each of the 1990-91 and 1991-92 fiscal years with an unanticipated
deficit in the budget reserve, the SFEU, as compared to projected positive
balances.
As a result of the revenue shortfalls accumulating for the previous two
fiscal years, the Controller in April 1992 indicated that cash resources
(including borrowing from Special Funds) would not be sufficient to meet all
General Fund obligations due on June 30 and July 1, 1992. On June 25, 1992, the
Controller issued $475 million of 1992 Revenue Anticipation Warrants (the "1992
Warrants") in order to provide funds to cover all necessary payments from the
General Fund at the end of the 1991- 92 fiscal year and on July 1, 1992. The
1992 Warrants were paid on July 24, 1992. In addition to the 1992 Warrants, the
Controller reported that as of June 30, 1992, the General Fund had borrowed
$1.336 billion from the SFEU and $4.699 billion from other Special Funds, using
all but about $183 million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were proposed
for the 1991-92 and 1992-93 fiscal years. Economic performance in the State
continued to be sluggish after the 1992-93 Governor's Budget was prepared. By
the time of the "May Revision," issued on May 20, 1992, the Administration
estimated that the 1992-93 Budget needed to address a gap of about $7.9 billion,
much of which was needed to repay the accumulated budget deficits of the
previous two years.
The severity of the budget actions needed led to a long delay in adopting
the budget. With the failure to enact a budget by July 1, 1992, the State had no
legal authority to pay many of its vendors until the budget was passed. Starting
on July 1, 1992, the Controller was required to issue "registered warrants" in
lieu of normal warrants backed by cash to pay many State obligations. Available
cash was used to pay constitutionally mandated and priority obligations, such as
debt service on bonds and revenue anticipation warrants. Between July 1 and
September 4, 1992, the Controller issued an aggregate of approximately $3.8
billion of registered warrants payable from the General Fund, all of which were
called for redemption by September 4, 1992 following enactment of the 1992-93
Budget Act and issuance by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992, and it
was signed by the Governor on September 2, 1992. The 1992-93 Budget Act provided
for expenditures of $57.4 billion and consisted of General Fund expenditures of
$40.8 billion and Special Fund and Bond Fund expenditures of $16.6 billion. The
Department of Finance estimated a balance in the SFEU of $28 million on June 30,
1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12 school
and community college districts, thereby reducing by that amount General Fund
support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget deficit of
about $2.8 billion, and a negative fund balance of about $2.2 billion (the
difference being certain reserves for encumbrances and school funding costs). As
a result, the State issued $5 billion of revenue anticipation notes and
warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of $39.9
billion. It also proposed Special Fund expenditures of $12.4 billion and Special
Fund revenues of $12.1 billion. The 1993-94 fiscal year represented the third
consecutive year the Governor and the Legislature were faced with a very
difficult budget environment, requiring revenue actions and expenditure cuts
totaling billions of dollars to produce a balanced budget. To balance the budget
in the face of declining revenues, the Governor proposed a series of revenue
shifts from local government, reliance on increased Federal aid and reductions
in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected, sales
tax was close to target, and bank and corporation taxes were lagging behind
projections. The May Revision projected the State would have an accumulated
deficit of about $2.75 billion by June 30, 1993. The Governor proposed to
eliminate this deficit over an 18-month period. He also agreed to retain the
0.5% sales tax scheduled to expire June 30 for a six-month period, dedicated to
local public safety purposes, with a November election to determine a permanent
extension. Unlike previous years, the Governor's Budget and May Revision did not
calculate a "gap" to be closed, but rather set forth revenue and expenditure
forecasts and proposals designed to produce a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993, along
with implementing legislation. The Governor vetoed about $71 million in
spending. With enactment of the Budget Act, the State carried out its regular
cash flow borrowing program for the fiscal year, which included the issuance of
approximately $2 billion of revenue anticipation notes that matured on June 28,
1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the January
Governor's Budget, but still about $400 million below 1992-93 (and the second
consecutive year of actual decline). The principal reasons for declining
revenues were the continued weak economy and the expiration (or repeal) of three
fiscal steps taken in 1991--a half cent temporary sales tax, a deferral of
operating loss carry forwards, and repeal by initiative of a sales tax on candy
and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9 billion,
an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5 billion
(a 6.3% reduction from projected 1992-93 expenditures of $41.1 billion), in
order to keep a balanced budget within the available revenues. The Budget also
included Special Fund expenditures of $12.1 billion, a 4.2% increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the second
half of the fiscal year, recessionary conditions continued longer than had been
anticipated when the 1993-94 Budget Act was adopted. Overall, revenues for the
1993-94 fiscal year were about $800 million lower than original projections, and
expenditures were about $780 million higher, primarily because of higher health
and welfare caseloads, lower property taxes which require greater State support
for K-14 education to make up to shortfall, and lower than anticipated Federal
government payments for immigration-related costs. The reports in May and June
1994, indicated that revenues in the second half of the 1993-94 fiscal year were
very close to the projections made in the Governor's Budget of January 10, 1994,
which was consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final June
receipts, reported that June revenues were $114 million (2.5%) above projection,
with final end-of-year results at $377 million (about 1%) above the May Revision
projections. Part of this result was due to the end-of-year adjustments and
reconciliations. Personal income tax and sales tax continued to track
projections. The largest factor in the higher than anticipated revenues was from
bank and corporation taxes, which were $140 million (18.4%) above projection in
June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured December
21, 1994. This borrowing reduced the cash deficit at the end of the 1993-94
fiscal year. Nevertheless, because of the $1.5 billion variance from the
original 1993-94 Budget Act assumptions, the General Fund ended the fiscal year
at June 30, 1994 carrying forward an accumulated deficit of approximately $1.8
billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the State
issued an additional $2.0 billion of revenue anticipation warrants that matured
July 26, 1994, which were needed to fund the State's obligations and expenses
through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget environment to
produce a balanced budget. Many program cost and budgetary adjustments had
already been made in the last three years. The Governor's Budget Proposal, as
updated in May and June 1994 proposed a two-year solution to pass the
accumulated deficit. The budget proposal set forth revenue and expenditure
forecasts and revenue and expenditure proposals which estimated operating
surpluses for the budget for both 1994-95 and 1995-96, and lead to the
elimination of the accumulated budget deficit, estimated at about $1.8 billion
at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994, projected
revenues and transfers of $41.9 billion, $2.1 billion higher than revenues in
1993-94. This reflected the Administration's forecast of an improving economy.
Also included in this figure was the projected receipt of about $360 million
from the Federal government to reimburse the State's cost of incarcerating
undocumented immigrants, most of which eventually was not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1 billion, a
decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The 1994-95
Budget Act also projected Special Fund expenditures of $13.7 billion, a 5.4%
increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended for
two years (1993 and 1994). A ballot proposition to permanently restore the
renters' tax credit after 1995 failed at the June 1994 election. The Legislature
enacted a further one-year suspension of the renters' tax credit, for 1995,
saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to defer
repayment of approximately $1.0 billion of its accumulated budget deficit into
the 1995-96 fiscal year. The Budget Adjustment Law enacted along with the
1994-95 Budget Act is designed to ensure that the warrants will be repaid in the
1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that General
Fund revenues for March 1995 were $28 million, or 1.1%, below forecast, and that
year-to-date General Fund revenues were $110 million, or 0.4%, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the Department
of Finance indicates that about $98 million was appropriated for California to
offset costs of incarceration of undocumented and refugee immigrants, less than
the $356 million which was assumed in the State's 1994-95 Budget Act.
For the first time in four years, the State enters the upcoming 1995-96
fiscal year with strengthening revenues based on an improving economy. On
January 10, 1995, the Governor presented his 1995-96 Fiscal Year Budget Proposal
(the "Proposed Budget"). The Proposed Budget estimates General Fund revenues and
transfers of $42.5 billion (an increase of 0.2% over 1994-95). This nominal
increase from 1994-95 fiscal year reflects the Governor's realignment proposal
and the first year of his tax cut proposal. Without these two proposals, General
Fund revenues would be projected at approximately $43.8 billion, or an increase
of 3.3% over 1994-95. Expenditures are estimated at $41.7 billion (essentially
unchanged from 1994-95). Special Fund revenues are estimated at $13.5 billion
(10.7% higher than 1994-95) and Special Fund expenditures are estimated at $13.8
billion (12.2% higher than 1994-95). The Proposed Budget projects that the
General Fund will end the fiscal year at June 30, 1996 with a budget surplus in
SFEU of about $92 million, or less than 1% of General Fund expenditures, and
will have repaid all of the accumulated budget deficits.
Recent Economic Trends. Revised employment data indicate that California's
recession ended in 1993, and following a period of stability, a solid recovery
is now underway. The State's unemployment rate fell sharply last year, from
10.1% in January to 7.7% in October and November 1994. The gap between the
national and California jobless rates narrowed from 3.4 percentage points at the
beginning of 1994 to an average of 2 percentage points in October and November.
The number of unemployed Californians fell by nearly 400,000 during the year,
while civilian employment increased more than 300,000 in 1994.
Other indicators, including retail sales, homebuilding activity, existing
home sales and bank lending volume all confirm the State's recovery.
Personal income was severely affected by the Northridge Earthquake, which
reduced the first quarter 1994 figure by $22 billion at an annual rate,
reflecting the uninsured damage to residences and unincorporated businesses. As
a result, personal income growth for all of 1994 was about 4.2%. However,
excluding the Northridge effects, growth would have been in excess of 5%.
Personal income is expected to grow 6.6% for 1995.
APPENDIX B
Description of S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded as
safe. This rating describes the third strongest capacity for payment of debt
service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between "A" and "BBB" rating is that the latter shows
more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B
Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of principal. In the event of adverse business, financial or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong capacity
to pay principal and interest. Those issues determined to possess overwhelming
safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to pay
principal and interest.
Commercial Paper Ratings
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what generally are known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and therefore not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Municipal Note Ratings
Moody's ratings for state municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature is
not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as MIG 1
or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's assigns a
MIG or VMIG rating, all categories define an investment grade situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a wide range of financial markets and assured sources of alternative
liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for recovery
on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA category covering 12-36 months or the DDD, DD
or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payments, but the margin of safety is not as great as
the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-92.6% AMOUNT VALUE
_______ _______
<S> <C> <C>
CALIFORNIA-86.5%
Anaheim Public Financing Authority, Tax Allocation Revenue
(Redevelopment Project Alpha) 6.45%, 12/28/2018 (Insured; MBIA)......... $ 4,000,000 $ 4,413,280
Antelope Valley Hospital District, Insured COP 7.30%, 1/1/2006.............. 2,400,000 2,576,376
California:
6.90%, 4/1/2005......................................................... 2,000,000 2,339,100
5.25%, 10/1/2011........................................................ 5,250,000 5,221,912
6.125%, 10/1/2011....................................................... 2,875,000 3,238,285
5.25%, 10/1/2018........................................................ 7,200,000 6,976,872
California Department of Water Resources, Revenue
(Central Valley Project) 4.75%, 12/1/2025............................... 3,120,000 2,810,184
California Educational Facilities Authority, Revenue, Refunding
(Saint Mary's College) 5%, 10/1/2012.................................... 4,000,000 3,752,120
California Health Facilities Financing Authority, Revenue
(Saint Francis Memorial Hospital) 5.875%, 11/1/2023..................... 4,500,000 4,555,170
California Housing Finance Agency, Home Mortgage Revenue:
6.70%, 8/1/2025......................................................... 2,000,000 2,074,040
7.50%, 8/1/2029......................................................... 1,135,000 1,188,390
8%, 8/1/2029............................................................ 525,000 556,852
7.60%, 8/1/2030......................................................... 1,605,000 1,703,467
7.70%, 8/1/2030......................................................... 1,200,000 1,272,072
California Pollution Control Financing Authority, SWDR (North County
Recycling Center) 6.75%, 7/1/2011 (LOC; Union Bank of Switzerland) (a)...... 2,500,000 2,533,700
California Public Works Board, LR:
(Secretary of State):
6.75%, 12/1/2012...................................................... 3,475,000 3,805,855
6.50%, 12/1/2008 (b).................................................. 1,400,000 1,639,932
(University of California Projects) 5.50%, 6/1/2014..................... 8,000,000 8,003,920
California Statewide Communities Development Authority, COP, Revenue,
Refunding
(Pacific Homes) 5.90%, 4/1/2009......................................... 4,340,000 4,515,596
Compton, COP, Refunding 7.50%, 8/1/2015 (LOC; Mitsui Trust and Banking) (a). 2,000,000 2,135,060
Contra Costa County, Water District Revenue 6%, 10/1/2011 (Insured; MBIA) (b) 1,725,000 1,855,048
Escondido Unified School District, Refunding 5.125%, 9/1/2015 (Insured; FGIC) (c) 1,500,000 1,470,870
Eureka Public Financing Authority, Tax Allocation Revenue, Refunding
(Eureka Redevelopment Projects) 6.25%, 11/1/2011 (Insured; CGIC)........ 2,000,000 2,169,260
Fairfield, Water Revenue, Refunding 5.375%, 4/1/2017 (Insured; AMBAC) (c)... 5,250,000 5,253,675
Fontana Redevelopment Agency, Tax Allocation Revenue
(North Fontana Redevelopment Project) 7.25%, 9/1/2020................... 4,250,000 4,607,595
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2030................................................... 40,000,000 4,660,400
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
Long Beach, Harbor Revenue 5.25%, 5/15/2025 (Insured; MBIA)................. $ 3,000,000 $ 2,876,490
Los Angeles, Wastewater Systems Revenue
7.10%, 2/1/2021 (Insured; MBIA, Prerefunded 2/1/1999) (d)............... 2,200,000 2,447,984
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue
5.25%, 7/1/2023 (Insured; AMBAC)........................................ 5,000,000 4,854,800
Los Angeles Harbor Department, Revenue 7.60%, 10/1/2018..................... 750,000 867,728
Madera County, COP (Valley Children's Hospital):
6.25%, 3/15/2006 (Insured; MBIA)........................................ 2,250,000 2,508,435
6.50%, 3/15/2009 (Insured; MBIA)........................................ 3,370,000 3,848,439
Menlo Park Community Development Agency, Tax Allocation, Refunding
(Las Pulgas Community Development Project) 6.55%, 10/1/2011 (Insured;
AMBAC).................................................................. 2,000,000 2,301,000
Monrovia Redevelopment Agency, Tax Allocation, Refunding
(Central Redevelopment Project) 6.70%, 5/1/2021 (Insured; AMBAC)........ 2,000,000 2,204,640
Mount Shasta, HR, COP (Mercy Medical Center)
7.25%, 7/1/2019 (Prerefunded 7/1/1999) (d).............................. 1,855,000 2,088,229
Nevada County, COP (Western Nevada Co. Solid Waste-McCourtney Road Landfill)
7.50%, 6/1/2021......................................................... 2,200,000 2,270,840
Northern California Power Agency, Public Power Revenue, Refunding
(Hydroelectric Project No. 1):
6.30%, 7/1/2018....................................................... 6,000,000 6,845,640
7.15%, 7/1/2024....................................................... 4,415,000 4,785,507
Orange County, Special Tax (Community Facilities District No. 87):
7.75%, 8/15/2014........................................................ 2,375,000 2,437,296
7.80%, 8/15/2015 (Prerefunded 8/15/2000) (d)............................ 2,000,000 2,337,780
Orange Cove, Irrigation District Revenue, COP
(Rehabilitation Project) 7.25%, 2/1/2012................................ 3,000,000 3,195,870
Pittsburg Public Financing Authority, Wastewater Revenue, Refunding
5.125%, 6/1/2015 (Insured; FGIC)........................................ 2,700,000 2,628,747
Richmond Joint Powers Financing Authority, Revenue 7.25%, 5/15/2013......... 1,500,000 1,684,605
Riverside County, SFMR 7.80%, 5/1/2021 (Collateralized; GNMA)............... 1,250,000 1,612,438
Roseville, Special Tax (Community Facilities District No. 1) 7.70%, 9/1/2020 2,000,000 2,081,240
Sacramento County, Special Tax (Community Facilities District No. 1):
8.20%, 12/1/2010........................................................ 2,250,000 2,434,815
8.25%, 12/1/2020........................................................ 2,000,000 2,163,180
Sacramento Municipal Utility District, Electric Revenue 7.875%, 8/15/2016... 2,900,000 3,248,899
Sacramento Schools Insurance Authority, Revenue
(Workers Compensation Program) 5.75%, 6/1/2003.......................... 3,930,000 4,126,028
San Diego County Water Authority, Water Revenue, COP 5.607%, 4/23/2008 (b).. 4,000,000 4,223,680
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
San Diego Public Facilities Financing Authority, Sewer Revenue
5%, 5/15/2015 (Insured; FGIC)........................................... $ 3,010,000 $ 2,906,787
San Joaquin Hills Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2022................................................... 15,000,000 2,998,050
San Jose - Santa Clara Water Financing Authority, Sewer Revenue
5.375%, 11/15/2015 (Insured; FGIC)...................................... 1,125,000 1,124,899
Simi Valley, Single Family Residential Mortgage Revenue 7.625%, 8/1/2022 (e) 2,000,000 1,200,000
Southern California Rapid Transit District, COP
(Worker's Compensation Fund) 6%, 7/1/2010............................... 2,045,000 2,167,168
University of California, Revenue, Refunding (Multiple Purpose Projects):
5%, 9/1/2014 (Insured; AMBAC)........................................... 4,000,000 3,879,760
5%, 9/1/2023 (Insured; AMBAC)........................................... 8,500,000 8,020,600
Vista, MFHR (Vista Hacienda Project) 6.95%, 4/1/2017........................ 3,000,000 3,191,490
Waterford Public Financing Authority, Revenue 8.20%, 9/15/2020.............. 2,615,000 2,087,764
U.S. RELATED-6.1%
Puerto Rico Commonwealth Highway and Transportation Authority, Revenue
5.50%, 7/1/2013......................................................... 7,250,000 7,400,800
Puerto Rico Electric Power Authority, Power Revenue, Refunding 7.125%, 7/1/2014 2,000,000 2,181,900
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,000,000 3,260,550
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $185,744,249)................... $195,823,109
=======
SHORT-TERM MUNICIPAL INVESTMENTS-7.4%
CALIFORNIA-6.4%
California Pollution Control Financing Authority, RRR, VRDN:
(Delano Project) 3.25% (LOC; ABN-Amro Bank) (a,f)....................... $ 4,600,000 $ 4,600,000
(Ultra Power-Rocklin):
3.90% (LOC; Bank of America National Trust and Savings Association) (a,f) 1,200,000 1,200,000
3.90% (LOC; Bank of America National Trust and Savings Association) (a,f) 1,800,000 1,800,000
Santa Clara Transportation District, Crossover Revenue, VRDN
3.75% (LOC; Sumitomo Bank) (a,f)........................................ 5,800,000 5,800,000
U.S. RELATED-1.0%
Puerto Rico Electric Power Authority, Power Revenue 3.24%, 7/1/2023 (g)..... 2,200,000 2,200,000
_______
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $15,600,000)...................................................... $ 15,600,000
=======
TOTAL INVESTMENTS-100.0%
(cost $201,344,249)..................................................... $211,423,109
=======
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
CGIC Capital Guaranty Insurance Corporation Insurance Corporation
COP Certificate of Participation MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
GNMA Government National Mortgage Association SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
LR Lease Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (H) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ __________ ____________
<S> <C> <C> <C>
AAA Aaa AAA 40.9%
AA Aa AA 4.5
A A A 32.5
BBB Baa BBB 8.8
D D D .6
F1 MIG1, VMIG1 & P1 SP1, A1 6.3
Not Rated (i) Not Rated (i) Not Rated (i) 6.4
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) Wholly held by the custodian in a segregated account as collateral
for when-issued securities.
(c) Purchased on a delayed delivery or when-issued basis.
(d) 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.
(e) Non-income producing security; interest payments in default.
(f) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(g) Inverse floater security - the interest rate is subject to change
periodically.
(h) Fitch currently provides creditworthiness information for a limited
number of investments.
(i) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's, have been determined by the Manager to be of comparable quality
to those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $201,344,249)-see statement..................................... $211,423,109
Cash.................................................................... 1,733,868
Interest receivable..................................................... 2,876,499
Receivable for shares of Beneficial Interest subscribed................. 14,321
Prepaid expenses........................................................ 6,790
_______
216,054,587
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 96,128
Due to Distributor...................................................... 52,761
Payable for investment securities purchased............................. 9,043,987
Payable for shares of Beneficial Interest redeemed...................... 84,051
Accrued expenses........................................................ 59,674 9,336,601
______ _______
NET ASSETS ................................................................ $206,717,986
=======
REPRESENTED BY:
Paid-in capital......................................................... $194,276,770
Accumulated undistributed net realized gain on investments.............. 2,362,356
Accumulated net unrealized appreciation on investments-Note 3........... 10,078,860
_______
NET ASSETS at value......................................................... $206,717,986
=======
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 14,277,414
=======
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,659,307
=======
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 81
=======
NET ASSET VALUE per share:
Class A Shares
($185,187,120 / 14,277,414 shares).................................... $12.97
=======
Class B Shares
($21,529,815 / 1,659,307 shares)...................................... $12.98
=======
Class C Shares
($1,051 / 81 shares).................................................. $12.98
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED JANUARY 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,901,785
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,152,436
Shareholder servicing costs-Note 2(c)................................. 662,327
Distribution fees-Note 2(b)........................................... 102,037
Professional fees..................................................... 54,939
Trustees' fees and expenses-Note 2(d)................................. 35,811
Custodian fees........................................................ 24,327
Registration fees..................................................... 7,191
Prospectus and shareholders' reports.................................. 3,223
Miscellaneous......................................................... 22,278
______
TOTAL EXPENSES.................................................... 2,064,569
______
INVESTMENT INCOME-NET............................................. 10,837,216
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,212,253
Net unrealized appreciation on investments.............................. 10,659,485
______
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 16,871,738
______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $27,708,954
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JANUARY 31,
________________________________
1995 1996
_______ _______
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 13,051,960 $ 10,837,216
Net realized gain on investments........................................ 1,759,018 6,212,253
Net unrealized appreciation (depreciation) on investments for the year.. (27,102,766) 10,659,485
_______ _______
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (12,291,788) 27,708,954
_______ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (12,067,054) (9,879,785)
Class B shares........................................................ (984,906) (957,402)
Class C shares........................................................ _ (29)
Net realized gain on investments:
Class A shares........................................................ (1,316,480) (4,193,091)
Class B shares........................................................ (128,731) (474,312)
Class C shares........................................................ _ (23)
_______ _______
TOTAL DIVIDENDS................................................... (14,497,171) (15,504,642)
_______ _______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 12,980,330 7,850,834
Class B shares........................................................ 6,515,990 2,433,172
Class C shares........................................................ _ 1,000
Dividends reinvested:
Class A shares........................................................ 6,079,502 6,858,326
Class B shares........................................................ 709,931 978,162
Class C shares........................................................ _ 52
Cost of shares redeemed:
Class A shares........................................................ (47,805,009) (32,515,537)
Class B shares........................................................ (3,113,197) (2,012,025)
_______ _______
(DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... (24,632,453) (16,406,016)
_______ _______
TOTAL (DECREASE) IN NET ASSETS.............................. (51,421,412) (4,201,704)
NET ASSETS:
Beginning of year....................................................... 262,341,102 210,919,690
_______ _______
End of year............................................................. $210,919,690 $206,717,986
======= =======
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ _____________________________ _______
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31, YEAR ENDED
_____________________________ _____________________________
JANUARY 31,
CAPITAL SHARE TRANSACTIONS: 1995 1996 1995 1996 1996*
_______ _______ ________ _______ ________
<S> <C> <C> <C> <C> <C>
Shares sold............. 1,040,833 611,979 506,103 191,459 77
Shares issued for dividends
reinvested............ 489,182 534,099 57,245 76,108 4
Shares redeemed......... (3,847,929) (2,546,673) (252,804) (157,990) _
_______ _______ ________ _______ ________
NET INCREASE (DECREASE)
IN SHARES
`OUTSTANDING...... (2,317,914) (1,400,595) 310,544 109,577 81
======= ======= ======== ======= ========
*From June 2, 1995 (commencement of initial offering) to January 31,
1996.
See notes to financial statements.
</TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated June 3, 1996.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier California Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company. The Fund's investment objective is to maximize current
income exempt from Federal and, where applicable, from State personal income
taxes to the extent consistent with the preservation of capital. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager is
a direct subsidiary of Mellon Bank. N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, if any,
it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the average daily
value of the Fund's net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. The most stringent state
expense limitation applicable to the Fund presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the average value of the Fund's net assets in accordance with California "blue
sky" regulations. There was no expense reimbursement for the year ended January
31, 1996.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc., a
wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. Such compensation amounted to $11,891 for the period from December 1, 1995
through January 31, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $11,623 during the year ended January 31, 1996 from commissions earned
on sales of the Fund's shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. For the period ended January 31, 1996, $102,032 was
charged to the Fund for the Class B shares and $5 was charged to the Fund for
the Class C shares.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor, at
an annual rate of .25 of 1 % of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. 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. The Distributor may make payments to Service Agents in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the period ended January 31, 1996, $472,817, $51,016 and $2
were charged to Class A, B and C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended January 31, 1996 amounted
to $188,136,590 and $215,416,205, respectively.
At January 31, 1996, accumulated net unrealized appreciation on investments
was $10,078,860, consisting of $11,535,635 gross unrealized appreciation and
$1,456,775 gross unrealized depreciation.
At January 31, 1996, 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).
PREMIER CALIFORNIA MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER CALIFORNIA MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities of
Premier California Municipal Bond Fund, including the statement of investments,
as of January 31, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier California Municipal Bond Fund at January 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
[Ernst and Young LLP signature logo]
New York, New York
March 5, 1996
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND
CLASS A AND CLASS B AND CLASS C SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
SEPTEMBER 3, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Premier State Municipal Bond Fund (the "Fund"), dated September 3, 1996, as it
may be revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . . . . .B-2
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . .B-13
Management Agreement . . . . . . . . . . . . . . . . . . . . . . . .B-17
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . .B-20
Distribution Plan and Shareholder Services Plan. . . . . . . . . . .B-22
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . .B-24
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . .B-26
Determination of Net Asset Value . . . . . . . . . . . . . . . . . .B-29
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . .B-29
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . .B-31
Performance Information. . . . . . . . . . . . . . . . . . . . . . .B-31
Information About the Fund . . . . . . . . . . . . . . . . . . . . .B-39
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors . . . . . . . . . . . . . .B-39
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-40
Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-89
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .B-98
Report of Independent Auditors . . . . . . . . . . . . . . . . . . .B-109
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the Fund"
and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal Obligations
(including notes) by ratings for the fiscal year ended April 30, 1996, computed
on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Fitch Moody's Standard &
Investors Investors Poor's
Service, L.P. Service, Inc. Ratings Group Connecticut Florida Georgia
("Fitch") or ("Moody's") or ("S&P") Series Series Series
- ------------- --------------- -------------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
AAA Aaa AAA 32.4% 42.8% 43.3%
AA Aa AA 33.8 14.8 39.6
A A A 14.3 5.8 13.4
BBB Baa BBB 12.0 15.0 2.3
BB Ba BB - 4.1 .8
F-1 MIG 1/P-1 SP-1/A-1 .3 1.8 -
Not Rated Not Rated Not Rated 7.2 (1) 15.7 (2) .6 (3)
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
_____________________________________
(1) Included in the Not Rated category are securities comprising 7.2% of
the Series' market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities
in the following rating categories: Aaa/AAA (.3%), Baa/BBB (6.7%)
and Ba/BB (.2%).
(2) Included in the Not Rated category are securities comprising 15.7%
of the Series' market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities
in the following rating categories: A/A (.3%) and Baa/BBB (15.4%).
(3) Included in the Not Rated category are securities comprising .6% of
the Series' market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities
in the following rating categories: F-1/MIG 1, P-1/SP-1, A-1 (.6%)
<TABLE>
<CAPTION>
Maryland Massachusetts Michigan
Fitch or Moody's or S&P Series Series Series
- ---------- ---------- ------------ -------- --------------- ---------
<S> <C> <C> <C> <C> <C>
AAA Aaa AAA 28.8% 44.6% 45.7%
AA Aa AA 38.5 9.1 18.9
A A A 21.0 27.6 14.9
BBB Baa BBB 3.9 10.2 10.8
BB Ba BB- - - -
F-1 MIG 1/P-1 SP-1/A-1 .5 .9 1.0
Not Rated Not Rated Not Rated 7.3 (4) 7.6 (5) 8.7 (6)
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
_____________________________________
(4) Included in the Not Rated category are securities comprising 7.3% of
the Series' 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 (6.3%), B (.8%) and F-1/MIG1,
P-1/SP-1, A-1 (.2%).
(5) Included in the Not Rated category are securities comprising 7.6% of
the Series' market value which, while not rated, have been determined
by the Manager to be of comparable quality to securities in the
following rating categories: A/A (.9%) and Baa/BBB (6.7%).
(6) Included in the Not Rated category are securities comprising 8.7% of
the Series' market value which, while not rated, have been determined
by the Manager to be of comparable quality to securities in the
following rating categories: Aaa/AAA (2.8%), A/A (.9%), Baa/BBB
(3.5%) and Ba/BB (1.5%).
<TABLE>
<CAPTION>
North
Minnesota Carolina
Fitch or Moody's or S&P Series Series
- ------------ ------------ ------------ ---------- --------
<S> <C> <C> <C> <C>
AAA Aaa AAA 50.3% 31.4%
AA Aa AA 21.3 22.7
A A A 13.3 30.4
BBB Baa BBB 10.3 13.8
BB Ba BB - -
F-1 MIG 1/P-1 SP-1/A-1 1.1 -
Not Rated Not Rated Not Rated 3.7 (7) 1.7 (8)
------ ------
100.0% 100.0%
====== ======
</TABLE>
_____________________________________
(7) Included in the Not Rated category are securities comprising 3.7% of
the Series' market value which, while not rated, have been determined
by the Manager to be of comparable quality to securities in the
following rating categories: Aaa/AAA (.3%), Aa/AA (.1%) and Baa/BBB
(3.3%).
(8) Included in the Not Rated category are securities comprising 1.7% of
the Series' market value which, while not rated, have been determined
by the Manager to be of comparable quality to securities in the
following rating categories: BBB (1.7%).
<TABLE>
<CAPTION>
Texas Virginia
Fitch or Moody's or S&P Series Series
- ----------- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
AAA Aaa AAA 44.1% 32.4%
AA Aa AA 25.0 25.5
A A A 9.7 26.3
BBB Baa BBB 16.4 13.1
BB Ba BB - -
F-1 MIG 1/P-1 SP-1/A-1 1.7 1.0
Not Rated Not Rated Not Rated 3.1 (9) 1.7 (10)
------ ------
100.0% 100.0%
====== ======
</TABLE>
_____________________________________
(9) Included under the Not Rated category are securities comprising 3.1%
of the Series' market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities
in the following rating categories: Aaa/AAA (.7%) and Baa/BBB (2.4%).
(10) Included under the Not Rated category are securities comprising 1.7%
of the Series' 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 (1.7%).
Municipal Obligations. The term "Municipal Obligations" generally includes
debt obligations issued to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other public purposes for which Municipal Obligations may be
issued include refunding outstanding obligations, obtaining funds for general
operating expenses and lending such funds to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, industrial, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal; the interest paid on such
obligations may be exempt from Federal income tax, although current tax laws
place substantial limitations on the size of such issues. Such obligations are
considered to be Municipal Obligations if the interest paid thereon qualifies as
exempt from Federal income tax in the opinion of bond counsel to the issuer.
There are, of course, variations in the security of Municipal Obligations, both
within a particular classification and between classifications.
Floating and variable rate demand obligations are tax exempt obligations
ordinarily having stated maturities in excess of one year, but which permit the
holder to demand payment of principal at any time, or at specified intervals.
The issuer of such obligations ordinarily has a corresponding right, after a
given period, to prepay in its discretion the outstanding principal amount of
the obligations plus accrued interest upon a specified number of days' notice to
the holders thereof. The interest rate on a floating rate demand obligation is
based on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a variable
rate demand obligation is adjusted automatically at specified intervals.
The yields on Municipal Obligations are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions in the Municipal Obligations market, size of a particular offering,
maturity of the obligation, and rating of the issue. The imposition of the
Fund's management fee, as well as other operating expenses, including fees paid
under the Fund's Shareholder Services Plan with respect to Class A, Class B and
Class C shares, and the Distribution Plan, with respect to Class B and Class C
shares only, will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation ordinarily is backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. The staff of the Securities and Exchange Commission
currently considers certain lease obligations to be illiquid. Determination as
to the liquidity of such securities is made in accordance with guidelines
established by the Fund's Board. Pursuant to such guidelines, the Board has
directed the Manager to monitor carefully each Series' investment in such
securities with particular regard to (1) the frequency of trades and quotes for
the lease obligation; (2) the number of dealers willing to purchase or sell the
lease obligation and the number of other potential buyers; (3) the willingness
of dealers to undertake to make a market in the lease obligation; (4) the nature
of the marketplace trades including the time needed to dispose of the lease
obligation, the method of soliciting offers and the mechanics of transfer; and
(5) such other factors concerning the trading market for the lease obligation as
the Manager may deem relevant. In addition, in evaluating the liquidity and
credit quality of a lease obligation that is unrated, the Fund's Board has
directed the Manager to consider (a) whether the lease can be cancelled; (b)
what assurance there is that the assets represented by the lease can be sold;
(c) the strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (d) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of nonappropriation"); (e) the
legal recourse in the event of failure to appropriate; and (f) such other
factors concerning credit quality as the Manager may deem relevant. No Series
will invest more than 15% of the value of its net assets in lease obligations
that are illiquid and in other illiquid securities. See "Investment Restriction
No. 6" below.
A Series will purchase tender option bonds only when the Fund 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 Series. Based on the tender option
bond agreement, the Fund expects to be able to value the tender option bond at
par; however, the value of the instrument will be monitored to assure that it is
valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the Fund,
an issue of rated Municipal Obligations may cease to be rated or its rating may
be reduced below the minimum required for purchase by the Fund. Neither event
will require the sale of such Municipal Obligations by the Fund, but the Manager
will consider such event in determining whether the Fund should continue to hold
the Municipal Obligations. To the extent that the ratings given by Moody's, S&P
or Fitch for Municipal Obligations may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use comparable
ratings as standards for its investments in accordance with the investment
policies contained in the Fund's Prospectus and this Statement of Additional
Information. The ratings of Moody's, S&P and Fitch represent their opinions as
to the quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and are
not absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Manager also will evaluate
these securities.
Illiquid Securities. Where a substantial market of qualified institutional
buyers develops for certain restricted securities purchased by the Fund pursuant
to Rule 144A under the Securities Act of 1933, as amended, the Fund intends to
treat such securities as liquid securities in accordance with procedures
approved by the Fund's Board. Because it is not possible to predict with
assurance how the market for restricted securities pursuant to Rule 144A will
develop, the Fund's Board has directed the Manager to monitor carefully the
Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified institutional
buyers cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in its portfolio during such period.
Taxable Investments. Securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities include U.S. Treasury securities, which
differ in their interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S. Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support to such
U.S. Government-sponsored agencies or instrumentalities, no assurance can be
given that it will always do so, since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes issued
to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate. Investments in time deposits generally are limited to
London branches of domestic banks that have total assets in excess of one
billion dollars. Time deposits which may be held by the Fund will not benefit
from insurance from the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
In a repurchase agreement, the Fund buys and the seller agrees to
repurchase a security at a mutually agreed upon time and price (usually within
seven days). The repurchase agreement thereby determines the yield during the
purchaser's holding period, while the seller's obligation to repurchase is
secured by the value of the underlying security. The Fund's custodian or
sub-custodian will have custody of, and will hold in a segregated account,
securities acquired by the Series under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange Commission
to be loans by the Series. In an attempt to reduce the risk of incurring a loss
on a repurchase agreement, each Series will enter into repurchase agreements
only with domestic banks with total assets in excess of $1 billion, or primary
government securities dealers reporting to the Federal Reserve Bank of New York,
with respect to securities of the type in which such Series may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. Repurchase agreements
could involve risks in the event of a default or insolvency of the other party
to the agreement, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities.
Management Policies
Short-Selling. Until the Fund closes its short position or replaces the
borrowed security, it will (a) maintain a segregated account, containing cash or
U.S. Government securities, at such a level that the amount deposited in the
account plus the amount deposited with the broker as collateral always equals
the current value of the securities sold short; or (b) otherwise cover its short
position.
Lending Portfolio Securities. In connection with its securities lending
transactions, each Series 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.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Series must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Series must be able
to terminate the loan at any time; (4) the Series must receive reasonable
interest on the loan, as well as any interest or other distributions payable on
the loaned securities, and any increase in market value; and (5) the Series may
pay only reasonable custodian fees in connection with the loan.
Derivatives. Each Series may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain market
risks, to provide a substitute for purchasing or selling particular securities
or to increase potential income gain. Derivatives may provide a cheaper, quicker
or more specifically focused way for the Series 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 each Series 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 Series can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with Derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Series. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
Futures Transactions--In General. Each Series may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade. Engaging
in these transactions involves risk of loss to the Series which could adversely
affect the value of the Fund's net assets. Although the Series 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 Series to substantial losses.
Successful use of futures by each Series also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market,
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Series 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 Series 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 Series has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Series 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 Series may be required to segregate cash or high
quality money market instruments in connection with its commodities transactions
in an amount generally equal to the value of the underlying commodity. The
segregation of such assets will have the effect of limiting the Series' ability
otherwise to invest those assets.
Specific Futures Transactions. Each Series may purchase and sell interest
rate futures contracts. An interest rate future obligates the Series to purchase
or sell an amount of a specific debt security at a future date at a specific
price.
Options--In General. Each Series may purchase and write (i.e., sell) call
or put options with respect to interest rate futures contracts. 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 cash or other securities. A put option written by the Fund is
covered when, among other things, cash or liquid securities having a value equal
to or greater than the exercise price of the option are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in the 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.
Futures Developments. Each Series 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 Series
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 Series. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
Forward Commitments. Municipal Obligations and other securities purchased
on a forward commitment or when-issued basis are subject to changes in value
(generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a forward
commitment or when-issued basis may expose the Series to risks because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be higher
than that obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when a Series is fully or almost fully invested
may result in greater potential fluctuation in the value of such Series' net
assets and its net asset value per share.
Investment Considerations and Risks
Lower Rated Bonds. Each Series is permitted to invest in securities rated
Ba or lower by Moody's or BB or lower by S&P or Fitch and as low as the lowest
rating assigned by Moody's, S&P or Fitch. Such bonds, though higher yielding,
are characterized by risk. See "Description of the Fund- -Investment
Considerations and Risks--Lower Rated Bonds" in the Prospectus for a discussion
of certain risks and "Appendix B" in this Statement of Additional Information
for a general description of Moody's, S&P and Fitch ratings of Municipal
Obligations. Although ratings may be useful in evaluating the safety of interest
and principal payments, they do not evaluate the market value risk of these
bonds. The Fund will rely on the Manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by S&P, Moody's and Fitch to be
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation and generally will
involve more credit risk than securities in the higher rating categories.
Because there is no established retail secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a secondary
trading market for these bonds does exist, it generally is not as liquid as the
secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and the Fund's
ability to dispose of particular issues when necessary to meet the Series'
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 a Series'
portfolio and calculating such Series' net asset value. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may decrease
the values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable objective data may be available.
These bonds may be particularly susceptible to economic downturns. It is
likely that any economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
The Fund may acquire these bonds during any initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any persons concerning the acquisition of such securities,
and the Manager will review carefully the credit and other characteristics
pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon bonds and pay-in-kind bonds in which each Series may
invest up to 5% of its net assets. Zero coupon securities and pay-in-kind or
delayed interest bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Series will realize no cash
until the cash payment date unless a portion of such securities are sold and, if
the issuer defaults, the Series may obtain no return at all on its investment.
See "Dividends, Distributions and Taxes."
Investing in State Municipal Obligations. Investors should review the
information in "Appendix A," which provides a brief summary of special
investment considerations and risk factors relating to investing in State
Municipal Obligations.
Investment Restrictions
The Fund has adopted the following investment restrictions (except as
otherwise noted) as fundamental policies which will apply to each Series. These
restrictions cannot be changed as to a Series without approval by the holders of
a majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of such Series' outstanding voting shares. Investment restrictions
numbered 3 and 6 are not fundamental policies and may be changed as to a Series
by a vote of a majority of the Fund's Board members at any time. No Series may:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Prospectus and
those arising out of transactions in futures and options.
2. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Series' total assets). Transactions in futures and options and the
entry into short sales transactions do not involve any borrowing for
purposes of this restriction.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings. The
deposit of assets in escrow in connection with the writing of covered put
and call options and the purchase of securities on a when-issued or
delayed-delivery basis and collateral arrangements with respect to initial
or variation margin for futures contracts and options on futures contracts
or indices will not be deemed to be pledges of assets.
4. Purchase securities on margin, but may make margin deposits in
connection with transactions in futures, including those related to
indices, and options on futures or indices.
5. Underwrite the securities of other issuers, except that the
Series 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 Series may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.
6. 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 that are
not subject to the demand feature described in the Fund's Prospectus and
floating and variable rate demand obligations as to which the Fund cannot
exercise the demand feature described in the Fund's Prospectus on not more
than seven days' notice if there is no secondary market), if, in the
aggregate, more than 15% of the value of the Series' net assets would be
so invested.
7. 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
related to indices, and options on futures contracts or indices.
8. Make loans to others except through the purchase of qualified
debt obligations and the entry into repurchase agreements referred to
above and in the Fund's Prospectus; however, the Fund may lend each
Series' portfolio securities in an amount not to exceed
33-1/3% of the value of the Series' 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.
9. 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.
10. Invest in companies for the purpose of exercising control.
11. Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or acquisition of
assets.
For purposes of Investment Restriction No. 9, 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 in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of Series shares in certain states. Should the
Fund determine that a commitment is no longer in the best interests of a Series
and its shareholders, the Fund reserves the right to revoke the commitment by
terminating the sale of such Series in the state involved.
In addition, although not fundamental policies, the Pennsylvania Series may
vary its portfolio investments only to (i) eliminate unsafe investments and
investments not consistent with the preservation of capital or the tax status of
investments of the Pennsylvania Series; (ii) honor redemption orders, meet
anticipated redemption requirements and negate gains from discount purchases;
(iii) reinvest the earnings from securities in like securities; or (iv) defray
ordinarily administrative expenses.
While not a fundamental policy, the Texas Series will not invest in real
estate limited partnerships.
MANAGEMENT OF THE FUND
Board members of the Fund, together with information as to their principal
business occupations during at least the last five years, are shown below. Each
Board member who is deemed to be an "interested person" of the Fund (as defined
in the 1940 Act) is indicated by an asterisk.
Board Members of the Fund
CLIFFORD L. ALEXANDER, JR., Board Member. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to 1981,
Mr. Alexander served as Secretary of the Army and Chairman of the
Board of the Panama Canal Company, and from 1975 to 1977, he was a
member of the Washington, D.C. law firm of Verner, Liipfert,
Bernhard, McPherson and Alexander. He is a director of American Home
Products Corporation, The Dun & Bradstreet Corporation, MCI
Communications Corporation, Mutual of America Life Insurance Company
and TLC Beatrice International Holdings, Inc. He is 61 years old and
his address is 400 C Street, N.E., Washington, D.C. 20002.
PEGGY C. DAVIS, Board Member. Shad Professor of Law, New York University
School of Law. Professor Davis has been a member of the New York
University law faculty since 1983. Prior to that time, she served
for three years as a judge in the courts of New York State; was
engaged for eight years in the practice of law, working in both
corporate and non-profit sectors; and served for two years as a
criminal justice administrator in the government of the City of New
York. She writes and teaches in the fields of evidence,
constitutional theory, family law, social sciences and the law, legal
process and professional methodology and training. She is 53 years
old and her address is c/o New York University School of Law, 249
Sullivan Street, New York, New York 10012.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board for various funds in the Dreyfus Family of Funds. He is
Chairman of the Board of Noel Group, Inc., a venture capital company;
a trustee of Bucknell University; and a director of the Muscular
Dystrophy Association, HealthPlan Services Corporation, Belding
Heminway, Inc., a manufacturer and marketer of industrial threads,
specialty yarns, home furnishings and fabrics, Curtis Industries,
Inc., a nationwide distributor of security products, chemicals and
automotive and other hardware, and Staffing Resources, Inc. For more
than five years prior to January 1995, he was President, a director
and, until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager, and until
August 1994, the Fund's distributor. From August 1994 to December
31, 1994, he was a director of Mellon Bank Corporation. He is 52
years old and his address is 200 Park Avenue, New York, New York
10166.
ERNEST KAFKA, Board Member. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents. Since
1981, he has served as an Instructor at the New York Psychoanalytic
Institute and, prior thereto, held other teaching positions. He is
Associate Clinical Professor of Psychiatry at Cornell Medical School.
For more than the past five years, Dr. Kafka has held numerous
administrative positions and has published many articles on subjects
in the field of psychoanalysis. He is 63 years old and his address
is 23 East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, Board Member. Chairman and Chief Executive Officer of SBK
Associates, which provides research and consulting services to
financial institutions. Dr. Klaman was President of the National
Association of Mutual Savings Banks until November 1983, President of
the National Council of Savings Institutions until June 1985, Vice
Chairman of Golembe Associates and BEI Golembe, Inc. until 1989 and
Chairman Emeritus of BEI Golembe, Inc. until November 1992. He also
served as an Economist to the Board of Governors of the Federal
Reserve System and on several Presidential Commissions, and has held
numerous consulting and advisory positions in the fields of economics
and housing finance. He is 76 years old and his address is 431-B
Dedham Street, The Gables, Newton Center, Massachusetts 02159.
NATHAN LEVENTHAL, Board Member. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for Operations
of New York City from September 1979 to March 1984 and Commissioner
of the Department of Housing Preservation and Development of New York
City from February 1978 to September 1979. Mr. Leventhal was an
associate and then a member of the New York law firm of Poletti
Freidin Prashker Feldman and Gartner from 1974 to 1978. He was
Commissioner of Rent and Housing Maintenance for New York City from
1972 to 1973. Mr. Leventhal also serves as Chairman of Citizens
Union, an organization which strives to reform and modernize City and
State government. He is 53 years old and his address is 70 Lincoln
Center Plaza, New York, New York 10023-6583.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the Board
members of the Fund who are not "interested persons" of the Fund, as defined in
the 1940 Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.
Ordinarily meetings of shareholders for the purpose of electing Board
members will not be held unless and until such time as less than a majority of
the Board members holding office have been elected by shareholders at which time
the Board members then in office will call a shareholders' meeting for the
election of Board members. Under the 1940 Act, shareholders of record of not
less than two-thirds of the outstanding shares of the Fund may remove a Board
member through a declaration in writing or by vote cast in person or by proxy at
a meeting called for that purpose. The Board members are required to call a
meeting of shareholders for the purpose of voting upon the question of removal
of any such Board member when requested in writing to do so by the shareholders
of record of not less than 10% of the Fund's outstanding shares.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund for the fiscal year ended April 30, 1996, and,
by all other funds in the Dreyfus Family of Funds for which such person is a
Board member (the number of which is set forth in parenthesis next to each Board
member's total compensation) for the year ended December 31, 1995, were as
follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
- -------------------------- ------------------- ------------------
Clifford L. Alexander, Jr. $3,750 $ 94,386 (17)
Peggy C. Davis $3,750 $ 81,636 (15)
Joseph S. DiMartino $4,688 $448,618 (94)
Ernest Kafka $3,750 $ 81,136 (15)
Saul B. Klaman $3,750 $ 81,886 (15)
Nathan Leventhal $3,750 $ 81,636 (15)
___________________________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $9,329 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she served
as Vice President and Controller, and later as Senior Vice President,
of The Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an Associate at Ropes & Gray. He is 32 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President
and Manager of Treasury Services and Administration of the
Distributor, and an officer of other investment companies advised or
administered by the Manager. From September 1989 to July 1994, she
was an Assistant Vice President and Client Manager for The Boston
Company, Inc. She is 32 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor
and an officer of other investment companies advised or administered
by the Manager. From July 1988 to August 1994, he was employed by
The Boston Company, Inc. where he held various management positions
in the Corporate Finance and Treasury areas. He is 34 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years
old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From April 1993 to January 1995, he was a Senior Fund
Accountant for Investors Bank & Trust Company. From December 1991 to
March 1993, he was employed as a Fund Accountant at The Boston
Company, Inc. He is 27 years old.
RICHARD W. INGRAM, Vice President and Assistant Secretary. Senior Vice
President and Director of Client Services and Treasury Operations of
the Distributor and an officer of other investment companies advised
or administered by the Manager. From March 1994 to November 1995, he
was Vice President and Division Manager for First Data Investor
Services Group. From 1989 to 1994, Mr. Ingram was Vice President,
Assistant Treasurer and Tax Director - Mutual Funds of The Boston
Company, Inc. He is 40 years old.
The address of all officers of the Fund is 200 Park Avenue, New York, New
York 10166.
The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's shares of beneficial interest outstanding on August 21, 1996.
As of August 21, 1996, the following persons owned 5% or more of the
outstanding shares of beneficial interest of the Fund; Class A: Connecticut
Series - Merrill Lynch Pierce Fenner & Smith, Inc., Jacksonville, FL - 8.7%;
Georgia Series - BHC Securities, Philadelphia, PA - 14.6%; Alicia B. Nichols -
5.3%; North Carolina Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 6.6%; Virginia Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 5.6%. Class B: Connecticut Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 7.2%; Florida Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 8.2%; Georgia Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 16.1%; Maryland Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 6.4%; Michigan Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 9.0%; Virginia Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 7.1%. Class C: Connecticut Series - US Clearing Corp, New
York, NY - 22.4%; Paul L. Lutson, Stratford, CT - 9.1%; US Clearing Corp, New
York, NY - 7.4%; US Clearing Corp, New York, NY - 6.0%; Georgia Series - BHC
Securities, Inc. - Philadelphia, PA - 19.5%; Selvin L. Smith, Jr., Atlanta, GA -
11.0%; Maryland Series - Charles R. Brenner & Louise M. Brenner, Severna Park,
MD - 60.8%; PaineWebber for the benefit of Adela Rotsztain, Potomac, MD - 36.8%;
Massachusetts Series - Premier Mutual Fund Services, Boston, MA - 100%; Michigan
Series - Merrill Lynch Pierce Fenner & Smith, Inc., Jacksonville, FL - 52.8%;
Murvale L. Huston & Catherine Ann Huston, Saint Clair, MI - 23.7%; Lee O.
Newport & Alice B. Newport, Constantine, MI - 7.5%; Richard D. Snyder & Carole
G. Snyder, Kalamazoo, MI 7.1%; Violet V. Webber, Waterford, MI - 6.6%; Minnesota
Series - John D. Floyd & Becky S. Floyd, Apple Valley, MN - 80.2%; Lawrence
McConnell, Chatfield, MN - 19.6%; North Carolina Series - Premier Mutual Fund
Services, Inc. Boston, MA - 100%; Ohio Series - Max Weisbrod & Sylvia Weisbrod,
Canton, OH - 90.1%; Merrill Lynch Pierce Fenner & Smith, Inc., Jacksonville, FL
- - 8.9%; Pennsylvania Series - Charles R. Weikert & Mary Jane Weikert, Fairfield,
PA - 69.3%; Robert Hoffman & Dorothy Hoffman, Norristown, PA - 20.2%; Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL - 6.9%; Texas Series - Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL - 74.6%; Linda Harward, Crawford,
TX - 24.0%; Virginia Series - US Clearing Corp, New York, NY - 30.2%; Stephens
Inc., Little Rock, AR - 22.4%; Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 20.5%. A shareholder who beneficially owned, directly or
indirectly, 25% or more of a Series' voting securities may be deemed to be a
"control person" (as defined in the 1940 Act) of that Series.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") with the Fund dated August 24, 1994. As to each
Series, 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 such Series, provided that in either event the continuance also is
approved by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager, by vote cast in person at a
meeting called for the purpose of voting on such approval. The Agreement was
last approved by the Fund's Board, including a majority of the Board members who
are not "interested persons" of any party to the Agreement, at a meeting held on
July 17, 1996. Shareholders of each Series approved the Agreement on August 3,
1994. The Agreement is terminable without penalty, as to each Series, on 60
days' notice, by the Fund's Board or by vote of the holders of a majority of
such Series' shares, or, on not less than 90 days' notice, by the Manager. The
Agreement will terminate automatically, as to the relevant Series, in the event
of its assignment (as defined in the Act).
The following persons are officers and/or directors of the Manager: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith, Vice
Chairman of the Board; Christopher M. Condron, President, Chief Operating
Officer and a director; Stephen E. Canter, Vice Chairman, Chief Investment
Officer and a director; Lawrence S. Kash, Vice Chairman-Distribution and a
director; Philip L. Toia, Vice Chairman-Operations and Administration and a
director; William T. Sandalls, Jr., Senior Vice President and Chief Financial
Officer; Elie M. Genadry, Vice President- Institutional Sales; William F.
Glavin, Jr., Vice President-Corporate Development; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew S.
Wasser, Vice President-Information Systems; Elvira Oslapas, Assistant
Secretary; and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence
M. Greene and Julian M. Smerling, directors.
The Manager manages each Series' portfolio of investments in accordance
with the stated policies of such Series, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions, and provides the
Fund with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. The Fund's portfolio managers are Joseph P.
Darcy, A. Paul Disdier, Douglas J. Gaylor, Karen M. Hand, Stephen C. Kris,
Richard J. Moynihan, Jill C. Shaffro, L. Lawrence Troutman, Samuel J. Weinstock
and Monica S. Wieboldt. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for the Fund as well as for other funds advised by the
Manager. All purchases and sales are reported for the Board's review at the
meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund and furnishes
statistical and research data, clerical help, accounting, data processing,
bookkeeping and internal auditing and certain other required services to the
Fund. The Manager also may make such advertising and promotional expenditures,
using its own resources, as it from time to time deems appropriate.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses borne by
the Fund include, without limitation, the following: taxes, interest, loan
commitment fees, interest and distributions 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 and 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 independent
pricing services, costs of maintaining the Fund's existence, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders, costs of shareholders' reports and meetings, and any extraordinary
expenses. In addition, shares of each Class are subject to an annual service fee
and Class B and Class C shares are subject to an annual distribution fee. See
"Distribution Plan and Shareholder Services Plan." Expenses attributable to a
particular Series are charged against the assets of that Series; other expenses
of the Fund are allocated among the Series on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets of
each Series.
As compensation for the Manager's services, the Fund has agreed to pay the
Manager a monthly management fee at the annual rate of .55 of 1% of the value of
each Series' average daily net assets. For the fiscal years ended April 30,
1994, 1995 and 1996, the management fee payable, the reduction in such amount
and the net fees paid to the Manager by each Series was as set forth below:
<TABLE>
<CAPTION>
Series Management Fee Payable Reduction in Fee
1994 1995 1996 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Connecticut $2,222,426 $2,082,924 $2,045,864 $378,489 $ 35,533 $ -
Florida 1,811,102 1,599,553 1,504,679 328,323 27,718 -
Georgia 120,183 149,119 160,860 120,183 149,119 59,898
Maryland 2,079,227 1,901,194 1,852,002 375,233 32,614 -
Massachusetts 466,331 426,673 423,126 95,389 7,190 -
Michigan 1,124,896 1,074,186 1,067,900 219,841 18,112 -
Minnesota 952,683 943,548 924,716 184,360 15,888 -
North Carolina 533,032 535,236 517,799 475,442 297,996 20,032
Ohio 1,811,687 1,707,720 1,684,215 386,259 28,783 -
Pennsylvania 1,544,000 1,589,232 1,600,235 317,330 26,631 -
Texas 503,485 485,593 464,591 503,485 485,593 464,591
Virginia 464,237 496,788 522,229 464,237 496,788 522,229
</TABLE>
<TABLE>
<CAPTION>
Series Net Fee Paid
1994 1995 1996
<S> <C> <C> <C>
Connecticut $1,843,937 $2,047,391 $2,045,864
Florida 1,482,779 1,571,835 1,504,679
Georgia -0- -0- 100,962
Maryland 1,703,994 1,868,580 1,852,002
Massachusetts 370,942 419,483 423,126
Michigan 905,055 1,056,074 1,067,900
Minnesota 768,323 927,660 924,716
North Carolina 57,590 237,240 497,767
Ohio 1,425,428 1,678,937 1,684,215
Pennsylvania 1,226,670 1,562,601 1,600,235
Texas -0- -0- -0-
Virginia -0- -0- -0-
</TABLE>
The Manager has agreed that if in any fiscal year the aggregate expenses of
each Series, 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 such Series, 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 of 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 Series' net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a best
efforts basis pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Premier Family
of Funds, for the funds in the Dreyfus Family of Funds and for certain other
investment companies. In some states, certain financial institutions effecting
transactions in Fund shares may be required to register as dealers pursuant to
state law.
For the fiscal year ended April 30, 1996, the Distributor retained the
following amounts from sales loads in the respect to Class A, and from
contingent deferred sales charges ("CDSC") with respect to Class B, of each
Series:
Series Class A Class B
Connecticut $25,153 $ 57,412
Florida 21,041 62,568
Georgia 1,369 36,034
Maryland 24,087 63,161
Massachusetts 6,837 3,841
Michigan 16,807 34,324
Minnesota 13,055 43,202
North Carolina 5,070 72,256
Ohio 23,198 52,134
Pennsylvania 21,816 133,577
Texas 4,008 25,002
Virginia 10,873 38,249
For the period from August 15, 1995 (commencement of offering of Class C
shares) through April 30, 1996, no amount was retained by the Distributor from
CDSC on Class C shares of each Series.
Using Federal Funds. Dreyfus Transfer, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund may attempt to
notify the investor upon receipt of checks drawn on banks that are not members
of the Federal Reserve System as to the possible delay in conversion into
Federal Funds and may attempt to arrange for a better means of transmitting the
money. If the investor is a customer of a securities dealer ("Selected Dealer")
and his order to purchase Fund shares is paid for other than in Federal Funds,
the Selected Dealer, acting on behalf of its customer, will complete the
conversion into, or itself advance, Federal Funds generally on the business day
following receipt of the customer order. The order is effective only when so
converted and received by the Transfer Agent. An order for the purchase of Fund
shares placed by an investor with sufficient Federal Funds or a cash balance in
his brokerage account with a Selected Dealer will become effective on the day
that the order, including Federal Funds, is received by the Transfer Agent.
Sales Loads--Class A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code")), although more than one beneficiary is involved; or a
group of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k), and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering price
of each Series' Class A shares. The examples assume a purchase of Class A shares
of the Series aggregating less than $50,000 subject to the schedule of sales
charges set forth in the Fund's Prospectus at a price based upon the net asset
value of the Series' Class A shares on April 30, 1996.
<TABLE>
<CAPTION>
Connecticut Florida Georgia Maryland
Series Series Series Series
<S> <C> <C> <C> <C>
Class A Shares:
NET ASSET VALUE, per share $11.90 $14.48 $13.05 $12.69
Sales load for individual sales of shares
aggregating less than $50,000 - 4.5%
of offering price
(approximately 4.7% of net asset
value per share). . . . . . . . . . . . . .56 .68 .61 .60
Offering price to public. . . . . . . . . . $12.46 $15.16 $13.66 $13.29
North
Massachusetts Michigan Minnesota Carolina
Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share $11.50 $15.15 $14.98 $12.91
Sales load for individual sales of shares
aggregating less than $50,000 - 4.5%
of offering price
(approximately 4.7% of net asset
value per share). . . . . . . . . . . . . .54 .71 .70 .61
Offering price to public. . . . . . . . . . $12.04 $15.86 $15.68 $13.52
Ohio Pennsylvania Texas Virginia
Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share $12.58 $16.17 $20.84 $16.27
Sales load for individual sales of shares
aggregating less than $50,000 - 4.5%
of offering price
(approximately 4.7% of net asset
value per share). . . . . . . . . . . . . .59 .76 .98 .77
Offering price to public. . . . . . . . . . $13.17 $16.93 $21.82 $17.04
</TABLE>
TeleTransfer Privilege. TeleTransfer purchase orders may be made at any
time. Purchase orders received by 4:00 p.m., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business will be
credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New York
time, on any business day the Transfer Agent and the New York Stock Exchange are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the New York Stock Exchange is not open for business), will be credited to
the shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the TeleTransfer Privilege, the initial
payment for the purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan and
Shareholder Services Plan."
Class B and Class C shares only are subject to a Distribution Plan and
Class A, Class B and Class C shares are subject to a Shareholder Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the Securities and
Exchange Commission under the 1940 Act provides, among other things, that an
investment company may bear expenses of distributing its shares only pursuant to
a plan adopted in accordance with the Rule. The Fund's Board has adopted such a
plan (the "Distribution Plan") with respect to the Class B and Class C shares of
each Series, pursuant to which the Fund pays the Distributor for distributing
the relevant Class of shares. The Fund's Board believes that there is a
reasonable likelihood that the Distribution Plan will benefit the Fund and the
holders of each Series' relevant Class of shares.
A quarterly report of the amounts expended under the Distribution Plan, and
the purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Distribution Plan provides that it
may not be amended to increase materially the costs which holders of Class B or
Class C shares may bear for distribution pursuant to the Distribution Plan
without such shareholders' approval and that other material amendments of the
Distribution Plan must be approved by the Fund's Board, and by the Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund and
have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreements entered into in connection with the
Distribution Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Distribution 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 Distribution Plan. The Distribution Plan was last so
approved by the Board members at a meeting held on July 17, 1996 and by the
Fund's shareholders on August 3, 1994. As to each such Class, the Distribution
Plan may be terminated 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 Distribution Plan, or by vote of the holders of
a majority of the outstanding shares of such Class.
For the fiscal year ended April 30, 1996, each Series paid the Distributor
the following amounts with respect to Class B shares and Class C shares under
the Distribution Plan:
Amount Charged Amount Charged
Series Class B Class C
Connecticut $ 190,357 $ 1,225
Florida 134,640 61
Georgia 101,671 100
Maryland 194,067 35
Massachusetts 24,276 6
Michigan 92,044 295
Minnesota 123,137 544
North Carolina 217,316 5
Ohio 184,668 6
Pennsylvania 362,739 9
Texas 87,651 6
Virginia 157,606 276
Shareholder Services Plan. The Fund has adopted a Shareholder Services
Plan, pursuant to which the Fund pays the Distributor for the provision of
certain services to the holders of Class A, Class B and Class C shares. 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 such shareholder accounts. Under the Shareholder Services Plan, the
Distributor may make payments to certain financial institutions (which may
include banks), Selected Dealers and other financial industry professionals
(collectively "Service Agents") in respect to these services.
A quarterly report of the amounts expended under the Shareholder Services
Plan, and the purposes for which such expenditures were incurred, must be made
to the Fund's Board for its review. In addition, the Shareholder Services Plan
provides that material amendments must be approved by the Fund's Board, and by
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund and have no direct or indirect financial interest in the operation
of the Shareholder Services Plan or in any agreements entered into in connection
with the Shareholder Services Plan by vote cast in person at a meeting called
for the purpose of considering such amendments. The Shareholder Services Plan is
subject to annual approval by such vote of the Board members cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was last so approved July 17, 1996. As to each Series,
the Shareholder Services Plan is terminable at any time by vote of a majority of
the Board members who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Shareholder Services Plan or
in any agreements entered into in connection with the Shareholder Services Plan.
For the fiscal year ended April 30, 1996, each Series paid the Distributor
the following amounts with respect to Class A, Class B and Class C under the
Shareholder Services Plan:
Series Class A Class B Class C
Connecticut $834,351 $ 95,178 $ 409
Florida 616,605 67,320 20
Georgia 22,250 50,835 33
Maryland 744,774 97,033 12
Massachusetts 180,190 12,138 2
Michigan 439,289 46,022 98
Minnesota 358,575 61,568 182
North Carolina 126,703 108,658 2
Ohio 673,216 92,334 2
Pennsylvania 546,007 181,369 3
Texas 167,350 43,826 2
Virginia 158,482 78,803 92
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Check Redemption Privilege - Class A Shares. An investor may indicate on
the Account Application, Shareholder Services Form or by later written request
that the Fund provide Redemption Checks ("Checks") with respect to Class A
shares, drawn on the investor's Fund account. Checks will be sent only to the
registered owner(s) of the account and only to the address of record. The
Account Application, Shareholder Services Form or later written request must be
manually signed by the registered owner(s). Checks may be made payable to the
order of any person in an amount of $500 or more. When a Check is presented to
the Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of full and fractional Class A
shares in the investor's account to cover the amount of the Check. Dividends are
earned until the Check clears. After clearance, a copy of the Check will be
returned to the investor. Investors generally will be subject to the same rules
and regulations that apply to checking accounts, although the election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
If the amount of the Check is greater than the value of the Class A shares
in the investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a TeleTransfer transaction
will be effected through the Automated Clearing House ("ACH") system unless more
prompt transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two business
days after receipt of the redemption request. See "Purchase of
Shares--TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each owner 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.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record of a Series, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of such
Series' 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 (which may include non-marketable securities) or other assets in case
of an emergency or any time a cash distribution would impair the liquidity of
the Series to the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the Series' portfolio is
valued. If the recipient sold 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
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Class A, Class B and Class C shares of the Fund may be
exchanged for shares of the respective Class of certain other funds advised or
administered by the Manager. Shares of the same Class of such other funds
purchased by exchange will be purchased on the basis of relative net asset value
per share as follows:
A. Class A shares of funds purchased without a sales load may be
exchanged for Class A shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales load
may be exchanged without a sales load for Class A shares of
other funds sold without a sales load.
C. Class A shares of funds purchased with a sales load, Class A
shares of funds acquired by a previous exchange from Class A
shares purchased with a sales load, and additional Class A
shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein
as "Purchased Shares") may be exchanged for Class A shares of
other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at
the time the Purchased Shares were acquired), without giving
effect to any reduced loads, the difference will be deducted.
D. Class B or Class C shares of any fund may be exchanged for the
same Class of shares of other funds without a sales load. Class
B or Class C shares of any fund exchanged for the same Class of
shares of another fund will be subject to the higher applicable
CDSC of the two exchanged funds and, for purposes of calculating
CDSC rates and conversion periods, will be deemed to have been
held since the date the shares being exchanged were initially
purchased.
To accomplish an exchange under item C above, an investor's Service Agent
must notify the Transfer Agent of the investor's prior ownership of such Class A
shares and the investor's account number.
To request an exchange, the investor's Service Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically, unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. By using the Telephone Exchange Privilege,
the investor authorizes the Transfer Agent to act on telephonic instructions
from any person representing himself or herself to be a representative of the
investor's Service Agent, and reasonably believed by the Transfer Agent to be
genuine. Telephone exchanges may be subject to limitations as to the amount
involved or the number of telephone exchanges permitted. Shares issued in
certificate form are not eligible for telephone exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
being required for shares of the same Class of the fund into which the exchange
is being made. For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") with only one participant, the
minimum initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among shares of the
same Class of the funds in the Dreyfus Family of Funds. To exchange shares held
in personal retirement plans, the shares exchanged must have a current value of
at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an investor to
purchase, in exchange for Class A, Class B or Class C shares of a Series, shares
of the same Class of one of the other Series or another fund in the Premier
Family of Funds or the Dreyfus Family of Funds. This Privilege is available only
for existing accounts. Shares will be exchanged on the basis of relative net
asset value as described above under "Fund Exchanges." Enrollment in or
modification or cancellation of this Privilege is effective three business days
following notification by the investor. An investor will be notified if his
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRA and other retirement plans are
eligible for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA accounts to
regular accounts. With respect to all other retirement accounts, exchanges may
be made only among those accounts.
Fund Exchanges and the Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the series or fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchanges service or the
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the investor,
the Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan. Class B or Class C
shares withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC.
Dividend Sweep. Dividend Sweep allows investors to invest automatically
their dividends or dividends and capital gain distributions, if any, from the
Fund in shares of the same Class of another fund in the Premier Family of Funds
or the Dreyfus Family of Funds of which the investor is a shareholder. Shares of
the same Class 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 with respect to Class A shares
by a fund may be invested without imposition of a sales load in
Class A shares of other funds that are offered without a sales
load.
B. Dividends and distributions paid with respect to Class A shares
by a fund which does not charge a sales load may be invested in
Class A shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and distributions paid with respect to Class A shares
by a fund which charges a sales load may be invested in Class A
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load
charged by the fund from which dividends or distributions are
being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and distributions paid with respect to Class B or
Class C shares by a fund may be invested without imposition of
any applicable CDSC in the same Class of shares of other funds
and the relevant Class of shares of such other funds will be
subject on redemption to any applicable CDSC.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. Each Series' 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) and, fees pursuant to the
Shareholder Services Plan, with respect to Class A, Class B and Class C shares,
and fees pursuant to the Distribution Plan, with respect to Class B and Class C
shares only, are accrued daily and are taken into account for the purpose of
determining the net asset value of the relevant Class of each Series' shares.
Because of the difference in operating expenses incurred by each Class, the per
share net asset value of each Class will differ.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions and
Taxes."
Management believes that each Series qualified as a "regulated investment
company" under the Code for the fiscal year ended April 30, 1996, and each
Series intends to continue to so qualify, so long as such qualification is in
the best interests of its shareholders. As a regulated investment company, a
Series will pay no Federal income tax on net investment income and net realized
capital gains to the extent that such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. To qualify as
a regulated investment company, a Series must distribute to its shareholders at
least 90% of its net income (consisting of net investment income from tax exempt
obligations and taxable obligations, if any, and net short-term capital gains),
must derive less than 30% of its annual gross income from gain on the sale of
securities held for less than three months, and must meet certain asset
diversification and other requirements. The term "regulated investment company"
does not imply the supervision of management or investment practices or policies
by any government agency.
The Code provides that if a shareholder has not held his shares for more
than six months (or such shorter period as the Internal Revenue Service may
prescribe by regulation) and has received an exempt-interest dividend with
respect to such shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend received. In addition,
any dividend or distribution paid shortly after an investor's purchase may have
the effect of reducing the net asset value of his shares below the cost of his
investment. Such a distribution would be a return on investment in an economic
sense although taxable as stated under "Dividends, Distributions and Taxes" in
the Prospectus.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of any gain realized
from the sale or other disposition of certain market discount bonds will be
treated as ordinary income under Section 1276 of the Code. In addition, all or a
portion of any gain realized from engaging in "conversion transactions" may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
"straddle" transactions, transactions marketed or sold to produce capital gains,
or transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by a Series from
certain financial futures and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon exercise or lapse of such futures or options as well as
from closing transactions. In addition, any such futures or options remaining
unexercised at the end of a Series' taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to a Series
characterized in the manner described above.
Offsetting positions held by a Series involving certain 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. The tax treatment of "straddles" is governed
by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256 of the Code. As such, all
or a portion of any short- or long-term capital gain from certain "straddle"
and/or conversion transactions may be recharacterized to ordinary income.
If a Series were treated as entering into "straddles" by reason of its
engaging in certain futures contracts or options transactions, such "straddles"
would be characterized as "mixed straddles" if the futures or options
transactions comprising a part of such "straddles" were governed by Section 1256
of the Code. A Series may make one or more elections with respect to "mixed
straddles." Depending on which election is made, if any, the results to a Series
may differ. If no election is made to the extent the "straddle" rules apply to
positions established by a Series, losses realized by a Series will be deferred
to the extent of unrealized gain in the offsetting position. Moreover, as a
result of the "straddle" and the conversion transaction rules, short-term
capital losses on "straddle" positions may be recharacterized as long-term
capital losses, and long-term capital gains may be treated as short-term capital
gains or ordinary income.
Investment by a Series 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, a Series 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, a Series may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Usually no brokerage commissions, as such,
are paid by the Fund for such purchases and sales, although the price paid
usually includes an undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter, and purchases of after-market
securities from dealers ordinarily are executed at a price between the bid and
asked price. No brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of the Manager that the receipt and study of such
services should not reduce the overall expenses of its research department.
Each Series anticipates that its annual portfolio turnover rate generally
will not exceed 100%, but the turnover rate will not be a limiting factor when
each Series deems it desirable to sell or purchase securities. Therefore,
depending upon market conditions, each Series' annual portfolio turnover rate
may exceed 100% in particular years.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
The current yield for the 30-day period ended April 30, 1996, for Class A,
Class B and Class C of each Series was as follows:
Current Net of Absorbed
Series Yield Expenses(1)
Class A:
Connecticut 4.99 -
Florida 4.96 -
Georgia 4.67 -
Maryland 4.94 -
Massachusetts 4.91 -
Michigan 4.29 -
Minnesota 4.70 -
North Carolina 4.92 -
Ohio 4.87 -
Pennsylvania 5.00 -
Texas 5.37 4.84
Virginia 5.32 4.79
____________________________
(1) This column sets forth current yield had expenses not been absorbed.
Current Net of Absorbed
Series Yield Expenses(1)
Class B:
Connecticut 4.71 -
Florida 4.69 -
Georgia 4.39 -
Maryland 4.63 -
Massachusetts 4.61 -
Michigan 4.61 -
Minnesota 4.40 -
North Carolina 4.62 -
Ohio 4.57 -
Pennsylvania 4.73 -
Texas 5.09 4.54
Virginia 5.05 4.50
Current Net of Absorbed
Series Yield Expenses(1)
Class C:
Connecticut 4.44 -
Florida 4.40 -
Georgia 4.11 -
Maryland 4.47 -
Massachusetts 4.37 -
Michigan 4.29 -
Minnesota 4.17 -
North Carolina 4.37 -
Ohio 4.32 -
Pennsylvania 4.41 -
Texas 4.80 4.25
Virginia 4.76 4.21
____________________________
(1) This column sets forth current yield had expenses not been absorbed.
Current yield is computed pursuant to a formula which operates as follows:
The amount of each Series' 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 Series
during the period. That result is then divided by the product of: (a) the
average daily number of shares outstanding during the period that were entitled
to receive dividends, and (b) the maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class B or Class C 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 the 1996 combined (except where noted) Federal and applicable
State tax rate specified below, the tax equivalent yield for the 30-day period
ended April 30, 1996 for Class A, Class B and Class C of each Series was as
follows:
Tax Equivalent Net of Absorbed
Series Tax Rate Yield Expenses(1)
Class A:
Connecticut 42.32 8.65 -
Florida(2) 39.60 8.21 -
Georgia 43.22 8.22 -
Maryland 44.13 8.84 -
Massachusetts 46.85 9.24 -
Michigan 42.26 8.49 -
Minnesota 44.73 8.50 -
North Carolina 44.28 8.83 -
Ohio 44.13 8.72 -
Pennsylvania 41.29 8.52 -
Texas(2) 39.60 8.89 8.01
Virginia 43.07 9.34 8.41
Class B:
Connecticut 42.32 8.17 -
Florida(2) 39.60 7.76 -
Georgia 43.22 7.73 -
Maryland 44.13 8.29 -
Massachusetts 46.85 8.67 -
Michigan 42.26 7.98 -
Minnesota 44.73 7.96 -
North Carolina 44.28 8.29 -
Ohio 44.13 8.18 -
Pennsylvania 41.29 8.06 -
Texas(2) 39.60 8.43 7.52
Virginia 43.07 8.87 7.90
____________________________
(1) This column sets forth tax equivalent yield had expenses not
been absorbed.
(2) Federal tax rate only. No state personal income tax imposed
during 1996.
Class C:
Connecticut 42.32 7.70 -
Florida(2) 39.60 7.28 -
Georgia 43.22 7.24 -
Maryland 44.13 8.00 -
Massachusetts 46.85 8.22 -
Michigan 42.26 7.43 -
Minnesota 44.73 7.54 -
North Carolina 44.28 7.84 -
Ohio 44.13 7.73 -
Pennsylvania 41.29 7.51 -
Texas(2) 39.60 7.95 7.04
Virginia 43.07 8.36 7.40
____________________________
(1) This column sets forth tax equivalent yield had expenses not
been absorbed.
(2) Federal tax rate only. No state personal income tax imposed
during 1996.
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
Series that is not tax-exempt.
The tax equivalent yield noted above represents the application of the
highest marginal personal tax rates currently in effect. For Federal personal
income tax purposes, a 39.60% tax rate has been used. The tax equivalent figure,
however, does not include the potential effect of any local (including, but not
limited to, county, district or city) taxes, including applicable surcharges. In
addition, there may be pending legislation which could affect such stated tax
rates or yields. Each investor should consult its tax adviser, and consider its
own factual circumstances and applicable tax laws, in order to ascertain the
relevant tax equivalent yield.
<TABLE>
<CAPTION>
The average annual total return for the periods indicated for Class A
of each Series was as follows:
1-year period 5-year period 8.926-year period
Series ended April 30, 1996 ended April 30, 1996 ended April 30, 1996
<S> <C> <C> <C>
Connecticut 2.08 6.15 7.14
Florida 1.85 6.63 9.00
Georgia 2.34 5.571 -
Maryland 2.42 6.30 6.56
Massachusetts 0.96 6.34 6.52
Michigan 2.02 7.05 8.62
Minnesota 1.34 6.32 7.73
North Carolina 1.98 6.492 -
Ohio 1.99 6.62 4.95
Pennsylvania 2.63 7.02 7.613
Texas 3.22 7.55 10.42
Virginia 2.46 7.032 -
____________________________
(1) For the 3.658 year period ended April 30, 1996.
(2) For the 4.748 year period ended April 30, 1996.
(3) For the 8.753 year period ended April 30, 1996.
</TABLE>
The average annual total return since inception and for the periods
indicated for Class B of each Series was as follows:
1-year period 3.290-year period
Series ended April 30, 1996 ended April 30, 1996
Connecticut 3.20 4.66
Florida 3.02 5.03
Georgia 3.69 5.37
Maryland 3.66 4.90
Massachusetts 2.16 4.41
Michigan 3.33 5.56
Minnesota 2.62 5.08
North Carolina 3.25 4.45
Ohio 3.20 5.02
Pennsylvania 3.92 5.35
Texas 4.50 6.08
Virginia 3.76 4.96
The average annual total return since inception for Class C of each
Series was as follows:
.710 years
Series ended April 30, 1996
Connecticut 3.94
Florida 3.33
Georgia 4.92
Maryland 4.21
Massachusetts 2.39
Michigan 4.76
Minnesota 3.78
North Carolina 4.56
Ohio 4.31
Pennsylvania 5.36
Texas 5.95
Virginia 4.28
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum offering
price in the case of Class A) per share 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. A Class' average annual total return figures
calculated in accordance with such formula assume that in the case of Class A
the maximum sales load has been deducted from the hypothetical initial
investment at the time of purchase or in the case of Class B or Class C the
maximum applicable CDSC has been paid upon redemption at the end of the period.
The total return for the period May 28, 1987 through April 30, 1996 (except
where indicated) for Class A of each Series was as follows:
Based on Maximum Based on Net Asset
Series Offering Price Value per Share
Connecticut 85.12 93.87
Florida 115.80 126.05
Georgia(1) 21.95 27.70
Maryland 76.25 84.58
Massachusetts 75.76 84.02
Michigan 109.18 118.98
Minnesota 94.30 103.51
North Carolina(2) 34.82 41.23
Ohio 53.98 61.18
Pennsylvania(3) 89.98 98.97
Texas 142.16 153.56
Virginia(2) 38.11 44.63
____________________________
(1) For the period from September 3, 1992 (commencement of
operations) through April 30, 1996.
(2) For the period from August 1, 1991 (commencement of operations)
through April 30, 1996.
(3) For the period from July 30, 1987 (commencement of operations)
through April 30, 1996.
The total return for the period January 15, 1993 to April 30, 1996
for Class B of each Series was as follows:
Series Based on Net Asset Based on
Class B: Value per Share Maximum CDSC
Connecticut 18.17 16.17
Florida 19.52 17.53
Georgia 20.79 18.79
Maryland 19.04 17.04
Massachusetts 17.22 15.27
Michigan 21.46 19.47
Minnesota 19.71 17.71
North Carolina 17.39 15.39
Ohio 19.48 17.50
Pennsylvania 20.70 18.70
Texas 23.44 21.44
Virginia 19.27 17.27
The total return for the period August 15, 1995 to April 30, 1996 for
Class C of each Series was as follows:
Series Based on Net Asset Based on
Class C: Value per Share Maximum CDSC
Connecticut 3.78 2.78
Florida 3.34 2.35
Georgia 4.47 3.47
Maryland 3.97 2.97
Massachusetts 2.68 1.69
Michigan 4.36 3.36
Minnesota 3.67 2.67
North Carolina 4.22 3.22
Ohio 4.03 3.04
Pennsylvania 4.78 3.78
Texas 5.19 4.19
Virginia 4.02 3.02
Total return is calculated by subtracting the amount of the Series' net
asset value (maximum offering price in the case of Class A) per share at the
beginning of a stated period from the net asset value per share at the end of
the period (after giving effect to the reinvestment of dividends and
distributions during the period and any applicable CDSC), and dividing the
result by the net asset value (maximum offering price in the case of Class A)
per share at the beginning of the period. Total return also may be calculated
based on the net asset value per share at the beginning of the period for Class
A shares or without giving effect to any applicable CDSC at the end of the
period for Class B or Class C shares. In such cases, the calculation would not
reflect the deduction of the sales load with respect to Class A shares or any
applicable CDSC with respect to Class B or Class C shares which, if reflected,
would reduce the performance quoted.
From time to time, the Fund may use hypothetical tax equivalent yields or
charts in its advertising. These hypothetical yields or charts will be used for
illustrative purposes only and not as representative of the Fund's past or
future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or events,
including those relating to actual or proposed tax legislation. Advertising
materials for the Fund also may refer to statistical or other information
concerning trends relating to investment companies, as compiled by industry
associations such as the Investment Company Institute. From time to time,
advertising materials for the Fund, also may refer to Morningstar ratings and
related analyses supporting such ratings.
The Fund may compare its performance, directly as well as against
inflation, with that of other instruments, such as short-term Treasury bills
(which are direct obligations of the U.S. Government), FDIC-insured bank money
market accounts and FDIC-insured fixed-rate certificates of deposit. In
addition, advertising for the Fund may indicate that investors may consider
diversifying their investment portfolios in order to seek protection of the
value of their assets against inflation.
From time to time, advertising materials for the Fund may include
biographical information relating to its portfolio managers and may refer to, or
include commentary by a portfolio manager relating to an investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Series share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Series' shares
have no preemptive or subscription rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
The Manager's legislative efforts led to the 1976 Congressional Amendment
to the Code permitting an incorporated mutual fund to pass through tax exempt
income to its shareholders. The Manager offered to the public the first
incorporated tax exempt fund and currently manages or administers over
twenty-five billion dollars in tax exempt assets.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses. For the period December 1, 1995
(effective date of transfer agency agreement) through April 30, 1996, the Fund
paid the Transfer Agent $428,901.
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Fund's custodian.
Neither the Transfer Agent nor The Bank of New York has any part in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
as counsel for the Fund, has rendered its opinion as to certain legal matters
regarding the due authorization and valid issuance of shares being sold pursuant
to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
RISK FACTORS -- INVESTING
IN STATE MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based primarily on information
drawn from official statements relating to securities offerings of the relevant
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.
Connecticut Series . . . . . . . . . . . . . . . . . . . . . . B-39
Florida Series . . . . . . . . . . . . . . . . . . . . . . . . B-41
Georgia Series . . . . . . . . . . . . . . . . . . . . . . . . B-46
Maryland Series. . . . . . . . . . . . . . . . . . . . . . . . B-49
Massachusetts Series . . . . . . . . . . . . . . . . . . . . . B-51
Michigan Series. . . . . . . . . . . . . . . . . . . . . . . . B-53
Minnesota Series . . . . . . . . . . . . . . . . . . . . . . . B-57
North Carolina Series. . . . . . . . . . . . . . . . . . . . . B-62
Ohio Series. . . . . . . . . . . . . . . . . . . . . . . . . . B-67
Pennsylvania Series. . . . . . . . . . . . . . . . . . . . . . B-72
Texas Series . . . . . . . . . . . . . . . . . . . . . . . . . B-79
Virginia Series. . . . . . . . . . . . . . . . . . . . . . . . B-84
Connecticut Series
Connecticut's economy is diverse, with manufacturing, services and trade
accounting for approximately 70% of total non-agricultural employment. The
State's manufacturing industry is diversified, but from 1970 to 1994
manufacturing employment declined 35.4%, while non-manufacturing employment
increased 66.3%, particularly in the service, trade and finance categories,
resulting in an increase of 28.8% in total growth in non-agricultural sectors.
Defense-related business plays an important role in the Connecticut economy, and
economic activity has been affected by the volume of defense contracts awarded
to Connecticut firms. In recent years, the Federal government has reduced the
amount of defense-related spending and the largest defense-related employers in
the State have announced substantial labor force reductions. The future effect
of these and other industrial labor force reductions on the Connecticut economy
cannot be predicted at this time.
Connecticut has a high level of personal income. According to Bureau of
Economic Analysis figures, personal income of State residents for calendar year
1994 was $95.1 billion, a 3.3% increase over the previous year. Total personal
income in the State increased 18.0% from 1989 to 1994 and 11.6% from 1991 to
1994. According to U.S. Department of Commerce projections, the State is
expected to continue to rank among the highest in State per capita income. For
1994, the estimated rate of unemployment (on a seasonably adjusted basis) in the
State was 5.6%.
While the State's General Fund ended fiscal 1984-85, 1985-86 and 1986-87
with operating surpluses of approximately $365.5 million, $250.1 million and
$365.2 million, respectively, the State recorded operating deficits of $115.6
million, $28.0 million, $259.5 million and $808.5 million for fiscal 1987-88,
1988-89, 1989-90 and 1990-91, respectively. Together with the deficit carried
forward from fiscal 1989-90, the total deficit for the fiscal year 1990-91 was
$965.7 million. The total deficit amount was funded by the issuance of General
Obligation Economic Recovery Notes in late 1991. As of April 4, 1996,
$311,055,000 of such Notes remained outstanding. The Comptroller's annual report
for the fiscal year ended June 30, 1992 reflected a General Fund operating
surplus of $110.2 million, which surplus was used to retire $110.1 million of
the State's Economic Recovery Notes. The Comptroller's annual report for the
fiscal year ended June 30, 1993 reflected a General Fund operating surplus of
$113.5 million. The Comptroller's annual report for the fiscal year ended June
30, 1994 reflected a General Fund operating surplus of $19.7 million. The
Comptroller's annual report for the fiscal year ended June 30, 1995 reflected a
General Fund operating surplus of $80.5 million, which was transfer to the
Budget Reserve Fund.
Since 1988, the Comptroller's annual report has reported results on the
basis of both the modified cash basis required by State law and the modified
accrual basis used for GAAP financial reporting. On a GAAP basis the cumulative
deficit was $576.9 million for fiscal 1994-95. The modified cash basis of
accounting used for statutory financial reporting and the modified accrual basis
used for GAAP financial reporting are different and, as a result, often produce
varying financial results, primarily because of differences in the recognition
of revenues and expenditures.
The State finances its operations primarily through the General Fund. All
tax and most non-tax revenues of the State, except for motor fuels taxes and
other transportation related taxes, fees and revenues, are paid into, and
substantially all expenditures pursuant to legislative appropriations are made
out of, the General Fund. The State derives over 70% of its revenues from taxes.
Miscellaneous fees, receipts, transfers and Federal grants account for most of
the other State revenue. The Sales and Use Taxes, the corporation business tax
and the recently enacted broad based personal income tax are the major revenue
raising taxes. For fiscal 1995-96 and 1996-97, the adopted budget anticipates
General Fund expenditures of $9.055 billion and $9.201 billion, respectively,
and General Fund revenues of $8.988 billion and $9.203 billion, respectively.
On November 3, 1992, Connecticut voters approved a constitutional amendment
which requires a balanced budget for each year and imposes a cap on the growth
of expenditures. The General Assembly is required by the constitutional
amendment to adopt by three-fifths vote certain spending cap definitions. The
statutory spending cap limits the growth of expenditures to either (1) the
rolling five-year average annual growth in personal income, or (2) the increase
in the consumer price index for urban consumers during the preceding
twelve-month period, whichever is greater. Expenditures for the payment of
bonds, notes and other evidences of indebtedness are excluded from the
constitutional and statutory definitions of general budget expenditures. To
preclude shifting expenditures out of the General Fund to other funds, the
spending cap applies to all appropriated funds combined.
The State has no constitutional or other organic limit on its power to
issue obligations or incur indebtedness other than that it may only borrow for
public purposes. There are no reported court decisions relating to State bonded
indebtedness other than two cases validating the legislative determination of
the public purpose for improving employment opportunities and related
activities. The State Constitution has never contained provisions requiring
submission of the questions of incurring indebtedness to a public referendum.
Therefore, the authorization and issuance of State debt, including the purpose,
amount and nature thereof, the method and manner of the incurrence of such debt,
the maturity and terms of repayment thereof, and other related matters are
statutory.
The State has established a program of temporary note issuances to cover
periodic cash flow requirements. The maximum volume of cash flow borrowing is
determined based upon the State's actual cash needs on a daily basis. The State,
as of April 17, 1990, commenced a program permitting the issuance of up to $539
million of General Obligation Temporary Notes (the "April 1990 Program"). Under
the April 1990 Program, the State may issue notes during a five-year period
concluding in April of 1995. Additionally, a separate $200 million temporary
note program commenced as of April 30, 1991 and concluded on October 31, 1991.
There are currently no notes outstanding under either program.
As of April 4, 1996, the General Assembly has empowered, pursuant to bonds
acts in effect, the State Bond Commission to authorize general obligation bonds
in the amount of $10,534,394,000. As of April 4, 1996, the State Bond Commission
has authorized $9,381,215,000 in such bonds and the balance of $1,153,179,000
was available for authorization. From such total authorizations of
$9,381,215,000, bonds in the aggregate of $8,237,794,000 have been issued and
the balance of $1,143,421,000 remained authorized but unissued as of April 4,
1996.
General obligation bonds issued by Connecticut municipalities are payable
primarily from ad valorem taxes on property subject to taxation by the
municipality. Certain Connecticut municipalities have experienced severe fiscal
difficulties and have reported operating and accumulated deficits in recent
years. The most notable of these is the City of Bridgeport.
S&P, Moody's and Fitch rate Connecticut's municipal bonds AA-, Aa and AA,
respectively.
Florida Series
Revenues and Expenditures. Financial operations of the State of Florida
covering all receipts and expenditures are maintained through the use of three
funds: General Revenue Fund, Trust Funds and Working Capital Fund. The General
Revenue Fund receives the majority of State tax revenues. The Trust Funds
consist of monies received by the State which under law or trust agreement are
segregated for a purpose authorized by law. Revenues in the General Revenue Fund
which are in excess of the amount needed to meet appropriations may be
transferred to the Working Capital Fund. Beginning in 1993-94, the Florida
Constitution requires that the State establish a Budget Stabilization Fund. This
fund is to contain a balance of at least 1% of the previous year's net General
Revenue collections in 1994-95, 2% in 1995-96, 3% in 1996-97, 4% in 1997-98 and
5% in 1998-99 and thereafter. These moneys can be only spent for the purpose of
covering revenue shortfalls and for emergency purposes as defined by general
law. Implementing legislation establishing this fund was enacted during the 1994
Session of the Florida legislature.
In November of 1994, Florida voters approved an amendment to the Florida
Constitution which set forth limitations on revenue collections by the State.
With certain exceptions, State revenues collected for any fiscal year are
limited to State revenues allowed under the amendment for the prior fiscal year
plus an adjustment for growth.
As used in the amendment, "growth" means an amount equal to the average
annual rate of growth in Florida personal income over the most recent twenty
quarters times the State revenues allowed under the amendment for the prior
fiscal year. For the 1995-1996 fiscal year, the State revenues allowed under the
amendment for the prior fiscal year shall equal the State revenues collected for
the 1994-1995 fiscal year. Florida personal income will be determined by the
Legislature, from information available from the United States Department of
Commerce or its successor on the first day of February prior to the beginning of
the fiscal year. State revenues collected for any fiscal year in excess of this
limitation will be transferred to the Budget Stabilization Fund until the fund
reaches the maximum balance specified above, and thereafter shall be refunded to
taxpayers as provided by general law. State revenues allowed under the amendment
for any fiscal year may be increased by a two-thirds vote of the membership of
each house of the Florida Legislature.
For purposes of the amendment "State revenues" means taxes, fees, licenses,
and charges for services imposed by the Legislature on individuals, businesses,
or agencies outside State government. However, "State revenues" does not
include: revenues that are necessary to meet the requirements set forth in
documents authorizing the issuance of bonds by the State; revenues that are used
to provide matching funds for the federal Medicaid program with the exception of
the revenues used to support the Public Medical Assistance Trust Fund or its
successor program and with the exception of State matching funds used to fund
elective expansions made after July 1, 1994; proceeds from the State Lottery
returned as prizes; receipts of the Florida Hurricane Catastrophe Fund; balances
carried forward from prior fiscal years; taxes, licenses, fees and charges for
services imposed by local, regional, or school district governing bodies; or
revenue from taxes, licenses, fees and charges for services required to be
imposed by any amendment or revision to the Constitution after July 1, 1994. An
adjustment to the revenue limitation will be made by general law to reflect the
fiscal impact of transfers of responsibility for the funding of governmental
functions between the State and other levels of government.
The amendment became effective January 1, 1995.
The Florida Constitution and Statutes mandate that the State budget as a
whole, and each separate fund within the State budget, be kept in balance from
currently available revenues each State fiscal year.
Florida ended fiscal years 1993-94 and 1994-95 with General Revenue plus
Working Capital Funds unencumbered reserves of approximately $351.8 million and
$319.5 million, respectively. Estimated fiscal year 1995-96 General Revenue plus
Working Capital Funds available total $14.99 billion. Total effective
appropriations for the 1995-96 fiscal year are estimated at $14.85 billion,
resulting in estimated unencumbered reserves of $140.0 million at the end of the
fiscal year.
In fiscal year 1994-95, the State derived approximately 61% of its total
direct revenues from the General Revenue Fund, Trust Funds and Working Capital
Fund from State taxes. Federal grants and other special revenues accounted for
the remaining revenues. Major sources of tax revenues to the General Revenue
Fund are the sales and use tax, corporate income tax, and beverage tax, which
amounted to 61%, 6% and 3%, respectively, of total General Revenue Fund
receipts.
State expenditures are categorized for budget and appropriation purposes by
type of fund and spending unit, which are further subdivided by line item. In
fiscal year 1993-94, expenditures from the General Revenue Fund for education,
health and welfare and public safety amounted to approximately 48.9%, 31.6% and
13%, respectively, of total General Revenues.
Sales and Use Tax. The greatest single source of tax receipts in Florida is
the sales and use tax. The sales tax is 6% of the sales price of tangible
property sold at retail in the State. The use tax is 6% of the cost price of
tangible personal property when the same is not sold but is used, or stored for
use, in the State. The use tax also applies to the use in the State of tangible
personal property purchased outside Florida which would have been subject to the
sales tax if purchased from a Florida dealer. Less than 10% of the sales tax is
designated for local governments and is distributed to the respective counties
in which it is collected for use by such counties and municipalities therein. In
addition to this distribution, local governments may (by referendum) assess a
.5% or 1% discretionary sales surtax within their county. Proceeds from this
local option sales tax are earmarked for funding local infrastructure programs
and acquiring land for public recreation or conservation or protection of
natural resources. In addition, non-consolidated counties with populations in
excess of 800,000 may levy a local option sales tax to fund indigent health
care. This tax rate may not exceed .5% and the combined levy of the indigent
health care surtax and the infrastructure surtax described above may not exceed
1%. Furthermore, charter counties which adopted a charter prior to June 1, 1976,
and each county with a consolidated county/municipal government, may (by
referendum) assess up to a 1% discretionary sales surtax within their county.
Proceeds from this tax are earmarked for the development, construction,
maintenance and operation of a fixed guideway rapid transit system or may be
remitted to an expressway or transportation authority for use on country roads
and bridges, for a bus system, or to service bonds financing roads and bridges.
The two taxes, sales and use, stand as complements to each other, and taken
together provide a uniform tax upon either the sale at retail or the use of all
tangible personal property irrespective of where it may have been purchased.
This tax also includes a levy on the following: (i) rentals of tangible personal
property, transient lodging and non-residential real property; (ii) admissions
to places of amusements, most sports and recreation events; (iii) utilities,
except those used in homes; and (iv) restaurant meals. Exemptions include:
groceries; medicines; hospital rooms and meals; fuels used to produce
electricity; purchases by religious, charitable and educational nonprofit
institutions; most professional, insurance and personal service transactions;
apartments used as permanent dwellings; the trade-in value of motor vehicles;
and residential utilities.
All receipts of the sales and use tax, with the exception of the tax on
gasoline and special fuels, are credited to either the General Revenue Fund, the
Solid Waste Management Trust Fund, or countries and cities. For the State fiscal
year which ended June 30, 1994, receipts from this source were $10.505 billion,
an increase of 11.4% from fiscal year 1992-93.
Motor Fuel Tax. The second largest source of State tax receipts is the tax
on motor fuels. Preliminary data show collections from this source in the State
fiscal year ended June 30, 1994, were $1.416 billion. However, these revenues
are almost entirely dedicated trust funds for specific purposes and are not
included in the State General Revenue Fund.
State and local taxes on motor fuels (gasoline and special fuel) include
several distinct fuel taxes: (i) the State sales tax on motor fuels, levied at
6% of the average retail price per gallon of fuel, not to fall below 6.9 cents
per gallon; (ii) the State excise tax of four cents per gallon of motor fuel,
proceeds distributed to local governments; (iii) the State Comprehensive
Enhanced Transportation System (SCETS) tax, which is levied at a rate in each
county equal to two-thirds of the sum of the county's local option motor fuel
taxes; and (iv) local option motor fuel taxes, which may range between one cent
to seven cents per gallon.
Alcoholic Beverage Tax. Florida's alcoholic beverage tax is an excise tax
on beer, wine, and liquor. This tax is one of the State's major tax sources,
with revenues totalling $559.3 million in State fiscal year ended June 30, 1994.
Alcoholic beverage receipts declined from the previous year's total. The
revenues collected from this tax are deposited into the State's General Revenue
Fund.
The 1990 Legislature established a surcharge on alcoholic beverages. This
cargo is levied on alcoholic beverages sold for consumption on premises. The
surcharge is at ten cents per ounce of liquor, ten cents per four ounces of
wine, four cents per twelve ounces of beer. Most of these proceeds are deposited
into the General Revenue Fund. In fiscal 1993-94 a total of $95.1 million was
collected.
Corporate Income Tax. Pursuant to an amendment to the State Constitution,
the State Legislature adopted, effective January 1, 1972, the "Florida Income
Tax Code" imposing a tax upon the net income of corporations, organizations,
associations and other artificial entities for the privilege of conducting
business, deriving income or existing within the State. This tax does not apply
to natural persons who engage in a trade or business or profession under their
own or any fictitious name, whether individually as proprietorships or in
partnerships with others, estates of decedents or incompetents, or testamentary
trusts.
The tax is imposed in an amount equal to 5.5% of the taxpayer's net
corporate income for the taxable year, less a $5,000 exemption, as defined in
such Code. Net income is defined by the Code as that share of a taxpayer's
adjusted Federal income for such year which is apportioned to the State of
Florida. Apportionment is by weighted factors of sales (50%), property (25%) and
payroll (25%). All business income is apportioned and non-business income is
allocated to a single jurisdiction, usually the State of commercial domicile.
All receipts of the corporate income tax are credited to the General
Revenue Fund. For the fiscal year ended June 30, 1995, receipts from this source
were $1.267 billion, an increase of 3% from fiscal year 1993-94.
Documentary Stamp Tax. Deeds and other documents relating to a realty are
taxed at 70 cents per $100 of consideration, while corporate shares, bonds,
certificates of indebtedness, promissory notes, wage assignments and retail
charge accounts are taxed at 35 cents per $100 of consideration. Documentary
stamp tax collections totalled $699.7 million during fiscal year 1994-95,
posting a 10% decrease from the previous fiscal year. The General Revenue Fund
receives approximately 62% of documentary stamp tax collections.
Gross Receipts Tax. Effective July 1, 1992, the tax rate was increased from
2.25% to 2.5% of the gross receipts of electric, natural gas and
telecommunications services. All gross receipts utilities collections are
credited to the Public Education Capital Outlay and Debt Service Trust Fund. In
fiscal year 1994-95, gross receipts utilities tax collections totalled $511.9
million, an increase of 9% over the previous fiscal year.
Intangible Personal Property Tax. This tax is levied on two distinct bases:
(i) stocks, bonds, including bonds secured by Florida realty, notes, government
leaseholds, interests in limited partnerships registered with the SEC, and other
miscellaneous intangible personal property not secured by liens on Florida
realty are taxed annually at a rate of 2 mills, (ii) mortgages and other
obligations secured by liens on Florida realty, taxed with a non-recurring 2
mill tax.
Of the tax proceeds, 33.5% is distributed to the Municipal Revenue Sharing
Trust Fund. The remainder is distributed to the General Reserve Fund.
Fiscal year 1994-95 total intangible personal property tax collections were
$1.055 billion, a 1% increase over the prior year.
Severance Taxes. The severance tax includes the taxation of oil, gas and
sulfur production and a tax on the severance of primarily phosphate rock and
other solid minerals. Total collections from severance taxes totalled $56.5
million during fiscal year 1994-95, up 3% from the previous fiscal year.
Lottery. The 1987 Legislature created the Department of the Lottery to
operate the State Lottery and setting forth the allocation of the revenues. Of
the revenues generated by the Lottery, 50% is to be returned to the public as
prizes; at least 38% is to be deposited in the Educational Enhancement Trust
Fund (for public education); and no more than 12% can be spent on the
administrative cost of operating the lottery.
Fiscal year 1994-95 produced ticket sales of $2.7 billion of which
education received approximately $1.1 billion.
Georgia Series
Georgia's economy grew rapidly in the 1980s, resulting in a general fund
reserve. As a result of a slowdown in the State's economy in the early 1990's,
the general fund reserve was effectively eliminated.
Beginning in fiscal 1993, however, revenues once again began to exceed
appropriations. The State's revenue shortfall reserve at the end of Fiscal 1995
was approximately $288 million. Revenues are estimated to slightly exceed
expenditures for Fiscal 1996.
Georgia's unemployment rate was 4.5% for 1996 (January-April annualized
rate), which is a decrease of 0.3% over the State's 1995 annual average
unemployment rate. The largest sectors of Georgia's economy are wholesale and
retail trade, services, manufacturing and government. Per capita income levels
are less than the U.S. average (92.9% of the U.S. average in 1993), but
Georgia's average annual growth rate of per capita income has exceeded that of
the United States as a whole since 1960.
Constitutional Provisions. Georgia's Constitution limits the appropriation
of funds for any given fiscal year to the sum of the amount of unappropriated
surplus expected to have accrued at the beginning of the fiscal year and the
amount not greater than the total receipts anticipated, less refunds, as
estimated. The State Constitution provides for supplementary appropriations in
accordance with its provisions as well.
Georgia may incur public debt to supply a temporary deficit due to a delay
in collecting the taxes of that fiscal year. Such debt may not exceed, in the
aggregate, 5% of the total revenue receipts, less refunds, in the fiscal year
immediately preceding the year in which such debt is incurred. The debt incurred
is to be repaid on or before the last day of the fiscal year in which it is
incurred out of taxes levied for that fiscal year. No such debt may be incurred
in any fiscal year under this provision if there is then outstanding unpaid debt
from any previous fiscal year which was incurred to supply a temporary deficit.
No such debt has been incurred under this provision since its inception.
The State Constitution also provides that the State may incur public debt
for three types of public purposes: (1) debt to "repel invasion, suppress
insurrection, and defend the State in time of war;" (2) general obligation debt
and (3) guaranteed revenue debt. General obligation debt may be incurred to
acquire, construct, develop, extend, enlarge or improve land, waters, property,
highways, buildings, structures, equipment or facilities of the State, its
agencies, departments, institutions and certain State Authorities, to provide
educational facilities for county and independent school systems, to provide
public library facilities for county and independent school systems, counties,
municipalities, and boards of trustees of public libraries or boards of trustees
of public library systems, and to make loans to counties, municipal
corporations, political subdivisions, local authorities and other local
government entities for water and sewerage facilities or systems. Guaranteed
revenue debt may be incurred by guaranteeing the payment of certain revenue
obligations issued by an instrumentality of the State as set forth in its
Constitution.
Georgia may not incur debt at any time when the highest aggregate annual
debt service requirements for the then current year or any subsequent year for
outstanding general obligation debt and guaranteed revenue debt, including the
proposed debt, and the highest aggregate annual payments for the then current
year or any subsequent fiscal year of the State under certain contracts then in
force, exceed 10% of the total revenue receipts, less refunds, of the State
treasury in the fiscal year immediately preceding the year in which any such
debt is to be incurred. No general obligation debt may be incurred at any time
when the term of the debt is in excess of 25 years.
The State Constitution also provides that Georgia counties, municipalities,
and other political subdivisions may not incur debt (including debt incurred on
behalf of any special district) in excess of 10% of the assessed value of all
taxable property within such county, municipality, or political subdivision.
However, a separate provision of the State Constitution permits certain
long-term, intergovernmental contracts for services and facilities. The Georgia
Supreme Court has held that certain categories of intergovernmental contracts
give rise to payment obligations which are not "debts" subject to the 10% debt
limitation. It is possible that the intergovernmental contracts clause could be
used by local governments to justify entering into transactions which increase
their financial obligations, and such transactions could result in increasing
the credit risk associated with debt obligations issued by such governmental
units.
Revenues and Expenditures. Georgia's major revenue sources are its sales
tax and its income tax. The State also receives revenues from its motor fuels
tax, from miscellaneous fees and sales, from other taxes (such as the
intangibles tax, alcohol taxes, inheritance tax, and license taxes), and from
the State lottery. Unaudited information from the Georgia Revenue Department
indicates that revenues from these sources increased 8% in fiscal year 1995 from
fiscal year 1994, and that these revenue sources generated the following
percentages of total Georgia State revenue in fiscal year 1995:
Sales Tax 34.04%
Income Tax 43.78%
Motor Fuels Tax 5.06%
Lottery 3.97%
Other Taxes 13.15%
TOTAL 100.0%
State expenditures are classified by major policy category for budgetary
purposes. In the fiscal year 1996 operating budget, Georgia expenditures for
educational development, human resources, protection of persons and property,
and transportation amounted to 52.2%, 25.6%, 9.0%, and 4.3%, respectively, of
total budgeted expenditures. Debt service for issued obligations accounts for
3.9% of total budgeted expenditures for fiscal year 1996, and is projected to
account for 3.7% of total budgeted expenditures in fiscal year 1997.
For fiscal years ended June 30, 1975 through June 30, 1997, the aggregate
general obligation debt and guaranteed revenue debt authorized by the State
General Assembly are $7.9 billion and $193 million, respectively. The aggregate
amount of general obligation debt and guaranteed revenue debt actually issued by
the State, as of May 31, 1996, is $8.1 billion. The total outstanding principal
amount of indebtedness of the State as of May 31, 1996 is $4.9 billion. Of this
outstanding debt, 28.8% is due and payable on or before January 1, 2001 and
56.8% is due and payable on or before January 1, 2006.
Significant Contingent Liabilities. The State from time to time is named as
a party in certain lawsuits, which may or may not have a material adverse impact
on the financial position of the State if decided in a manner adverse to the
State's interests. Certain of such lawsuits which could have a significant
impact on the State's financial position are summarized below.
Age International, Inc. v. State (two cases) and Age International, Inc. v.
Miller. Three suits (two for refund and one for declaratory and injunctive
relief) have been filed against the State of Georgia by out-of-state producers
of alcoholic beverages. The first suit for refund seeks 96 million dollars in
refunds of alcohol taxes imposed under Georgia's post-Bacchus (see previous
note) statute, O.C.G.A. Section 3-4-60. These claims constitute 99% of all such
taxes paid during the 3 years preceding these claims. In addition, the claimants
have filed a second suit for refund for an additional 23 million dollars for
later time periods. These two cases encompass all known or anticipated claims
for refund of such type within the apparently applicable statutes of limitations
for the years in question, i.e., 1989 through January 1993. The two Age refund
cases are still pending in the state trial court. The Age declaratory/injunctive
relief case was dismissed by the District Court. That dismissal was affirmed by
the Eleventh Circuit Court of Appeals.
Board of Public Education for Savannah/Chatham County v. State of Georgia.
This case is based on the local school board's claim that the State is obligated
to finance the major portion of the costs of its desegregation program. The
Savannah Board originally requested restitution in the amount of approximately
$30,000,000, but the Federal District Court set forth a formula which would
require a State payment in the amount of approximately $8,900,000 computed
through June 30, 1994. Plaintiffs, dissatisfied with the apportionment of
desegregation costs between State and county, and an adverse ruling on the State
funding formula for transportation costs, appealed to the Eleventh Circuit Court
of Appeals. The State has filed a responsive cross-appeal on the ground that
there is no basis for any liability. Subsequently, the parties agreed to a
settlement, which has been approved by the Court. The settlement calls for the
State to pay the amount awarded to the Plaintiff and to offer an option
regarding future funding methodology for pupil transportation. Because interest
was accruing in the settlement, in March, 1995, the State paid the Plaintiffs
$8,925,000 in partial satisfaction of the settlement agreement. The final
settlement figure has yet to be calculated, due to costs which accrued during
the pendency of the settlement proposal. Those cost calculations will be
finalized in the next several months but are not expected to exceed a total of
$10,000,000, including the money already paid.
DeKalb County v. State of Georgia. A similar complaint has been filed by
DeKalb County. The Plaintiffs sought approximately $67,500,000 in restitution.
The Federal District court ruled that the State's funding formula for pupil
transportation (which the District Court in the Savannah/Chatham County case
upheld) was contrary to State law. This ruling would require a State payment of
a state law funding entitlement in the amount of approximately $34,000,000
computed through June 30, 1994. Motions to reconsider and amend the Court's
judgment were filed by both parties. The State's motion was granted, in part,
which reduced the required State payment to approximately $28,000,000. Notices
of appeal to the Eleventh Circuit Court of appeals have been filed. There are
approximately five other school districts which might file similar claims.
Leslie K. Johnson v. Collins. Plaintiff in this case has filed suit in
federal district court and in the State Superior Court of Chatham County.
Plaintiff challenges the constitutionality of Georgia's transfer fee provided by
O.C.G.A. Section 40-3-21.1 (often referred to as "impact fee") by asserting that
the fee violates the commerce clause, due process, equal protection and
privilege and immunities provisions of the constitution. Plaintiff seeks to
prohibit the State from further collections and to require the State to return
to her and those similarly situated all fees previously collected. A similar
lawsuit has also been filed in the Superior Court of Fulton County (Mueller v.
Collins). From May of 1992 to February 15, 1995, the State has collected
$20,006,834.72. The State continues to collect approximately $500,000 to
$600,000 per month.
Daniel W. Tedder v. Marcus E. Collins, Sr., Cobb County Superior Court,
Civil Action No. 931553028. Class action challenging the validity of a Georgia
Department of Revenue Regulation issued in July of 1992, which resulted in
enforcement of sales tax collections on sales of used transportation equipment,
most notably sales of used cars where neither party is engaged in the regular
sale of used cars. The trial court declared the regulation invalid.
Approximately $30,000,000 of tax on such sales was collected before the
regulation was rescinded and collections ceased. Accordingly, refund claims of
up to $30,000,000 plus interest, could be sought. Approximately $21,900,000 in
refunds have been paid.
Buskirk and Estill v. State of Georgia, et al.. On September 1, 1994,
plaintiffs in this case filed a civil action in the Superior Court of Fulton
County, Georgia (No. E-31547) on behalf of all "classified employees of the
State of Georgia or its agencies and departments during all or part of fiscal
year 1992 through 1995 who were eligible to receive within grade pay increases
and who would have received same were it not for a freeze of within grade pay
increases." The trial court granted the State's motion to dismiss and for
summary judgement, which completely resolved the case in the State's favor.
Plaintiffs have filed a notice of appeal to the Georgia Supreme Court. If the
plaintiffs prevail, the parties will conduct separate discovery on the issue of
damages. The State believes that it has good and adequate defenses to the claims
made, but, should the plaintiffs prevail in every aspect of their claims, the
liability of the State in this matter could be as much as $295,000,000, based on
best estimates currently available.
Maryland Series
The State's total expenditures for the fiscal years ending June 30, 1993,
1994 and 1995 were $11.786 billion, $12.351 billion and $13.528 billion,
respectively. As of February 14, 1996, it was estimated that total expenditures
for fiscal year 1996 would be $14.611 billion. The State's General Fund,
representing approximately 54% - 60% of each year's total budget, had an
unreserved deficit of $56 million in fiscal year 1992 and unreserved surpluses
of $11 million, $60 million and $132.5 million in fiscal years 1993, 1994 and
1995, respectively. The Governor of Maryland reduced fiscal year 1993
appropriations by approximately $56 million to offset the fiscal year 1992
deficit. The State Constitution mandates a balanced budget.
In April 1995, the General Assembly approved the $14.429 billion 1996
fiscal year budget. The Budget includes $2.8 billion in aid to local governments
(reflecting a $161 million increase in funding over 1995 that provides for
substantial increase in education, health and police aid), and 134.1 million in
general fund deficiency appropriations for fiscal year 1995, of which $60
million is a legislatively mandated appropriation to the Revenue Stabilization
Account of the State Reserve Fund. The Revenue Stabilization Account was
established in 1986 to retain State revenues for future needs and to reduce the
need for future tax increases. The 1996 Budget does not include any proposed
expenditures dependent on additional revenue from new or broad-based taxes. When
the 1996 Budget was enacted, it was estimated that the general fund surplus on a
budgetary basis at June 30, 1996, would be approximately $7.8 million. As of
February 14, 1996, it is estimated that the general fund surplus on a budgetary
basis at June 30, 1996, will be $1 million. At its December 12, 1995 meeting,
the Board of Revenue Estimates lowered the estimate of fiscal year 1996 revenues
by $92 million. The Governor has proposed a plan to address this shortfall by
reducing general fund appropriations by $26 million and by obtaining additional
money for the general Fund from appropriate sources (including use of the 1995
surplus and from a transfer from the Revenue Stabilization Account).
In January 1996, the Governor submitted his proposed 1997 Fiscal Year
Budget to the General Assembly. The Budget includes $2.9 billion in aid to local
governments (reflecting a $121.5 million increase over 1996 that provides
substantial increases in education, health and police aid), and $77 million in
general fund deficiency appropriations for fiscal year 1996. As of February 14,
1996, it is estimated that the general fund surplus on a budgetary basis at June
30, 1997 will be $500 thousand and that the balance in the Revenue Stabilization
Account of the State Reserve Fund also at June 30, 1997 will be $538 million.
The public indebtedness of Maryland and its instrumentalities is divided
into three basic types. The State issues general obligation bonds for capital
improvements and for various State-sponsored projects. The Department of
Transportation of Maryland issues limited special obligations bonds for
transportation purposes payable primarily from specific, fixed-rate excise taxes
and other revenues related mainly to highway use. Certain authorities issue
obligations solely from specific non-tax enterprise fund revenues and for which
the State has no liability and has given no moral obligation assurance.
At least since the end of the Civil War, the State has paid the principal
of and interest on its general obligation bonds when due. There is no general
debt limit imposed by the State Constitution or public general laws. Although
the State has the authority to make short-term borrowings in anticipation of
taxes and other receipts up to a maximum of $100 million, the State in the past
has not issued short-term tax anticipation and bond anticipation notes, or made
any other similar short-term borrowings for cash flow purposes.
As of July 1996, the State's general obligation bonds were rated "Aaa" by
Moody's and "AAA" by S&P and Fitch.
The Maryland Department of Transportation issues Consolidated
Transportation Bonds, which are payable out of specific excise taxes, motor
vehicle taxes and corporate income taxes, and from the general revenues of the
Department. Issued to finance highway, port, transit, rail or aviation
facilities, as of July 1996, these bonds were rated "Aa" by Moody's and "AA" by
S&P and Fitch. The Maryland Transportation Authority, an entity of the
Department issues its own revenue bonds for transportation facilities, which are
payable from certain highway, bridge and tunnel tolls. These bonds were rated
"A1" by Moody's and "A+" by S&P as of July 1996.
According to recent available ratings, general obligation bonds of
Montgomery County (abutting Washington, D.C.) are rated "Aaa" by Moody's and
"AAA" by S&P. Prince George's County, also in the Washington, D.C. suburbs,
issues general obligation bonds rated "Aa" by Moody's and "AA" by S&P, while
Baltimore County, a separate political subdivision surrounding the City of
Baltimore, issues general obligation bonds rated "Aaa" by Moody's and "AAA" by
S&P. The City of Baltimore's general obligation bonds are rated "A1" by Moody's
and "A" by S&P. The other counties in Maryland which are rated by Moody's all
have general obligation bond ratings of "A" or better from Moody's, except for
Allegheny County, the bonds of which are rated "Baa" by Moody's. The Washington
Suburban Sanitary district, a bi-county agency providing water and sewerage
services in Montgomery and Prince George's Counties, issues general obligation
bonds rated "Aa1" by Moody's and "AA" by S&P as of July 1996. Additionally, some
of the large municipal corporations in Maryland (such as the cities of Rockville
and Annapolis) have issued general obligation bonds. There can be no assurance
that any of the foregoing ratings will continue.
Massachusetts Series
The economy of the Commonwealth of Massachusetts is experiencing a recovery
following a slowdown that began in mid-1988. Massachusetts had benefitted from
an annual job growth rate of approximately 2% since the early 1980s, but by 1989
employment started to decline. Between 1988 and 1992, total employment in
Massachusetts declined 10.7%. In 1993, 1994 and 1995, however, total employment
increased by 1.6%, 2.2% and 2.4%, respectively. Employment levels increased in
all sectors except manufacturing. Between 1990 and 1992, the Commonwealth's
unemployment rate was considerably higher than the national average, however,
unemployment rates in Massachusetts since 1993 have declined faster than the
national average (6.9% compared to 6.8% in 1993) and the employment rate in
Massachusetts in 1994 and 1995 was slightly below the national average (6.0%
compared to 6.1% for 1994 and 5.4% compared with 5.6% for 1995).
While the Commonwealth's expenditures for State programs and services in
each of the fiscal years 1987 through 1991 exceeded each year's current
revenues, Massachusetts ended each of the fiscal years 1991 to 1996 with a
positive closing fund balance in its budgeted operating funds.
In recent years, health care related costs have risen dramatically in
Massachusetts and across the nation and the increase in the State's Medicaid and
group health insurance costs reflects this trend. In fiscal 1993, Medicaid was
the largest item in Massachusetts' budget and has been one of the fastest
growing budget items, although the rate of increase has abated in recent years.
During fiscal years 1989, 1990, 1991 and 1992, Medicaid expenditures were $1.83
billion, $2.12 billion, $2.77 billion and $2.82 billion, respectively,
representing an average annual increase of 15.4%. Expenditures for fiscal 1993
were $3.15 billion, an 11.8% increase over fiscal 1992. Medicaid expenses in
fiscal 1994 were $3.31 billion and in fiscal 1995 $3.398 billion. The average
annual growth from fiscal 1991 to fiscal 1995 was 5.4% compared with
approximately 17% between fiscal 1987 and fiscal 1991.
Massachusetts' pension costs have risen dramatically as the State has
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased at an average
annual rate of 8.1% from $703.9 million in fiscal 1991 to $968.8 million in
fiscal 1995.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 11.6% from $649.8 million in
fiscal 1989 to $1.23 billion in fiscal 1995. Debt service payments were $898.3
million in fiscal 1992, $1.14 billion in fiscal 1993 and $1.15 billion in fiscal
1994. In 1990, legislation was enacted which generally imposes a 10% limit on
the total appropriations in any fiscal year that may be expended for payment of
interest and principal on general obligation debt. As of January 1, 1995, the
State had approximately $9,595 billion of long-term general obligation debt
outstanding and short-term direct obligations of the Commonwealth totalled $264
million.
Certain independent authorities and agencies within the State are
statutorily authorized to issue debt for which Massachusetts is directly, in
whole or in part, or indirectly liable. The State's liabilities are either in
the form of (i) a direct guaranty, (ii) State support through contract
assistance payments for debt service, or (iii) indirect obligations. The State
is indirectly liable for the debt of certain authorities through a moral
obligation to maintain the funding of reserve funds which are pledged as
security for the authorities' debt.
In November 1980, voters in the Commonwealth approved a State-wide tax
limitation initiative petition, commonly known as Proposition 2-1/2, to
constrain levels of property taxation and to limit the charges and fees imposed
on cities and towns by certain government entities, including county
governments. The law is not a constitutional provision and accordingly is
subject to amendment or repeal by the legislature. Proposition 2-1/2 limits the
property taxes which a Massachusetts city or town may assess in any fiscal year
to the lesser of (i) 2.5% of the full and fair cash value of real estate and
personal property therein and (ii) 2.5% over the previous year's levy limit plus
any growth in the tax base from certain new construction and parcel
subdivisions. In addition, Proposition 2-1/2 limits any increase in the charges
and fees assessed by certain governmental entities, including county
governments, on cities and towns to the sum of (i) 2.5% of the total charges and
fees imposed in the preceding fiscal year, and (ii) any increase in charges for
services customarily provided locally or services obtained by the city or town
at its option. The law contains certain override provisions which require vote
approval at a general or special election. Proposition 2-1/2 also limits any
annual increase in the total assessments on cities and towns by any county,
district, authority, the Commonwealth, or any other governmental entity except
regional school districts and regional water and sewer districts whose budgets
are approved by 2/3 of their member cities and towns. During the 1980s,
Massachusetts increased payments to the cities, towns and regional school
districts ("Local Aid") to mitigate the impact of Proposition 2-1/2 on local
programs and services. In fiscal 1996, approximately 19.1% of Massachusetts'
budget was allocated to Local Aid. Direct Local Aid dropped from a high of
$2.961 billion in fiscal 1989 to $2.727 billion in fiscal 1994, but increased to
$2.976 billion in fiscal 1995 and an estimated $3.240 billion in fiscal 1996.
Recent increases are largely a result of comprehensive education reform
legislation enacted in 1993 that requires annual increases in state expenditures
for education funding, subject to annual legislative appropriations, above a
fiscal 1993 base of approximately $1.288 billion. Increases of $175 million
above the base for fiscal 1994 to $876 million for fiscal 1997 have been fully
funded. Additional increases are called for in future years.
Many factors affect the financial condition of the Commonwealth and its
cities, towns and public bodies, such as social, environmental, and economic
conditions, many of which are not within the control of such entities. As is the
case with most urban States, the continuation of many of Massachusetts'
programs, particularly its human services programs, is in significant part
dependent upon continuing Federal reimbursements which have been steadily
declining. The loss of grants to Massachusetts and its cities and towns could
further slow economic development. To the extent that such factors may exist,
they could have an adverse effect on economic conditions in Massachusetts,
although what effect, if any, such factors would have on Massachusetts'
Municipal Obligations cannot be predicted.
Michigan Series
General. Recently, the State's economy has been undergoing certain basic
changes in its underlying structure. These changes reflect a diversifying
economy which is less reliant on the automobile industry. As a result, the State
anticipates that its economy in the future will be less susceptible to cyclical
swings and more resilient when national downturns occur. In 1995, approximately
77% of wage and salary employment was in the State's non-manufacturing sectors.
In 1995, total employment was 4,491,000 with manufacturing wage and salary
employment totaling 974,900. Manufacturing employment remains below the peak
employment level of 1,179,600 attained in 1978. Employment in the durable goods
manufacturing industries was 728,600 and non-durable goods employment was
246,400 in the State in 1995. The motor vehicle industry, which is still an
important component in the State's economy, employed 283,700 in 1995. The
State's average unemployment rate for calendar year 1995 was 5.3%.
The State's general obligation bonds are rated Aa by Moody's, AA by S&P and
AA by Fitch. Because most of the State Municipal Obligations are revenue or
general obligations of local government or authorities, rather than general
obligations of the State of Michigan itself, ratings on such State Municipal
Obligations may be different from those given to the State of Michigan.
State Constitutional Provisions Affecting Revenues and Expenditures. The
State Constitution provides that proposed expenditures and revenues of any
operating fund must be in balance and that any prior year's surplus or deficit
must be included in the succeeding year's budget for that fund.
In 1978, the State Constitution was amended to limit the amount of total
State revenues raised from taxes and certain other sources. State revenues
(excluding Federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or average of the prior
three calendar years, whichever is greater. The percentage is fixed by the
amendment to equal the ratio of the 1978-79 fiscal year revenues to total
calendar 1977 State personal income.
If, in any fiscal year, revenues exceed the revenue limitation by 1% or
more, the entire amount of such excess shall be rebated in the following fiscal
year's personal income tax or single business tax. Any excess of less than 1%
may be transferred to the State's Budget Stabilization Fund. The State may raise
taxes in excess of the limit for emergencies when deemed necessary by the
Governor and two-thirds of the members of each house of the Legislature.
The State Constitution provides that the proportion of State spending paid
to all units of local government to total State spending may not be reduced
below the proportion in effect in the 1978-79 fiscal year. If such spending does
not meet the required level in a given year, an additional appropriation for
local governmental units is required by the following fiscal year. Spending for
local units met this requirement for fiscal years 1985-86 through 1991-92 and
fiscal year 1993-94.
The State has settled litigation with Oakland County, Michigan in which
Oakland County had alleged that the classification of State expenditures for
certain mental health programs as spending for local units was improper. As part
of the settlement, the State agreed to reclassify these expenditures, beginning
in fiscal year 1992-93. As a result, the State determined that in fiscal year
1992-93 the proportion of State spending from State sources paid to local units
of government was approximately $97 million less than constitutionally required
and an amount at least this large will be appropriated to the State's local
government payment fund in the next budget submission.
The State Constitution also requires the State to finance any new or
expanded activity of local governments mandated by State law. Any expenditures
required by this provision would be counted as State spending for local units of
government for the purpose of determining compliance with the provision cited
above.
Economic and Fiscal Condition. Legislation requires that the administration
prepare two economic forecasts each year. These are presented to a Consensus
Revenue Estimating Conference in January and May of each year. The May 1996
forecast is summarized below.
The State's economic forecast for calendar year 1996 projects modest
growth. Real GDP is projected to grow 2.7% in 1996, on a calendar year basis.
Car and light truck sales are expected to total 14.9 million units in 1996.
The forecast assumes moderate inflation, accompanied by steady interest
rates. Ninety-day T-Bill rates are expected to average 5.1 percent for 1996. The
United States' unemployment rate is projected to decline to an average of 5.5
percent for 1996.
The State's forecast for the Michigan economy reflects the above national
outlook. Total wage and salary employment is projected to grow 1.5% in 1996.
This slight growth reflects the ongoing diversification of the Michigan economy.
The unemployment rate is projected to average 6.0% in 1996, continuing the
recent trend to Michigan's unemployment rate being near the national average
compared to the 15-year history of having higher unemployment.
The Governor's Executive Budget for fiscal year 1995-96 was submitted to
the Legislature on February 9, 1995. The fiscal year 1995-96 general fund
general purpose Executive Budget recommendation totaled $8,507.6 million. The
budget was passed by the Legislature in June 1995.
The Governor's Executive Budget for fiscal year 1996-97 was submitted to
the Legislature on February 8, 1996. The fiscal year 1996-97 general
fund/general purpose Executive Budge recommendation totaled $8,246.6 million.
Property Tax Reform Proposals. On August 19, 1993, the Governor signed into
law Act 145, Public Acts of Michigan, 1993 ("Act 145"), a measure which would
have significantly impacted financing of primary and secondary school operations
and which has resulted in additional property tax and school finance reform
legislation. Act 145 would have exempted all property in the State of Michigan
from millage levied for local and intermediate school districts operating
purposes, other than millage levied for community colleges, effective July 1,
1994. In order to replace local property tax revenues lost as a result of Act
145, the Michigan Legislature, in December 1993, enacted several statutes which
address property tax and school finance reform.
The property tax and school finance reform measures included a ballot
proposal which was approved by the voters on March 15, 1994. Effective May 1,
1994, the State sales and use tax was increased from 4% to 6%, the State income
tax was decreased from 4.6% to 4.4%, the cigarette tax was increased from $.25
to $.75 per pack and an additional tax of 16% of the wholesale price was imposed
on certain other tobacco products. A 0.75% real estate transfer tax became
effective January 1, 1995. Beginning in 1994, a State-wide property tax of 6
mills will be imposed on all real and personal property currently subject to the
general property tax. The ability of school districts to levy property taxes for
school operating purposes has been partially restored. A school board will, with
voter approval, be able to levy up to the lesser of 18 mills or the number of
mills levied in 1993 for school operating purposes, on non-homestead property
and non-qualified agricultural property. The adopted ballot proposal contains
additional provisions regarding the ability of local school districts to levy
taxes as well as a limit on assessment increases for each parcel of property,
beginning in 1995 to the lesser of 5% or the rate of inflation. When property is
subsequently sold, its assessed value will revert to the current assessment
level of 50% of true cash value. Under the adopted ballot proposal, much of the
additional revenue generated by the new taxes will be dedicated to the State
School Aid Fund.
The adopted ballot proposal contains a system of financing local school
operating costs relying upon a foundation allowance amount which may vary by
district based upon historical spending levels. State funding will provide each
school district an amount equal to the difference between their foundation
allowance and the revenues generated by their local property tax levy. Local
school districts will also be entitled to levy supplemental property taxes to
generate additional revenue if their foundation allowance is less than their
historical per pupil expenditures. The adopted proposal also contains provisions
which allow for the levy of a limited number of enhancement mills on regional
and local school district bases.
The adopted ballot proposal shifts significant portions of the cost of
local school operations from local school districts to the State and raises
additional State revenues to fund these additional State expenditures. These
additional revenues will be included within the State's constitutional revenue
limitations and may impact the State's ability to raise additional revenues in
the future.
Budget Stabilization Fund. In 1977, the BSF was established to accumulate
balances during years of significant economic growth which may be utilized in
years when the State's economy experiences cyclical downturns or unforeseen
fiscal emergencies. Calculated on an accrual basis, the unreserved ending
accrued balance of the Budget Stabilization Fund on September 30, 1994 was
$775.5 million. The preliminary unreserved accrued balance of the Budget
Stabilization Fund on September 30, 1995 was $1,003.2 million.
State and State-Related Indebtedness. The State Constitution limits State
general obligation debt to (i) short-term debt for State operating purposes,
(ii) short- and long-term debt for the purpose of making loans to school
districts and (iii) voter-approved long-term debt.
Short-term debt for operating purposes is limited to an amount not in
excess of 15% of undedicated revenues received during the preceding fiscal year
and must be issued only to meet obligations incurred pursuant to appropriation
and repaid during the fiscal year in which incurred. Such debt does not require
voter approval.
Debt incurred by the State for the purpose of making loans to school
districts may be issued in whatever amount required without voter approval. All
other general obligation bonds issued by the State must be approved as to
amount, purpose and method of repayment by a two-thirds vote of each house of
the Legislature and by a majority vote of the public at a general election.
There is no limitation as to number or size of such general obligation issues.
There are also various State authorities and special purpose agencies
created by the State which issue bonds secured by specific revenues. Such debt
is not a general obligation of the State.
The State has issued outstanding general obligation full faith and credit
bonds and notes for Water Resources, Environmental Protection, Recreation
Program, and School Loan purposes. As of September 30, 1995, the outstanding
principal amount of all State general obligation bonds was $706 million. On
February 20, 1996, the State issued $900 million in short-term general
obligation notes in order to meet cash flow requirements. These notes will
mature on September 30, 1996.
As of December 31, 1994, approximately $5.0 billion in principal amount of
"qualified" bonds of local school districts was outstanding. In the past 30
years, the State has been required only once to advance monies from the State
School Bond Loan Fund to make a debt service payment on behalf of a school
district, other than for routine loans. In that case the tax collections
available to the school district for payment of debt service were escrowed on
the due date because of litigation. After the litigation was completed, the
escrowed funds were repaid in full to the State School Bond Loan Fund.
Minnesota Series
State Government. The State of Minnesota was formally organized as a
territory in 1849 and was admitted to the Union in 1858 as the 32nd state.
Bordered by Canada on the north, Lake Superior and Wisconsin on the east, Iowa
on the south, and North and South Dakota on the west, it is the 12th largest and
20th most populous state in the Union.
The Minnesota Constitution organizes State government into three branches:
Executive, Legislative and Judicial. The Legislative Branch is composed of a
Senate and a House of Representatives. Fiscal administration is performed by the
Department of Fiance under the control and supervision of the Commissioner of
Finance.
State and State-Related Indebtedness. The Minnesota Constitution authorizes
public debt to be incurred for the acquisition and betterment of public land,
buildings and other improvements of a capital nature or for appropriations or
loans to Minnesota state agencies or political subdivisions for this purpose, as
the Legislature by the three-fifths vote of each House may direct, and to fiance
the development of agricultural resources of the State by extending credit on
real estate security, as the Legislature may direct. All such debt is evidenced
by the issuance of State of Minnesota bonds maturing within 20 years of their
date of issue, for which the full faith and credit and taxing powers of the
State are irrevocably pledged. There is no limitation as to the amount or
interest rate of such general obligation issues.
As of May 1, 1996, the outstanding principal amount of all Minnesota
general obligation bonds was approximately $2.109 billion.
The Minnesota Constitution limits Minnesota general obligation debt to (i)
short-term debt for Minnesota operating purposes, (ii) short-term debt for
purpose of making loans to school districts and (iii) voter- approved long-term
debt.
Short-term debt for operating purposes is limited to an amount not in
excess of 15 percent of undedicated revenues received during the preceding
fiscal year and must be issued only to meeting obligations incurred pursuant to
appropriation and repaid during the fiscal year in which incurred. The May,
1995, end of the first special session cash flow analysis for Minnesota's
Statutory General Fund indicates that Minnesota will have a positive cash flow
balance during the Current Biennium which began on July 1, 1995 and ends June
30, 1997. Minnesota has no short-term debt outstanding and, therefore, Minnesota
does not expect to do any short term borrowing for cash flow purposes during the
Current Biennium. A more recent cash flow analysis is not available. The
Department of Finance is in the process of developing a new cash flow
forecasting model and expects to do its next cash flow analysis in connection
with the November, 1996 revenue and expenditure forecast.
There are also various Minnesota authorities and special purpose agencies
created by the state which issue bonds secured by specific revenues. Such debt
is not a general obligation of the State of Minnesota.
Constitutional and Statutory Provisions Relating to Minnesota and Local
Funding. Minnesota revenues in Minnesota are generated primarily from individual
income taxes, corporate franchise taxes, sales and use taxes, insurance gross
earnings taxes, estate taxes, motor vehicle excise taxes, excise taxes on liquor
and tobacco, mortgage taxes, deed taxes, legalized gambling taxes, rental motor
vehicle taxes, 900 telephone service taxes, taconite and iron ore taxes, and
health care provider taxes. In addition to the major taxes described above,
other sources of non-dedicated revenue include minor taxes, 60 percent of
Minnesota's lottery net proceeds, unrestricted grants, fees and charges of
Minnesota state agencies and departments, and investment income. County,
municipal and certain special purpose districts (such as water, flood or
mosquito control districts) are authorized to levy property taxes within
specified legislative limits. A portion of Minnesota's revenues is allocated
from state government to other governmental units within Minnesota such as
municipal and county governments, school districts and state agencies through a
complex series of appropriations and financial aid formulas. This financial
interdependency of the Minnesota state government with other units of
government, subject all levels of government, in varying degrees, to
fluctuations in Minnesota's overall economy.
Minnesota's constitutional prescribed fiscal period is a biennium, and
Minnesota operates on a biennial budget basis with revenues created in the
period in which they are collected and expenditures debited in the period in
which the corresponding liabilities are incurred. The biennium begins on July
1st of the odd numbered year and runs through June 30th of the next odd numbered
year.
Minnesota's ability to appropriate funds is limited by the Minnesota
Constitution, which directs that Minnesota government shall not in any biennium
appropriate funds in excess of projected tax revenues from all sources.
Minnesota is authorized to levy additional taxes to resolve any inadvertent
shortfalls.
Appropriations for each biennium are enacted during the final legislative
session of the immediately preceding biennium. A revenue forecast is prepared
during the legislative session to provide the legislature with updated
information for the appropriations process. During each biennium regular
forecasts of revenues and expenditures are prepared.
Minnesota's biennial appropriation process relies on revenue forecasting as
the basis for establishing aggregate expenditure levels. Risks are inherent in
the revenue and expenditure forecasts. Assumptions about U.S. economic activity
and federal tax and expenditure policies underlie these forecasts. Any federal
law changes that increases federal income taxes or reduce federal spending
programs may adversely affect these forecasts. Finally, even if economic and
federal tax assumptions are correct, revenue forecasts are still subject to some
normal level of error. The correctness of revenue forecasts and the strength of
Minnesota's overall economy may restrict future aid or appropriations from
Minnesota government to other units of government.
Prior to the Current Biennium, Minnesota law established a Budget Reserve
and Cash Flow Account in the Accounting General Fund which served two functions.
However, in 1995 the Minnesota Legislature departed the Budget Reserve and Cash
Flow Account into two separate accounts; the Cash Flow Account and the Budge
Reserve Account, each having a different function. The Cash Flow Account was
established in the General Accounting Fund for the purpose of providing
sufficient cash balances to cover monthly revenue and expenditure imbalances.
The use of funds from the Cash Flow Account is governed by statute. The Cash
Flow Account balance is set for the Current Biennium at $350 million. No
provision has been made for increasing the balance of the Cash Flow Account from
increases in forecast revenues over forecast expenditures. The Budget Reserve
Account was established in the Accounting General Fund for the purpose of
reserving funds to cushion the State from an economic downturn. The use of funds
from the Budget Reserve Account and the allocation of surplus forecast balances
to the Budget Reserve Account are governed by statute. The Budget Reserve
Account balance is set for the Current Biennium at $270 million.
For Fiscal Year 1995, ending June 30, 1995, net revenues received were
$8.984 billion. After total expenditures and net transfers of $8.894 billion,
Fiscal Year 1995 ended with an Unrestricted Accounting General Fund balance of
$445 million and an Unreserved Accounting General Fund balance of $1.021
billion.
For Fiscal Year 1996, ending June 30, 1996, total revenues are estimated to
be approximately $9.237 billion. Total expenditures and transfers are estimated
at $9.363 billion and after deducting a Cash Flow Account appropriations carry
forward of $350 million and Budget Reserve Account carry forward of $220
million, it is estimated that an Unrestricted Accounting General Fund balance of
$324 million will remain.
For Fiscal Year 1997, ending June 30, 1997, total revenues are estimated to
be approximately $9.215 billion. Total expenditures and transfers are estimated
at $9.488 billion and after deducting a Cash Flow Account appropriations carry
forward of $350 million and Budget Reserve Account carry forward of $270
million, it is estimated that an Unrestricted Accounting General Fund balance of
$1.025 billion will remain.
In 1992 the Minnesota Legislature established the MinnesotaCare(R) program
to provide subsidized health care insurance for long term uninsured Minnesotans,
reform individual and small group health insurance regulations, create a health
care analysis unit to collect condition- specific data about health care
practices in order to develop practice parameters for health care providers,
implement certain cost containment measures into the system, and establish an
office of rural health to ensure the health care needs of all Minnesotans are
being met. The program is not part of the Accounting General Fund. A separate
account, called the Health Care Access Fund, has been established in Minnesota's
Special Reserve Fund to account for revenues and expenditures for the
MinnesotaCare(R) program. Program expenditures are limited to revenues received
in the Health Care Access Fund. Program revenues are derived from dedication of
insurance premiums paid by individuals, five cents of the state cigarette tax
through December 31, 1993, and permanent taxes including a 2 percent gross
revenue tax on hospitals, health care providers and wholesale drug distributors,
a 2 percent use tax on prescription drugs and a 1 percent gross premium tax on
nonprofit health service plans and HMOs. A previously required transfer from the
Health Care Access Fund to the Accounting General Fund was eliminated after
Fiscal year 1995. The purpose of the transfer was to pay for increased costs in
the generally funded Medicaid (MA) and General Assistance Medical Care (GAMC)
programs, due to applicants found ineligible for MinnesotaCare(R), but
qualifying for MA or GAMC.
The 1993 Legislature adopted legislation establishing a school district
credit enhancement program. The legislation authorizes and directs the
Commissioner of Finance, under certain circumstances and subject to the
availability of funds, to issue a warrant and authorize the Commissioner of
Children, Families and Learning to pay debt service coming due on school
district tax and state-aid anticipation certificates of indebtedness and school
district general obligation bonds in the event that the school district notifies
the Commissioner of Children, Families and Learning that it does not have
sufficient money in its debt service fund for that purpose, or the paying agent
informs the Commissioner of Children, Families and Learning that it has not
received from the school district timely payment of moneys to be used to pay
debt service. The legislation appropriates annually from the Accounting General
Fund to the Commissioner of Children, Families and Learning the amount needed to
pay any warrants which are issued. The amounts paid on behalf of any school
district are required to be repaid by it with interest, either through a
reduction of subsequent state-aid payments or by the levy of an ad valorem tax
which may be made with the approval of the Commissioner of Children, Families
and Learning. As of April 1, 1996 there were approximately $1.913 billion
principal amount of bonds enrolled in the program, some of which have been paid.
The State has not had to made any debt service payments on behalf of school
districts under the program and does not expect to make any payments in the
future.
The amount of revenue generated by Minnesota's tax structure, because of
the dependence on the income and sales taxes, is sensitive to the status of the
national and local economy. There can be no assurance that the financial
problems referred to or similar future problems will not affect the market value
or marketability of the Minnesota Municipal Obligations or the ability of the
issuers thereof to pay the interest or principal of such obligations.
Minnesota general obligation bonds are rated AAA by Moody's and AA+ by S&P
and AAA by Fitch.
Selected Economic and Demographic Factors. Diversity and a significant
natural resource base are two important characteristics of Minnesota's economy.
Minnesota's economy is being lifted by strong earnings growth in the service
industry, rising housing construction, and job gains which are slowly firming up
to labor market.
When viewed in 1995 at a highly aggregative level of detail, the structure
of Minnesota's economy parallels the structure of the U.S. economy as a whole.
Minnesota employment in ten major industrial sectors was distributed in
approximately the same proportions as national employment. In all sectors, the
share of total Minnesota employment was within two percentage points of national
employment share.
Minnesota's employment in the durable goods industries continues to be
highly concentrated in industries specializing in the manufacturing of
industrial machinery, fabricated metal and instruments. This emphasis is
partially explained by the location in Minnesota of computer-related equipment
manufacturers. Further, manufacturers of food products, wood products, and
printed and published materials joined the high technology manufacturing group
which has lead to significant business expansion in Minnesota in this decade.
The importance of Minnesota's rich natural resource base for overall
employment is apparent in the employment mix in non-durable goods industries. In
1995, approximately 29.0 percent of Minnesota's non-durable goods employment
was concentrated in food and kindred industries, and approximately 18.8 percent
in paper and allied industries. This compares to approximately 21.7 percent and
8.9 percent, respectively, for comparable sectors in the national economy. both
of these rely heavily on renewable resources in Minnesota. Over half of
Minnesota's acreage is devoted to agricultural purposes and nearly one-third to
forestry. Printing and publishing are also relatively more important in
Minnesota than in the U.S.
Mining is currently a less significant factor in the Minnesota economy than
formerly. Mining employment, primarily in the iron ore or taconite industry,
dropped from 17.3 per thousand in 1979 to 7.9 per thousand in 1995. It is not
expected that mining employment will soon return to 1979 levels. However,
Minnesota retains vast quantities of taconite as well as copper, nickel, cobalt
and peat which may be utilized in the future.
While Minnesota's involvement in the defense industry is limited, as
military procurement cuts continue, Minnesota employers may face challenges in
maintaining employment and sales. More importantly, Minnesota firms producing
electronic components, communication equipment, electrical equipment, chemicals,
plastics, computers and software may face additional competition from companies
converting from military to civilian production.
Job expansion and business start-ups improved remarkably in this decade
with an average rate for new businesses at 2 percent, while business
dissolutions were on the decline.
Finally, despite a state economy that is outperforming the national
economy, the future economic outlook is guarded primarily because the growth of
the health care industry has slowed significantly and the mainframe computer and
airline industries face continued softness.
Minnesota resident population grew from 4,085,000 in 1980 to 4,387 in 1990
or, at an average annual compound rate of .7 percent. In comparison, U.S.
population grew at an annual compound rate of .9 percent during this period.
Minnesota population is currently forecast by the U.S. Department of Commerce to
grow at an annual compound rate of .8 percent through 2005.
Employment and Income Growth in Minnesota. In the period 1980 to 1990,
overall employment growth in Minnesota lagged behind national growth. However,
manufacturing has been a strong sector, with Minnesota employment outperforming
its U.S. counterpart in both the 1980-1990 and 1990-1995 periods.
In spite of the strong manufacturing sector, during the 1980 to 1990
period, total employment in Minnesota increased 17.9 percent as compared to 20.1
percent nationally. Most of Minnesota's slower growth can be associated with
declining agricultural employment and two recessions in the U.S. economy in the
early 1980's which were more severe in Minnesota than nationwide. Minnesota
non-farm employment growth generally kept pace with the nation in the period
after the 1981-82 recession ended in late 1982. In the period 1990 to 1995,
non-farm employment growth in Minnesota exceeded national growth. Minnesota's
non-farm employment grew 11.5 percent compared to 6.6 percent nationwide.
Since 1980, Minnesota per capita personal income has been within three
percentage points of national per capita personal income. The state's per capita
income, which is computed by dividing personal income by total resident
population, has generally remained above the national average in spit of the
early 1980's recessions and some difficult years in agriculture. In 1994,
Minnesota per capita personal income was 103.0 percent of its U.S. counterpart.
Another measure of the vitality of Minnesota's economy is its unemployment
rate. During 1994 and 1995, respectively, Minnesota's monthly unemployment rate
was generally less than the national unemployment rate, averaging 3.6 percent in
1995, as compared to the national average of 5.2 percent.
North Carolina Series
Economic Characteristics. The economic profile of North Carolina consists
of a combination of industry, agriculture, and tourism. Non-agricultural wage
and salary employment accounted for approximately 3,361,100 jobs in 1994, of
which approximately 858,900 were in manufacturing. According to the North
Carolina Employment Security Commission, in November 1994, the State ranked
ninth in non-agricultural employment and eighth in manufacturing employment.
During the period from 1980 to 1993, per capita income in the State grew from
$7,999 to $18,702, an increase of 133.8%. The North Carolina Employment Security
Commission estimated the March 1995 seasonally adjusted unemployment rate to be
3.9%, as compared with a national unemployment rate of 5.5%.
Agriculture is a basic element in North Carolina's economy. Gross
agricultural income in 1993 exceeded $5.3 billion, placing the State tenth in
the nation in gross agricultural income. Tobacco production is the leading
source of agricultural income, accounting for 20% of gross agricultural income.
The poultry industry (chicken, eggs, broilers, and turkeys) provides nearly 34%
of the total agricultural income. The pork industry continues to expand and
North Carolina is now the second largest pork-producing State. Pork production
accounts for 17% of gross agricultural income.
North Carolina's agricultural diversity and a continuing push in marketing
efforts have protected farm income from some of the wide variations experienced
in States where most of the agricultural economy is dependent on a small number
of agricultural commodities. North Carolina is the third most diversified
agricultural State in the nation. In 1993, there were approximately 59,000 farms
in the State. A strong agribusiness sector also supports farmers with farm
inputs (agricultural chemicals and fertilizer, farm machinery, and building
supplies) and processing of commodities produced by farmers (vegetable canning
and cigarette manufacturing). North Carolina's agricultural industry, including
food, fiber and forest, contributes over $42 billion annually to the State's
economy.
The labor force has undergone significant changes during recent years. The
State has moved from an agricultural to a service and goods producing economy.
According to the Employment Security Commission, the labor force has grown from
2,855,200 in 1980 to 3,609,000 in 1994, an increase of 26.4%.
The Travel and Tourism Division of the North Carolina Department of
Commerce has estimated that in excess of $8 billion was spent on tourism in the
State in 1993 (up from slightly less than $7 billion in 1990), two-thirds of
which was derived from out-of-State travelers. The Travel and Tourism Division
estimates approximately 250,000 people were employed in tourism-related jobs in
the State. The State maintains 43 State parks covering an area of approximately
135,000 acres. State forests cover an area of approximately 35,355 acres.
Revenue Structure. North Carolina's two major operating funds which receive
revenues and from which monies are expended are the General Fund and the Highway
Fund. The 1989 General Assembly also created the Highway Trust Fund to provide
monies for a major highway construction program for the State. There are no
prohibitions or limitations in the North Carolina Constitution on the State's
power to levy taxes except an income tax rate limitation of 10% and a
prohibition against a capitation or "poll" tax.
A portion of North Carolina's tax revenue is generated from individual and
corporate income taxes, sales and use taxes, highway use tax on certain motor
vehicle rentals, corporate franchise tax, taxes on alcoholic beverages, tobacco
products and soft drinks, inheritance taxes, insurance taxes levied on insurance
companies and other taxes, which revenues are deposited into the State's General
Fund. Additional tax revenue is generated from a motor fuels tax, highway use
tax and motor vehicle license tax, which revenue is deposited in the Highway
Fund and Highway Trust Fund. Additional non-tax revenue deposited to the General
Fund consists of (i) institutional and departmental receipts which are deposited
with the State Treasurer, including fees, tuition payments, and Federal funds
collected by State agencies, (ii) interest earned by the State Treasurer on
investments of General Fund monies, and (iii) revenues from the judicial branch.
Federal aid is an important source of non-tax revenue for the Highway Fund and
Highway Trust Fund.
State Budget. The North Carolina Constitution requires that the total
expenditures of the State for the fiscal period covered by the budget not exceed
the total of receipts during the fiscal period and the surplus remaining in the
State Treasury at the beginning of the period.
The Executive Budget Act, adopted by the General Assembly in 1925, sets out
the procedure by which the State's budget is adopted and administered. The Act
requires the adoption of a balanced budget. North Carolina's Governor does not
have the power to veto budget or other legislative actions; however, North
Carolina General Statute Section 143-25 provides that the Governor, as ex
officio Director of the Budget, "may reduce all of said appropriations, pro rata
when necessary, to prevent an overdraft or deficit to the fiscal period for
which such appropriations are made. The purpose and policy of this Article is to
provide and insure that there shall be no overdraft or deficit in the General
Fund of the State at the end of the fiscal period, growing out of appropriations
for maintenance, and the Director of the Budget is directed and required to so
administer this Article so as to prevent any such overdraft or deficit. Prior to
taking any action under this section to reduce appropriations pro rata, the
Governor may consult with the Advisory Budget Commission." The Governor may take
less drastic action to reduce expenditures to maintain a balanced budget before
the need for across-the-board appropriations reduction arises.
The 1993 Sessions of the General Assembly reduced departmental operating
requirements $357.6 million in 1994-95 and authorized continuation funding of
$8,603.4 million for 1994-95. The saving reductions were based on
recommendations from the Governor, the Government Performance Audit Committee
and selective savings identified by the General Assembly. After review of the
continuation budget, the General Assembly authorized funding for planned
expansion of existing programs and new initiatives for children, economic
development, education, human services and environmental programs. Expansion
funds of $1,650.4 million for 1994-95 were approved by the 1993 Regular Session,
the 1994 Special Session and the 1994 Regular Session of the General Assembly.
In 1993, the General Assembly appropriated a $66.7 million transfer to the
Savings Reserve Account, in addition to the regularly scheduled transfer thereto
from the credit balance in the General Fund. The General Assembly authorized
$189.4 million for capital improvements spending and $60 million for repairs and
renovations for 1994-95.
With capital projects being financed with bond proceeds and fund balance,
continuation appropriations and expansion items discussed above are supported
with the assistance of a number of new taxes and fees enacted by the 1991
Session of the General Assembly. These taxes and fees generated an estimated
$665.5 million in 1991-92. Revenues for 1992-93 were estimated to include an
additional $95.6 million as a result of the actions of the 1991 Session of the
General Assembly. These taxes and fees combined with a projected growth of 4.8%
for 1994-95 finance the authorized budget by the 1993 Session of the General
Assembly.
The Highway Fund revenue collections totalled $982.4 million in fiscal year
1993-94, $37.8 million above budgeted revenues. Sources of revenue for the
Highway Fund include taxes on the sale of motor fuels as well as registration
and licensing fees for motor vehicles.
The Highway Trust Fund is more dependent on consumption-based revenues,
such as taxes and fees derived from sales of motor fuels and vehicles, than the
Highway Fund, which draws upon more stable sources for its revenue, such as
motor vehicle registration and licensing fees. Collections for the Highway Trust
Fund totaled $643.7 million in 1993-94, $86 million more than the budgeted
amount. Total Highway Trust Fund collections increased approximately 12.5% in
1993-94 over 1992-93.
The budget is based upon estimated revenues and a multitude of existing and
assumed State and non-State factors, including State and national economic
conditions, international activity and federal government policies and
legislation.
State Indebtedness. The North Carolina Constitution provides in substance
that the State shall not contract a debt, other than refunding debt, by
borrowing money in any biennium and pledge its faith and credit to the payment
thereof for an amount in excess of two-thirds of the amount by which the
outstanding debt of the State was reduced in the preceding biennium unless the
proposed debt is submitted to and approved by the voters at an election.
The State is authorized by the Constitution to borrow in anticipation of
the collection of taxes due and payable within the current fiscal year to an
amount not exceeding 50% of such taxes. The State has not borrowed in
anticipation of taxes since fiscal year 1959-60.
There are no bonds of the State outstanding which contemplate the
appropriation by the General Assembly of such amount as may be necessary to make
up any deficiency in a debt service reserve. Furthermore, no legislation has
been enacted by the General Assembly which would authorize the issuance of any
such bonds.
Litigation. The following are cases pending in which the State of North
Carolina faces the risk of either a loss of revenue or an unanticipated
expenditure but which, in the opinion of the Department of State Treasurer,
would not materially adversely affect the State of North Carolina's ability to
meet its financial obligations:
1. Leandro, et al. v. State of North Carolina and State Board of Education.
On May 25, 1994, students and boards of education in five counties in the State
filed suit in Superior Court requesting a declaration that the public education
system of North Carolina, including its system of funding, violates the State
constitution by failing to provide adequate or substantially equal educational
opportunities and denying due process of law and violates various statutes
relating to public education. The suit requests the Court for such other
equitable relief, including injunction or mandamus, as the Court deems proper.
The suit is similar to a number of suits in other states, some of which
resulted in holdings that the respective systems of public education funding
were unconstitutional under the applicable state law. The defendants filed a
motion to dismiss for failure to state a cause of action, which was denied at
the trial court level. An appeal from the decision was taken to the North
Carolina Court of Appeals, which reversed the trial court and granted defendants
motion to dismiss. The plaintiffs have appealed to the North Carolina Supreme
Court, and oral argument is scheduled for September 12, 1996. The North Carolina
Attorney General's Office believes that sound legal arguments support the
State's position.
2. Francisco Case. On August 10, 1994, a class action lawsuit was filed in
Wake County Superior Court against the Superintendent of Public Instruction and
the State Board of Education on behalf of a class of parents and their children
who are characterized as limited English proficient. The complaint alleges that
the State has failed to provide funding for the education of these students and
has failed to supervise local school systems in administering programs for them.
The complaint does not allege an amount in controversy, but asks the Court to
order the defendants to fund a comprehensive program to insure equal educational
opportunities for limited English proficient children. Discovery is underway,
but no trial date has been set. The North Carolina Attorney General's Office
believes that sound legal arguments support the State's position.
3. Bailey case -- State Tax Refunds-State Retirees. State and local
government retirees filed a class action suit in 1990 as a result of the repeal
of the income tax exemptions for state and local government retirement benefits.
The original suit was dismissed after the North Carolina Supreme Court ruled in
1991 that the plaintiffs had failed to comply with state law requirements for
challenging unconstitutional taxes and the United States Supreme Court denied
review. In 1992, many of the same plaintiffs filed a new lawsuit alleging
essentially the same claims, including breach of contract, unconstitutional
impairment of contract rights by the State in taxing benefits that were
allegedly promised to be tax-exempt and violation of several state
constitutional provisions. The North Carolina Attorney General's Office
estimates that the amount in controversy is approximately $40-$45 million
annually for tax years 1989 through 1992. A decision was entered in favor of the
plaintiffs at the trial court level. The State has appealed the decision to the
North Carolina Supreme Court and oral arguments are scheduled for September 12,
1996. The North Carolina Attorney General's Office believes that sound legal
arguments support the State's position.
4. Faulkenbury v. Teachers' and State Employees' Retirement System, Peele
v. Teachers' and State Employees' Retirement System and Woodard v. Local
Governmental Employees' Retirement System. Plaintiffs are disability retirees
who brought class actions in state court challenging changes in the formula for
payment of disability retirement benefits and claiming impairment of contract
rights, breach of fiduciary duty, violation of other federal constitutional
rights, and violation of state constitutional and statutory rights. The State
estimates that the cost in damages and higher prospective benefit payments to
plaintiffs and class members would probably amount to $50 million or more in
Faulkenbury, $50 million or more in Peele and $15 million or more in Woodard,
all ultimately payable, at least initially, from the funds of the Retirement
Systems. Upon review in Faulkenbury, the North Carolina Court of Appeals and
Supreme Court have held that claims made in Faulkenbury, substantially similar
to those in Peele and Woodard, for breach of fiduciary duty and violation of
federal constitutional rights brought under the federal Civil Rights Act either
do not state a cause of action or are otherwise barred by the statute of
limitations. In 1994 plaintiffs took voluntary dismissals of their claims for
impairment of contract rights in violation of the United States Constitution and
filed new actions in federal court asserting the same claims along with claims
for violation of constitutional rights in the taxation of retirement benefits.
The remaining State court claims in all cases were heard in the Superior Court
of Wake County and the trial court rendered a decision in favor of the
plaintiffs. The State has appealed the decision to the North Carolina Supreme
Court and oral arguments are scheduled for September 12, 1996. The federal court
actions have been stayed pending the trial in State Court. The Attorney
General's Office believes that sound legal arguments support the State's
position in these cases.
5. Fulton Case. The State's intangible personal property tax levied on
certain shares of stock, as in effect for taxable years ending before January 1,
1995, was challenged by the plaintiff on grounds that it violates the United
States Constitution Commerce Clause by discriminating against stock issued by
corporations that do all or part of their business outside the State. The
plaintiff in the action is a North Carolina corporation that does all or part of
its business outside the State. The plaintiff sought to invalidate the tax in
its entirety and to recover tax paid on the value of its shares in other
corporations. The North Carolina Court of Appeals invalidated the taxable
percentage deduction and excised it from the statute beginning with the 1994 tax
year. The North Carolina Supreme Court reversed the Court of Appeals and held
that the tax is valid and constitutional. The plaintiff's petition for review by
the United States Supreme Court was granted, and on February 21, 1996, the
United States Supreme Court reversed the lower courts and invalidated the tax in
its entirety. The case is currently on remand to the North Carolina Supreme
Court for determination of an appropriate remedy. Net collections from the tax
for the fiscal year ended on June 30, 1993 amounted to $120.6 million. The North
Carolina General Assembly has repealed the intangibles tax, effective for
taxable years beginning on or after January 1, 1995.
Ohio Series
State Economy and Budget. Non-manufacturing industries now employ
approximately 78.9% of all payroll workers in the State of Ohio. However, due to
the continued importance of manufacturing industries (including auto-related
manufacturing), economic activity in Ohio, as in many other industrially
developed States, tends to be more cyclical than in some other States and in the
nation as a whole. Agriculture also is an important segment of the Ohio economy.
The financial condition of the State has fluctuated in a pattern related to
national economic conditions, with periods of prolonged stringency
characterizing fiscal years 1980 through 1983. Additionally, the 1980-82
recession brought with it a substantial increase in bankruptcies and
foreclosures. While the State's economy improved since 1983, the State
experienced an economic slowdown in 1990-91, consistent with the national
economic conditions during that period.
The State constitution imposes a duty on the Ohio General Assembly to
"provide for raising revenue, sufficient to defray the expenses of the State,
for each year, and also a sufficient sum to pay the principal and interest as
they become due on the State debt." The State is effectively precluded by law
from ending a fiscal year or a biennium in a "deficit" position. State borrowing
to meet casual deficits or failures in revenues or to meet expenses not
otherwise provided for is limited by the constitution to $750,000.
The State finances most of its operations through the General Revenue Fund
("GRF") which receives general State revenues not otherwise dedicated pursuant
to certain constitutional and statutory claims on State revenues. The GRF
sources consist primarily of personal income and sales-use taxes. The GRF ending
(June 30) fund balance is reduced during less-favorable national economic
periods and then increases during more favorable economic periods.
The Office of Budget and Management ("OBM") reported positive $781.3
million and $1,138.5 million ending fund and cash balances, respectively, for
the GRF for fiscal year ended June 30, 1996. In addition, as of June 30, 1996
the Budget Stabilization Fund ("BSF") had a cash balance of $828.3 million.
The GFR appropriations bill for the biennium ending June 30, 1997 was
passed on June 28, 1995 and promptly signed, with selective vetoes, by the
Governor. The act provides for total GRF biennial expenditures of approximately
$33.5 billion, an increase over those for the 1994-95 fiscal biennium. As
reported by OBM, the high ending GRF fund balance for the fiscal year ended June
30, 1996 guaranteed the availability of funds to support an income tax reduction
for 1996 and a variety of educational projects for primary and secondary
education in the State. Pursuant to a recently enacted budget corrections bill,
the OBM reported that it will be able to certify a projected $400.0 million
income tax cut, or approximately 6.5% reduction in income taxes.
State statutory provisions permit the adjustment of payment schedules and
the use of the Total Operating Fund ("TOF") to manage temporary GRF cash flow
deficiencies. The State has not undertaken external revenue anticipation
borrowing.
TOF includes the total consolidated total cash balances, revenues,
disbursements and transfers of the GRF and several other specified funds. TOF
cash balance at June 30, 1996 was $5.063 billion. These cash balances are
consolidated only for the purpose of meeting cash flow requirements and, except
for the GRF, a positive cash balance must be maintained for each discrete fund
included in the TOF. The GRF is permitted to incur a temporary cash deficiency
by drawing upon the available consolidated cash balance in the TOF. The amount
of that permitted GRF cash deficiency at any time is limited to 10% of GRF
revenues for the then-preceding fiscal year. GRF cash flow deficiencies occurred
in seven months of the fiscal year ended June 30, 1996, the highest being $742.0
million in December 1995.
State Debt. The Ohio Constitution prohibits the incurrence or assumption of
debt by the State without a popular vote except to (i) cover causal deficits or
failures in revenues limited in amount to $750,000 and (ii) repel invasion,
suppress insurrection or defend the State in war.
At various times between 1921 and 1993, the voters of Ohio, by thirteen
specific constitutional amendments, have authorized the incurrence of up to
$6.764 billion in State debt to which taxes or excises were pledged for payment.
As of February 1, 1996, excluding Highway Obligations Bonds discussed below,
$3.405 billion had been issued, of which $2.642 billion had been retired and
approximately $777.9 million (all evidenced by bonds) remained outstanding. The
only such debt still authorized to be incurred is a portion of the Highway
Obligations Bonds and Coal Development Bonds as well as State general obligation
bonds for local government infrastructure projects, described below and general
obligation park bonds.
Approved at the November 1995 election was a constitutional amendment
authorizing additional Highway Obligations Bonds. As of February 1, 1996, the
General Assembly had authorized approximately $1.855 billion of highway bonds.
The amendment authorizes not more than $1.2 billion to be outstanding at any one
time and not more than $220 million to be issued in a fiscal year.
A 1985 constitutional amendment authorized up to $100 million in State full
faith and credit obligations for coal research and development to be outstanding
at any one time. In addition, the General Assembly has authorized the issuance
of $150 million of Coal Development Bonds. As of February 1, 1996, $95 million
of Coal Development Bonds were issued, of which $45.3 million were outstanding.
A 1987 State constitutional amendment authorized the issuance of $1.2
billion of State full faith and credit obligations for infrastructure
improvements of which no more than $120 million may be issued in any calendar
year. A 1995 constitutional amendment extended this authority by authorizing an
additional $1.2 billion of State full faith and credit obligations to be issued
over ten years. As of February 1, 1996, approximately $960.0 million of such
obligations were issued, of which $805.4 million were outstanding.
A constitutional amendment adopted in 1990 authorizes greater State and
political subdivision participation in the provision of housing for individuals
and families. This supplements the previously constitutionally authorized for
loans-for-lenders and other housing assistance programs, financed in part with
State Revenue Bonds. The amendment authorizes the General Assembly to provide
for State assistance for housing in a variety of manners. The General Assembly
could authorize State borrowing for the purpose by the issuance of State
obligations secured by a pledge of all or a portion of State revenues or
receipts, although the obligations may not be supported by the State's full
faith and credit.
A constitutional amendment approved by the voters in 1993 authorizes $200.0
million in State general obligation bonds to be outstanding for parks,
recreation and natural resource purposes (no more than $50.0 million to be
issued in any one fiscal year). The General Assembly in the general capital
appropriations act for the 1995-96 capital appropriations biennium authorized
the Commissioners of the Sinking Fund to issue $100.0 million of such
obligations.
A constitutional amendment approved at the November 1994 election pledges
the full faith and credit and taxing power of the State to meeting certain
guarantees under the State's tuition credit program. That program provides for
purchase of tuition credits, for the benefit of State residents, guaranteed to
cover a specified amount when applied to the cost of higher education tuition.
Under the amendment, to secure the tuition guarantees the General Assembly shall
appropriate moneys sufficient to offset any deficiency that may occur from time
to time in the trust fund that provides for the guarantees and at any time
necessary to make payment of the full amount of any tuition payment or refund
required by a tuition payment contract.
As of February 1, 1996, approximately $1.645 billion in Highway Obligations
Bonds had been issued and $457.7 million were outstanding.
Resolutions have been introduced in both houses of the General Assembly
that would submit a constitutional amendment relating to certain other aspects
of the State debt. The amendment would authorize, among other things, the
issuance of general obligation state debt for a variety of purposes, with debt
service on all general obligation State debt and GRF-supported obligations not
to exceed 5% of the preceding fiscal year's GRF expenditures. It cannot be
predicted whether any such amendment will in fact be submitted, or, if
submitted, whether it would be approved by the electors.
In addition, the State constitution authorizes the issuance, for certain
purposes, of State obligations the owners or holders of which are not given the
right to have taxes or excises levied by the General Assembly to pay principal
and interest. Such special obligations include bonds and notes issued by, among
others, the Ohio Public Facilities Commission ("OPFC"), the Ohio Building
Authority ("OBA") and certain obligations issued by the Treasurer of State. As
of February 1, 1996 the OPFC had issued approximately $3.821 billion for higher
education facilities, approximately $2.164 billion of which were outstanding,
$997.535 million for mental health facilities, approximately $458.7 million of
which were outstanding and $184.95 million for parks and recreation facilities,
approximately $110.95 million of which were outstanding.
A statewide economic development program assists, with loans and loan
guarantees, the financing of facilities for industry, commerce, research and
distribution. The law authorizes the issuance of State bonds and loan guarantees
secured by a pledge of portions of the State profits from liquor sales. The
General Assembly has authorized the issuance of these bonds by the State
Treasurer, with a general maximum of $300 million currently authorized to be
outstanding at any one time (excluding bonds issued to meet guarantees, but less
any amount be which 4% of the unpaid principal amount of guaranteed loan
payments exceeds the funded amount applicable to the guarantees). The aggregate
amount from the liquor profits to be used in any fiscal year in connection with
these bonds (except for bonds issued to meet guarantees) may not under present
law exceed $25 million. The total of unpaid guaranteed loan amounts and unpaid
principal of direct loans may not exceed $500 million. Of the $147.685 million
liquor profits refunding bonds issued in 1989, $69.284 million is outstanding;
the highest future fiscal year debt service on those bonds, which are payable
through 2000, is $18.261 million.
Only a portion of State capital needs can be met by direct GRF
appropriations; therefore, additional State borrowing for capital purposes has
been and will be required. Under present constitutional limitations, most of
that borrowing will be primarily by lease-rental supported obligations such as
those issued by OPFC and OBA.
The general capital appropriations act for the 1995-96 capital
appropriations biennium authorizes additional borrowing. It authorizes issuance
by OPFC of obligations, in addition to those previously authorized by the
General Assembly, in the amounts of $679.2 million for higher education capital
facilities projects (a substantial number of which are renovations of equipment
and improvements to existing facilities), $77.5 million for mental health and
retardation facilities projects, and $30.0 million for parks and recreation
facilities. It also authorized the OBA to issue obligations in the amounts of
$221.0 million for local jails and prisons, $48.0 million for Department of
Youth Services facilities, $230.3 million for Department of Administrative
Services facilities, $42.5 million for Ohio Arts Facilities Commission
facilities, $11.2 million for Department of Public Safety and $43.95 million for
Ohio Department of Transportation facilities. In addition, the Treasurer of
State has been authorized to issue bonds to finance approximately $138.6 million
of capital improvements for elementary and secondary public school facilities
($68.64 issued). As of February 1, 1996, the Commissioners of the Sinking Fund
had additional General Assembly authorization to issue $55.0 million of
additional Coal Development Bonds, $209.7 million of Highway Obligation Bonds,
and $50.0 million of Natural Resources Bonds.
A State law, originally enacted in 1986 and now amended (the "Rail Act"),
authorizes the Ohio Rail Development Commission (replacing the prior Ohio
High-Speed Rail Authority to issue obligations to finance the cost of rail
service projects within the State, either directly or by loans to other
entities. The Rail Act originally was limited to inter-city passenger services.
The amendments extend the authority to include freight and commuter service. The
Rail Development Commission (or the predecessor Authority) from time to time has
considered financing plan options and the general possibility of issuing bonds
or notes. The Rail Act prohibits, without express approval by joint resolution
of the General Assembly, the collapse of any escrow of financing proceeds for
any purpose other than payment of the original financing, the substitution of
any other security, and the application of any proceeds to loans or grants. The
Rail Act authorizes the Rail Development Commission, but only with subsequent
General Assembly action, to pledge the faith and credit of the State but not the
State's power to levy and collect taxes (except ad valorem property taxes if
subsequently authorized by the General Assembly) to secure debt service on any
post-escrow obligations and, provided it obtains the annual consent of the State
Controlling Board, to pledge to and use for the payment of debt service on any
such obligations all excises, fees, fines and forfeitures and other revenues
(except highway use receipts) of the State after provision for the payment of
certain other State obligations.
The State and State agencies have issued revenue bonds that are payable
from net revenues of revenue-producing facilities or categories of facilities,
such as those issued by the Ohio Turnpike Commission. Under interpretations by
Ohio courts, those revenue bonds are not "debt" within the meaning of the
constitutional provisions prohibiting the incurrence of debt without popular
vote. The Constitution also authorizes State bonds (issued by the Ohio Housing
Finance Agency) for certain housing purposes; tax moneys may not be obligated or
pledged to those bonds.
The State is a party to various legal proceedings seeking damages or
injunctive relief and generally incidental to its operations. In particular,
litigation contesting the Ohio system of school funding is pending on appeal in
the Ohio Supreme Court.
The outstanding State Bonds issued by the OPFC are rated A + by S&P and A1
by Moody's. (Certain recent issues or portions of issues of Commission bonds are
the object of municipal bond insurance procured by the original or subsequent
purchasers and bear different ratings.) S&P rates certain of the State's general
obligation bonds AA, with AAA ratings on the State's Highway Obligations Bonds.
The State's general obligation debt is rated as Aa by Moody's.
State Employees and Retirement Systems. The State has established five
public retirement systems to provide retirement, disability retirement and
survivor benefits. Three cover both State and local employees, one State
employees only and one local government employees only. The Public Employees
Retirement System ("PERS"), the largest of the five, covers both State and local
public employees. The State Teachers Retirement System ("STRS") and School
Employees Retirement System ("SERS") primarily cover school district employees
and public higher education employees. The Highway Patrol Retirement System
("HPRS") covers State troopers and the Police and Fire Pension and Disability
System ("PFPDS") covers local safety forces.
As of the most recent year reported by the particular system, the unfunded
accrued liabilities of STRS and SERS were $8.043 billion and $3.182 billion,
respectively, and the unfunded accrued liabilities of PERS, HPRS and PFPDS were
$4.928 billion, $51.2 million and $1.071 million, respectively.
State Municipalities. Ohio has a mixture of urban and rural population,
with approximately three-quarters urban. There are approximately 943
incorporated cities and villages (populations under 5,000) in the State; six
cities have populations of over 100,000 and nineteen over 50,000. A 1979 act
established procedures for identifying and assisting those few cities and
villages experiencing defined "fiscal emergencies."
A commission composed of State and local officials, and private sector
members experienced in business and finance appointed by the Governor, is to
monitor the fiscal affairs of a municipality facing substantial financial
problems. That act requires the municipality to develop, subject to approval and
monitoring by its commission, a financial plan to eliminate deficits and cure
any defaults and otherwise remedy fiscal emergency conditions, and to take other
actions required under its financial plan. It also provides enhanced protection
for the municipality's bonds and notes and, subject to the act's stated
standards and controls, permits the State to purchase limited amounts of the
municipality's short-term obligations (used only once, in 1980).
As of 1994, the act has been applied to 11 cities and to 12 villages. The
situations in 9 cities and 10 villages have been resolved and their commissions
terminated. Only the Cities of East Cleveland and Nelsonville and 2 villages
remain under the procedure.
Summary. Many factors affect or could affect the financial condition of the
State and other issuers of debt obligations, many of which are not within the
control of the State or such issuers. There can be no assurance that such
factors and the resulting impact on State and local governmental finances will
not affect adversely the market value of Ohio Municipal Obligations held in the
portfolio of the Fund or the ability of the respective obligors to make required
payments on such obligations.
Pennsylvania Series
General. Pennsylvania historically has been dependent on heavy industry,
although recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic growth
in Pennsylvania are in the service sector, including trade, medical and health
services, education and financial institutions. Agriculture continues to be an
important component for the Commonwealth's economic structure, with nearly one-
fourth of the Commonwealth's total land area devoted to cropland, pasture and
farm woodlands.
In 1994, the population of Pennsylvania was 12.1 million people. According
to the U.S. Bureau of the Census, Pennsylvania experienced a slight increase
from the 1985 estimate of 11.8 million. Pennsylvania has a high proportion of
persons 65 or older. The Commonwealth is highly urbanized, with almost 85% of
the 1990 census population residing in metropolitan statistical areas. The
cities of Philadelphia and Pittsburgh, the Commonwealth's largest metropolitan
statistical areas, together comprise approximately 50% of the Commonwealth's
total population.
Pennsylvania's average annual unemployment rate remained below the national
average between 1986 and 1990. Slower economic growth caused the rate to rise to
6.9% in 1991 and 7.5% in 1992. The resumption of faster economic growth resulted
in a decrease in the Commonwealth's unemployment rate to 7.0 percent in 1993.
Seasonally adjusted data for March 1996 shows and unemployment rate of 5.6%
compared to an unemployment rate of 5.5% for the United States as a whole.
Financial Accounting. Pennsylvania utilizes the fund method of accounting
and over 150 funds have been established for the purpose of recording receipts
and disbursements, of which the General Fund is the largest. Most of the
operating and administrative expenses are payable from the General Fund. The
Motor License Fund is a special revenue fund that receives tax and fee revenues
relating to motor fuels and vehicles (except one-half cent per gallon of the
liquid fuels tax which is deposited in the Liquid Fuels Tax Fund for
distribution to local municipalities) and all such revenues are required to be
used for highway purposes. Other special revenue funds have been established to
receive specified revenues appropriated to specific departments, boards and/or
commissions. Such funds include the Game, Fish, Boat, Banking Department, Milk
Marketing, State Farm Products Show, State Racing and State Lottery Funds. The
General Fund, all special revenue funds, the Debt Service Funds and the Capital
Project Funds combine to form the Governmental Fund Types.
Enterprise funds are maintained for departments or programs operated like
private enterprises. The largest of the Enterprise funds is the State Stores
Fund, which is used for the receipts and disbursements of the Commonwealth's
liquor store system. Sale and distribution of all liquor within Pennsylvania is
a government enterprise.
Financial information for the funds is maintained on a budgetary basis of
accounting ("Budgetary"). Since 1984, the Commonwealth has also prepared
financial statements in accordance with generally accepted accounting principles
("GAAP"). The GAAP statements have been audited jointly by the Auditor General
of the Commonwealth and an independent public accounting firm. The Budgetary
information is adjusted at fiscal year end to reflect appropriate accruals for
financial reporting in conformity with GAAP. The Commonwealth maintains a June
30th fiscal year end.
The Constitution of Pennsylvania provides that operating budget
appropriations may not exceed the actual and estimated revenues and available
surplus in the fiscal year for which funds are appropriated. Annual budgets are
enacted for the General Fund and for certain special revenue funds which
represent the majority of expenditures of the Commonwealth.
Revenues and Expenditures. Pennsylvania's Governmental Fund Types receive
over 57% of their revenues from taxes levied by the Commonwealth. Interest
earnings, licenses and fees, lottery ticket sales, liquor store profits,
miscellaneous revenues, augmentations and federal government grants supply the
balance of the receipts to these funds. Revenues not required to be deposited in
another fund are deposited in the General Fund. The major tax sources for the
General Fund are the 6% sales and use tax (34.1% of General Fund revenues in
fiscal 1995), the 2.8% personal income tax (31.3% of General Fund revenues in
fiscal 1995) and the 10.99% corporate net income tax (11.7% of General Fund
revenues in fiscal 1995). Tax and fee proceeds relating to motor fuels and
vehicles are constitutionally dedicated to highway purposes and are deposited
into the Motor License Fund. The major sources of revenues for the Motor License
Fund include the liquid fuels tax and the oil company franchise tax. That Fund
also receives revenues from fees levied on heavy trucks and from taxes on fuels
used for aviation purposes. These latter revenues are restricted to the repair
and construction of highway bridges and aviation programs, respectively.
Revenues from lottery ticket sales are deposited in the State Lottery Fund and
are reserved by statute for programs to benefit senior citizens.
Pennsylvania's major expenditures include funding for education ($6.7
billion of fiscal 1995 expenditures, $7.0 billion of the fiscal 1996 budget, and
$7.0 billion of the fiscal 1997 budget) and public health and human services
($12.4 billion of fiscal 1995 expenditures, $13.1 billion of the fiscal 1996
budget and $12.9 billion of the fiscal 1997 budget).
Governmental Fund Types: Financial Condition/Results of Operations (GAAP
Basis). Financial conditions during fiscal years 1991 through 1995 were
distinguished by slow economic growth and a rapid expansion of the costs of
certain governmental programs that together produced a significant stress on the
Commonwealth's budget. These problems were particularly evident during fiscal
years 1990 and 1991 when revenues were significantly below projections, and
expenditures, largely driven by demand for public welfare services, rose above
budgeted amounts. Actions taken during fiscal 1992 to bring the General Fund
back into balance, including tax increases and expenditure restraints, resulted
in a $1.1 billion reduction to the unreserved-undesignated fund deficit for
combined Governmental Fund Types and a return to a positive fund balance. The
fund balance for the Governmental Fund Types, as restated, has increased during
the 1993, 1994 and 1995 fiscal years. At June 30, 1995, the fund balance totaled
$1,927.6 million including an unreserved-undesignated fund balance of $104.8
million.
General Fund: Financial Condition/Results of Operations.
Five Year Overview (GAAP Basis). For the five year period fiscal 1991
through fiscal 1995, total revenues and other sources rose at a 9.1 percent
average annual rate while total expenditures and other uses grew by 7.4 percent
annually. Over two-thirds of the increase in total revenues and other sources
during this period occurred during fiscal 1992 when a $2.7 billion tax increase
was enacted to address a fiscal 1991 budget deficit and to fund increased
expenditures for fiscal 1992. For the four year period fiscal 1992 through
fiscal 1995, total revenues and other sources increased at an annual average of
3.3 percent, less than one-half the rate of increase for the five year period
beginning with fiscal 1991. This slower rate of growth was due, in part, to tax
rate reductions and other tax law revisions that restrained the growth of tax
receipts for fiscal years 1993, 1994 and 1995.
Expenditures and other uses followed a patten similar to that for revenues,
although with smaller growth rates, during the fiscal 1991 through fiscal 1995
period. Program areas having the largest increase in costs for the fiscal 1991
to fiscal 1995 period were for protection of persons and property, due to an
expansion of state prisons, and for public heath and welfare, due to rising
caseloads, program utilization and increased prices. Recently, efforts to
restrain the rapid expansion of public health and welfare program costs have
resulted in expenditure increases at or below the total rate of increase for
total expenditures in each fiscal year. For the period fiscal 1992 through
fiscal 1995, public health and welfare costs increased by an average annual rate
of 3.5 percent, well below the 5.2 percent average for total expenditures and
other uses during the same period.
Fiscal 1994 Financial Results (GAAP Basis). The fund balance of the General
Fund increased by $194.0 million during the 1994 fiscal year, over the prior
fiscal year balance. The unreserved-undesignated balance increased by $14.8
million to $79.2 million. Revenues and other sources increased by 1.8 percent
over the prior fiscal year while expenditures and other uses increased by 4.3
percent. Consequently, the operating surplus declined to $179.4 million for
fiscal 1994 from $686.3 million for fiscal 1993.
Fiscal 1994 Financial Results (Budgetary Basis). Commonwealth revenues
during the 1994 fiscal year totaled $15,210.7 million, $38.6 million above the
fiscal year estimate, and 3.9 percent over commonwealth revenues during the
previous fiscal year. The sales tax was an important contributor to the higher
than estimated revenues. The strength of collections from the sales tax offset
the lower than budgeted performance of the personal income tax which ended the
fiscal year $74.4 million below estimate. The shortfall in the personal income
tax was largely due to shortfalls in income not subject to withholding such as
interest, dividends and other income. Tax refunds in fiscal 1994 were reduced
substantially below the amount provided in fiscal 1993. The higher fiscal 1993
amount and the reduced fiscal 1994 amount occurred because reserves of
approximately $160 million were added to fiscal 1993 tax refunds to cover
potential payments if the Commonwealth lost litigation known as Philadelphia
Suburban Corp. v. Commonwealth. Those reserves were carried into fiscal 1994
until the litigation was decided in the Commonwealth's favor in December 1993
and $147.3 million of those reserves for tax refunds were released.
Fiscal 1995 Financial Results (GAAP Basis): Revenues and other sources
totaled $23,771.6 million, an increase of $1,135.0 million (0.5 percent) over
the prior fiscal year. The largest increase was $817.9 million in taxes which
represents a 5.6 percent increase over taxes in the prior fiscal year.
Expenditures and other uses rose by $1,364.1 million to $23,821.4 million, an
increase over the prior fiscal year of 6.1 percent. Consequently, an operating
deficit of $49.8 million was recorded for the fiscal year and led to a decline
in fund balance to $688.3 million at June 30, 1995. The fund balance for June
30, 1994, was restated for the fiscal 1995 financial statements. That
restatement totaled $116.7 million to recognize previously unreported revenues
and expenditures for fiscal 1994. The fund balance for June 30, 1994, as
restated, was $776.3 million.
Fiscal 1995 Financial Results (Budgetary Basis): Commonwealth revenues for
the fiscal year were above estimate and exceeded fiscal year expenditures and
encumbrances. Fiscal 1995 was the fourth consecutive fiscal year the
Commonwealth reported an increase in the fiscal year-end unappropriated balance.
Prior to reserves for transfer to the Tax Stabilization Reserve Fund, the fiscal
1995 closing unappropriated surplus was $540.0 million, and increase of $204.2
million over the fiscal 1994 closing unappropriated surplus prior to transfers.
Commonwealth revenues were $459.4 million, 2.9 percent, above the estimate
of revenues used at the time the budget was enacted. Corporation taxes
contributed $329.4 million of the additional receipts due largely to higher
receipts from the corporate net income tax. The sales and use tax and
miscellaneous revenues also showed strong year-over-year growth that produced
above-estimate revenue collections. Sales and use tax revenues were $5,526.9
million, $12.8 million above the enacted budget estimate and 7.9 percent over
fiscal 1994 collections. Personal income tax receipts for fiscal 1995 were
slightly above the budgeted estimate. Receipts totaled $5,083.2 million, $5.1
million above the estimate and 4.3 percent over collections for fiscal 1994. The
higher than estimated revenues from tax sources were due to faster economic
growth in the national and state economy than had been projected when the budget
was adopted. The higher rate of economic growth for the nation and the state
gave rise to increases in employment, income and sales higher than expected
which translated into above-estimate tax revenues.
Tax revenue refunds were also higher than estimated in the budget. An
acceleration of the tax refund process for corporation taxes, litigation
settlements, and an increase in the personal income tax poverty exemption
contributed to the higher tax refunds.
Funds held in reserve at the end of fiscal 1995 for transfer to the Tax
Stabilization Reserve Fund totaled $111.0 million. The Tax Stabilization Reserve
Fund was anticipated to have an available balance of $182.8 million at June 30,
1996, representing approximately 1.1 percent of general fund annual commonwealth
revenues.
Fiscal 1996 Budget: The fiscal 1996 budget provided for expenditures from
commonwealth revenues of $16,165.7 million, a 2.7 percent increase over total
appropriations from commonwealth revenues in fiscal 1995. The appropriations
increase for fiscal 1996 is one of the lowest rates in recent years. Tax changes
enacted with the fiscal 1996 budget totaled a net reduction of $282.9 million,
representing an approximate 1.7 percent of base revenues. The largest dollar
value changes were in the corporate net income tax where the scheduled 1997
reduction of the tax rate to 9.99 percent was accelerated to the 1995 tax year.
Other major components of the tax reduction include a $12.1 million decrease for
the capital stock and franchise tax from an increase in the basic exemption;
$24.7 million from the repeal of the tax on annuities; and $27.9 million from an
acceleration of the scheduled phase-out of the inheritance tax on transfers of
certain property to a surviving spouse. A 90 day tax amnesty program also was
authorized in the tax bill.
Increases in authorized spending for fiscal 1996 emphasized education.
Appropriations for the basic subsidy for pubic schools were increased $143
million representing a 4.4 percent increase. This increase reversed a four-year
trend of a declining budget share for education. The budget also contemplated
several changes to certain public welfare programs. Estimated savings are
approximately $27 million based on a caseload of approximately 90,000 persons
per year.
Commonwealth revenues for fiscal 1996 were $59.8 million (or 0.4 percent)
over the official estimate of revenues for the fiscal year. The fiscal year
ending unappropriated surplus (prior to any transfer to the Tax Stabilization
Reserve Fund) was $153.5 million. The increase is primarily due to the amount of
appropriation lapses anticipated in excess of supplemental appropriation needs
and to a lower estimate of tax refunds.
Fiscal 1997 Proposed Budget: In February 1996, the Governor presented his
proposed budget for fiscal 1997. Proposed appropriations from General Fund
commonwealth revenues total $16.2 billion, a slight reduction from the estimate
for fiscal 1996. Revenue receipts are estimated to increase by $403.9 million,
or 2.5 percent, over anticipated receipts for fiscal 1996. The decline in
appropriation authority over the prior fiscal year in the proposed budget relies
on several program changes. The largest changes proposed are $329 million of
cost containment efforts in public health and welfare programs. Other
significant cost restrains include reductions to appropriations for state- aided
colleges and universities and no increases for state-related colleges and
universities. Funds for basic education programs to local school districts are
proposed to increase slightly.
Commonwealth Debt. Current constitutional provisions permit Pennsylvania to
issue the following types of debt: (i) debt to suppress insurrection or
rehabilitate areas affected by disaster, (ii) electorate approved debt, (iii)
debt for capital projects subject to an aggregate debt limit of 1.75 times the
annual average tax revenues of the preceding five fiscal years, (iv) tax
anticipation notes payable in the fiscal year of issuance. All debt except tax
anticipation notes must be amortized in substantial and regular amounts.
General obligation debt totaled $5,045.4 million at June 30, 1995. Over the
10-year period ended June 30, 1995, total outstanding general obligation debt
increased at an annual rate of 1.1% and for the five years ended June 30, 1995,
at an annual rate of 1.7%. All outstanding general obligation bonds of the
Commonwealth are rated AA- by Standard and Poor's Corporation, A1 by Moody's
Investors Service, and AA- by Fitch Investors Service. The ratings reflect only
the views of the rating agencies.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
already outstanding, may not exceed in aggregate 20% of the revenues estimated
to accrue to the appropriate fund in the fiscal year. The Commonwealth is not
permitted to fund deficits between fiscal years with any form of debt. All
year-end deficit balances must be funded within the succeeding fiscal year's
budget. Pennsylvania issued a total of $500.0 million of tax anticipation notes
for the account of the General Fund in fiscal 1996, all of which matured on June
28 1996, and were paid from fiscal 1996 General Fund receipts.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years. Currently, there are no bond anticipation notes outstanding.
State-related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of, or revenues derived from, the various
projects financed and the debt of such agencies is not an obligation of
Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations. The following agencies had debt currently
outstanding as of December 3, 1995: Delaware River Joint Toll Bridge Commission
($55.1 million), Delaware River Port Authority ($185.5 million), Pennsylvania
Economic Development Financing Authority ($1,050.8 million), Pennsylvania Higher
Education Assistance Agency ($1,408.8 million), Pennsylvania Higher Educational
Facilities Authority ($2,115.1 million), Pennsylvania Industrial Development
Authority ($344.8 million), Pennsylvania Infrastructure Investment Authority
($213.1 million), Pennsylvania Turnpike Commission ($1,228.7 million),
Philadelphia Regional Port Authority ($62.6 million), and the State Public
School Building Authority ($316.2 million). In addition, the Governor is
statutorily required to place in the budget of the Commonwealth an amount
sufficient to make up any deficiency in the capital reserve fund created for, or
to avoid default on, bonds issued by the Pennsylvania Housing Finance Agency
($2,164.8 million of revenue bonds as of December 31, 1995), and an amount of
funds sufficient to alleviate any deficiency that may arise in the debt service
reserve fund for bonds issued by The Hospitals and Higher Education Facilities
Authority of Philadelphia ($1.49 million of the loan principal was outstanding
as of December 31, 1995.)
Litigation. Certain litigation is pending against the Commonwealth that
could adversely affect the ability of the Commonwealth to pay debt service on
its obligations, including suits relating to the following matters: (a)
Approximately 3,500 tort suits are pending against the Commonwealth pursuant to
the General Assembly's 1978 approval of a limited waiver of sovereign immunity
which permits recovery of damages for any loss up to $250,000 per person and
$1,000,000 per accident ($27 million was appropriated from the Motor License
Fund for fiscal 1996); (b) The ACLU filed suit in April 1990 in federal court
demanding additional funding for child welfare services (no estimates of
potential liability are available), which the Commonwealth is seeking to have
dismissed based on, among other things, the settlement in a similar Commonwealth
Court action that provided for more funding in fiscal 1991 as well as a
commitment to pay to counties $30.0 million over 5 years. In January 1992, the
district court denied the ACLU's motion for class certification, but that ruling
was overturned by the Third Circuit and the parties have resumed discovery; (c)
in 1987, the Supreme Court of Pennsylvania held that the statutory scheme for
county funding of the judicial system was in conflict with the Pennsylvania
Constitution but stayed judgement pending enactment by the legislature of
funding consistent with the opinion. The legislature has yet to consider
legislation implementing the judgment; (d) in November 1990, the ACLU brought a
class action suit on behalf of the inmates in thirteen Commonwealth correctional
institutions challenging confinement conditions and including a variety of other
allegations. In 1995, the parties agreed to a court monitored settlement and the
Commonwealth paid $1.3 million in attorney fees; (e) Actions have been filed in
both state and federal court by an association of rural and small schools and
several individual school districts and parents challenging the
constitutionality of the Commonwealth's system for funding local school
districts. The federal case has been stayed pending resolution of the state
case. The trial has not yet bee scheduled, and there is no available estimate of
potential liability; and (f) Several banks have filed suit against the
Commonwealth contesting the constitutionality of a 1989 law imposing a bank
shares tax on banking institutions. After the Commonwealth Court ruled in favor
of the Commonwealth, finding no constitutional deficiencies, Fidelity Bank, the
Commonwealth, and certain intervenor banks filed Notices of Appeal to the
Pennsylvania Supreme Court on August 5, 1994. Pursuant to a Settlement
Agreement, dated as of April 2, 1995, the Commonwealth agreed to enter a credit
in favor of Fidelity in the amount of $4,100,000 in settlement of the
constitutional and non-constitutional issues including interest. Pursuant to a
separate Settlement Agreement, dated as of April 21, 1995, the Commonwealth
settled with the intervening banks, referred to as "New Banks." As part of the
settlement, the commonwealth agreed neither to assesses nor attempt to recoup
any new bank tax credits which had been granted or taken by any of the
intervening banks. Although the described settlements have quantified the
Commonwealth's exposure to Fidelity and the intervening banks, other banks have
filed protective Petitions, and one or more of these banks may seek to raise a
new constitutional challenge in the Commonwealth Court. However, the
Commonwealth Court has previously examined and confirmed the Act's
constitutionality; and (g) on November 11, 1993, the Commonwealth of
Pennsylvania, Department of Transportation and Envirotest/Synterra Partners
("Envirotest"), a partnership, entered into a "Contract for Centralized
Emissions Inspection Facilities." Thereafter, Envirotest acquired certain land
and constructed approximately 85 automobile emissions inspection facilities
throughout various regions of the Commonwealth. By Act of the General Assembly
in October 1994 (Act No. 1994-95), the program was suspended and the Department
of Transportation was prohibited from expending funds to implement the program.
Envirotest sued, and on December 15, 1995, Envirotest Systems Corporation,
Envirotest Partners (successor to Envirotest/Synterra Partners) and the
Commonwealth of Pennsylvania entered into a Settlement Agreement pursuant to
which Envirotest will receive $145 million by installment payments through 1998.
Philadelphia. The City of Philadelphia is the largest city in the
Commonwealth, with an estimated population of 1,585,577 people according to the
1990 Census. Philadelphia functions both as a city of the first class and a
county for the purpose of administering various governmental programs.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class cities in
remedying fiscal emergencies was enacted by the General Assembly and approved by
the Governor in June 1991. PICA is designed to provide assistance through the
issuance of funding debt to liquidate budget deficits and to make factual
findings and recommendations to the assisted city concerning its budgetary and
fiscal affairs. An intergovernmental cooperation agreement between Philadelphia
and PICA was approved by City Council and the PICA Board and signed by the Mayor
in January, 1992. At this time, Philadelphia is operating under a five year
fiscal plan approved by PICA on April 17, 1995, with technical modifications
approved in July 1995.
PICA has issued $1,418,680,000 of its Special Tax Revenue Bonds. This
financial assistance has included the refunding of certain general obligation
bonds to fund capital projects and to liquidate the Cumulative General Fund
balance deficit as of June 30, 1992, of $224.9 million. The audited General Fund
balance as of June 30, 1995, showed a surplus of approximately $80.5 million.
Texas Series
General. Beginning in late 1982, the decline of the State's oil and gas
industry, the devaluation of the Mexican peso and the generally soft national
economy combined to cause a significant reduction in the rate of growth of State
revenues. During late 1985 and early 1986, the price of oil fell dramatically
worldwide. This drop in oil prices created a ripple that caused other sectors of
the State's economy, such as real estate, to decline. As a result of an increase
in non-performing loans in the energy and real estate sectors, major Texas bank
holding companies, individual banks and savings and loans experienced losses or
sharp downturns in profitabilities and many sought Federal assistance from the
FDIC.
As a further result of the drastic drop in the price of oil, the subsequent
loss of jobs and the overbuilding in the real estate market, the State
experienced deficits for fiscal years ended August 31, 1986 and 1987 of $230
million and $744 million, respectively. However, as a result of the budget
trimming and increasing taxes and the improving Texas economy, the State
finished fiscal years 1989, 1990, 1991, 1992, 1993, 1994 and 1995 with surpluses
in the General Revenue Fund of $295 million, $768 million, $1.006.4 billion,
$615.3 million, $1.630 billion, $2.239 billion and $2.101 billion, respectively.
Since the early 1990's, the State's economy has rebounded in several areas and
has, to a large extent, significantly improved its performance since the deep
recession of the 1980's.
By December 1990, the Texas unemployment rate had declined to 6.6%. The
unemployment rate, however, began to increase in 1991 and by December 1992 was
7.6%. This increase was merely temporary since by September 1994, the
unemployment rate had declined to just over 6.5% and by September 1995, it had
again declined to 6.1%.
In the overall race for new job growth, Texas has been the national leader
for most of the 1990's. Total employment in Texas has been steadily improving
since 1991. Total non-farm employment stood at 8.02 million as of July 1995, up
892,000 (12.5%) from July 1990. Over the 12 month period ending in June 1995,
Texas gained 284,800 jobs, an increase of 3.7%. Most of the new jobs have been
in the service sector, which added an estimated 267,712 jobs from 1994 to 1995.
State Debt. Except as specifically authorized, the Texas Constitution
generally prohibits the creation of debt by or on behalf of the State, with two
exceptions: (i) debt created to supply casual deficiencies in revenues which
does not exceed in the aggregate, at any one time, $200,000 and (ii) debt to
repel invasion, suppress insurrection, defend the State in war or pay existing
debt. In addition, the State Constitution prohibits the Legislature from lending
the credit of the State to or in aid of any person, including municipalities, or
pledging the credit of the State in any manner for the payment of the
liabilities of any individual, association of individuals, corporation or
municipality. The limitations of the State Constitution do not prohibit the
issuance of revenue bonds. Furthermore, obligations which are payable from funds
expected to be available during the current budget period, such as tax and
revenue anticipation notes issued by the State Treasurer, do not constitute
"debt" within the meaning of the Texas Constitution. The State may issue short
term obligations like Tax and Revenue Anticipation Notes which must mature and
be paid in full during the biennium in which notes were issued; such obligations
are not deemed to be debt within the meaning of the State constitutional
prohibition.
At various times, State voters, by constitutional amendment, have
authorized the issuance of debt by the State, including general obligation
indebtedness for which the full faith and credit and the taxing power of the
State may be pledged. The total amount of general obligation bonds that have
been authorized by the voters is in excess of $11.57 billion. Bond income during
the State's fiscal year ending August 31, 1995 brought an end to the trend
toward increased issuance of nonself-supporting Texas bonds whereby income from
such bonds declined from $656,915,000 for fiscal year 1994 to $430,293,000. On
August 31, 1995, Texas had $3.1 billion in bonds outstanding which must be paid
back from the State's general revenue fund. This is the same amount of such
bonds outstanding at the end of fiscal 1994, and is up from $2.3 billion in such
bonds outstanding at the end of fiscal 1993, $1.8 billion outstanding at the end
of fiscal 1992, and $1.5 billion outstanding at the end of fiscal 1991.
Revenue Sources and Tax Collection. Historically, the primary sources of
the State's revenues have been sales taxes, mineral severance taxes and Federal
grants. Due to the collapse of oil and gas prices and the resulting enactment of
recent State Legislatures of new tax measures, including those increasing the
rates of existing taxes and expanding the tax base and adding a component of the
corporate (franchise) tax measured by income, there has been a reordering in the
relative importance of the State's taxes in terms of their contribution to the
State's revenue in any year. Federal grants are the State's single largest
revenue source, accounting for approximately 29.9% of total revenue during
fiscal year 1995. Sales taxes are the State's second largest source of revenues
(and by far the largest source of tax revenue), accounting for approximately
29.4% of the State's total revenues during fiscal year 1995. Licenses, fees and
permits, motor fuels taxes and interest and investment income, accounted for
approximately 8.9%, 6.4% and 4.8%, respectively, of the State's total revenue in
fiscal year 1995. The remainder of the State's revenues are derived primarily
from other taxes. The State has no personal income tax. The State does impose a
corporate franchise tax based on the greater of a corporation's capital or net
earned surplus (i.e., income), from which it derived approximately 4.1% of total
revenues in fiscal 1995. The corporate franchise tax is, in essence, based upon
net income apportionable to the State, and thus works very much like a corporate
income tax. It is likely to become a larger source of revenues in future years.
Total net revenues and opening balances for fiscal years 1990, 1991, 1992,
1993, 1994 and 1995 amounted to approximately $23.622 billion, $26.190 billion,
$29.647 billion, $33.795 billion, $36.707 billion and $38.682 billion,
respectively, while tax collections for the same period amounted to $12.905
billion, $14.922 billion, $15.849 billion, $17.011 billion, $18.106 billion and
$18.859 billion, respectively.
The 75th State Legislative Session convened in January 1995 and before
adjourning passed a budget for the 1996-97 biennium. The 1996-97 budget provides
for appropriations totalling $45.1 billion from general revenue related funds
and $79.9 billion from all fund sources. The 1995-96 biennium budget increases
general revenue funding by 10.9%, which funding from all funds increased by
12.5%. Funding for education has been increased by $2.3 billion, or 6.9%, while
health and human services increased $2.4 billion, or 9.1%.
Limitations on Taxing Powers. The State Constitution prohibits the State
from levying ad valorem taxes on property for general revenue purposes. Property
taxes are levied exclusively by county and local taxing authorities. There is
also a constitutional prohibition on enacting a personal income tax unless
approved by a majority of voters in a referendum.
The State Constitution also limits the rate of growth of appropriations
from tax revenues not dedicated by the Constitution during any biennium to the
estimated rate of growth for the State's economy. The Legislature may avoid the
constitutional limitation if it finds, by a majority vote of both houses, that
an emergency exists. The State Constitution authorizes the Legislature to
provide by law for the implementation of this restriction, and the Legislature,
pursuant to such authorization, has defined the estimated rate of growth in the
State's economy to mean the estimated increase in State personal income.
Petroleum Production and Mining. The Texas economy and the oil and gas
industry have been intricately linked since the discovery of the Spindletop
Field in southeast Texas in 1901. Dramatic increases in the price of oil in
1973-74 and 1979-81 propelled Texas into a leadership position in national
economic growth. This situation, however, changed rapidly for Texas during the
1980's. The Texas economy reeled in 1982-83 and again in 1986 as the price of
West Texas Intermediate crude oil declined over 50% from $30 per barrel in
November 1985 to under $12 per barrel in July 1986. During the oil-patch
recession of 1986-87, employment levels declined as the effects of the downturn
in the energy industry rippled through the rest of the economy. While there have
been fluctuations in petroleum production and mining employment since the
recession, the overall trend of that sector in its importance to the Texas
economy has been downward. The number of oil and gas wells drilled in the state
during 1995 (9,299) was less than half the number drilled in 1986 (18,707).
Texas mining employment is currently at its lowest level since 1977. Oil and gas
comprises 95% of Texas employment in the mining sector. Because of substantial
weakness in the oil and gas industry, mining employment in the State totals
approximately 160,400, a decrease of approximately 14% from July 1990. The shift
of drilling activity to other parts of the world and weak natural gas prices
indicate a likely persistent sluggishness in the industry.
Financial Institutions. The decline in oil prices, particularly since
January 1986, and the recession that followed have had a severe effect on the
banking and savings and loans industries in Texas. In most cases, major Texas
bank holding companies, individual banks and savings and loans have experienced
losses or sharp downturns in profitability due to the increase in non-performing
loans in the energy and real estate sectors. The financial difficulties also led
to a number of closings among banks and savings and loans. Texas bank failures
peaked in 1989, reaching 133 or two-thirds of all bank closings in the nation.
Texas bank failures declined to 103 in 1990, 31 in both 1991 and 1992, and 29 in
1993 (of which 20 were subsidiaries of a single bank holding company). No Texas
banks failed in 1994 or 1995.
The Texas banking industry has made substantial strides toward recovery
during the 1990's. Texas bank profits in 1993, 1994 and 1995 were $2.4 billion,
$1.9 billion and $2.3 billion, respectively. Total loans, total equity capital,
and total assets also rose in 1993, 1994 and 1995. Most loan growth was in
consumer real estate, but business lending also showed an increase. On a
discordant note, nonperforming loans increased 26% in 1995.
Many Texas banks and banking organizations have consolidated with a
continuing downward trend in the number of operating banks. Texas had 948 banks
at the end of 1995, compared to 991 banks in 1994 and down from 1,125 banks as
of the end of 1991. It is anticipated that the number of banking organizations
in the state will continue to drop, although the number of branch location will
rise. Also, in keeping with a nationwide trend, Texas banks have been shifting a
substantial amount of their portfolios away from loans and into federal
securities. The annualized return on assets for Texas banks in 1995 was 1.16%.
No industry was more severely affected by the decline in Texas real estate
values during the 1980's than the savings and loan industry. At the end of 1992,
assets of private Texas savings and loan associations totaled $42.9 billion,
down from the industry high in 1988 of $112.4 billion in assets. Further, the
number of Texas savings and loans has decreased from 273 in 1984 to only 45 in
1993. However, in terms of profits, after a nearly flat year in 1991, the
State's thrifts have posted healthy earnings from 1992 forward. Texas' savings
and loans led the nation in profits for 1993. After a dip in 1994, Texas savings
and loans, benefitting from home refinancing, increased their earning by 59% in
1995. Texas' savings and loan problems of recent years has mostly been resolved,
with steady progress being made in increasing capital levels.
Property Values and Taxes. Various State laws place limits upon the amounts
of tax that can be levied upon the property subject to ad valorem taxes within
various taxing units, such as cities, counties and the districts which have ad
valorem taxing powers (including, without limitation, school and hospital
districts). Similarly, the amounts of sales and use taxes which can be levied
and the types of property and services to which sales and use taxes apply are
subject to legal restrictions.
The 1994 total value of taxable property in Texas School Districts (the
most recent information available) amounted to approximately $645 billion in
1994, according to records compiled by the Property Tax Division of the Office
of the Comptroller (derived from school districts in the State). This $645
billion valuation total included approximately $248.5 billion of single-family
residences (after allowing for exemptions), a strong 7.7% increase over the
$230.7 billion amount for 1993. The value of multi-family residential property
values increased 7.6 percent during the same period. By way of contrast, the
valuation of oil, gas and mineral properties dropped a dramatic 13.3% during
1993. The value of commercial and industrial real estate rose more slowly during
1993, increasing at the rates of 0.5% and 1.5%, respectively. The value of
vacant lots also declined slightly by about 0.5%.
Litigation. After protracted litigation over property tax in the early
1990's, the Texas Legislature (in February 1993) approved proposed
constitutional amendments that were intended to address the constitutional
deficiencies in the State's system of funding public schools that have been
noted by the courts. At an election held on May 1, 1993, the voters of the State
rejected all of the proposed constitutional amendments.
The legislation was enacted in late May 1993 (Senate Bill 7), which
included provisions concerning the operation of school districts as well as
creating a whole new funding system for public education in the State. This bill
provided for a two-tiered education finance structure, known as the Foundation
School Program. Tier 1 provides that each school district is entitled to a basic
allotment of $2,300.00 per student, financed by ad valorem taxes of $.86 per
$100.00 valuation on property within the district, with any deficiency to be
made up by the State. Tier 2 provides that school districts may levy additional
ad valorem taxes of as much as $.64 per $100.00 valuation. For every cent of the
additional tax levy a district undertakes, the State guarantees a yield of
$20.55 per student, regardless of how much tax revenue is actually collected.
Senate Bill 7 also imposes a cap on a school district's taxable property at a
level of $280,000 per student. School districts with property more valuable than
$280,000 per student have various choices as to how their taxable property may
be brought within the $280,000 cap.
Senate Bill 7 was immediately challenged by numerous groups of plaintiffs,
representing hundreds of school districts, both property-rich and property-poor,
as well as many parents and local officials. After a trial on the consolidated
actions in the case of Edgewood v. Meno, the district court held that Senate
Bill 7 was constitutional, but found that the Legislature had failed to provide
efficiently for facilities. The district court accordingly denied most of the
relief sought by the plaintiffs but ordered by injunction that no bonds for any
school district could be approved, registered, or guaranteed after September 1,
1995, unless the Legislature had provided for the efficient funding of
educational facilities by that time. On appeal, the Texas Supreme Court affirmed
the constitutionality of the public school finance system enacted in Senate Bill
7 in all respects. The Supreme Court modified the district court's judgment to
provide that the relief requested by the plaintiffs was denied in all respects
and that the district court's injunction was vacated. In all other respects, the
Supreme Court affirmed the district court's judgment.
The current governor has made property tax reform one of the centerpieces
of his legislative agenda, with a stated goal of substantially reducing the
state's reliance on school property taxes. There are a number of public hearings
scheduled through Texas during 1996 to address the issue of the continuing rise
of property taxes paid by both individuals and businesses. It is uncertain at
the present time what, if any, changes will result to the state's tax system as
a result of dissatisfaction with the property tax structure.
Virginia Series
The rate of economic growth in the Commonwealth of Virginia has increased
steadily over the past decade. Per capita income in Virginia has been
consistently above national levels during that time. The services sector in
Virginia generates the largest number of jobs, followed by wholesale and retail
trade, state and local government and manufacturing. Because of Northern
Virginia, with its proximity to Washington, D.C., and Hampton Roads, which has
the nation's largest concentration of military installations, the Federal
government has a greater economic impact on Virginia relative to its size than
any states other than Alaska and Hawaii. It is unclear what effect the current
efforts by the Federal government to restructure the defense budget will have on
long-term economic conditions in Virginia.
According to statistics published by the U.S. Department of Labor, Virginia
typically has one of the lowest unemployment rates in the nation. This is
generally attributed to the balance among the various sectors represented in the
economy. Virginia is one of twenty states with a right-to-work law and is
generally regarded as having a favorable business climate marked by few strikes
or work stoppages. Virginia is also one of the least unionized among the
industrialized states.
Virginia's state government operates on a two-year budget. The Constitution
vests the ultimate responsibility and authority for levying taxes and
appropriating revenue in the General Assembly, but the Governor has broad
authority to manage the budgetary process. Once an appropriation act becomes
law, revenue collections and expenditures are constantly monitored by the
Governor, assisted by the Secretary of Finance and the Department of Planning
and Budget, to ensure that a balanced budget is maintained. If projected revenue
collections fall below amounts appropriated at any time, the Governor must
reduce expenditures and withhold allotments of appropriations (other than for
debt service and other specified purposes) to restore balance. An amendment to
the Constitution, effective January 1, 1993, established a Revenue Stabilization
Fund. This Fund is used to offset a portion of anticipated shortfalls in
revenues in years when appropriations based on initial forecasts exceed expected
revenues in any subsequent forecast. The Revenue Stabilization Fund consists of
an amount not to exceed 10 percent of Virginia's average annual tax revenues
derived from taxes on income and retail sales for the three preceding fiscal
years.
General Fund revenues are principally composed of direct taxes. In recent
fiscal years most of the total tax revenues have been derived from five major
taxes imposed by Virginia on individual and fiduciary income, sales and use,
corporate income, public services corporations and premiums of insurance
companies.
In September 1991, the Debt Capacity Advisory Committee was created by the
Governor through an executive order. The committee is charged with annually
estimating the amount of tax-supported debt that may prudently be authorized
consistent with the financial goals, capital needs and policies of Virginia. The
committee reviews the outstanding debt of all agencies, institutions, boards and
authorities of Virginia for which Virginia has either a direct or indirect
pledge of tax revenues or moral obligation.
The Constitution of Virginia prohibits the creation of debt by or on behalf
of Virginia that is backed by Virginia's full faith and credit, except as
provided in Section 9 of Article X. Section 9 of Article X contains several
different provisions for the issuance of general obligation and other debt, and
Virginia is well within its limit for each:
Section 9(a)(2) provides that the General Assembly may incur general
obligation debt to meet certain types of emergencies, subject to limitations on
amount and duration; to meet casual deficits in the revenue or in anticipation
of the collection of revenues of Virginia; and to redeem a previous debt
obligation of Virginia. Total indebtedness issued pursuant to this Section may
not exceed 30 percent of an amount equal to 1.15 times the annual tax revenues
derived from taxes on income and retail sales, as certified by the auditor of
Public Accounts for the preceding fiscal year.
Section 9(b) provided that the General Assembly may authorize the creation
of general obligation debt for capital projects. Such debt is required to be
authorized by an affirmative vote of a majority of each house of the General
Assembly and approved in a statewide election. The outstanding amount of such
debt is limited to an amount equal to 1.15 times the average annual tax revenues
derived from taxes on income and retail sales, as certified by the Auditor of
Public Accounts for the three preceding fiscal years less the total amount of
bonds outstanding. The amount of 9(b) debt that may be authorized in any single
fiscal year is limited to 25 percent of the limit on all 9(b) debt less the
amount of 9(b) debt authorized in the current and prior three fiscal years.
Section 9(c) provides that the General Assembly may authorize the creation
of general obligation debt for revenue-producing capital projects (so-called
"double-barrel" debt). Such debt is required to be authorized by an affirmative
vote of two-thirds of each house of the General Assembly and approved by the
Governor. The Governor must certify before the enactment of the authorizing
legislation and again before the issuance of the debt that the net revenues
pledged are expected to be sufficient to pay principal of and interest on the
debt. The outstanding amount of 9(c) debt is limited to an amount equal to 1.15
times the average annual tax revenues derived from taxes on income and retail
sales, as certified by the Auditor of Public Accounts for the three preceding
fiscal years. While the debt limits under Sections 9(b) and 9(c) are each
calculated as the same percentage of the same average tax revenues, these debt
limits are separately computed and apply separately to each type of debt.
Article X further provides in Section 9(d) that the restrictions of Section
9 are not applicable to any obligation incurred by Virginia or any of its
institutions, agencies or authorities if the full faith and credit of Virginia
is not pledged or committed to the payment of such obligation. There are
currently outstanding various types of such 9(d) revenue bonds. Certain of these
bonds, however, are paid in part or in whole from revenues received as
appropriations by the General Assembly from general tax revenues, while others
are paid solely from revenues of the applicable project. The debt repayments of
the Virginia Public Building Authority, the Virginia Port Authority, the
Virginia College Building Authority Equipment Leasing Program and The Innovative
Technology Authority are supported in large part by General Fund appropriations.
The Commonwealth Transportation Board is a substantial issuer of bonds for
highway projects. These bonds are secured by and payable from funds appropriated
by the General Assembly from the Transportation Trust Fund for such purpose. The
Transportation Trust Fund was established by the General Assembly in 1986 as a
special non-reverting fund administered and allocated by the Transportation
Board to provide increased funding for constructions, capital and other needs of
state highways, airports, mass transportation and ports. The Virginia Port
Authority has also issued bonds which are secured by a portion of the
Transportation Trust Fund.
Virginia is involved in numerous leases that are subject to appropriation
of funding by the General Assembly. Virginia also finances the acquisition of
certain personal property and equipment through installment purchase agreements.
Bonds issued by the Virginia Housing Development Authority, the Virginia
Resources Authority and the Virginia Public School Authority are designed to be
self-supporting from their individual loan programs. A portion of the Virginia
Housing Development Authority and Virginia Public School Authority bonds and all
of the Virginia Resources Authority bonds are secured in part by a moral
obligation pledge of Virginia. Should the need arise, Virginia may consider
funding deficiencies in the respective debt service reserves for such moral
obligation debt. To date, none of these authorities has advised Virginia that
any such deficiencies exist.
Local government in Virginia is comprised of 95 counties, 41 incorporated
cities, and 188 incorporated towns. Virginia is unique among the several states
in that cities and counties are independent, and their land areas do not
overlap. The largest expenditure by local governments in Virginia are for
education, but local governments also provide other services such as water and
sewer, police and fire protection and recreational facilities. The Virginia
Constitution imposes numerous restrictions on local indebtedness, affecting both
its incurrence and amount.
In Davis v. Michigan (decided March 28, 1989), the United States Supreme
Court ruled unconstitutional states' exempting from state income tax the
retirement benefits paid by the state or local governments without exempting
retirement benefits paid by the Federal government. At that time, Virginia
exempted state and local retirement benefits but not Federal retirement
benefits. At a Special Session held in April 1989, the General Assembly repealed
the exemption of state and local retirement benefits. Following Davis, at least
five suits, some with multiple plaintiffs, for refunds of Virginia income taxes,
were filed by Federal retirees. These suits were consolidated under the name of
Harper V. Virginia Department of Taxation.
In a Special Session, the Virginia General Assembly on July 9, 1994, passed
emerging legislation to provide payments to Federal retirees in settlement of
the retirees' claims as a result of Davis. The settlement payments are to be
made over a five-year period, commencing March 31, 1995. The total amount of
authorized appropriations for the settlement is $340 million (payable to
participating retirees in installments of $60 million on March 31, 1995, and $70
million on each succeeding March 31 through March 31, 1999, subject to
appropriation by the General Assembly).
On September 15, 1995, the Virginia Supreme Court rendered its decision in
Harper, reversing the judgement of the trial court, entering final judgement in
favor of the plaintiff retirees who elected not to settle, and dictating that
the amounts unlawfully collected be refunded with statutory interest. The total
cost to Virginia of the settlement and judgment will be approximately $394.9
million, of which approximately $203.2 million has been paid.
Most recently, Moody's has rated the long-term general obligations bonds of
Virginia Aaa, and Standard & Poor's has rated such bonds AAA. There can be no
assurance that the economic conditions on which these ratings are based will
continue or that particular bond issues may not be adversely affected by changes
in economic or political conditions.
APPENDIX B
Description of S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA is 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 Obligations 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 pledge 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 Obligations 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" ratings is that the latter shows
more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal 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 interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong capacity
to pay principal and interest. Those issues determined to possess overwhelming
safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to pay
principal and interest.
SP-3
The issuers of these municipal notes exhibit speculative capacity to pay
principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Issues assigned an A rating 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.
A-1
This designation 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.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3
Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what generally are known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and therefor not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). Such ratings recognize the
difference 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.
MIG 3/VMIG 3
This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4
This designation denotes adequate quality. Protection commonly regarded as
required of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
Commercial Paper Ratings
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 range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirements for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonable 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 13-36 months or the DDD, DD,
or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payments, but the margin of safety is not as great as
the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
Principal
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_____________ ______________
<S> <C> <C>
CONNECTICUT-79.4%
Connecticut:
6.90%, 3/15/2009 (Prerefunded 3/15/2000) (a)............................ $ 3,000,000 $ 3,298,410
5.50%, 3/15/2010........................................................ 3,000,000 3,007,020
6.875%, 7/15/2010 (Prerefunded 7/15/2000) (a)........................... 7,100,000 7,838,329
6.75%, 3/1/2011 (Prerefunded 3/1/2001) (a).............................. 3,000,000 3,318,540
5.50%, 5/15/2014........................................................ 2,000,000 1,951,920
5.375%, 10/1/2014....................................................... 6,500,000 6,242,795
5.50%, 5/15/2015........................................................ 3,000,000 2,912,100
Special Tax Obligation Revenue (Transportation Infrastructure):
Refunding 5.375%, 9/1/2008............................................ 2,500,000 2,504,275
6.80%, 12/1/2009 (Prerefunded 12/1/1999) (a).......................... 3,000,000 3,283,560
7.125%, 6/1/2010...................................................... 8,400,000 9,676,296
6.75%, 6/1/2011 (Prerefunded 6/1/2003) (a)............................ 8,500,000 9,466,365
Connecticut Clean Water Fund, Revenue:
7%, 1/1/2011 (Prerefunded 1/1/2001) (a)................................. 6,700,000 7,230,975
5.125%, 5/1/2018........................................................ 5,500,000 5,013,855
Connecticut Development Authority, Revenue:
First Mortgage Gross
(Elim Park Baptist Home Inc. Project) 9%, 12/1/2020................... 3,565,000 3,790,130
Health Care:
(Jerome Home Project) 8%, 11/1/2019................................... 1,940,000 2,018,395
(Masonic Charity Foundation of Connecticut) 6.50%, 8/1/2020 (Insured; AMBAC) 4,150,000 4,284,626
Life Care Facilities (Seabury Project):
Refunding 8.75%, 9/1/2006............................................. 1,625,000 1,615,965
10%, 9/1/2021......................................................... 11,175,000 11,805,941
Pollution Control
(Pfizer Inc. Project) 6.55%, 2/15/2013................................ 2,000,000 2,114,540
Water Facilities, Refunding
(Bridgeport Hydraulic Project) 5.60%, 6/1/2028 (Insured; MBIA)........ 2,600,000 2,398,916
Connecticut Health and Educational Facilities Authority, Revenue:
7%, 1/1/2020 (Insured; MBIA)............................................ 3,000,000 3,233,880
(Bridgeport Hospital, Connie Lee) 5.375%, 7/1/2025..................... 2,125,000 1,917,345
(Cherry Brook Nursing Center Project) 6%, 11/1/2022 (Insured; AMBAC).... 4,600,000 4,614,858
(Danbury Hospital) 6.50%, 7/1/2014 (Insured; MBIA)...................... 3,250,000 3,394,138
(Day Kimball Hospital) 5.375%, 7/1/2026 (Insured; FSA).................. 2,000,000 1,825,200
(Greenwich Academy) 5.75%, 3/1/2026 (Insured; FSA)...................... 3,130,000 3,027,962
(Greenwich Hospital) 5.80%, 7/1/2026 (Insured; MBIA).................... 9,365,000 9,110,740
(Hartford University):
6.75%, 7/1/2012....................................................... 3,500,000 3,507,175
8%, 7/1/2018 (Prerefunded 7/1/2003) (a)............................... 3,075,000 3,430,409
6.80%, 7/1/2022....................................................... 8,500,000 8,421,970
(Johnson Evergreen Corp.) 8.50%, 7/1/2022............................... 4,500,000 4,725,630
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ______________
CONNECTICUT (CONTINUED)
Connecticut Health and Educational Facilities Authority, Revenue (continued):
(Lawrence and Memorial Hospital)
7%, 7/1/2020 (Insured; MBIA) (Prerefunded 7/1/2000) (a)............... $ 2,500,000 $ 2,770,975
(Lutheran General Health Care System) 7.375%, 7/1/2019.................. 1,400,000 1,641,066
(Mansfield Nursing Center Project) 6%, 11/1/2022 (Insured; AMBAC)....... 2,700,000 2,708,721
(Middlesex Hospital) 6.25%, 7/1/2022 (Insured; MBIA).................... 2,500,000 2,542,050
(New Britain Memorial Hospital) 7.75%, 7/1/2022......................... 16,000,000 16,851,520
(Norwalk Hospital) 6.25%, 7/1/2022 (Insured; MBIA)...................... 3,600,000 3,681,540
(Nursing Home Program-Noble Horizon) 6%, 11/1/2022 (Insured; AMBAC)..... 1,500,000 1,504,845
(Quinnipiac College):
6%, 7/1/2013.......................................................... 6,545,000 6,077,883
7.75%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 1,000,000 1,116,680
(Refunding- Saint Francis Hospital and Medical Center)
6.20%, 7/1/2022 (Insured; MBIA)....................................... 1,725,000 1,757,430
(Sacred Heart University):
6.50%, 7/1/2016....................................................... 2,000,000 1,985,340
5.80%, 7/1/2023....................................................... 1,700,000 1,472,642
6.625%, 7/1/2026...................................................... 3,000,000 2,953,470
(Saint Raphael Hospital) 6.625%, 7/1/2014 (Insured; AMBAC).............. 2,500,000 2,629,050
(Taft School) 7.375%, 7/1/2020 (Prerefunded 7/1/2000) (a)............... 1,150,000 1,276,236
(William W. Backus Hospital):
6%, 7/1/2012.......................................................... 1,500,000 1,459,800
6.375%, 7/1/2022...................................................... 2,250,000 2,235,578
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
7.20%, 11/15/2008....................................................... 10,280,000 10,648,744
5.60%, 5/15/2014........................................................ 4,000,000 3,816,520
6.45%, 5/15/2022........................................................ 6,000,000 6,023,280
6.70%, 11/15/2022....................................................... 26,000,000 26,523,120
6.75%, 11/15/2023....................................................... 6,000,000 6,192,000
6.05%, 11/15/2025....................................................... 9,065,000 8,809,820
Connecticut Municipal Electric Energy Cooperative, Power Supply System
Revenue,
Refunding:
5%, 1/1/2011 (Insured; MBIA).......................................... 4,660,000 4,344,844
5%, 1/1/2012 (Insured; MBIA).......................................... 2,000,000 1,858,980
5%, 1/1/2013 (Insured; MBIA).......................................... 2,000,000 1,843,400
Eastern Connecticut Resource Recovery Authority, Solid Waste Revenue
(Wheelabrator Lisbon Project):
5.50%, 1/1/2014....................................................... 10,000,000 9,111,900
5.50%, 1/1/2020....................................................... 7,250,000 6,429,518
New Haven
7.40%, 8/15/2011........................................................ 1,500,000 1,623,930
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30,1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
CONNECTICUT (CONTINUED)
South Central Connecticut Regional Water Authority, Water Systems Revenue
5.75%, 8/1/2012 (Insured; FGIC)......................................... $ 6,000,000 $ 6,031,440
Stamford 6.60%, 1/15/2010................................................... 2,750,000 3,078,653
Stratford 7.30%, 3/1/2012 (Prerefunded 3/1/2001) (a)........................ 1,130,000 1,267,826
University of Connecticut 5%, 2/1/2015 (Insured; FGIC)...................... 1,250,000 1,135,825
U. S. RELATED-20.6%
Commonwealth of Puerto Rico 5.40%, 7/1/2025................................. 13,000,000 11,773,710
Puerto Rico:
(Public Improvement):
7.70%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 3,000,000 3,409,710
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)............................ 6,000,000 6,732,000
Refunding 5.50%, 7/1/2013 .............................................. 3,000,000 2,852,670
Puerto Rico Aqueduct and Sewer Authority, Revenue 6%, 7/1/2009.............. 7,250,000 7,435,310
Puerto Rico Electric Power Authority, Power Revenue 7%, 7/1/2021
(Prerefunded 7/1/2001) (a).............................................. 6,775,000 7,607,038
Puerto Rico Highway and Transportation Authority, Highway Revenue:
6.673%, 7/1/2010 (b).................................................... 3,200,000 2,872,000
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. 5,000,000 5,561,950
5.25%, 7/1/2020 (Insured; FSA).......................................... 1,750,000 1,596,998
5.50%, 7/1/2026......................................................... 5,000,000 4,597,650
Puerto Rico Industrial Medical and Environmental Pollution Control Facilities
Financing Authority, Revenue (Motorola Inc. Project) 6.75%, 1/1/2014........ 2,000,000 2,168,160
Puerto Rico Ports Authority, Special Facilities Revenue (American Airlines)
6.30%, 6/1/2023......................................................... 2,000,000 2,013,040
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities, Refunding 5.75%, 7/1/2015............................ 8,000,000 7,628,880
University of Puerto Rico, University Revenue:
5.50%, 6/1/2015 (Insured; MBIA)......................................... 5,000,000 4,881,449
5.25%, 6/1/2025 (Insured; MBIA)......................................... 3,400,000 3,136,295
Virgin Islands Public Finance Authority, Revenue, Refunding
7.25%, 10/1/2018........................................................ 2,000,000 2,104,539
_____________
TOTAL INVESTMENTS (cost $360,448,142)....................................... $370,758,285
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation FSA Financial Security Assurance
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ ______________ __________________ ____________________
<S> <C> <C> <C>
AAA Aaa AAA 36.3%
AA Aa AA 28.3
A A A 14.8
BBB Baa BBB 13.2
Not Rated (d) Not Rated (d) Not Rated (d) 7.4
____________
100.0%
============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse floater security - the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $360,448,142)-see statement..................................... $370,758,285
Interest receivable..................................................... 7,846,808
Receivable for shares of Beneficial Interest subscribed................. 133,395
Prepaid expenses........................................................ 9,644
________________
378,748,132
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 163,199
Due to Distributor...................................................... 90,636
Due to Custodian........................................................ 16,924,558
Payable for shares of Beneficial Interest redeemed...................... 66,590
Accrued expenses........................................................ 99,532 17,344,515
________________ _______________
NET ASSETS ................................................................ $361,403,617
===============
REPRESENTED BY:
Paid-in capital......................................................... $347,570,572
Accumulated undistributed net realized gain on investments.............. 3,522,902
Accumulated net unrealized appreciation on investments-Note 3........... 10,310,143
_______________
NET ASSETS at value......................................................... $361,403,617
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 27,023,443
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,265,372
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 84,734
===============
NET ASSET VALUE per share:
Class A Shares
($321,558,697/ 27,023,443 shares)..................................... $11.90
===============
Class B Shares
($38,837,586 / 3,265,372 shares)...................................... $11.89
===============
Class C Shares
($1,007,334 / 84,734 shares).......................................... $11.89
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $23,749,936
EXPENSES:
Management fee-Note 2(a).............................................. $ 2,045,864
Shareholder servicing costs-Note 2(c)................................. 1,147,331
Distribution fees-Note 2(b)........................................... 191,582
Professional fees..................................................... 56,898
Custodian fees........................................................ 38,166
Prospectus and shareholders' reports.................................. 19,462
Trustees' fees and expenses-Note 2(d)................................. 5,501
Registration fees..................................................... 2,800
Miscellaneous......................................................... 126,118
_______________
TOTAL EXPENSES.................................................... 3,633,722
______________
INVESTMENT INCOME-NET............................................. 20,116,214
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 5,701,419
Net unrealized (depreciation) on investments............................ (1,150,970)
________________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 4,550,449
_______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $24,666,663
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
__________________________________________
1995 1996
__________________ ________________
OPERATIONS:
Investment income-net................................................... $ 21,655,899 $ 20,116,214
Net realized gain (loss) on investments................................. (1,973,798) 5,701,419
Net unrealized (depreciation) on investments for the year............... (287,865) (1,150,970)
__________________ _________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 19,394,236 24,666,663
__________________ _________________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (19,881,887) (18,231,897)
Class B shares........................................................ (1,774,012) (1,877,253)
Class C shares........................................................ - (7,064)
__________________ _________________
TOTAL DIVIDENDS................................................... (21,655,899) (20,116,214)
__________________ _________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 15,947,221 14,645,030
Class B shares........................................................ 5,896,601 5,468,178
Class C shares........................................................ - 1,023,317
Dividends reinvested:
Class A shares........................................................ 11,434,147 10,502,564
Class B shares........................................................ 1,240,658 1,298,271
Class C shares........................................................ - 6,163
Cost of shares redeemed:
Class A shares........................................................ (53,507,884) (43,749,996)
Class B shares........................................................ (3,788,582) (3,727,309)
Class C shares........................................................ - (1,996)
__________________ _________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (22,777,839) (14,535,778)
__________________ _________________
TOTAL (DECREASE) IN NET ASSETS.................................. (25,039,502) (9,985,329)
NET ASSETS:
Beginning of year....................................................... 396,428,448 371,388,946
__________________ _________________
End of year............................................................. $371,388,946 $361,403,617
================== =================
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ _______________________ _______________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ _______________________
1995 1996 1995 1996 1996*
_______________ ____________ __________ __________ _______________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 1,373,091 1,212,141 503,373 453,771 84,387
Shares issued for
dividends reinvested. 983,180 869,313 106,773 107,482 515
Shares redeemed........ (4,637,620) (3,626,051) (329,539) (309,036) (168)
_______________ ____________ __________ __________ _______________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (2,281,349) (1,544,597) 280,607 252,217 84,734
=============== ============ ========== ========== ===============
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Connecticut Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $1,837 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $190,357 was
charged to the Series for the Class B shares and $1,225 was charged to the
Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $834,351, $95,178 and $409
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $59,649 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $109,381,501 and $106,401,513, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $10,310,143, consisting of $14,959,283 gross unrealized appreciation and
$4,649,140 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Connecticut Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Connecticut Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP - Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_______ _______
<S> <C> <C>
FLORIDA-95.7%
Alachua County Health Facilities Authority, Health Facilities Revenue, Refunding
(Santa Fe Healthcare Facilities Project) 7.60%, 11/15/2013.............. $ 3,500,000 $ 3,998,750
Arcadia, Water and Sewer Revenue 7.75%, 12/1/2021........................... 2,190,000 2,352,542
Brevard County Health Facilities Authority, HR
(Holmes Regional Medical Center Project) 5.70%, 10/1/2008............... 4,585,000 4,701,963
Broward County Health Facilities Authority, Revenue, Refunding
(Broward County Nursing Home) 7.50%, 8/15/2020 (LOC; Allied Irish Bank) (a) 1,000,000 1,058,270
Charlotte County, Health Care Facilities Revenue
(Charlotte Community Mental Health Project) 9.25%, 7/1/2020............. 1,635,000 1,795,917
Clay County Housing Finance Authority, SFMR
8.20%, 6/1/2021 (Collateralized; GNMA).................................. 670,000 703,453
Dade County:
Aviation Revenue:
6.55% 10/1/2013 (Insured; MBIA)....................................... 4,225,000 4,434,898
(Miami International Airport) 5.75%, 10/1/2013 (Insured; MBIA)........ 10,000,000 9,950,500
Refunding (Seaport) 5.125%, 10/1/2021 (Insured; MBIA)................... 7,500,000 6,780,225
Water and Sewer Systems Revenue 6.25%, 10/1/2011 (Insured; FGIC)........ 2,115,000 2,288,684
Dade County Health Facilities Authority, HR
(South Shore Hospital and Medical Center) 7.60%, 8/1/2024 (Insured; FHA) 2,345,000 2,528,426
Dade County Housing Finance Authority, Revenue, Refunding:
MFMR (Cutler Meadows Apartment) 6.50%, 7/1/2022 (Insured; FHA).......... 1,785,000 1,804,260
SFMR 6.70%, 4/1/2028 (Collateralized: FNMA & GNMA)...................... 4,500,000 4,540,905
Duval County Housing Finance Authority, SFMR:
7.85%, 12/1/2022 (Collateralized; GNMA)................................. 2,625,000 2,765,464
7.70%, 9/1/2024 (Collateralized; GNMA).................................. 1,460,000 1,534,460
Escambia County Housing Finance Authority, SFMR 7.80%, 4/1/2022............. 1,090,000 1,144,380
Florida, Refunding (Jacksonville Transportation) 5.30%, 7/1/2018............ 2,000,000 1,849,000
Florida Board of Education, Capital Outlay, Refunding:
5.80%, 6/1/2010......................................................... 2,000,000 2,045,080
5%, 6/1/2015............................................................ 10,300,000 9,284,317
5.125%, 6/1/2022........................................................ 4,000,000 3,543,640
Florida Division of Bond Finance Department, General Services Revenues
(Department of Natural Resources-Preservation 2000)
5.75%, 7/1/2013 (Insured; AMBAC)........................................ 7,695,000 7,726,626
Florida Housing Finance Agency:
(Brittany Rosemont Apartments) 7%, 2/1/2035............................. 6,000,000 6,357,360
Multi-Family Housing (Driftwood Terrace Project)
7.65%, 12/20/2031 (Collateralized; GNMA).............................. 3,440,000 3,645,815
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
FLORIDA (CONTINUED)
Florida Housing Finance Agency (continued):
Single Family Mortgage, Refunding 6.65%, 1/1/2024....................... $ 2,415,000 $ 2,445,984
(Turtle Creek Apartment Projects) 6.10%, 5/1/2016 (Insured; AMBAC)...... 1,000,000 1,000,840
Florida Municipal Power Agency, Revenue (All Requirements Power Supply
Project)
5.10%, 10/1/2025 (Insured; AMBAC)....................................... 5,000,000 4,434,800
Florida Turnpike Authority, Turnpike Revenue, Refunding:
5%, 7/1/2013 (Insured; FGIC)............................................ 3,750,000 3,435,788
5%, 7/1/2019 (Insured; FGIC)............................................ 3,000,000 2,666,280
Gainesville, Utility System Revenue, Refunding 5.20%, 10/1/2026............. 5,000,000 4,491,500
Greater Orlando Aviation Authority, Airport Facilities Revenue, Refunding:
5.50%, 10/1/2008 (Insured; AMBAC)....................................... 5,940,000 5,949,207
5.50%, 10/1/2013 (Insured; AMBAC)....................................... 2,750,000 2,648,498
Highlands County Health Facilities Authority, Revenue (Adventist Sunbelt Hospital)
7%, 11/15/2014.......................................................... 1,500,000 1,621,155
Hillsborough, Capital Improvement Program, Revenue, Refunding
5%, 8/1/2015 (Insured; FGIC)............................................ 3,325,000 3,009,690
Hillsborough County, Utility Revenue, Refunding:
6.625%, 8/1/2011........................................................ 4,000,000 4,247,320
7%, 8/1/2014............................................................ 4,765,000 5,116,514
Hillsborough County Aviation Authority, Revenue, Refunding (Delta Airlines):
6.80%, 1/1/2024......................................................... 2,500,000 2,570,150
7.75%, 1/1/2024......................................................... 1,500,000 1,587,435
Indian Trace Community Development District, Water and Sewer Revenue
8.50%, 4/1/1997......................................................... 151,000 155,681
Jacksonville, Excise Taxes Revenue, Refunding 6.50%, 10/1/2013 (Insured; AMBAC) 5,000,000 5,293,350
Jacksonville, Water and Sewer Revenue 5%, 10/1/2020 (Insured; MBIA)......... 3,000,000 2,668,800
Jacksonville Health Facilities Authority, HR, Refunding (Saint Luke's Hospital)
7.125%, 11/15/2020...................................................... 6,700,000 7,201,428
Lake County Resource Recovery, IDR, Refunding (NRG/Recovery Group)
5.85%, 10/1/2009........................................................ 6,000,000 5,790,600
Marion County Hospital District, Revenue, Refunding
(Munroe Regional Medical Center) 6.25%, 10/1/2012 (Insured; FGIC)....... 3,000,000 3,124,200
North Miami, Educational Facilities Revenue (Johnson & Whales University Project)
6.10%, 4/1/2013......................................................... 5,000,000 4,883,850
North Miami Health Facilities Authority, Health Facilities Revenue
(Villa Maria Nursing Housing Project) 7.50%, 9/1/2012................... 2,670,000 2,888,326
Orange County, Solid Waste Facilities Revenue 6.375%, 10/1/2007 (Insured; FGIC) 4,910,000 5,293,226
PRINCIPAL
_______ _______
Orange County Health Facilities Authority, Health Facilities Revenue
(Mental Health Service Project) 9.25%, 7/1/2020 (Prerefunded 7/1/2000) (b) $ 3,780,000 $ 4,459,379
Osceola County Industrial Development Authority, Revenue
(Community Provider Pooled Loan Program) 7.75%, 7/1/2017................ 5,235,000 5,295,674
Palm Bay, Utility Revenue, Refunding (Palm Bay Utility Corp. Project)
5%, 10/1/2022 (Insured; MBIA)........................................... 5,300,000 4,662,039
Palm Beach County:
Solid Waste Industrial Development Revenue:
(Okeelanta Power LP Project) 6.85%, 2/15/2021......................... 11,000,000 10,862,830
(Osceola Power LP) 6.85%, 1/1/2014.................................... 5,800,000 5,737,824
Water and Sewer Revenue 5%, 10/1/2010 (Insured; MBIA)................... 4,320,000 4,084,042
Palm Beach County Housing Finance Authority, Single Family Mortgage
Purchase Revenue 6.55%, 4/1/2027........................................ 2,750,000 2,770,900
Pinellas County, PCR, Refunding (Florida Power Corp.) 7.20%, 12/1/2014...... 3,000,000 3,203,820
Pinellas County Housing Finance Authority, SFMR:
7.70%, 8/1/2022......................................................... 2,810,000 2,949,207
(Multi-County Program) 6.70%, 2/1/2028 (Insured; FHA)................... 5,000,000 5,060,050
Polk County Industrial Development Authority, IDR
(IMC Fertilizer) 7.525% 1/1/2015........................................ 10,000,000 10,355,200
Reedy Creek, Improvement District 5%, 6/1/2019 (Insured; AMBAC)............. 3,325,000 2,963,539
Saint Lucie County, SWDR (Florida Power and Light Co. Project)
7.15%, 2/1/2023......................................................... 4,000,000 4,318,040
Sarasota County, Utility System Revenue, Refunding
5.25%, 10/1/2016 (Insured; FGIC)........................................ 1,000,000 931,800
Sunrise, Special Tax District Number 1, Refunding
6.375%, 11/1/2021 (LOC; Bayerische Hypotheken-und Weschel Bank) (a)..... 2,500,000 2,570,400
Tampa, Water and Sewer Revenue 5.125%, 10/1/2017 (Insured; FGIC)............ 1,000,000 908,090
U.S. RELATED-4.3%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 5,000,000 5,015,200
Virgin Islands Public Finance Authority, Revenue, Refunding 7.25%, 10/1/2018 5,400,000 5,682,258
__________
TOTAL INVESTMENTS (cost $247,491,507)....................................... $251,189,849
============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FNMA Federal National Mortgage Association MFMR Multi-Family Mortgage Revenue
GNMA Government National Mortgage Association PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<S> <C> <C> <C>
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _______ _______________ ____________________
AAA Aaa AAA 50.3%
AA Aa AA 15.3
A A A 2.6
BBB Baa BBB 10.5
BB Ba BB 5.8
Not Rated (d) Not Rated (d) Not Rated (d) 15.5
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) 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.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $247,491,507)-see statement..................................... $251,189,849
Receivable for investment securities sold............................... 4,063,458
Interest receivable..................................................... 3,753,959
Receivable for shares of Beneficial Interest subscribed................. 28,830
Prepaid expenses........................................................ 19,543
_____________
259,055,639
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 115,542
Due to Distributor...................................................... 63,611
Due to Custodian........................................................ 3,819,244
Payable for shares of Beneficial Interest redeemed...................... 461,014
Accrued expenses........................................................ 59,907 4,519,318
____________ _____________
NET ASSETS ................................................................ $254,536,321
==============
REPRESENTED BY:
Paid-in capital......................................................... $245,312,787
Accumulated undistributed net realized gain on investments.............. 5,525,192
Accumulated net unrealized appreciation on investments-Note 3........... 3,698,342
_____________
NET ASSETS at value......................................................... $254,536,321
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 15,710,599
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,867,187
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 2,430
===============
NET ASSET VALUE per share:
Class A Shares
($227,478,154 / 15,710,599 shares).................................... $14.48
========
Class B Shares
($27,023,005 / 1,867,187 shares)...................................... $14.47
========
Class C Shares
($35,162 / 2,430 shares).............................................. $14.47
========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $17,013,955
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,504,679
Shareholder servicing costs-Note 2(c)................................. 855,159
Distribution fees-Note 2(b)........................................... 134,701
Professional fees..................................................... 78,027
Custodian fees........................................................ 29,329
Prospectus and shareholders' reports.................................. 6,418
Trustees' fees and expenses-Note 2(d)................................. 3,746
Registration fees..................................................... 1,892
Miscellaneous......................................................... 18,676
__________
TOTAL EXPENSES.................................................. 2,632,627
__________
INVESTMENT INCOME-NET........................................... 14,381,328
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,336,711
Net unrealized (depreciation) on investments............................ (2,819,982)
__________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 3,516,729
__________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $17,898,057
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
_____________ ___________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 16,368,966 $ 14,381,328
Net realized gain on investments........................................ 4,410,983 6,336,711
Net unrealized (depreciation) on investments for the year............... (2,782,324) (2,819,982)
_____________ ___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 17,997,625 17,898,057
_____________ ___________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (15,149,356) (13,092,008)
Class B shares........................................................ (1,219,610) (1,288,976)
Class C shares........................................................ _ (344)
Net realized gain on investments:
Class A shares........................................................ (716,166) (3,306,553)
Class B shares........................................................ (65,057) (370,770)
Class C shares........................................................ _ (14)
_____________ ___________
TOTAL DIVIDENDS................................................... (17,150,189) (18,058,665)
_____________ ___________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 12,537,474 9,844,149
Class B shares........................................................ 5,009,096 4,401,949
Class C shares........................................................ _ 36,586
Dividends reinvested:
Class A shares........................................................ 5,971,345 6,539,239
Class B shares........................................................ 509,461 644,364
Class C shares........................................................ _ 107
Cost of shares redeemed:
Class A shares........................................................ (56,564,392) (41,280,587)
Class B shares........................................................ (2,889,736) (3,176,969)
_____________ ___________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (35,426,752) (22,991,162)
_____________ ___________
TOTAL (DECREASE) IN NET ASSETS.................................. (34,579,316) (23,151,770)
NET ASSETS:
Beginning of year....................................................... 312,267,407 277,688,091
_____________ ___________
End of year............................................................. $277,688,091 $254,536,321
============ ===============
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 877,487 658,995 350,773 295,615 2,423
Shares issued for dividends
reinvested........... 419,064 437,472 35,744 43,121 7
Shares redeemed........ (3,988,619) (2,776,392) (202,194) (214,088) _
_________ _______ _______ _______ _______
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (2,692,068) (1,679,925) 184,323 124,648 2,430
============ ============ ========== ========== ============
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Florida Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $2,593 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $134,640 was
charged to the Series for the Class B shares and $61 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the year ended April 30, 1996, $616,605, $67,320 and $20
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $44,055 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $144,987,747 and $171,615,659, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $3,698,342, consisting of $7,261,047 gross unrealized appreciation and
$3,562,705 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Florida Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Florida Series at April 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the indicated years, in conformity with generally accepted accounting
principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
__________ __________
<S> <C> <C>
GEORGIA-97.9%
Albany, Sewer System Revenue 6.50%, 7/1/2009 (Insured; MBIA)................ $ 100,000 $ 109,094
Albany-Dougherty Inner City Authority, Revenue, Refunding 6%, 2/1/2011...... 200,000 203,008
Athens-Clarke County Unified Government, Water and Sewer Revenue, Refunding
5.875%, 1/1/2008 (Insured; FGIC)........................................ 265,000 273,888
Atlanta:
Airport Facilities Revenue:
6.50%, 1/1/2013....................................................... 150,000 154,929
6%, 1/1/2014 (Insured; AMBAC)......................................... 1,000,000 1,000,260
COP (Atlanta Pretrial Detention Center Project) 6.25%, 12/1/2011 (Insured; MBIA) 300,000 311,370
GO 6.10%, 12/1/2019..................................................... 1,000,000 1,008,860
School Improvement 5.60%, 12/1/2018..................................... 1,000,000 957,360
Atlanta Downtown Development Authority, Revenue, Refunding
(Underground Atlanta Project) 6.25%, 10/1/2016.......................... 200,000 205,354
Barrow County School District 5.60%, 2/1/2015 (Insured; MBIA)............... 1,000,000 977,780
Bartow County, Water and Sewer Revenue, Refunding
6%, 9/1/2015 (Insured; AMBAC)........................................... 450,000 455,989
Chatham County School District 6.25%, 8/1/2016.............................. 1,000,000 1,098,460
Clayton County and Clayton County Water Authority, Water and Sewer Revenue,
Refunding 5.60%, 5/1/2013 (Insured; AMBAC).............................. 1,200,000 1,191,816
Columbus, Water and Sewer Revenue, Refunding:
6.25%, 5/1/2011 (Insured; FGIC)......................................... 155,000 162,114
5.70%, 5/1/2020......................................................... 500,000 478,905
Columbus Hospital Authority, Revenue Certificates (Saint Francis Hospital)
6.20%, 1/1/2010 (Insured; MBIA)......................................... 200,000 207,090
Coweta County School System:
6.35%, 8/1/2012......................................................... 100,000 104,388
Refunding 5.75%, 2/1/2010 (Insured; FGIC)............................... 200,000 203,348
Dekalb County Development Authority, Revenue:
Refunding (Emory University Project) 5.25%, 11/1/2015................... 1,000,000 943,500
(Wesley Homes, Inc.-Budd Terrace Project)
6.75%, 10/1/2013 (LOC; Wachovia Bank of Georgia, N.A.) (a)............ 200,000 207,382
Dekalb County Health Facilities, GO 5.50%, 1/1/2020......................... 1,000,000 942,550
Dekalb County School District, Refunding 5.60%, 7/1/2010.................... 500,000 503,125
Fayette County School District 6.125%, 3/1/2015............................. 500,000 514,455
Fulco Hospital Authority, Revenue Anticipation Certificates
(Georgia Baptist Healthcare) 6.25%, 9/1/2013............................ 250,000 241,265
Fulton County, Water and Sewer Revenue, Refunding
6.375%, 1/1/2014 (Insured; FGIC)........................................ 290,000 311,759
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ __________
GEORGIA (CONTINUED)
Fulton County Building Authority, Revenue, Refunding
(County Government and Health Facilities Project) 6.125%, 1/1/2011..... $ 300,000 $ 311,193
Fulton County Development Authority, Special Facilities Revenue, Refunding
(Delta Air Lines Inc., Project) 6.95%, 11/1/2012........................ 245,000 253,698
Fulton County Hospital Authority, Revenue Anticipation Certificates
(Northside Hospital Project)
6.625%, 10/1/2016 (Insured; MBIA) (Prerefunded 10/1/2002) (b)........... 200,000 223,430
Gainesville, Water and Sewer Revenue, Refunding 6%, 11/15/2012 (Insured; FGIC) 300,000 315,981
Gainesville and Hall County Hospital Authority, Revenue Anticipation
Certificates
(Northeast Healthcare Project) 6.25%, 10/1/2012 (Insured; MBIA)......... 100,000 104,004
Georgia, GO:
6.30%, 3/1/2008......................................................... 100,000 110,042
6.65%, 3/1/2009......................................................... 1,000,000 1,128,960
5.65%, 3/1/2012......................................................... 1,000,000 1,012,570
Georgia Housing and Finance Authority, Revenue:
(Home Ownership Opportunity Program) 6.50%, 12/1/2011................... 130,000 132,817
Single Family Mortgage 6.50%, 12/1/2017 (Insured; FHA).................. 1,000,000 1,007,270
Georgia Medical Center Hospital Authority, Revenue
(Columbus Regional Healthcare System) 5.50%, 8/15/2015 (Insured; MBIA).. 2,200,000 2,087,206
Georgia Municipal Electric Authority:
Power Revenue, Refunding:
5.50%, 1/1/2012....................................................... 1,000,000 956,420
6.125%, 1/1/2014 (Insured; FGIC)...................................... 300,000 305,415
Special Obligation (First Crossover-General Resolution) 6.50%, 1/1/2020. 100,000 105,548
Glynn County, Board of Education 5.10%, 7/1/2011............................ 500,000 471,610
Hancock County, Various Purpose Asset Guaranty 6.70%, 4/1/2015.............. 1,000,000 1,042,960
Henry County and Henry County Water and Sewer Authority, Revenue, Refunding
6.50%, 2/1/2011 (Insured; MBIA)......................................... 100,000 105,748
Marietta Development Authority, Revenue (First Mortgage-Life College)
5.75%, 9/1/2014 (Insured; CGIC)......................................... 850,000 831,564
Metropolitan Atlanta Rapid Transportation Authority, Sales Tax Revenue, Refunding
6.25%, 7/1/2020 (Insured; AMBAC)........................................ 300,000 317,604
Monroe County Development Authority, PCR (Oglethorpe Power Corp. Scherer
Project)
6.80%, 1/1/2011......................................................... 100,000 108,026
Private Colleges and Universities Authority, Revenue, Refunding
(Spellman College Project) 6.20%, 6/1/2014 (Insured; FGIC).............. 1,000,000 1,037,510
Roswell, GO 5.65%, 2/1/2011................................................. 1,000,000 1,009,610
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_____________ __________
GEORGIA (CONTINUED)
Savannah Economic Development Authority, PCR, Refunding (Union Camp Corp. Project)
6.80%, 2/1/2012......................................................... $ 200,000 $ 214,074
Savannah Hospital Authority, Revenue, Refunding (Saint Joseph's Hospital
Project)
6.20%, 7/1/2023......................................................... 1,000,000 964,940
Sugar Hill Public Utility, Revenue, Refunding 5.90%, 1/1/2014 (Insured; FSA) 500,000 498,595
U.S. RELATED-2.1%
Puerto Rico, GO, Refunding 6%, 7/1/2014..................................... 600,000 591,786
______
TOTAL INVESTMENTS (cost $27,683,090)........................................ $28,016,630
______
______
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation GO General Obligation
CGIC Capital Guaranty Insurance Company LOC Letter of Credit
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration PCR Pollution Control Revenue
FSA Financial Security Assurance
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_________ ______ _________________ ___________________
<S> <C> <C> <C>
AAA Aaa AAA 49.1%
AA Aa AA 35.3
A A A 14.7
BB Ba BB .9
_____
100.0%
=====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) 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.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $27,683,090)-see statement...................................... $28,016,630
Cash.................................................................... 110,909
Interest receivable..................................................... 479,345
Receivable for shares of Beneficial Interest subscribed................. 10,000
Prepaid expenses........................................................ 1,384
__________
28,618,268
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $12,932
Due to Distributor...................................................... 14,221
Payable for shares of Beneficial Interest redeemed...................... 27,051
Accrued expenses........................................................ 24,167 78,371
_______ ___________
NET ASSETS.................................................................. $28,539,897
___________
___________
REPRESENTED BY:
Paid-in capital......................................................... $28,940,292
Accumulated net realized (loss) on investments.......................... (733,935)
Accumulated net unrealized appreciation on investments-Note 3........... 333,540
__________
NET ASSETS at value......................................................... $28,539,897
___________
___________
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 639,462
___________
___________
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,539,970
___________
___________
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 6,723
___________
___________
NET ASSET VALUE per share:
Class A Shares
($8,346,358 / 639,462 shares)......................................... $13.05
__________
__________
Class B Shares
($20,105,797 / 1,539,970 shares)...................................... $13.06
__________
__________
Class C Shares
($87,742 / 6,723 shares).............................................. $13.05
__________
__________
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $1,673,453
EXPENSES:
Management fee-Note 2(a).............................................. $ 160,860
Shareholder servicing costs-Note 2(c)................................. 103,832
Distribution fees-Note 2(b)........................................... 101,771
Custodian fees........................................................ 3,641
Professional fees..................................................... 3,061
Prospectus and shareholders' reports.................................. 1,092
Registration fees..................................................... 795
Trustees' fees and expenses-Note 2(d)................................. 356
Miscellaneous......................................................... 4,655
______
TOTAL EXPENSES.................................................. 380,063
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 59,898
______
NET EXPENSES.................................................... 320,165
__________
INVESTMENT INCOME-NET........................................... 1,353,288
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(205,254)
Net unrealized appreciation on investments.............................. 774,119
______
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 568,865
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,922,153
___________
___________
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
___________________
1995 1996
_______ ______
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 1,478,725 $ 1,353,288
Net realized (loss) on investments...................................... (508,036) (205,254)
Net unrealized appreciation on investments for the year................. 667,389 774,119
_________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 1,638,078 1,922,153
_________ ____________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (548,712) (443,972)
Class B shares........................................................ (930,013) (908,818)
Class C shares........................................................ - (498)
_________ ____________
TOTAL DIVIDENDS................................................... (1,478,725) (1,353,288)
_________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 698,373 326,483
Class B shares........................................................ 4,788,621 2,305,085
Class C shares........................................................ - 88,634
Dividends reinvested:
Class A shares........................................................ 386,985 316,447
Class B shares........................................................ 479,506 438,970
Class C shares........................................................ - 498
Cost of shares redeemed:
Class A shares........................................................ (2,172,832) (1,482,789)
Class B shares........................................................ (2,227,045) (2,436,019)
_________ ____________
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 1,953,608 (442,691)
========= ============
TOTAL INCREASE IN NET ASSETS.................................... 2,112,961 126,174
NET ASSETS:
Beginning of year....................................................... 26,300,762 28,413,723
_________ ____________
End of year............................................................. $28,413,723 $28,539,897
_________ ____________
_________ ____________
</TABLE>
<TABLE>
<CAPTION>
SHARES
_____________________________________________________________________
CLASS A CLASS B CLASS C
________________________ ________________________ ___________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
________________________ ________________________
1995 1996 1995 1996 1996*
__________ ________ _______ _______ __________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 56,480 24,765 380,245 173,357 6,685
Shares issued for
dividends reinvested. 30,950 23,848 38,336 33,082 38
Shares redeemed........ (178,009) (111,113) (180,856) (183,789) -
________ _________ _________ _________ ________
NET INCREASE
(DECREASE)
IN SHARES
OUTSTANDING.... (90,579) (62,500) 237,725 22,650 6,723
________ _________ _________ _________ ________
________ _________ _________ _________ ________
_________________________
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series, including the Georgia Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax-exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Series has an unused capital loss carryover of approximately $648,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1996. The carryover
does not include net realized securities losses from November 1, 1995 through
April 30, 1996 which are treated, for Federal income tax purposes, as arising in
fiscal 1997. If not applied, $14,625 of the carryover expires in fiscal 2002,
$366,375 of the carryover expires in fiscal 2003 and $267,000 of the carryover
expires in fiscal 2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager had
undertaken from May 1, 1995 through July 6, 1995 to reimburse all fees and
expenses of the series (excluding 12b-1 distribution plan fees, Shareholder
Services Plan fees and certain expenses as described above), and thereafter
through March 17, 1996, to reduce the management fee and reimburse such excess
expenses paid by the Series, to the extent that the Series' aggregate expenses
(excluding 12b-1 distribution plan fees and certain expenses as described above)
exceeded specified annual percentages of the Series' average daily net assets.
The Manager has currently undertaken from March 18, 1996 through April 30, 1997
to reduce the management fee or reimburse such excess expenses paid by the
Series, to the extent that the Series' aggregate annual expenses (excluding
12b-1 distribution plan fees and certain expenses as described above) exceed an
annual rate of 1.25 of 1% of the value of the Series' average daily net assets.
The reduction in management fee, pursuant to the undertakings, amounted to
$59,898 for the year ended April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $83 during the year ended April 30,1996 from commissions earned on
sales of the Series' shares.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $101,671 was
charged to the Series for the Class B shares and $100 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $22,250, $50,835 and $33 were
charged to Class A, Class B and Class C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $5,294 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $9,554,141 and $10,052,890, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $333,540, consisting of $612,291 gross unrealized appreciation and $278,751
gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Georgia Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Georgia Series at April 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the indicated years, in conformity with generally accepted accounting
principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.8% AMOUNT VALUE
_______ _______
<S> <C> <C>
MARYLAND-84.0%
Anne Arundel County,
Consolidated Water and Sewer 7.75%, 3/15/2008........................... $ 1,000,000 $ 1,095,570
Baltimore:
7%, 10/15/2007 (Insured; MBIA).......................................... 1,500,000 1,740,000
7.15%, 10/15/2008....................................................... 1,275,000 1,478,554
Port Facilities Revenue (Consolidated Coal Sales) 6.50%, 12/1/2010...... 9,740,000 10,484,915
Baltimore City Housing Corp., MFHR, Refunding
7.25%, 7/1/2023 (Collateralized; FNMA).................................. 3,245,000 3,386,255
Baltimore County:
Mortgage Revenue:
(First Mortgage - Pickersgill) 7.70%, 1/1/2021........................ 3,000,000 3,120,750
(Refunding - Tindeco Wharf Project) 6.50%, 12/20/2012 (Collateralized; GNMA) 1,500,000 1,553,940
PCR Refunding (Bethlehem Steel Corp. Project):
7.50%, 6/1/2015....................................................... 3,500,000 3,586,660
7.55%, 6/1/2017....................................................... 2,500,000 2,581,650
Gaithersburg, Hospital Facilities Improvement Revenue, Refunding (Shady
Grove)
6.50%, 9/1/2012 (Insured; FSA).......................................... 10,000,000 11,005,100
Howard County:
COP 8.15%, 2/15/2020.................................................... 605,000 797,154
EDR, Refunding (M.O.R. XIV Associates Project) 7.75%, 6/1/2012.......... 2,500,000 2,669,150
Howard County Metropolitan District 6.125%, 5/15/2023....................... 2,000,000 2,058,640
Kent County, College Revenue, Refunding (Washington College Project)
7.70%, 7/1/2018......................................................... 1,750,000 1,897,052
Maryland Community Development Administration,
Department of Housing and Community Development:
MFHR:
5.95%, 5/15/2013.................................................. 10,000,000 10,006,600
6.50%, 5/15/2013.................................................. 5,000,000 5,165,300
8.875%, 5/15/2021................................................. 360,000 365,069
7.30%, 5/15/2023.................................................. 2,205,000 2,308,370
6.85%, 5/15/2033.................................................. 5,000,000 5,126,900
6.70%, 5/15/2036 (Insured; FHA)................................... 5,415,000 5,541,982
Single Family Program:
7.40%, 4/1/2009................................................... 1,000,000 1,054,950
6.95%, 4/1/2011................................................... 6,125,000 6,385,312
7.70%, 4/1/2015................................................... 3,590,000 3,723,979
6.55%, 4/1/2026................................................... 7,500,000 7,610,475
6.75%, 4/1/2026................................................... 3,650,000 3,723,693
7.375%, 4/1/2026.................................................. 2,000,000 2,059,000
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MARYLAND (CONTINUED)
Maryland Community Development Administration,
Department of Housing and Community Development (continued):
Single Family Program (continued):
Zero Coupon, 4/1/2029............................................. $ 85,075,000 $ 5,887,190
7.625%, 4/1/2029.................................................. 7,545,000 7,829,597
7.45%, 4/1/2032................................................... 6,410,000 6,686,591
Maryland Department of Transportation, Consolidated Transportation
6.375%, 9/1/2006........................................................ 5,000,000 5,354,450
Maryland Economic Development Corp., Revenue
(Health and Mental Hygiene Providers Facilities Acquisition Program):
8.375%, 3/1/2013...................................................... 4,415,000 4,684,006
8.75%, 3/1/2017....................................................... 5,150,000 5,462,863
Maryland Health and Higher Educational Facilities Authority, Revenue:
(Bon Secours Hospital) 7.375%, 9/1/2017 (Prerefunded 7/1/2000) (a)...... 2,575,000 2,822,406
(Frederick Memorial Hospital) 5%, 7/1/2023 (Insured; FGIC) (b).......... 2,870,000 2,506,428
(Refunding - Doctors Community Hospital) 5.50%, 7/1/2024................ 4,700,000 4,010,181
(Refunding - Francis Scott Key Medical Center) 5%, 7/1/2023 (Insured; FGIC) 1,000,000 873,320
(Refunding - Memorial Hospital of Cumberland) 6.50%, 7/1/2017 (Insured; MBIA) 1,000,000 1,022,430
(Refunding - Roland Park Project) 7.75%, 7/1/2012....................... 2,230,000 2,355,304
(Refunding - Suburban Hospital) 5.125%, 7/1/2021 (Insured; AMBAC)....... 4,700,000 4,199,732
(Union Hospital of Cecil County) 6.70%, 7/1/2009........................ 2,320,000 2,381,039
(University of Maryland Medical Systems):
7%, 7/1/2022 (Insured; FGIC).......................................... 4,500,000 5,225,355
Refunding:
5.40%, 7/1/2008 (Insured; FGIC)................................... 2,625,000 2,627,993
(Northwest Hospital Center) 5.25%, 7/1/2013 (Insured; AMBAC)...... 6,500,000 6,103,955
Maryland Industrial Development Financing Authority, EDR
(Medical Waste Association) 8.75%, 11/15/2010........................... 750,000 750,000
Maryland Local Government Insurance Trust, Capitalization Program, COP
7.125%, 8/1/2009........................................................ 3,250,000 3,551,535
Maryland National Capital Park and Planning Commission,
Prince Georges County, Refunding
(Park Aquisition and Development) 5.125%, 7/1/2010...................... 1,990,000 1,917,246
Maryland Stadium Authority, Sports Facility LR 7.60%, 12/15/2019............ 5,250,000 5,739,930
Maryland State and Local Facilities 5.125%, 10/15/2010...................... 4,635,000 4,479,218
Maryland Transportation Authority, Transportation Facilities Project Revenue
Refunding 5.70%, 7/1/2005............................................... 3,700,000 3,884,186
Maryland Water Quality Financing Administration, Revolving Loan Fund Revenue:
6.70%, 9/1/2013 (Prerefunded 9/1/2001) (a).............................. 1,200,000 1,332,612
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MARYLAND (CONTINUED)
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue (continued):
7.10%, 9/1/2013 (Prerefunded 9/1/2001) (a)............................ $ 600,000 $ 676,794
Montgomery County, PCR, Refunding (Potomac Electric Power Company)
5.375%, 2/15/2024 (Insured; MBIA)....................................... 8,750,000 8,136,538
Montgomery County Housing Opportunities Commission, Revenue:
Multi-Family Mortgage:
7.05%, 7/1/2032....................................................... 2,485,000 2,570,260
7.375%, 7/1/2032...................................................... 4,630,000 4,831,729
Single Family Mortgage:
7.375%, 7/1/2017...................................................... 1,835,000 1,939,228
6.625%, 7/1/2026...................................................... 3,750,000 3,825,150
Montgomery County Revenue Authority, LR (Olney Indoor Swim Center Project)
6.30%, 7/15/2012 (Prerefunded 7/15/2000) (a)............................ 2,110,000 2,284,307
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project):
6%, 7/1/2006.......................................................... 6,170,000 6,334,739
6%, 7/1/2008.......................................................... 3,690,000 3,737,343
6.20%, 7/1/2010....................................................... 8,650,000 8,724,304
Prince Georges County:
Consolidated Public Improvement:
5.50%, 1/1/2012 (Insured; MBIA)....................................... 3,000,000 2,973,360
Refunding 6.75%, 7/1/2010 (Prerefunded 7/1/2001) (a).................. 1,170,000 1,266,069
PCR, Refunding (Potomac Electric Project):
5.75%, 3/15/2010...................................................... 5,250,000 5,339,093
6%, 9/1/2022.......................................................... 3,750,000 3,790,763
Prince Georges County Housing Authority:
Mortgage Revenue, Refunding:
(New Keystone Apartment Project) 6.80%, 7/1/2025 (Insured: FHA & MBIA) 4,300,000 4,467,829
(Stevenson Apartments Project) 6.35%, 7/20/2020 (Collateralized; GNMA) 3,000,000 3,055,890
SFMR 6.60%, 12/1/2025 (Collateralized: FNMA & GNMA)..................... 4,660,000 4,745,464
University of Maryland, System Auxiliary Facility and Tuition Revenue:
5.375%, 4/1/2009........................................................ 2,500,000 2,502,500
6.50%, 10/1/2012 (Prerefunded 10/1/2002) (a)............................ 1,420,000 1,575,802
Washington County, Public Improvement
4.875%, 1/1/2014 (Insured; FGIC)........................................ 1,450,000 1,299,142
Washington Suburban Sanitary District, Refunding
(Water Supply) 5%, 6/1/2011............................................. 1,200,000 1,128,996
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
U. S. RELATED-14.8%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ $ 4,000,000 $ 4,012,160
Guam Power Authority, Revenue 6.30%, 10/1/2012.............................. 3,400,000 3,346,892
Puerto Rico Commonwealth 5.85%, 7/1/2009.................................... 5,000,000 5,046,350
Puerto Rico Commonwealth Aqueduct and Sewer Authority, Revenue, Refunding
5%, 7/1/2019............................................................ 6,000,000 5,196,420
Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue:
5.40%, 7/1/2006 (Insured; FSA).......................................... 11,000,000 11,022,770
5.50%, 7/1/2013......................................................... 4,000,000 3,822,160
Refunding:
5.25%, 7/1/2021 (c)................................................... 2,500,000 2,206,325
5%, 7/1/2022.......................................................... 2,080,000 1,764,630
Puerto Rico Public Buildings Authority, Revenue, Refunding 5.70%, 7/1/2009.. 3,500,000 3,543,400
University of Puerto Rico, University Revenue 5.25%, 6/1/2025 (Insured; MBIA) 7,775,000 7,171,971
____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $307,100,599)................... $314,552,965
==============
SHORT-TERM MUNICIPAL INVESTMENTS-1.2%
MARYLAND-.1%
Frederick, VRDN 3.90% (LOC; Fuji Bank and Trust Company) (d,e).............. $ 300,000 $ 300,000
U.S. RELATED-1.1%
Puerto Rico Electric Power Authority, Power Revenue 3.32% (Insured; FSA) (f) 3,600,000 3,600,000
____________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $3,900,000).................... $ 3,900,000
==============
TOTAL INVESTMENTS-100.0% (cost $311,000,599)................................ $318,452,965
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation LR Lease Revenue
EDR Economic Development Revenue MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association PCR Pollution Control Revenue
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GNMA Government National Mortgage Association VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<S> <C> <C> <C>
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
____ ________ ___________________ ______________________
AAA Aaa AAA 30.8%
AA Aa AA 35.2
A A A 21.9
BBB Baa BBB 4.9
F1+ & F1 MIG1, VMIG1 & P1 SP1 & A1 .1
Not Rated (h) Not Rated (h) Not Rated (h) 7.1
__________
100.0%
===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Wholly held by the custodian in a segregated account as collateral
for a delayed-delivery security.
(c) Purchased on a delayed-delivery basis.
(d) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(e) Secured by letters of credit.
(f) Inverse floater security - the interest rate is subject to change
periodically.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(i) At April 30, 1996, the Series had $103,850,755 (31.9% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from housing projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $311,000,599)-see statement..................................... $318,452,965
Cash.................................................................... 1,251,041
Interest receivable..................................................... 5,430,384
Receivable for investment securities sold............................... 2,677,860
Receivable for shares of Beneficial Interest subscribed................. 196,474
Prepaid expenses........................................................ 8,469
___________
328,017,193
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 147,272
Due to Distributor...................................................... 83,750
Payable for investment securities purchased............................. 2,242,850
Payable for shares of Beneficial Interest redeemed...................... 393,595
Accrued expenses........................................................ 65,973 2,933,440
____________ _____________
NET ASSETS.................................................................. $325,083,753
=============
REPRESENTED BY:
Paid-in capital......................................................... $314,643,536
Accumulated undistributed net realized gain on investments.............. 2,987,851
Accumulated net unrealized appreciation on investments-Note 3........... 7,452,366
___________
NET ASSETS at value......................................................... $325,083,753
=============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 22,367,145
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,244,429
=============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 2,094
=============
NET ASSET VALUE per share:
Class A Shares
($283,877,760 / 22,367,145 shares).................................... $12.69
========
Class B Shares
($41,179,420 / 3,244,429 shares)...................................... $12.69
========
Class C Shares
($26,573 / 2,094 shares).............................................. $12.69
========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 20,680,770
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,852,002
Shareholder servicing costs-Note 2(c)................................. 1,067,466
Distribution fees-Note 2(b)........................................... 194,102
Professional fees..................................................... 48,325
Custodian fees........................................................ 36,892
Prospectus and shareholders' reports.................................. 13,072
Registration fees..................................................... 6,769
Trustees' fees and expenses-Note 2(d)................................. 4,732
Miscellaneous......................................................... 23,089
___________
TOTAL EXPENSES.................................................. 3,246,449
____________
INVESTMENT INCOME-NET........................................... 17,434,321
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $4,318,992
Net unrealized appreciation on investments.............................. 1,867,438
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 6,186,430
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $23,620,751
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
________________________________
1995 1996
______________ ______________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 19,487,297 $ 17,434,321
Net realized gain on investments........................................ 874,479 4,318,992
Net unrealized appreciation on investments for the year................. 276,297 1,867,438
______________ ______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 20,638,073 23,620,751
______________ ______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (17,819,972) (15,612,512)
Class B shares........................................................ (1,667,325) (1,821,592)
Class C shares........................................................ - (217)
Net realized gain on investments:
Class A shares........................................................ - (1,739,958)
Class B shares........................................................ - (229,505)
Class C shares........................................................ - (6)
______________ ______________
TOTAL DIVIDENDS................................................... (19,487,297) (19,403,790)
______________ ______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 15,871,084 11,106,487
Class B shares........................................................ 7,200,284 7,992,863
Class C shares........................................................ - 27,000
Dividends reinvested:
Class A shares........................................................ 11,260,663 11,154,241
Class B shares........................................................ 1,087,620 1,358,026
Class C shares........................................................ - 219
Cost of shares redeemed:
Class A shares........................................................ (61,788,292) (44,093,946)
Class B shares........................................................ (3,903,364) (3,601,826)
______________ ______________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (30,272,005) (16,056,936)
______________ ______________
TOTAL (DECREASE) IN NET ASSETS.................................. (29,121,229) (11,839,975)
NET ASSETS:
Beginning of year....................................................... 366,044,957 336,923,728
______________ ______________
End of year............................................................. $336,923,728 $325,083,753
============ ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________ ____________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 1,283,464 860,692 582,210 620,596 2,077
Shares issued for
dividends reinvested. 913,405 863,509 88,247 105,093 17
Shares redeemed........ (5,049,171) (3,429,459) (321,839) (279,793) -
_________ _______ _______ _______ _______
NET INCREASE
(DECREASE)
IN SHARES
OUTSTANDING.... (2,852,302) (1,705,258) 348,618 445,896 2,094
============ ============ ========== ========== ============
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated September 3,1996.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Maryland Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $1,197 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $194,067 was
charged to the Series for the Class B shares and $35 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the year ended April 30, 1996, $744,774, $97,033 and $12
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $62,934 for the period from December 1,
1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $137,715,503 and $160,233,158, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $7,452,366, consisting of $10,271,631 gross unrealized appreciation and
$2,819,265 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Maryland Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Maryland Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_______ _______
<S> <C> <C>
MASSACHUSETTS-81.7%
Boston Industrial Development Financing Authority, Sewer Facility Revenue
(Harbor Electric Energy Co. Project) 7.375%, 5/15/2015.................. $ 2,500,000 $ 2,681,625
Leominster 7.50%, 4/1/2009 (Insured; MBIA, Prerefunded 4/1/2000) (a)........ 1,275,000 1,430,193
Lynn Water and Sewer Commission, General Revenue
7.25%, 12/1/2010 (Insured; MBIA, Prerefunded 12/1/2000) (a)............. 1,000,000 1,125,740
Massachusetts Bay Transportation Authority:
7%, 3/1/2021............................................................ 1,000,000 1,141,620
7.053%, 3/1/2021 (Insured; MBIA) (b,c).................................. 2,300,000 1,940,625
Massachusetts Commonwealth:
7.25%, 3/1/2000 (Insured; FGIC)......................................... 650,000 721,903
7%, 8/1/2012 (Prerefunded 8/1/2001) (a)................................. 1,850,000 2,074,368
Massachusetts Education Loan Authority, Education Loan Revenue
7.75%, 1/1/2008 (Insured; MBIA)......................................... 1,220,000 1,240,923
Massachusetts Health and Educational Facilities Authority, Revenue:
(Cooley Dickinson Hospital) 5.50%, 11/15/2018 (Insured; AMBAC).......... 3,500,000 3,274,915
(Medical Center of Central Massachusetts) 7.10%, 7/1/2021............... 1,000,000 1,064,500
(New England Deaconess Hospital) 6.875%, 4/1/2022....................... 6,000,000 6,271,020
(Refunding - Milton Hospital) 7%, 7/1/2016 (Insured; MBIA).............. 2,050,000 2,209,613
(South Shore Hospital) 7.50%, 7/1/2020
(Insured; MBIA, Prerefunded 7/1/2000) (a)............................. 2,000,000 2,253,540
(University Hospital) 7.25%, 7/1/2019 (Insured; MBIA)................... 2,750,000 2,995,988
Massachusetts Housing Finance Agency, Single Family Housing Revenue:
7.80%, 12/1/2005........................................................ 875,000 922,197
7.90%, 6/1/2014......................................................... 880,000 932,738
7.95%, 6/1/2023......................................................... 1,930,000 2,033,969
Massachusetts Industrial Finance Agency, Revenue:
(Brooks School) 5.95%, 7/1/2023......................................... 1,000,000 980,770
(Provider Lease Program) 8.75%, 7/15/2009............................... 685,000 722,504
(Water Treatment - American Hingham) 6.95%, 12/1/2035................... 3,000,000 3,011,580
Massachusetts Municipal Wholesale Electric Co., Power Supply Systems Revenue
6.125%, 7/1/2019........................................................ 1,200,000 1,180,920
Massachusetts Port Authority, Revenue:
Refunding 5%, 7/1/2018.................................................. 3,680,000 3,250,213
Special Project (Harborside Hyatt) 10%, 3/1/2026........................ 3,000,000 3,369,570
Massachusetts Water Pollution Abatement Trust (Pool Loan Program) 5.70%, 2/1/2015 1,300,000 1,292,317
Massachusetts Water Resources Authority:
7.625%, 4/1/2014 (Prerefunded 4/1/2000) (a)............................. 750,000 844,905
5%, 12/1/2016 (Insured; MBIA)........................................... 3,000,000 2,701,920
5%, 12/1/2025 (Insured; MBIA)........................................... 5,400,000 4,699,782
South Essex Sewer District, Refunding 5.25%, 6/15/2024 (Insured; MBIA)...... 1,000,000 913,140
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
U. S. RELATED-18.3%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ $ 1,500,000 $ 1,504,560
Puerto Rico Commonwealth:
5.40%, 7/1/2025......................................................... 2,000,000 1,811,340
Public Improvement 6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)........... 1,000,000 1,122,000
Refunding:
6%, 7/1/2014.......................................................... 2,000,000 1,972,620
5.375%, 7/1/2022 (Insured; MBIA)...................................... 2,500,000 2,352,825
Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue:
6.573%, 7/1/2009 (b).................................................. 1,000,000 905,000
6.673%, 7/1/2010 (b).................................................. 1,000,000 897,500
Puerto Rico Public Buildings Authority,
Guaranteed Government Facilities Revenue 6.25%, 7/1/2015 (Insured; AMBAC) 1,100,000 1,177,231
Virgin Islands Public Finance Authority, Revenue, Refunding
7.25%, 10/1/2018........................................................ 1,000,000 1,052,270
__________
TOTAL INVESTMENTS (cost $69,082,072)........................................ $70,078,444
============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _______ _______________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 46.2%
AA Aa AA 10.2
A A A 23.5
BBB Baa BBB 12.8
Not Rated (e) Not Rated (e) Not Rated (e) 7.3
________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse floater security-the interest rate is subject to change
periodically.
(c) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1996, this security amounted to $1,940,625 or 2.6% of net assets.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(f) At April 30, 1996, 32.2% of the Series' net assets are insured by
MBIA.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $69,082,072)-see statement...................................... $70,078,444
Cash.................................................................... 2,505,274
Interest receivable..................................................... 1,377,601
Receivable for shares of Beneficial Interest subscribed................. 188,009
Prepaid expenses........................................................ 2,191
____________
74,151,519
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $33,389
Due to Distributor...................................................... 17,331
Accrued expenses........................................................ 33,135 83,855
____________ ____________
NET ASSETS.................................................................. $74,067,664
============
REPRESENTED BY:
Paid-in capital......................................................... $71,387,032
Accumulated undistributed net realized gain on investments.............. 1,684,260
Accumulated net unrealized appreciation on investments-Note 3........... 996,372
____________
NET ASSETS at value......................................................... $74,067,664
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 5,985,415
============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 457,347
============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 89
============
NET ASSET VALUE per share:
Class A Shares
($68,812,117 / 5,985,415 shares)...................................... $11.50
=======
Class B Shares
($5,254,525 / 457,347 shares)......................................... $11.49
=======
Class C Shares
($1,022 / 89 shares).................................................. $11.48
=======
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,011,570
EXPENSES:
Management fee-Note 2(a).............................................. $ 423,126
Shareholder servicing costs-Note 2(c)................................. 248,839
Distribution fees-Note 2(b)........................................... 24,282
Professional fees..................................................... 10,940
Custodian fees........................................................ 8,595
Prospectus and shareholders' reports.................................. 3,544
Registration fees..................................................... 2,902
Trustees' fees and expenses-Note 2(d)................................. 1,020
Miscellaneous......................................................... 14,320
______________
TOTAL EXPENSES.................................................. 737,568
___________
INVESTMENT INCOME-NET........................................... 4,274,002
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 2,354,880
Net unrealized (depreciation) on investments............................ (2,363,586)
______________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (8,706)
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $4,265,296
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
___________ ___________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 4,665,750 $ 4,274,002
Net realized gain (loss) on investments................................. (120,750) 2,354,880
Net unrealized (depreciation) on investments for the year............... (311,459) (2,363,586)
____________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 4,233,541 4,265,296
____________ ____________
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (4,451,783) (4,029,063)
Class B shares........................................................ (213,967) (244,904)
Class C shares........................................................ - (35)
From net realized gain on investments:
Class A shares........................................................ - (164,269)
Class B shares........................................................ - (11,333)
Class C shares........................................................ (2)
In excess of net realized gain on investments:
Class A shares........................................................ (343,505) -
Class B shares........................................................ (17,797) -
Class C shares........................................................ - -
____________ ____________
TOTAL DIVIDENDS................................................... (5,027,052) (4,449,606)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 4,730,079 2,996,973
Class B shares........................................................ 1,042,859 1,256,028
Class C shares........................................................ - 1,000
Dividends reinvested:
Class A shares........................................................ 2,596,861 2,291,472
Class B shares........................................................ 123,653 142,581
Class C shares........................................................ - 37
Cost of shares redeemed:
Class A shares........................................................ (10,711,882) (9,062,697)
Class B shares........................................................ (603,243) (324,846)
____________ ____________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (2,821,673) (2,699,452)
____________ ____________
TOTAL (DECREASE) IN NET ASSETS.................................. (3,615,184) (2,883,762)
NET ASSETS:
Beginning of year...................................................... 80,566,610 76,951,426
____________ ____________
End of year........................................................... $ 76,951,426 $ 74,067,664
============== ================
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________ _________________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 413,848 255,371 90,978 106,403 86
Shares issued for
dividends reinvested. 228,208 194,345 10,873 12,098 3
Shares redeemed........ (939,699) (771,980) (53,757) (27,545) -
_________ _______ _______ _______ _______
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (297,643) (322,264) 48,094 90,956 89
============= =========== ======== =========== ===========
____________________
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated September 3,
1996.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Massachusetts Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $825 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $24,276 was
charged to the Series for the Class B shares and $6 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $180,190, $12,138 and $2 were
charged to Class A, Class B and Class C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $13,747 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $26,612,251 and $33,956,985, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $996,372, consisting of $2,696,274 gross unrealized appreciation and
$1,699,902 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Massachusetts Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Massachusetts Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.4% AMOUNT VALUE
_______ _______
<S> <C> <C>
MICHIGAN-98.0%
Brighton Area School District, Refunding:
Zero Coupon, 5/1/2014 (Insured; AMBAC).................................. $ 8,000,000 $ 2,702,560
Zero Coupon, 5/1/2020 (Insured; AMBAC).................................. 5,000,000 1,157,400
Byron Center Public Schools, Refunding 5.875%, 5/1/2024 (Insured; MBIA) (a). 3,400,000 3,344,954
Capital Region Airport Authority, Airport Revenue
6.70%, 7/1/2021 (Insured; MBIA)......................................... 2,500,000 2,615,550
Chelsea School District 6%, 5/1/2015 (Insured; FGIC) (a).................... 1,625,000 1,645,101
Chippewa Valley Schools, Refunding 7%, 5/1/2010 (Prerefunded 5/1/2001) (b).. 1,275,000 1,424,303
Clarkston Community School 5.75%, 5/1/2016 (Insured; FGIC).................. 1,340,000 1,321,990
Detroit:
(Development Area No. 1) 7.60%, 7/1/2010................................ 4,150,000 4,599,445
(Unlimited Tax) 6.35%, 4/1/2014......................................... 3,325,000 3,236,455
Water Supply Systems Revenue, Refunding:
4.75%, 7/1/2019 (Insured; FGIC)....................................... 2,500,000 2,099,000
8.79%, 7/1/2022 (Insured; FGIC) (c)................................... 1,500,000 1,578,750
Ferris State University, Revenue, Refunding 5.25%, 10/1/2020 (Insured; MBIA) 1,200,000 1,103,328
Flat Rock Community School District 5.25%, 5/1/2018 (Insured; MBIA)......... 1,500,000 1,383,315
Grand Ledge Public School District, Refunding 5.375%, 5/1/2024 (Insured; MBIA) 1,000,000 930,420
Grand Rapids Housing Finance Authority, Multi-Family Revenue, Refunding
7.625%, 9/1/2023 (Collateralized; FNMA)................................. 1,000,000 1,086,810
Huron Valley School District, Refunding:
Zero Coupon, 5/1/2018 (Insured; FGIC)................................... 6,370,000 1,665,755
6.125%, 5/1/2020 (Insured; FGIC)........................................ 1,735,000 1,772,285
Iron Mountain City School District, Refunding 5.125%, 5/1/2021 (Insured; AMBAC) 1,000,000 905,990
Kalamazoo Hospital Finance Authority, Hospital Facilities Revenue, Refunding
(Borgess Medical Center) 6.25%, 6/1/2014 (Insured; FGIC)................ 2,000,000 2,121,860
Kent County, Airport Revenue (Kent County International Airport):
5.90%, 1/1/2012......................................................... 1,145,000 1,134,512
5.90%, 1/1/2013......................................................... 1,095,000 1,078,925
Lake Orion Community School District:
5.25%, 5/1/2021 (Insured; FSA) (d)...................................... 1,400,000 1,284,360
Refunding 5.80%, 5/1/2015 (Insured; AMBAC).............................. 2,085,000 2,057,853
Lapeer Economic Development Corp., Ltd. Obligation Revenue
(Lapeer Health Services Project) 8.625%, 2/1/2020 (Prerefunded 2/1/2000) (b) 2,000,000 2,290,500
Leslie Public School (Ingham and Jackson Counties School Building and Site)
Refunding 6%, 5/1/2015 (Insured; AMBAC)................................. 1,000,000 1,013,260
Mason Public Schools District 5.40%, 5/1/2021 (Insured; FGIC)............... 1,760,000 1,655,544
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MICHIGAN (CONTINUED)
Michigan Building Authority, Revenue 6.75%, 10/1/2007 (Insured; AMBAC) (a).. $ 1,600,000 $ 1,755,488
Michigan Higher Education Student Loan Authority, Student Loan Revenue:
6.875%, 10/1/2007 (Insured; AMBAC)...................................... 2,250,000 2,287,890
7.55%, 10/1/2008 (Insured; MBIA)........................................ 1,625,000 1,662,537
6.125%, 9/1/2010........................................................ 1,520,000 1,499,906
Michigan Hospital Finance Authority, HR:
(Crittenton Hospital) 6.70%, 3/1/2007................................... 2,250,000 2,316,083
(Daughters of Charity National Health Systems-Providence Hospital) 7%, 11/1/2021 2,700,000 2,868,723
Refunding:
(Daughters of Charity National Health Systems-Providence Hospital)
5.25%, 11/1/2015.................................................. 3,700,000 3,389,459
(Detroit Medical Center) 8.125%, 8/15/2012............................ 220,000 236,898
(Genesys Health Systems) 8.125%, 10/1/2021............................ 5,000,000 5,420,450
(Henry Ford Health System) 5.25%, 11/15/2025.......................... 8,500,000 7,510,770
(Middle Michigan Obligation Group) 6.625%, 6/1/2010................... 2,000,000 2,029,040
(Sinai Hospital of Greater Detriot) 6.70%, 1/1/2026................... 2,500,000 2,475,850
(Sisters of Mercy Health Corp.):
6.25%, 2/15/2009 (Insured; FSA)................................... 1,065,000 1,116,674
5.375%, 8/15/2014 (Insured; MBIA)................................. 1,340,000 1,258,233
Michigan Housing Development Authority:
(Home Improvement Program) 7.65%, 12/1/2012............................. 2,150,000 2,264,789
MFHR 8.375%, 7/1/2019 (Insured; FGIC)................................... 1,550,000 1,632,351
Rental Housing Revenue:
6.50%, 4/1/2006....................................................... 2,000,000 2,085,340
7.70%, 4/1/2023 (Insured; FSA)........................................ 4,185,000 4,434,384
SFMR:
7.55%, 12/1/2014...................................................... 105,000 105,392
7.50%, 6/1/2015....................................................... 2,355,000 2,485,679
7.75%, 12/1/2019...................................................... 2,480,000 2,588,128
6.95%, 12/1/2020...................................................... 1,750,000 1,842,173
Michigan Municipal Bond Authority, Revenue (State Revolving Fund):
6.50%, 10/1/2014........................................................ 2,500,000 2,664,475
6.50%, 10/1/2017........................................................ 3,500,000 3,674,020
Michigan Strategic Fund:
Ltd. Obligation Revenue:
(Northeastern Community Mental Health Foundation) 8.25%, 1/1/2009..... 1,495,000 1,548,536
Refunding (Ledyard Association Ltd. Partnership Project)
6.25%, 10/1/2011 (Insured; ITT Lyndon Property Insurance Co.)..... 3,075,000 3,140,559
Solid Waste Disposal Revenue Refunding
(Genesee Power Station Project) 7.50%, 1/1/2021....................... 3,000,000 3,011,790
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MICHIGAN (CONTINUED)
Monroe County:
PCR (Detroit Edison Project):
7.50%, 12/1/2019 (Insured; AMBAC)..................................... $ 4,650,000 $ 5,117,185
7.875%, 12/1/2019..................................................... 2,720,000 2,950,275
7.65%, 9/1/2020 (Insured; FGIC)....................................... 2,250,000 2,476,575
6.55%, 6/1/2024 (Insured; MBIA)....................................... 1,700,000 1,756,831
Water Supply Systems (Frenchtown Charter Township Water Treatment
and Distribution Systems) 6.50%, 5/1/2013............................. 2,500,000 2,614,725
Monroe County Economic Development Corp., Ltd. Obligation Refunding, Revenue
(Detroit Edison Co. Project) 6.95%, 9/1/2022 (Insured; FGIC)............ 2,000,000 2,292,000
Muskegon Public Schools 5.25%, 5/1/2013 (Insured; FGIC)..................... 2,100,000 1,990,317
Nice Community School District of Marquette and Baraga Counties
5.25%, 5/1/2016 (Insured; MBIA)......................................... 1,950,000 1,799,070
Northville, Special Assessment (Wayne County) 7.875%, 1/1/2006.............. 1,685,000 1,837,779
Northwestern Michigan College, Community College Improvement Revenue,
Refunding
7%, 7/1/2011............................................................ 1,800,000 1,913,166
Novi Community School District 5.30%, 5/1/2021 (Insured; FGIC) (d).......... 6,600,000 6,097,806
Oakland County Economic Development Corp., Ltd. Obligation Revenue
(Pontiac Osteopathic Hospital Project)
9.625%, 1/1/2020 (Prerefunded 1/1/2000) (b)............................. 1,630,000 1,922,080
Oxford Area Community School District, Building and Site
5.40%, 5/1/2025 (Insured; FGIC)......................................... 1,000,000 936,860
Riverview Community School District, Refunding:
5.25%, 5/1/2014 (Insured; AMBAC)........................................ 2,000,000 1,862,260
5.25%, 5/1/2021 (Insured; AMBAC)........................................ 2,000,000 1,834,800
Rockford Public Schools, Refunding (Kent County School Building and Site)
7.375%, 5/1/2019 (Prerefunded 5/1/2000) (b)............................. 2,000,000 2,218,240
Romulus Community Schools, Refunding:
5.125%, 5/1/2017 (Insured; FGIC)........................................ 4,650,000 4,253,262
Capital Appreciation Zero Coupon, 5/1/2019 (Insured; FGIC).............. 2,390,000 588,012
Romulus Economic Development Corp., Ltd. Obligation EDR
Refunding (Romulus Hir Ltd. Partnership Project)
7%, 11/1/2015 (Insured; ITT Lyndon Property Insurance Co.).............. 3,700,000 3,943,053
Saint Johns Public Schools 5.625%, 5/1/2020 (Insured; FGIC)................. 2,500,000 2,420,125
Sandusky Community School District, Refunding 5.25%, 5/1/2021 (Insured; AMBAC) 1,000,000 917,400
South Lyon Community Schools (School Building) 6.375%, 5/1/2018............. 1,500,000 1,554,045
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MICHIGAN (CONTINUED)
Traverse City Area Public Schools (Building and Site)
5.70%, 5/1/2020 (Insured; MBIA)......................................... $ 5,000,000 $ 4,888,150
Wayne Charter County, Special Airport Facilities Revenue, Refunding
(Northwest Airlines Inc.) 6.75%, 12/1/2015.............................. 5,000,000 4,995,850
U.S. RELATED-1.4%
Puerto Rico Housing Finance Corp., MFMR
7.50%, 4/1/2022 (LOC; Government Development Bank) (e).................. 2,510,000 2,646,971
______________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $175,510,898)..................................................... $180,342,679
==============
SHORT-TERM MUNICIPAL INVESTMENT-.6%
MICHIGAN;
Midland County Economic Development Corp., Economic Development Limited Obligation
Revenue, Refunding, VRDN (Dow Chemical Corp.) 4% (f)
(cost $1,000,000)....................................................... $ 1,000,000 $ 1,000,000
==============
TOTAL INVESTMENTS-100.0%
(cost $176,510,898)..................................................... $181,342,679
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
EDR Economic Development Revenue Insurance Corporation
FGIC Financial Guaranty Insurance Company MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association MFMR Multi-Family Mortgage Revenue
FSA Financial Security Assurance PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ _________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 46.7%
AA Aa AA 17.3
A A A 13.2
BBB Baa BBB 10.0
F1 MIG1 SP1 .6
Not Rated (h) Not Rated (h) Not Rated (h) 12.2
________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Held by the custodian in a segregated account as collateral for a
delayed-delivery security.
(b) 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.
(c) Inverse floater security - the interest rate is subject to change
periodically.
(d) Purchased on a delayed-delivery basis.
(e) Secured by letters of credit.
(f) Security payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(i) At April 30, 1996, the Series had $61,403,484 (33.1% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from city municipal projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $176,510,898)-see statement..................................... $181,342,679
Receivable for investment securities sold............................... 6,402,083
Interest receivable..................................................... 3,891,829
Receivable for shares of Beneficial Interest subscribed................. 9,268
Prepaid expenses........................................................ 6,558
___________
191,652,417
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 84,311
Due to Distributor...................................................... 46,194
Payable for investment securities purchased............................. 5,546,040
Payable for shares of Beneficial Interest redeemed...................... 151,155
Accrued expenses and other liabilities.................................. 122,794 5,950,494
____________ ____________
NET ASSETS.................................................................. $185,701,923
=============
REPRESENTED BY:
Paid-in capital......................................................... $178,271,945
Accumulated undistributed net realized gain on investments.............. 2,598,197
Accumulated net unrealized appreciation on investments-Note 3........... 4,831,781
___________
NET ASSETS at value......................................................... $185,701,923
=============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 10,992,391
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,256,241
=============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 8,764
=======
NET ASSET VALUE per share:
Class A Shares
($166,537,676 / 10,992,391 shares).................................... $15.15
=======
Class B Shares
($19,031,405 / 1,256,241 shares)...................................... $15.15
=======
Class C Shares
($132,842 / 8,764 shares)............................................. $15.16
=======
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,183,096
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,067,900
Shareholder servicing costs-Note 2(c)................................. 643,363
Distribution fees-Note 2(b)........................................... 92,339
Professional fees..................................................... 26,897
Custodian fees........................................................ 21,558
Prospectus and shareholders' reports.................................. 17,979
Registration fees..................................................... 2,905
Trustees' fees and expenses-Note 2(d)................................. 2,496
Miscellaneous......................................................... 17,727
____________
TOTAL EXPENSES.................................................. 1,893,164
____________
INVESTMENT INCOME-NET........................................... 10,289,932
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 4,253,950
Net unrealized (depreciation) on investments............................ (1,629,095)
____________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 2,624,855
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $12,914,787
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
____________ ____________
<S> <C> <C>
OPERATIONS:
Investment income-net........................................... $ 10,969,293 $ 10,289,932
Net realized gain on investments........................................ 1,828,821 4,253,950
Net unrealized (depreciation) on investments for the year............... (818,115) (1,629,095)
____________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 11,979,999 12,914,787
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (10,186,162) (9,401,220)
Class B shares........................................................ (783,131) (886,953)
Class C shares........................................................ - (1,759)
Net realized gain on investments:
Class A shares........................................................ (2,793,660) (2,113,095)
Class B shares........................................................ (239,175) (230,061)
Class C shares........................................................ - (13)
____________ ____________
TOTAL DIVIDENDS................................................... (14,002,128) (12,633,101)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 10,587,097 6,590,274
Class B shares........................................................ 4,942,392 4,290,323
Class C shares........................................................ - 135,546
Dividends reinvested:
Class A shares........................................................ 7,582,697 6,818,746
Class B shares........................................................ 656,238 688,066
Class C shares........................................................ - 1,816
Cost of shares redeemed:
Class A shares........................................................ (27,084,772) (23,824,458)
Class B shares........................................................ (2,852,874) (2,354,777)
____________ ____________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (6,169,222) (7,654,464)
____________ ____________
TOTAL (DECREASE) IN NET ASSETS.................................. (8,191,351) (7,372,778)
NET ASSETS:
Beginning of year...................................................... 201,266,052 193,074,701
____________ ____________
End of year............................................................. $193,074,701 $185,701,923
============= ============
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 701,669 424,521 327,697 276,378 8,647
Shares issued for
dividends reinvested. 511,163 437,436 44,292 44,106 117
Shares redeemed........ (1,819,806) (1,537,548) (191,401) (152,659) -
_________ _______ _______ _______ _______
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (606,974) (675,591) 180,588 167,825 8,764
========== =========== ========= ========= ==========
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series, including the Michigan Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax-exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $5,680 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $92,044 was
charged to the Series for the Class B shares and $295 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $439,289, $46,022 and $98
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $39,610 for the period from December 1,
1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $108,216,959 and $116,812,970, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $4,831,781, consisting of $7,151,570 gross unrealized appreciation and
$2,319,789 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Michigan Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Michigan Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.9% AMOUNT VALUE
_______________ _________________
<S> <C> <C>
MINNESOTA-91.1%
Anoka County:
Resources Recovery Revenue (Northern States Power Co.) 7.15%, 12/1/2008. $ 1,150,000 $ 1,227,062
Solid Waste Disposal Revenue (United Power Association Project)
6.95%, 12/1/2008 (Guaranteed; National Rural Utilities
Cooperative Finance Corp.)............................................ 3,825,000 4,054,500
Burnsville, MFHR Refunding (Conventry Court Apartments)
7.50%, 9/1/2027 (Insured; FHA).......................................... 2,250,000 2,358,788
Burnsville Independent School District Number 191 5.125%, 2/1/2015.......... 3,875,000 3,617,894
Dakota County Housing and Redevelopment Authority, South-Saint Paul
Revenue Refunding (Single Family-GNMA Program) 8.10%, 9/1/2012.......... 155,000 164,438
Duluth Economic Development Authority, Health Care Facilities Revenue
(Benedictine Health-Saint Mary's Project)
8.375%, 2/15/2020 (Prerefunded 2/15/2000) (a)........................... 2,500,000 2,872,900
Eagan, MFHR Refunding (Forest Ridge Apartments) 7.50%, 9/1/2017 (Insured; FHA) 1,000,000 1,056,070
Eden Prairie, MFHR Refunding:
(Eden Investments Project) 7.40%, 8/1/2025 (Insured; FHA)............... 500,000 523,795
(Welsh Parkway Apartments) 8%, 7/1/2026 (Insured; FHA).................. 2,860,000 3,085,626
Edina:
Hospital Systems Revenue (Fairview Hospital) 7.125%, 7/1/2006........... 1,000,000 1,062,660
Housing Development Revenue Refunding (Edina Park Plaza Project)
7.70%, 12/1/2028 (Insured; FHA)....................................... 2,500,000 2,631,675
Hubbard County, Solid Waste Disposal Revenue (Potlatch Corp. Project)
7.375%, 8/1/2013........................................................ 1,000,000 1,068,030
Minneapolis:
Zero Coupon, 12/1/2014.................................................. 1,825,000 609,331
Home Ownership Program 7.10%, 6/1/2021.................................. 730,000 758,689
HR (Lifespan Inc.-Minneapolis Children's Medical Center Project):
8.125%, 8/1/2017 (Prerefunded 8/1/1998) (a)........................... 1,500,000 1,651,950
7%, 12/1/2020 (Prerefunded 6/1/2001) (a).............................. 5,650,000 6,324,836
MFHR Refunding (Churchill Apartments Project) 7.05%, 10/1/2022 (Insured; FSA) 4,000,000 4,158,560
MFMR (Seward Towers Project) 7.375%, 12/20/2030 (Collateralized; GNMA).. 2,350,000 2,481,177
Refunding (Sports Arena Project) 5.20%, 10/1/2024....................... 5,000,000 4,517,000
Minneapolis Community Development Agency, Ltd. Tax Support
Development Revenue:
8.375%, 6/1/2007...................................................... 2,500,000 2,694,325
8%, 12/1/2009......................................................... 300,000 315,228
7.75%, 12/1/2019...................................................... 2,850,000 3,114,024
7.40%, 12/1/2021...................................................... 2,000,000 2,161,320
Minneapolis-Saint Paul Housing and Redevelopment Authority,
Health Care Systems Revenue:
8%, 8/15/2014 (Prerefunded 8/15/2000) (a)............................. 3,000,000 3,447,900
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______________ ________________
MINNESOTA (CONTINUED)
Minneapolis-Saint Paul Housing and Redevelopment Authority,
Health Care Systems Revenue (continued):
(Group Health Plan Inc., Project) 6.75%, 12/1/2013...................... $ 2,750,000 $ 2,910,270
Refunding:
(Childrens Health Care) 5.50%, 8/15/2025 (Insured; FSA)............... 1,000,000 937,190
(Healthspan Health Systems) 4.75%, 11/15/2018 (Insured; AMBAC)........ 2,000,000 1,674,780
Minneapolis-Saint Paul Housing Finance Board, SFMR:
8.875%, 11/1/2018 (Collateralized; GNMA)................................ 125,000 131,685
8.30%, 8/1/2021 (Collateralized; GNMA).................................. 370,000 388,189
7.30%, 8/1/2031 (Collateralized; GNMA).................................. 6,265,000 6,539,282
Minneapolis-Saint Paul Metropolitan Apartments Community 7.80%, 1/1/2014.... 3,000,000 3,281,490
State of Minnesota (Duluth Airport) 6.25%, 8/1/2014......................... 2,500,000 2,549,825
Minnesota Agricultural and Economic Development Board,
Minnesota Small Business Development Loan Revenue:
9%, Series B, 8/1/2008................................................ 75,000 77,127
9%, Series C, 8/1/2008................................................ 245,000 251,948
8.125%, Lot 2, 8/1/2009............................................... 500,000 521,975
8.125%, Lot 3, 8/1/2009............................................... 815,000 850,819
8.20%, 8/1/2009....................................................... 655,000 697,745
8.375%, 8/1/2010...................................................... 1,385,000 1,476,479
Minnesota Higher Education Facilities Authority, Revenue (University of St.
Thomas)
5.625%, 10/1/2016....................................................... 1,000,000 955,570
Minnesota Housing Finance Agency, Revenue:
Rental Housing 6.10%, 8/1/2009.......................................... 2,585,000 2,611,186
Single Family Mortgage:
7.35%, 7/1/2016....................................................... 1,555,000 1,647,787
7.30%, 1/1/2017....................................................... 895,000 947,393
7.90%, 7/1/2019....................................................... 1,630,000 1,705,860
7.45%, 7/1/2022 (Insured; FHA)........................................ 2,830,000 2,937,653
7.95%, 7/1/2022....................................................... 1,700,000 1,785,867
6.15%, 1/1/2026....................................................... 1,690,000 1,662,656
6.95%, 7/1/2026....................................................... 2,960,000 3,060,581
Minnesota Public Facilities Authority, Water Pollution Control Revenue:
7.10%, 3/1/2012 (Prerefunded 3/1/2000) (a).............................. 2,350,000 2,598,724
6.95%, 3/1/2013 (Prerefunded 3/1/2001) (a).............................. 3,000,000 3,344,790
6.50%, 3/1/2014......................................................... 5,200,000 5,532,020
New Prague Independent School District 5%, 2/1/2016 (Insured; MBIA)......... 2,000,000 1,809,860
New York Mills Independent School District,
Refunding 5.05%, 2/1/2015 (Insured; AMBAC).............................. 1,000,000 913,260
Northern Municipal Power Agency, Electric System Revenue Refunding
7.25%, 1/1/2016......................................................... 3,500,000 3,702,720
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______________ ______________
MINNESOTA (CONTINUED)
North Saint Paul Maplewood Independent School District, Refunding
5.125%, 2/1/2025........................................................ $ 2,500,000 $ 2,241,000
City of Red Wing, Health Care Facilities Revenue Refunding
(River Region Obligation Group) 6.50%, 9/1/2022......................... 3,445,000 3,461,329
Saint Cloud, Hospital Facilities Revenue (The Saint Cloud Hospital):
7%, 7/1/2020 (Insured; AMBAC) (Prerefunded 7/1/2001) (a)................ 1,000,000 1,120,850
Refunding 5%, 7/1/2020 (Insured; AMBAC)................................. 2,000,000 1,763,740
Saint Louis Park, Health Care Facilities Revenue (Health Systems Obligated
Group)
5.20%, 7/1/2016 (Insured; AMBAC)........................................ 2,500,000 2,266,250
Saint Paul Housing and Redevelopment Authority, SFMR
Refunding 6.90%, 12/1/2021 (Insured; FNMA).............................. 2,765,000 2,851,019
Saint Paul Port Authority:
First Lien Tax Increment Refunding (Energy Park Project)
5%, 2/1/2008 (Insured; AGIC).......................................... 5,495,000 5,097,107
IDR Refunding (Hampden Building Project) 9.25%, 6/1/2011................ 1,065,000 966,594
Sartell, PCR Refunding (Champion International Corp. Project) 6.95%, 10/1/2012 5,000,000 5,285,200
Seaway Port Authority of Duluth,
Industrial Development Dock and Wharf Revenues Refunding (Cargill Inc.
Project)
6.80%, 5/1/2012......................................................... 3,000,000 3,227,340
Southern Minnesota Municipal Power Agency, Power Supply System Revenue:
Zero Coupon, 1/1/2026 (Insured; MBIA)................................... 11,000,000 1,832,380
(Custodial Receipts) 5%, 1/1/2013....................................... 2,000,000 1,831,340
Refunding 4.75%, 1/1/2016............................................... 1,500,000 1,279,665
U.S. RELATED-8.8%
Commonwealth of Puerto Rico:
(Custodial Receipts) 6.45%, 7/1/2017 (Insured; AMBAC)................... 1,700,000 1,793,857
5.875%, 7/1/2018 (Insured; AMBAC)....................................... 4,000,000 3,958,080
Puerto Rico Highway and Transportation Authority, Highway Revenue
5.55%, 7/1/2010......................................................... 6,900,000 6,549,204
University of Puerto Rico 5.25%, 6/1/2025 (Insured; MBIA)................... 2,000,000 1,844,880
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $155,784,856)..................................................... $160,832,344
=============
SHORT-TERM MUNICIPAL INVESTMENT-.1%
U.S. RELATED;
Puerto Rico Electric Power Authority, Revenue VRDN 3.32% (Insured; FSA) (b)
(cost $200,000)......................................................... $ 200,000 $ 200,000
=============
TOTAL INVESTMENTS-100.0%
(cost $155,984,856)..................................................... $161,032,344
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AGIC Asset Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
AMBAC American Municipal Bond Assurance Corporation Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association MFMR Multi-Family Mortgage Revenue
FSA Financial Security Assurance PCR Pollution Control Revenue
GNMA Government National Mortgage Association SFMR Single Family Mortgage Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
IDR Industrial Development Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
____________ ____________ __________________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 50.5%
AA Aa AA 23.9
A A A 12.0
BBB Bbb BBB 10.6
Not Rated(d) Not Rated(d) Not Rated(d) 3.0
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse floater security - the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) 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 Series may invest.
(e) At April 30, 1996, the Series had $42,729,286 (26.0% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from housing projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $155,984,856)-see statement..................................... $161,032,344
Cash.................................................................... 169,196
Interest receivable..................................................... 3,027,802
Receivable for shares of Beneficial Interest subscribed................. 61,945
Prepaid expenses........................................................ 5,377
________________
164,296,664
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 74,204
Due to Distributor...................................................... 44,543
Payable for shares of Beneficial Interest redeemed...................... 100,462
Accrued expenses........................................................ 30,110 249,319
_____________ ________________
NET ASSETS.................................................................. $164,047,345
================
REPRESENTED BY:
Paid-in capital......................................................... $158,631,229
Accumulated undistributed net realized gain on investments.............. 368,628
Accumulated net unrealized appreciation on investments-Note 3........... 5,047,488
________________
NET ASSETS at value......................................................... $164,047,345
================
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 9,213,422
================
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,706,860
================
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 24,834
================
NET ASSET VALUE per share:
Class A Shares
($138,057,638 / 9,213,422 shares)..................................... $14.98
================
Class B Shares
($25,616,979 / 1,706,860 shares)...................................... $15.01
================
Class C Shares
($372,728 / 24,834 shares)............................................ $15.01
================
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $10,604,102
EXPENSES:
Management fee-Note 2(a).............................................. $ 924,716
Shareholder servicing costs-Note 2(c)................................. 535,663
Distribution fees-Note 2(b)........................................... 123,681
Professional fees..................................................... 28,332
Custodian fees........................................................ 16,772
Prospectus and shareholders' reports.................................. 8,862
Registration fees..................................................... 1,660
Trustees' fees and expenses-Note 2(d)................................. 2,143
Miscellaneous......................................................... 3,284
_______________
TOTAL EXPENSES.................................................. 1,645,113
________________
INVESTMENT INCOME-NET........................................... 8,958,989
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,903,251
Net unrealized (depreciation) on investments............................ (911,785)
_______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 991,466
________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 9,950,455
================
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
________________________________________
1995 1996
________________ ________________
OPERATIONS:
Investment income-net................................................... $ 9,619,787 $ 8,958,989
Net realized gain (loss) on investments................................. (1,533,666) 1,903,251
Net unrealized appreciation (depreciation) on investments for the year.. 3,390,900 (911,785)
________________ ________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 11,477,021 9,950,455
________________ ________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (8,494,472) (7,756,084)
Class B shares........................................................ (1,125,315) (1,199,994)
Class C shares........................................................ - (2,911)
Net realized gain on investments:
Class A shares........................................................ (40,522) -
Class B shares........................................................ (6,066) -
________________ ________________
TOTAL DIVIDENDS................................................... (9,666,375) (8,958,989)
________________ ________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 5,767,528 8,018,049
Class B shares........................................................ 3,173,322 4,260,990
Class C shares........................................................ - 376,197
Dividends reinvested:
Class A shares........................................................ 5,693,880 5,052,267
Class B shares........................................................ 758,030 781,540
Class C shares........................................................ - 2,715
Cost of shares redeemed:
Class A shares........................................................ (23,226,166) (21,377,789)
Class B shares........................................................ (1,976,764) (2,719,337)
________________ ________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (9,810,170) (5,605,368)
________________ ________________
TOTAL (DECREASE) IN NET ASSETS.................................. (7,999,524) (4,613,902)
NET ASSETS:
Beginning of year....................................................... 176,660,771 168,661,247
________________ ________________
End of year............................................................. $168,661,247 $164,047,345
================ ================
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________________________
CLASS A CLASS B CLASS C
__________________________ _____________________________ _____________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
___________________________ ______________________________
1995 1996 1995 1996 1996*
___________ ___________ ___________ ____________ _________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 395,165 525,972 215,707 279,091 24,654
Shares issued for
dividends reinvested. 389,703 331,830 51,805 51,250 180
Shares redeemed........ (1,600,971) (1,405,368) (136,616) (179,050) -
___________ ___________ ___________ ____________ _________________
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (816,103) (547,566) 130,896 151,291 24,834
=========== =========== =========== ============ =================
________________________________
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Minnesota Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $174 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $123,137 was
charged to the Series for the Class B shares and $544 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $358,575, $61,568 and $182
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $29,902 for the period from December 1,
1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $63,976,521 and $57,393,998, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $5,047,488, consisting of $7,303,483 gross unrealized appreciation and
$2,255,995 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Minnesota Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Minnesota Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP - Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
________________ ______________
<S> <C> <C>
NORTH CAROLINA-79.2%
Board of Governors of the University of North Carolina, Revenue
(University of North Carolina Hospitals at Chapel Hill):
6%, 2/15/2024......................................................... $ 3,000,000 $ 2,895,630
5.25%, 2/15/2026...................................................... 2,500,000 2,261,750
5%, 2/15/2029......................................................... 4,000,000 3,436,520
Buncombe County Metropolitan Sewage District, Sewage System Revenue:
6.75%, 7/1/2022 (Prerefunded 7/1/2002) (a).............................. 500,000 560,520
Refunding 5.50%, 7/1/2022 (Insured; FGIC)............................... 1,125,000 1,058,861
Charlotte, COP Refunding (Convention Facility Project)
5.25%, 12/1/2020 (Insured; AMBAC)....................................... 2,000,000 1,811,900
Haywood County, Environmental Improvement Revenue, Refunding
(Champion International Corp. Project) 6.25%, 9/1/2025.................. 2,000,000 1,983,840
Martin County Industrial Facilities and Pollution Control Financing
Authority,
Revenue (Solid Waste Disposal - Weyerhaeuser Company Project):
6.80%, 5/1/2024....................................................... 2,000,000 2,117,180
6%, 11/1/2025......................................................... 2,000,000 1,941,660
New Hanover County Industrial Facilities and Pollution Control Financing
Authority,
SWDR (Occidental Petroleum) 6.50%, 8/1/2014............................. 1,000,000 1,007,530
North Carolina Eastern Municipal Power Agency, Power System Revenue:
5.75%, 12/1/2016........................................................ 1,865,000 1,706,363
Refunding:
5.125%, 1/1/2012 (Insured; AMBAC)..................................... 3,000,000 2,797,830
5.875%, 1/1/2013...................................................... 5,000,000 4,750,000
6%, 1/1/2013.......................................................... 2,500,000 2,414,275
6%, 1/1/2022.......................................................... 1,000,000 960,130
North Carolina Housing Finance Agency, Single Family Revenue:
6.10%, 9/1/2025 (Insured; FHA).......................................... 3,730,000 3,818,625
6.50%, 9/1/2026......................................................... 4,275,000 4,340,963
6.70%, 9/1/2026......................................................... 2,185,000 2,227,258
North Carolina Medical Care Commission, HR:
(Annie Penn Memorial Hospital Project) 7.50%, 8/15/2021................. 4,250,000 4,388,167
(Duke University Hospital Project) 7%, 6/1/2021 (Prerefunded 6/1/2001) (a) 3,000,000 3,358,320
Refunding (Mercy Hospital Project) 6.50%, 8/1/2015...................... 1,000,000 1,009,710
North Carolina Municipal Power Agency Number 1, Catawba Electric Revenue:
5%, 1/1/2015 (Insured; MBIA)............................................ 1,000,000 903,610
5.75%, 1/1/2015 (Insured; MBIA)......................................... 6,250,000 6,092,438
5.75%, 1/1/2020 (Insured; MBIA)......................................... 2,000,000 1,938,260
Pitt County, Revenue Refunding (Pitt County Memorial Hospital)
5.25%, 12/1/2021........................................................ 3,500,000 3,177,790
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
______________ ______________
NORTH CAROLINA (CONTINUED)
Shelby, Combined Enterprise System Revenue, Refunding 5.625%, 5/1/2014...... $ 1,000,000 $ 963,850
Wake County, Hospital System Revenue, Refunding:
Zero Coupon, 10/1/2010 (Insured; MBIA).................................. 2,200,000 936,716
5.125%, 10/1/2026 (Insured; MBIA)....................................... 3,250,000 2,852,298
U.S. RELATED-20.8%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,006,080
Commonwealth of Puerto Rico:
5.40%, 7/1/2025......................................................... 2,000,000 1,811,340
Public Improvement:
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)............................ 600,000 673,200
Refunding 5.50%, 7/1/2013............................................. 2,000,000 1,901,780
Puerto Rico Highway and Transportation Authority, Highway Revenue
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. 3,600,000 4,004,604
Puerto Rico Ports Authority, Special Facilities Revenue
(American Airlines, Inc. Project) 6.30%, 6/1/2023....................... 1,500,000 1,509,780
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health
Facilities Refunding 5.75%, 7/1/2015.................................... 4,500,000 4,291,245
Virgin Islands Public Finance Authority, Revenue, Refunding,
Matching Fund Loan Notes 7.25%, 10/1/2018............................... 1,500,000 1,578,405
_____________ _______________
TOTAL INVESTMENTS
(cost $86,142,776)...................................................... $85,488,428
===============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation HR Hospital Revenue
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (B) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
__________ __________ ___________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 31.6%
AA Aa AA 25.9
A A A 27.9
BBB Baa BBB 12.8
Not Rated (c) Not Rated (c) Not Rated (c) 1.8
__________
100.0%
==========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Fitch currently provides creditworthiness information for a limited
number of investments.
(c) 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 Series may invest.
(d) At April 30, 1996, the Series had $24,316,901 (27.1% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $86,142,776)-see statement...................................... $85,488,428
Cash.................................................................... 2,851,526
Interest receivable..................................................... 1,522,395
Receivable for shares of Beneficial Interest subscribed................. 51,739
Prepaid expenses........................................................ 3,877
______________
89,917,965
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $40,715
Due to Distributor...................................................... 36,068
Payable for shares of Beneficial Interest redeemed...................... 95,066
Accrued expenses........................................................ 35,432 207,281
____________ ______________
NET ASSETS ................................................................ $89,710,684
==============
REPRESENTED BY:
Paid-in capital......................................................... $92,094,075
Accumulated net realized (loss) on investments.......................... (1,729,043)
Accumulated net unrealized (depreciation) on investments-Note 3......... (654,348)
______________
NET ASSETS at value......................................................... $89,710,684
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)................. 3,644,295
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,307,913
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 81
==============
NET ASSET VALUE per share:
Class A Shares
($47,042,169 / 3,644,295 shares)...................................... $12.91
==============
Class B Shares
($42,667,470 / 3,307,913 shares)...................................... $12.90
==============
Class C Shares
($1,045 / 81 shares).................................................. $12.90
==============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,728,170
EXPENSES:
Management fee-Note 2(a).............................................. $ 517,799
Shareholder servicing costs-Note 2(c)................................. 307,348
Distribution fees-Note 2(b)........................................... 217,321
Professional fees..................................................... 14,110
Prospectus and shareholders' reports.................................. 12,402
Custodian fees........................................................ 10,310
Trustees' fees and expenses-Note 2(d)................................. 1,229
Registration fees..................................................... 597
Miscellaneous......................................................... 81,355
________________
TOTAL EXPENSES.................................................. 1,162,471
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 20,032
________________
NET EXPENSES.................................................... 1,142,439
______________
INVESTMENT INCOME-NET........................................... 4,585,731
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 874,881
Net unrealized appreciation on investments.............................. 520,983
________________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,395,864
______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $5,981,595
==============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
_____________________________________
1995 1996
__________________ _______________
OPERATIONS:
Investment income-net................................................... $ 5,259,404 $ 4,585,731
Net realized gain (loss) on investments................................. (2,342,576) 874,881
Net unrealized appreciation on investments for the year................. 2,019,925 520,983
__________________ _______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 4,936,753 5,981,595
__________________ _______________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (3,229,769) (2,589,575)
Class B shares........................................................ (2,029,635) (1,996,124)
Class C shares........................................................ - (32)
__________________ _______________
TOTAL DIVIDENDS................................................... (5,259,404) (4,585,731)
__________________ _______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 3,792,421 3,323,717
Class B shares........................................................ 5,258,725 3,025,081
Class C shares........................................................ - 1,000
Dividends reinvested:
Class A shares........................................................ 1,700,541 1,291,521
Class B shares........................................................ 1,251,870 1,177,707
Class C shares........................................................ - 32
Cost of shares redeemed:
Class A shares........................................................ (23,036,441) (8,574,929)
Class B shares........................................................ (3,172,359) (4,444,067)
__________________ _______________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (14,205,243) (4,199,938)
__________________ _______________
TOTAL (DECREASE) IN NET ASSETS.................................. (14,527,894) (2,804,074)
NET ASSETS:
Beginning of year....................................................... 107,042,652 92,514,758
__________________ _______________
End of year............................................................. $ 92,514,758 $ 89,710,684
================== ===============
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________________
CLASS A CLASS B CLASS C
____________________________ _________________________ _________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
____________________________ _________________________
1995 1996 1995 1996 1996*
_____________ _____________ ____________ __________ _________________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 302,337 254,297 420,696 229,111 78
Shares issued for
dividends reinvested. 135,607 98,177 100,207 89,591 3
Shares redeemed........ (1,840,173) (653,564) (256,909) (338,431) -
_____________ _____________ ____________ __________ _________________________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (1,402,229) (301,090) 263,994 (19,729) 81
============= ============= ============ ========== =========================
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the North Carolina Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $1,728,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1996. If not
applied, $225,000 of the carryover expires in fiscal 2002, $1,308,000 of the
carryover expires in fiscal 2003 and $195,000 of the carryover expires in fiscal
2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager had
undertaken through July 10, 1995 to reduce the management fee paid by the
Series, to the extent that the Series' aggregate expenses (exclusive of certain
expenses as described above) exceeded specified annual percentages of the
Series' average daily net assets. The reduction in management fee, pursuant to
the undertakings, amounted to $20,032 for the year ended April 30, 1996.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $217,316 was
charged to the Series for the Class B shares and $5 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the year ended April 30, 1996, $126,703, $108,658 and $2
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $18,897 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $43,892,947 and $50,856,286, respectively.
At April 30, 1996, accumulated net unrealized depreciation on investments
was $654,348, consisting of $1,446,961 gross unrealized appreciation and
$2,101,309 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
North Carolina Series (one of the Series constituting the Premier State
Municipal Bond Fund) as of April 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and financial highlights for
each of the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, North Carolina Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP- Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.3% AMOUNT VALUE
________________ ________________
<S> <C> <C>
OHIO-95.5%
Akron, Waterworks System Mortgage Revenue Improvement:
6%, 3/1/2014 (Insured; FGIC)............................................ $ 1,000,000 $ 1,016,610
Refunding 4.875%, 3/1/2012 (Insured; MBIA).............................. 2,250,000 2,039,355
Akron Bath Copley Joint Township Hospital District, Revenue
(Summa Health Systems) 5.75%, 11/15/2008................................ 5,000,000 4,880,000
Akron-Wilbeth Housing Development Corp., First Mortgage Revenue
7.90%, 8/1/2003 (Insured; FHA).......................................... 1,805,000 2,077,410
Allen County, Industrial First Mortgage Revenue, Refunding
6.75%, 11/15/2008 (Guaranteed; K-Mart Corp.)............................ 1,280,000 1,135,104
Anthony Wayne Local School District 5.75%, 12/1/2024 (Insured; FGIC)........ 1,000,000 988,190
Breckville-Broadview Heights City School District, School Improvement
5.25%, 12/1/2021 (Insured; FGIC)....................................... 5,000,000 4,632,250
Butler County:
Hospital Facilities Revenue, Refunding and Improvement
(Fort Hamilton Hughes Hospital) 7.25%, 1/1/2001....................... 4,000,000 4,099,280
Sewer System Revenue 5.25%, 12/1/2021 (Insured; AMBAC).................. 1,500,000 1,385,925
City of Barberton, Hospital Facilities Revenue
(The Barberton Citizens Hospital Co. Project) 7.25%, 1/1/2012........... 2,400,000 2,549,424
Buckeye Valley Local School District
5.25%, 12/1/2020 (Insured; MBIA)........................................ 3,140,000 2,917,028
Celina City School District 5.25%, 12/1/2020 (Insured; FGIC)................ 1,750,000 1,610,700
City of Cambridge, HR Refunding (Guernsey Memorial Hospital Project)
8%, 12/1/2006........................................................... 2,000,000 2,150,880
Clermont County, Hospital Facilities Revenue, Refunding (Mercy Health
Systems):
6%, 9/1/2019 (Insured; AMBAC)........................................... 2,000,000 2,006,180
7.50%, 9/1/2019 (Prerefunded 9/1/2001) (Insured; AMBAC) (a)............. 180,000 203,573
City of Cleveland:
COP (Motor Vehicle, Motorized and Communication Equipment) 7.10%, 7/1/2002 2,000,000 2,086,720
Parking Facility Improvement Revenue 8%, 9/15/2012...................... 5,000,000 5,444,100
Waterworks First Mortgage Revenue:
5.50%, 1/1/2013 (Insured; MBIA)....................................... 2,660,000 2,626,936
5.50%, 1/1/2021 (Insured; MBIA)....................................... 5,000,000 4,794,550
Cleveland City School District, School Improvement 8%, 12/1/2001............ 1,675,000 1,901,292
Cuyahoga County:
5.25%, 11/15/2015....................................................... 1,485,000 1,381,198
HR:
(Meridia Health Systems):
7.25%, 8/15/2019.................................................. 4,715,000 5,047,454
7%, 8/15/2023..................................................... 1,750,000 1,863,155
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
Cuyahoga County (continued):
HR:
Refunding:
(Cleveland Clinic Foundation) 8%, 12/1/2015....................... $ 1,000,000 $ 1,049,530
Improvement (University Hospitals Health) 5.625%, 1/15/2015
(Insured; MBIA)............................................................. 3,695,000 3,615,225
(Mount Sinai Medical Center) 8.125%, 11/15/2014................... 1,000,000 1,059,940
Jail Facilities 7%, 10/1/2013 (Prerefunded 10/1/2001) (a)............... 6,125,000 6,885,480
Delaware City School District 5.75%, 12/1/2020 (Insured; FGIC).............. 1,000,000 988,920
Eaton, IDR Refunding (Baxter International Inc. Project) 6.50%, 12/1/2012... 1,500,000 1,573,545
Euclid City School District, Improvement:
7.10%, 12/1/2011 (Prerefunded 12/1/2001) (a)............................ 1,000,000 1,129,290
Library and School, Refunding 5.125%, 12/1/2015 (Insured; AMBAC)........ 1,420,000 1,318,796
Village of Evendale, IDR Refunding (Ashland Oil Inc. Project) 6.90%, 11/1/2010 2,000,000 2,078,720
Fairfield City School District, School Improvement Unlimited Tax:
7.20%, 12/1/2011 (Insured; FGIC)........................................ 1,000,000 1,146,770
7.20%, 12/1/2012 (Insured; FGIC)........................................ 1,250,000 1,433,463
6.10%, 12/1/2015 (Insured; FGIC)........................................ 2,000,000 2,048,700
6%, 12/1/2020 (Insured; FGIC)........................................... 2,000,000 2,028,240
Fairlawn, Health Care Facilities Revenue (Village at Saint Edward Project)
8.75%, 10/1/2019........................................................ 2,420,000 2,602,420
Fairview Park City School District, 5.25%, 12/15/2013 (Insured; AMBAC)...... 2,000,000 1,934,040
Franklin County:
Hospital Improvement Revenue (The Children's Hospital Project)
6.60%, 11/1/2011 (Prerefunded 11/1/2001) (a).......................... 1,500,000 1,660,245
HR:
(Holy Cross Health Systems Corp.-Mount Carmel Health)
6.75%, 6/1/2019 (Insured; MBIA)................................... 2,500,000 2,665,525
Refunding Improvement:
(The Children's Hospital Project) 6.60%, 5/1/2013................. 4,000,000 4,183,760
(Worthington Christian Village Congregate Care Project):
10.25%, 8/1/2015................................................ 805,000 882,385
7.80%, 2/1/2017 (Insured; FHA).................................. 5,690,000 6,067,190
Gallia County Local School District, 7.375%, 12/1/2004...................... 570,000 659,268
Greater Cleveland Gateway Economic Development Corp.:
Senior Lien Excise Tax Revenue 6.875%, 9/1/2005 (Insured; FSA).......... 1,500,000 1,630,020
Stadium Revenue 7.50%, 9/1/2005......................................... 5,675,000 6,221,389
Hamilton County:
Hospital Facilities Improvement Revenue, Refunding (Deaconess Hospital)
7%, 1/1/2012.......................................................... 2,570,000 2,713,792
Mortgage Revenue (Judson Care Center) 7.80%, 8/1/2019 (Insured; FHA).... 3,970,000 4,219,832
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
Hamilton County (continued):
Sewer Systems Improvement Revenue, Refunding
5.50%, 12/1/2017 (Insured; FGIC)...................................... $ 5,500,000 $ 5,314,430
Hilliard School District, School Improvement:
Zero Coupon, 12/1/2013 (Insured; FGIC).................................. 1,655,000 606,541
Zero Coupon, 12/1/2014 (Insured; FGIC).................................. 1,655,000 567,748
5.75%, 12/1/2019 (Insured; FGIC)........................................ 4,500,000 4,451,085
5%, 12/1/2020 (Insured; FGIC)........................................... 1,600,000 1,434,304
Kirtland Local School District 7.50%, 12/1/2009............................. 760,000 827,161
Knox County, IDR (Weyerhaeuser Co. Project) 9%, 10/1/2007................... 1,000,000 1,251,330
Lakota Local School District 6.125%, 12/1/2017 (Insured; AMBAC)............. 1,075,000 1,103,133
Lorain, Water System Revenue 5.20%, 4/1/2016 (Insured; AMBAC)............... 2,260,000 2,109,800
Lorain County, HR Refunding (EMH Regional Medical Center)
5.375%, 11/1/2021 (Insured; AMBAC)...................................... 4,650,000 4,287,067
Lowellville, Sanitary Sewer Systems Revenue (Browning-Ferris Industries Inc.)
7.25%, 6/1/2006......................................................... 1,300,000 1,369,849
Mahoning County, Health Care Facilities Revenue:
(Western Reserve Care System) 5.50%, 10/15/2025 (Insured; MBIA)......... 2,450,000 2,305,646
(Youngstown Osteopathic Hospital Project)
7.60%, 8/1/2010 (LOC; Marine Midland Bank) (b)........................ 3,775,000 4,073,565
Marion County, Health Care Facilities Revenue (United Church Homes Inc.)
Refunding and Improvement 6.375%, 11/15/2010............................ 3,000,000 2,945,610
Miami County, Hospital Facilities Revenue, Refunding
(Upper Valley Medical Center) 8.375%, 5/1/2013.......................... 525,000 549,397
Moraine, SWDR (General Motors Corp. Project)
6.75%, 7/1/2014......................................................... 5,000,000 5,458,750
Mount Vernon City School District 5.85%, 12/1/2019 (Insured; FGIC).......... 1,000,000 989,220
Muskingum County, Revenue, Refunding:
(Franciscan Health Advisory Services) 7.50%, 3/1/2012................... 3,185,000 3,345,811
Hospital Facilities Improvement (Bethesda Care System)
5.40%, 12/1/2016 (Insured; Connie Lee)................................ 2,755,000 2,587,221
North Royalton City School District 6.10%, 12/1/2019 (Insured; MBIA)........ 2,000,000 2,057,780
State of Ohio:
Economic Development Revenue:
Ohio Enterprise Bond Fund (VSM Corp. Project) 7.375%, 12/1/2011....... 885,000 932,781
(Sponge Inc. Project) 8.375%, 6/1/2014................................ 1,640,000 1,814,479
Mortgage Revenue (Odd Fellows Home Ohio Inc. Project)
8.15%, 8/1/2017 (Insured; FHA)........................................ 350,000 371,263
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
State of Ohio (continued):
PCR (Standard Oil Co. Project)
6.75%, 12/1/2015 (Guaranteed; British Petroleum Co. p.l.c.)........... $ 2,700,000 $ 3,007,881
Ohio Air Quality Development Authority, Revenue:
8.10%, 9/1/2018......................................................... 1,000,000 1,056,640
Pollution Control Refunding:
(Cleveland Electric Illuminating Co. Project) 6.85%, 7/1/2023......... 5,250,000 4,901,663
(Ohio Edison) 7.45%, 3/1/2016 (Insured; FGIC)......................... 3,500,000 3,832,325
Refunding:
(JMG Funding Limited Partnership Project) 6.375%, 4/1/2029 (Insured; AMBAC) 2,500,000 2,568,775
(Ohio Power Co. Project) 7.40%, 8/1/2009.............................. 1,500,000 1,572,615
Ohio Building Authority, State Facilities:
(Administration Building Fund Projects):
4.875%, 10/1/2009..................................................... 2,500,000 2,307,150
4.875%, 10/1/2010..................................................... 1,735,000 1,581,921
(Adult Correctional Facilities Building Fund Projects) 5.90%, 10/1/2012 (Insured; MBIA) 1,000,000 1,023,780
(Adult Correctional Facilities Building Fund Projects) 5.50%, 4/1/2016
(Insured; AMBAC)............................................................ 2,000,000 1,926,140
(Juvenile Correctional Building Fund Projects) 6.60%, 10/1/2014 (Insured; AMBAC) 1,660,000 1,768,680
Ohio Capital Corp. for Housing, MFHR Refunding
7.60%, 11/1/2023 (Collateralized; FNMA)................................. 1,250,000 1,328,400
Ohio Higher Educational Facility Community, Revenue
(Case Western Reserve Project):
7.70%, 10/1/2018 (Prerefunded 10/1/1997) (a).......................... 485,000 516,855
7.70%, 10/1/2018...................................................... 15,000 15,847
Ohio Housing Finance Agency:
Mortgage Revenue (Saint Francis Court Apartment Project)
8%, 10/1/2026 (Insured; FHA).......................................... 695,000 744,435
SFMR (GNMA Mortgage Backed Securities Program):
8.25%, 12/15/2019 .................................................... 165,000 173,616
8.125%, 3/1/2020...................................................... 365,000 384,389
Zero Coupon, 9/1/2021................................................. 17,545,000 2,324,011
7.85%, 9/1/2021....................................................... 1,880,000 1,971,142
7.65%, 3/1/2029....................................................... 5,325,000 5,591,357
7.80%, 3/1/2030....................................................... 3,005,000 3,160,419
Ohio Turnpike Commission, Turnpike Revenue 5.75%, 2/15/2024................. 3,250,000 3,142,555
Ohio Water Development Authority, Revenue:
(Fresh Water Development) 5.90%, 12/1/2015 (Insured; AMBAC)............. 4,000,000 4,001,360
Pollution Control Facilities:
(Cleveland Electric Illuminating Project) 8%, 10/1/2023............... 5,800,000 5,895,932
(Ohio Edison) 8.10%, 10/1/2023........................................ 3,700,000 3,924,109
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
Ohio Water Development Authority, Revenue (continued):
Pollution Control Facilities (continued):
(Pennsylvania Power Co. Project) 8.10%, 9/1/2018...................... $ 2,000,000 $ 2,112,740
Refunding:
(Ohio Edison) 7.625%, 7/1/2023.................................... 5,000,000 5,299,200
(Toledo Edison Co.):
7.55%, 6/1/2023................................................. 2,000,000 2,023,900
8%, 10/1/2023................................................... 3,635,000 3,724,094
Ottawa County, Sanitary Sewer Systems Special Assessment
(Portage-Catawba Island Sewer Project) 7%, 9/1/2011 (Insured; AMBAC).... 1,000,000 1,101,250
Shelby County, Hospital Facilities Revenue, Refunding and Improvement
(The Shelby County Memorial Hospital Association) 7.70%, 9/1/2018....... 2,500,000 2,628,075
South Euclid, Recreation Facilities 7%, 12/1/2011........................... 2,285,000 2,462,636
South Western City School District, (Franklin and Pickway Counties)
5%, 12/1/2013 (Insured; MBIA)........................................... 2,825,000 2,579,225
Southwest Regional Water District, Water Revenue:
6%, 12/1/2015 (Insured; MBIA)........................................... 1,600,000 1,626,848
6%, 12/1/2020 (Insured; MBIA)........................................... 1,250,000 1,266,037
Springboro Community City School District, Refunding
5.10%, 12/01/2023 (Insured; AMBAC)...................................... 6,000,000 5,421,300
Springdale, Hospital Facilities First Mortgage Revenue,
(Southwestern Seniors Services, Inc.) 5.875%, 11/1/2012................. 3,000,000 2,804,730
Student Loan Funding Corp.:
Student Loan Revenue, Refunding 7.20%, 8/1/2003......................... 3,115,000 3,293,801
Student Loan Senior Subordinated Revenue 6.15%, 8/1/2010................ 6,775,000 6,663,890
Sylvania City School District 5.75%, 12/1/2022 (Insured; FGIC).............. 1,750,000 1,732,255
University of Cincinnati, COP 6.75%, 12/1/2009 (Insured; MBIA).............. 750,000 815,235
University of Ohio, General Receipts, 5%, 12/1/2018 (Insured; FGIC)......... 1,250,000 1,112,675
Warren 7.75%, 11/1/2010 (Prerefunded 11/1/2000) (a)......................... 2,785,000 3,202,583
U.S. RELATED-3.8%
Puerto Rico Highway and Transportation Authority, Highway Revenue
5.45%, 7/1/2007......................................................... 5,500,000 5,299,250
Virgin Islands Public Finance Authority, Revenue Refunding
Matching Fund Loan Notes 7.25%, 10/1/2018............................... 2,200,000 2,314,994
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,450,000 3,652,550
________________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $281,807,598)..................................................... $291,247,035
================
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS-.7% AMOUNT VALUE
________________ ________________
OHIO;
Cuyahoga County Ohio Hospital Revenue
VRDN 4.15%, (LOC; The Dai-Ichi Kangyo Bank) (b,c)
(cost $2,000,000)....................................................... $ 2,000,000 $ 2,000,000
=================
TOTAL INVESTMENTS-100.0%
(cost $283,807,598)..................................................... $293,247,035
=================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association PCR Pollution Control Revenue
FSA Financial Security Assurance SFMR Single-Family Mortgage Revenue
GNMA Government National Mortgage Association SWDR Solid Waste Disposal Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
IDR Industrial Development Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ ____________ __________________ _____________________
<S> <C> <C> <C>
AAA Aaa AA 44.0%
AA Aa AA 8.9
A A A 22.8
BBB Baa BBB 15.3
B B B 6.0
F1 MIG1 SP1 .7
Not Rated(e) Not Rated(e) Not Rated(e) 2.3
_________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Security payable on demand. The interest rate, which is subject to
change, is based upon prime rates or an index of market interest rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(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 Series may invest.
(f) At April 30, 1996, the Series had $81,418,173 (27.3% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $283,807,598)-see statement..................................... $293,247,035
Interest receivable..................................................... 5,282,357
Receivable for investment securities sold............................... 972,801
Receivable for shares of Beneficial Interest subscribed................. 156,757
Prepaid expenses........................................................ 9,345
_____________
299,668,295
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $134,689
Due to Distributor...................................................... 77,621
Due to Custodian........................................................ 141,842
Payable for investment securities purchased............................. 942,276
Payable for shares of Beneficial Interest redeemed...................... 202,537
Accrued expenses........................................................ 53,692 1,552,657
_____________ ____________
NET ASSETS.................................................................. $298,115,638
============
REPRESENTED BY:
Paid-in capital......................................................... $286,947,311
Accumulated undistributed net realized gain on investments.............. 1,728,890
Accumulated net unrealized appreciation on investments-Note 3........... 9,439,437
____________
NET ASSETS at value......................................................... $298,115,638
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 20,481,238
============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,215,868
============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 82
============
NET ASSET VALUE per share:
Class A Shares
($257,638,998 / 20,481,238 shares).................................... $12.58
============
Class B Shares
($40,475,608 / 3,215,868 shares)...................................... $12.59
============
Class C Shares
($1,032 / 82 shares).................................................. $12.59
============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $19,529,154
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,684,215
Shareholder servicing costs-Note 2(c)................................. 976,878
Distribution fees-Note 2(b)........................................... 184,674
Custodian fees........................................................ 31,318
Prospectus and shareholders' reports.................................. 16,049
Professional fees..................................................... 10,791
Registration fees..................................................... 4,140
Trustees' fees and expenses-Note 2(d)................................. 3,907
Miscellaneous......................................................... 5,819
_______________
TOTAL EXPENSES.................................................. 2,917,791
_____________
INVESTMENT INCOME-NET........................................... 16,611,363
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,261,292
Net unrealized (depreciation) on investments............................ (2,957,977)
_______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 3,303,315
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $19,914,678
=============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
________________ ______________
OPERATIONS:
Investment income-net................................................... $ 17,976,032 $ 16,611,363
Net realized gain (loss) on investments................................. (231,734) 6,261,292
Net unrealized (depreciation) on investments for the year............... (1,447,408) (2,957,977)
________________ ______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 16,296,890 19,914,678
________________ ______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (16,395,897) (14,787,880)
Class B shares........................................................ (1,580,135) (1,823,448)
Class C shares........................................................ - (35)
Net realized gain on investments:
Class A shares........................................................ (737,090) (3,773,931)
Class B shares........................................................ (80,832) (523,745)
Class C shares........................................................ - (15)
________________ ______________
TOTAL DIVIDENDS................................................... (18,793,954) (20,909,054)
________________ ______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 14,075,586 9,363,475
Class B shares........................................................ 7,880,402 9,283,699
Class C shares........................................................ - 1,000
Dividends reinvested:
Class A shares........................................................ 11,395,733 12,469,387
Class B shares........................................................ 1,146,894 1,692,992
Class C shares........................................................ - 48
Cost of shares redeemed:
Class A shares........................................................ (43,645,693) (36,740,008)
Class B shares........................................................ (3,696,758) (2,982,178)
________________ ______________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (12,843,836) (6,911,585)
________________ ______________
TOTAL (DECREASE) IN NET ASSETS.................................. (15,340,900) (7,905,961)
NET ASSETS:
Beginning of year....................................................... 321,362,499 306,021,599
________________ ______________
End of year............................................................. $306,021,599 $298,115,638
================ ==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
____________________________________________________________________________________________
CLASS A CLASS B CLASS C
____________________________ ________________________ __________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
____________________________ ________________________
1995 1996 1995 1996 1996*
____________ ____________ ___________ _________ _______________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold........... 1,122,269 724,402 625,670 718,846 79
Shares issued for
dividends reinvested 911,859 964,492 91,754 130,834 3
Shares redeemed....... (3,506,799) (2,853,615) (296,186) (230,753) -
____________ ____________ ___________ _________ _______________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING..... (1,472,671) (1,164,721) 421,238 618,927 82
============ ============ =========== ========= ===============
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated September 3,
1996.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Ohio Series (the "Series"). The Fund's investment objective
is to maximize current income exempt from Federal and, where applicable, from
State income taxes, without undue risk. The Dreyfus Corporation ("Manager")
serves as the Fund's investment adviser. The Manager is a direct subsidiary of
Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Funds' shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $554 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $184,668 was
charged to the Series for the Class B shares and $6 was charged to the Series
for Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor,
at an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $673,216, $92,334 and $2 were
charged to Class A, Class B and Class C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $56,600 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities during the year ended April 30, 1996 amounted to
$131,059,631 and $140,879,528, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $9,439,437, consisting of $11,812,801 gross unrealized appreciation and
$2,373,364 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund
Ohio Series, (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Ohio Series at April 30, 1996, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the indicated years, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP-SIGNATURE)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-94.4% AMOUNT VALUE
__________________ ______________
<S> <C> <C>
PENNSYLVANIA-84.3%
Allegheny County, Airport Revenue, Refunding
(Pittsburgh International Airport)
5.75%, 1/1/2008 (Insured; FSA).......................................... $ 2,005,000 $ 2,025,251
Allegheny County Industrial Development Authority, Revenue:
Commercial Development, Refunding
(Kaufmann Medical Office Building) 6.80%, 3/1/2015 (Insured; MBIA) (a) 3,500,000 3,774,260
Medical Center, Refunding (Presbyterian Medical Center of
Oakmont Pennsylvania, Inc.) 6.75%, 2/1/2026 (Insured; FHA)............ 1,945,000 1,978,532
Allegheny County Residential Finance Authority, SFMR:
7.40%, 12/1/2022........................................................ 1,945,000 2,048,610
7.95%, 6/1/2023......................................................... 1,425,000 1,498,616
Beaver County Industrial Development Authority, PCR, Refunding:
(Ohio Edison Project) 7.75%, 9/1/2024................................... 3,150,000 3,320,069
(Pennsylvania Power Company Mansfield Project) 7.15%, 9/1/2021.......... 3,000,000 3,059,490
Berks County Municipal Authority, Revenue
(Phoebe Berks Village, Inc. Project) 8.25%, 5/15/2022................... 2,445,000 2,575,196
Bethlehem Authority, Water Revenue, Refunding
5.20%, 11/15/2021 (Insured; MBIA)....................................... 7,350,000 6,661,820
Blair County Hospital Authority, Revenue (Altoona Hospital Project)
6.375%, 7/1/2013 (Insured; AMBAC)....................................... 5,000,000 5,192,700
Bradford County Industrial Development Authority, SWDR
(International Paper Company Projects) 6.60%, 3/1/2019.................. 3,250,000 3,329,983
Bucks County Technical School Authority, Revenue
5.375%, 8/15/2015 (Insured; AMBAC)...................................... 1,640,000 1,553,178
Butler County Hospital Authority, Refunding,
HR (Butler Memorial Hospital) 5.25%, 7/1/2016 (Insured; FSA)............ 2,500,000 2,269,900
Revenue, Health Center (Saint Francis Health Care Project) 6%, 5/1/2008. 1,860,000 1,857,638
Cambria County Industrial Development Authority, RRR
(Cambria Cogen Project):
7.75%, 9/1/2019, Series F-1 (LOC; Fuji Bank) (b)...................... 1,750,000 1,837,290
7.75%, 9/1/2019, Series F-2 (LOC; Fuji Bank) (b)...................... 2,750,000 2,887,170
Delaware County Authority:
HR (Crozer - Chester Medical Center) 5.30%, 12/15/2011 (Insured; MBIA).. 2,750,000 2,598,970
Revenue (Elwyn Inc. Project) 8.35%, 6/1/2015............................ 4,300,000 4,707,769
University Revenue (Villanova University) 5.50%, 8/1/2023 (Insured; MBIA) 6,510,000 6,137,498
Haverford Township School District, Refunding
5.30%, 3/15/2019 (Insured; FGIC)........................................ 2,200,000 2,042,832
Langhorne Manor Borough Higher Educational and Health Authority, HR
(Lower Bucks Hospital) 7%, 7/1/2005..................................... 1,975,000 1,806,197
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________________ ______________
PENNSYLVANIA (CONTINUED)
Lawrence County 4.875%, 8/1/2010 (Insured; FGIC)............................ $ 3,890,000 $ 3,563,357
Lehigh County General Purpose Authority, Revenue:
Refunding (Ceder Crest College) 6.65%, 4/1/2017 (c)..................... 2,500,000 2,437,625
(Wiley House):
8.75%, 11/1/2014 (LOC; Northeastern Bank of Pennsylvania) (b)......... 3,785,000 3,902,600
9.50%, 11/1/2016...................................................... 2,000,000 2,138,100
Lehigh County Industrial Development Authority, PCR, Refunding
(Pennsylvania Power and Light Company Project)
6.40%, 11/1/2021 (Insured; MBIA)........................................ 4,845,000 5,046,213
Luzerne County Industrial Development Authority, Exempt Facilities Revenue,
Refunding
(Pennsylvania Gas and Water Company Project) 7.125%, 12/1/2022.......... 4,000,000 4,168,360
Meadville 5.25%, 10/1/2025 (Insured; AMBAC)................................. 2,655,000 2,427,281
Montgomery County 6.10%, 10/15/2025......................................... 5,000,000 5,078,600
Montgomery County Higher Educational and Health Authority:
HR (Abington Memorial Hospital) 5.125%, 6/1/2014 (Insured; AMBAC)....... 3,000,000 2,726,370
Revenue:
First Mortgage (Montgomery Income Project) 10.50%, 9/1/2020........... 3,000,000 3,247,470
Mortgage (Waverly Heights Project):
6%, 1/1/2013...................................................... 1,250,000 1,173,525
6.25%, 1/1/2018................................................... 2,825,000 2,677,337
(Northwestern Corporation) 8.375%, 6/1/2009........................... 2,685,000 2,909,976
Montgomery County Industrial Development Authority, RRR
7.50%, 1/1/2012 (LOC; Banque Paribas) (b)............................... 11,715,000 12,409,348
Norristown Municipal Waste Authority, Sewer Revenue
5.125%, 11/15/2023 (Insured; FGIC)...................................... 4,400,000 3,941,168
Northampton County Industrial Development Authority, Refunding, Revenue:
(Moravian Hall Square Project)
7.45%, 6/1/2014 (LOC; Meridian Bank) (Prerefunded 6/1/1999) (b,d)..... 1,800,000 1,987,812
Pollution Control:
(Bethlehem Steel) 7.55%, 6/1/2017..................................... 5,700,000 5,873,736
(Met Edison) 6.10%, 7/15/2021 (Insured; MBIA)......................... 5,000,000 5,041,850
Pennsylvania:
5%, 11/15/2011 (Insured; AMBAC)......................................... 3,875,000 3,622,350
5%, 11/15/2013 (Insured; AMBAC)......................................... 3,875,000 3,562,481
Pennsylvania Convention Center Authority, Revenue, Refunding
6.75%, 9/1/2019......................................................... 3,520,000 3,711,066
Pennsylvania Economic Development Financing Authority:
Exempt Facilities Revenue (Macmillan Ltd. Partnership Project) 7.60%, 12/1/2020 3,500,000 3,862,845
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________________ ______________
PENNSYLVANIA (CONTINUED)
Pennsylvania Economic Development Financing Authority (continued):
RRR (Northampton Generating Project):
6.40%, 1/1/2009....................................................... $ 2,500,000 $ 2,429,700
6.50%, 1/1/2013....................................................... 6,500,000 6,262,685
Wastewater Treatment Revenue (Sun Co. Inc. - R and M Project) 7.60%, 12/1/2024 4,240,000 4,651,577
Pennsylvania Higher Education Assistance Agency, Student Loan Revenue
7.05%, 10/1/2016 (Insured; AMBAC)....................................... 2,500,000 2,596,850
Pennsylvania Higher Educational Facilities Authority, College and University
Revenue
Refunding (Dequesne University) 7%, 4/1/2010 (Insured; MBIA)............ 2,000,000 2,155,740
Pennsylvania Housing Finance Agency:
6.50%, 7/1/2023......................................................... 2,750,000 2,819,658
Single Family Mortgage:
7.875%, 10/1/2020..................................................... 1,435,000 1,511,170
6.90%, 4/1/2025....................................................... 6,250,000 6,439,438
Philadelphia, Water and Wastewater Revenue:
Refunding 5.50%, 6/15/2007 (Insured; MBIA).............................. 4,155,000 4,232,657
Refunding 5.625%, 6/15/2008 (Insured; FSA).............................. 5,000,000 5,136,900
6.25%, 8/1/2010 (Insured; MBIA)......................................... 2,730,000 2,942,831
Refunding 5.25%, 6/15/2023 (Insured; MBIA).............................. 15,255,000 13,853,523
Philadelphia Hospital and Higher Education Facilities Authority:
HR:
(Albert Einstein Medical Center) 7%, 10/1/2021........................ 1,500,000 1,545,705
(Graduate Health System Obligation) 7.25%, 7/1/2018................... 3,500,000 3,523,030
(Pennsylvania Hospital) 5.25%, 2/15/2014 (Insured; FGIC).............. 2,500,000 2,290,025
(Refunding - Philadelphia Children's Hospital) 5%, 2/15/2021.......... 2,155,000 1,837,956
Revenue (Northwestern Corporation) 8.375%, 6/1/2009..................... 1,885,000 2,042,944
Philadelphia Industrial Development Authority, IDR, Refunding
(Ashland Oil Inc. Project) 5.70%, 6/1/2005.............................. 2,500,000 2,503,200
Philadelphia Municipal Authority, LR, Refunding
5.60%, 11/15/2009 (Insured; FGIC)....................................... 2,100,000 2,118,942
Philadelphia School District:
Refunding 6.25%, 9/1/2009 (Insured; AMBAC).............................. 2,000,000 2,162,920
5.50%, 9/1/2025 (Insured; AMBAC)........................................ 2,000,000 1,887,540
Pittsburgh Urban Redevelopment Authority:
Mortgage Revenue 7.05%, 4/1/2023........................................ 1,785,000 1,837,711
Single Family Mortgage 7.40%, 4/1/2024.................................. 860,000 893,454
Schuylkill County Industrial Development Authority, Refunding
First Mortgage Revenue (Valley Health Concerns) 8.75%, 3/1/2012......... 2,500,000 2,644,950
RRR (Schuylkill Energy Resources Inc.) 6.50%, 1/1/2010.................. 7,090,000 7,098,223
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________________ ______________
PENNSYLVANIA (CONTINUED)
Washington County Industrial Development Authority, Revenue, Refunding
(Presbyterian Medical Center) 6.75%, 1/15/2023 (Insured; FHA)........... $ 3,000,000 $ 3,109,410
York County Hospital Authority, Revenue
(Health Center - Village at Sprenkle Drive)
7.75%, 4/1/2022 (Prerefunded 4/1/2002) (d).............................. 1,205,000 1,403,740
U.S. RELATED-10.1%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 4,500,000 4,513,679
Guam Government 5.375%, 11/15/2013.......................................... 4,000,000 3,550,200
Puerto Rico Highway and Transportation Authority,
Highway Revenue:
5.40%, 7/1/2006....................................................... 10,000,000 9,658,100
5.25%, 7/1/2020 (Insured; FSA)........................................ 6,600,000 6,022,961
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities, Refunding 5.70%, 7/1/2009................................... 5,000,000 5,078,800
______________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $264,448,694)................... $269,428,658
==============
SHORT-TERM MUNICIPAL INVESTMENTS-5.6%
PENNSYLVANIA-3.0%
Allegheny County Hospital Development Authority, Revenue, VRDN
(Presbyterian Health Center) 4.10% (Insured; MBIA) (e).................. $ 1,500,000 $ 1,500,000
Pennsylvania, TAN 4.50%, 6/28/1996.......................................... 2,000,000 2,002,140
Pennsylvania Energy Development Authority, Energy Development Revenue
(B and W Ebensburg Project) 4.20% (LOC; Swiss Bank Corporation) (b,e)... 5,000,000 5,000,000
U.S. RELATED-2.6%
Commonwealth of Puerto Rico Government Development Bank, Refunding, VRDN
3.75% (LOC; Credit Suisse) (b,e)........................................ 6,950,000 6,950,000
Puerto Rico Electric Power Authority, Power Revenue 3.32% (Insured; FSA) (f) 400,000 400,000
______________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $15,853,105)................... $ 15,852,140
==============
TOTAL INVESTMENTS-100%
(cost $280,301,799)..................................................... $285,280,798
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration PCR Pollution Control Revenue
FSA Financial Security Assurance RRR Resources Recovery Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit TAN Tax Anticipation Notes
LR Lease Revenue VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ _______________ ___________________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 43.7%
AA Aa AA 3.4
A A A 15.2
BBB Baa BBB 19.8
BB Ba BB .6
F1 MIG1/P1 SP1/A1 5.4
Not Rated (h) Not Rated (h) Not Rated (h) 11.9
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly held by custodian as collateral for delayed-delivery
security.
(b) Secured by letters of credit.
(c) Purchased on a delayed-delivery basis.
(d) 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.
(e) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(f) Inverse Floater Security - the interest rate is subject to change
periodically.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $280,301,799)-see statement..................................... $285,280,798
Cash.................................................................... 1,233,609
Interest receivable..................................................... 5,521,212
Receivable for shares of Beneficial Interest subscribed................. 224,540
Receivable for investment securities sold............................... 93,433
Prepaid expenses........................................................ 9,137
______________
292,362,729
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 128,905
Due to Distributor...................................................... 88,348
Payable for investment securities purchased............................. 2,447,858
Payable for shares of Beneficial Interest redeemed...................... 214,060
Accrued expenses........................................................ 50,486 2,929,657
_______________
NET ASSETS.................................................................. $289,433,072
==============
REPRESENTED BY:
Paid-in capital......................................................... $282,542,947
Accumulated undistributed net realized gain on investments.............. 1,911,126
Accumulated net unrealized appreciation on investments-Note 3........... 4,978,999
______________
NET ASSETS at value......................................................... $289,433,072
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 13,408,608
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 4,492,451
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 1,302
==============
NET ASSET VALUE per share:
Class A Shares
($216,801,832 / 13,408,608 shares).................................... $16.17
=========
Class B Shares
($72,610,204 / 4,492,451 shares)...................................... $16.16
=========
Class C Shares
($21,036 / 1,302 shares).............................................. $16.16
=========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $18,081,065
EXPENSES:
Management fee-Note 2(a).............................................. $1,600,235
Shareholder servicing costs-Note 2(c)................................. 981,973
Distribution fees-Note 2(b)........................................... 362,748
Professional fees..................................................... 45,123
Custodian fees........................................................ 32,496
Prospectus and shareholders' reports.................................. 21,254
Trustees' fees and expenses-Note 2(d)................................. 3,918
Registration fees..................................................... 1,736
Miscellaneous......................................................... 5,404
_______________
TOTAL EXPENSES.................................................... 3,054,887
_______________
INVESTMENT INCOME-NET............................................. 15,026,178
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $3,624,514
Net unrealized appreciation on investments.............................. 2,233,089
______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 5,857,603
_______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $20,883,781
===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
__________________________________________
1995 1996
____________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 16,303,282 $ 15,026,178
Net realized gain on investments........................................ 3,749,748 3,624,514
Net unrealized appreciation (depreciation) on investments for the year.. (2,373,737) 2,233,089
____________________ __________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 17,679,293 20,883,781
____________________ __________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (12,907,659) (11,560,546)
Class B shares........................................................ (3,395,623) (3,465,577)
Class C shares........................................................ - (55)
Net realized gain on investment:
Class A shares........................................................ - (3,548,917)
Class B shares........................................................ - (1,187,046)
Class C shares........................................................ - (17)
____________________ __________________
TOTAL DIVIDENDS................................................... (16,303,282) (19,762,158)
____________________ __________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 14,323,499 20,084,706
Class B shares........................................................ 13,962,833 6,829,157
Class C shares........................................................ - 21,000
Dividends reinvested:
Class A shares........................................................ 6,652,944 8,442,622
Class B shares........................................................ 2,024,872 2,978,350
Class C shares........................................................ - 73
Cost of shares redeemed:
Class A shares........................................................ (37,539,324) (32,654,140)
Class B shares........................................................ (5,465,675) (7,401,867)
____________________ __________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (6,040,851) (1,700,099)
____________________ __________________
TOTAL (DECREASE) IN NET ASSETS.................................. (4,664,840) (578,476)
NET ASSETS:
Beginning of year....................................................... 294,676,388 290,011,548
____________________ __________________
End of year............................................................. $290,011,548 $289,433,072
==================== ==================
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
________________________________________________________________________________________
CLASS A CLASS B CLASS C
____________________________ __________________________ ______________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
____________________________ __________________________ ______________________
1995 1996 1995 1996 1996*
____________ ___________ ___________ __________ ______________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 900,647 1,227,069 881,375 412,949 1,298
Shares issued for
dividends reinvested. 421,108 508,499 128,216 179,443 4
Shares redeemed........ (2,389,230) (1,973,350) (350,112) (448,471) -
____________ ___________ ___________ __________ ______________________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (1,067,475) (237,782) 659,479 143,921 1,302
============= =========== =========== ========== ======================
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Pennsylvania Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $852 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $362,739 was
charged to the Series for the Class B shares and $9 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $546,007, $181,369 and $3
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $67,082 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $148,797,723 and $173,013,257, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $4,978,999, consisting of $7,513,971 gross unrealized appreciation and
$2,534,972 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Pennsylvania Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Pennsylvania Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.5% AMOUNT VALUE
_______________ ______________
<S> <C> <C>
TEXAS-98.1%
Allen Independent School District Building
5.20%, 2/15/2021........................................................ $ 2,030,000 $ 1,827,670
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc., Project) 7.50%, 12/01/2029..................... 3,800,000 4,041,224
Amarillo Health Facilities Corp., HR (High Plains Baptist Hospital)
6.562%, 1/3/2022 (Insured; FSA)......................................... 4,500,000 4,635,810
Bexar County, Refunding, Limited Tax 5%, 6/15/2010.......................... 5,000,000 4,711,850
Bexar County Health Facilities Development Corp., HR Refunding
(Baptist Memorial Hospital System Project) 6.625%, 2/15/2011 (Insured; MBIA) 2,690,000 2,873,861
Brazos Higher Education Authority Inc., Student Loan Revenue, Refunding:
5.70%, 6/1/2004......................................................... 3,500,000 3,564,680
6.80%, 12/1/2004........................................................ 850,000 899,725
Brazos River Authority, Special Facilities Revenue, Refunding
5.50%, 8/15/2021 (Insured; FGIC)........................................ 2,000,000 1,886,620
Clear Creek Independent School District
4.25%, 2/1/2013......................................................... 1,575,000 1,294,115
Clint Independent School District, Refunding
7%, 3/1/2015............................................................ 750,000 799,650
Dallas-Fort Worth Regional Airport, Joint Revenue
6.625%, 11/1/2021 (Insured; FGIC)....................................... 1,250,000 1,286,475
El Paso Housing Authority, Multi-Family Revenue
(Section 8 Projects) 6.25%, 12/1/2009................................... 2,510,000 2,533,042
Grapevine-Colleyville Independent School District
5.125%, 8/15/2022....................................................... 3,000,000 2,678,280
Gulf Coast Waste Disposal Authority, SWDR
(Champion International Corp. Project) 7.25%, 4/1/2017.................. 1,000,000 1,057,070
Harris County (Toll Road) Senior Lien 6.375%, 8/15/2024 (Insured; MBIA)..... 3,000,000 3,114,300
Harris County Health Facilities Development Corp., Health Care System Revenue
(Sisters of Charity) 7.10%, 7/1/2021.................................... 1,000,000 1,079,810
Houston:
Refunding 7%, 3/1/2008.................................................. 2,000,000 2,304,500
Water and Sewer System Revenue, Refunding (Junior Lien)
5.25%, 12/1/2025 (Insured; FGIC)...................................... 3,000,000 2,726,550
Keller Independent School District,
Unlimited Tax School Building and Refunding
5.125%, 8/15/2025....................................................... 2,000,000 1,778,600
Leander 6.75%, 8/15/2016.................................................... 2,325,000 2,349,389
Leon County, PCR, Refunding (Nucor Corp. Project) 7.375%, 8/1/2009.......... 750,000 816,982
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______________ _____________
TEXAS (CONTINUED)
Lewisville Independent School District 5.35%, 8/15/2014..................... $ 2,750,000 $ 2,612,858
Matagorda County Navigation District No. 1, PCR
(Collateralized Houston Lighting and Power) 7.875%, 2/1/2019............ 500,000 531,190
Montgomery County Health Facilities Development Corp., Hospital Mortgage
Revenue
(Woodlands Medical Center Project) 8.85%, 8/15/2014..................... 580,000 627,676
North Texas Higher Education Authority, Inc., Student Loan Revenue
7.25%, 4/1/2003 (Insured; AMBAC)........................................ 1,000,000 1,056,970
Red River Authority, PCR
(Hoechst Celanese Corp. Project) 6.875%, 4/1/2017....................... 4,100,000 4,325,377
San Antonio, Water Revenue (Prior Lien)
7.125%, 5/1/2016 (Prerefunded 5/1/1999) (a)............................. 750,000 817,110
Southwest Higher Education Authority, Inc., Higher Education Revenue
(Southern Methodist University Project) 5.125%, 10/1/2026 (Insured; FSA) 1,000,000 885,230
Texas (Veterans Housing Assistance) 6.80%, 12/1/2023........................ 3,135,000 3,205,569
Texas Health Facilities Development Corp., HR, Refunding
(All Saints Episcopal Hospitals) 6.25%, 8/15/2022 (Insured; MBIA)....... 2,000,000 2,044,280
Texas Higher Education Coordinating Board, College Student Loan Revenue
7.30%, 10/1/2003........................................................ 750,000 783,923
Texas National Research Laboratory Commission Financing Corp., LR
(Superconducting Super Collider):
6.95%, 12/1/2012...................................................... 700,000 772,877
7.10%, 12/1/2021 (Prerefunded 12/1/2001) (a).......................... 230,000 260,466
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation) 8.875%, 9/1/2011 (Prerefunded 9/1/2001) (a) 455,000 549,708
Texas Water Development Board, Revenue (State Revolving Fund) Senior Lien
6%, 7/15/2013........................................................... 3,000,000 3,014,130
Tomball Hospital Authority, Revenue, Refunding 6%, 7/1/2013................. 5,000,000 4,716,000
Tyler Texas Health Facility Development Corp., HR
(East Texas Medical Center Regional Health) 6.625%, 11/1/2011........... 1,820,000 1,831,575
West Side Calhoun County Navigation District, SWDR
(Union Carbide Chemical and Plastics) 8.20%, 3/15/2021.................. 500,000 557,685
U.S. RELATED-1.4%
Puerto Rico Public Buildings Authority, Guaranteed
Public Education and Health Facilities
6.875%, 7/1/2012 (Prerefunded 7/1/2002) (a)............................. 1,000,000 1,128,500
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $76,587,967)...................................................... $77,981,327
=============
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENT-.5% AMOUNT VALUE
________________ _______________
U.S. RELATED;
Puerto Rico Electric Power Authority, Power Revenue, 3.32% (Insured; FSA) (b)
(cost $400,000)......................................................... $ 400,000 $ 400,000
================
TOTAL INVESTMENTS-100.0%
(cost $76,987,967)...................................................... $78,381,327
================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance PCR Pollution Control Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LR Lease Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
________________ _____________ ___________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 52.9%
AA Aa AA 15.4
A A A 11.6
BBB Baa BBB 15.6
Not Rated (d) Not Rated (d) Not Rated (d) 4.5
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse Floater Security - the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $76,987,967)-see statement...................................... $78,381,327
Cash.................................................................... 584,941
Interest receivable..................................................... 1,405,965
Receivable for shares of Beneficial Interest subscribed................. 20,000
Prepaid expenses........................................................ 7,101
________________
80,399,334
LIABILITIES:
Due to Distributor...................................................... $23,690
Payable for shares of Beneficial Interest redeemed...................... 20,714
Accrued expenses........................................................ 29,340 73,744
_____________ ________________
NET ASSETS.................................................................. $80,325,590
================
REPRESENTED BY:
Paid-in capital......................................................... $78,414,939
Accumulated undistributed net realized gain on investments.............. 517,291
Accumulated net unrealized appreciation on investments-Note 3........... 1,393,360
________________
NET ASSETS at value......................................................... $80,325,590
================
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 3,016,239
================
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 837,867
================
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 51
================
NET ASSET VALUE per share:
Class A Shares
($62,863,623 / 3,016,239 shares)...................................... $20.84
================
Class B Shares
($17,460,915 / 837,867 shares)........................................ $20.84
================
Class C Shares
($1,052 / 50,504 shares).............................................. $20.83
================
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,091,856
EXPENSES:
Management fee-Note 2(a).............................................. $ 464,591
Shareholder servicing costs-Note 2(c)................................. 257,487
Distribution fees-Note 2(b)........................................... 87,657
Professional fees..................................................... 15,522
Prospectus and shareholders' reports.................................. 10,225
Custodian fees........................................................ 9,835
Registration fees..................................................... 1,209
Trustees' fees and expenses-Note 2(d)................................. 1,123
Miscellaneous......................................................... 18,385
______________
TOTAL EXPENSES.................................................. 866,034
Less-Management fee waived due to
undertaking-Note 2(a)............................................. 464,591
______________
NET EXPENSES.................................................... 401,443
______________
INVESTMENT INCOME-NET........................................... 4,690,413
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,514,366
Net unrealized appreciation on investments.............................. 400,100
______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,914,466
______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $6,604,879
==============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
_________________________________________
1995 1996
____________________ _________________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 5,213,354 $ 4,690,413
Net realized gain on investments........................................ 336,502 1,514,366
Net unrealized appreciation on investments for the year................. 460,699 400,100
____________________ _________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 6,010,555 6,604,879
____________________ _________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (4,315,213) (3,789,456)
Class B shares........................................................ (898,141) (900,921)
Class C shares........................................................ - (36)
Net realized gain on investments:
Class A shares........................................................ - (937,967)
Class B shares........................................................ - (248,855)
Class C shares........................................................ - (15)
____________________ _________________
TOTAL DIVIDENDS................................................... (5,213,354) (5,877,250)
____________________ _________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 1,872,238 1,598,276
Class B shares........................................................ 1,960,522 1,221,189
Class C shares........................................................ - 1,014
Dividends reinvested:
Class A shares........................................................ 1,978,459 2,309,470
Class B shares........................................................ 498,663 668,539
Class C shares........................................................ - 51
Cost of shares redeemed:
Class A shares........................................................ (12,622,094) (9,766,053)
Class B shares........................................................ (1,719,028) (1,355,717)
____________________ _________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (8,031,240) (5,323,231)
____________________ _________________
TOTAL (DECREASE) IN NET ASSETS.................................. (7,234,039) (4,595,602)
NET ASSETS:
Beginning of year....................................................... 92,155,231 84,921,192
____________________ _________________
End of year............................................................. $ 84,921,192 $ 80,325,590
==================== =================
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
__________________________________________________________________________________
CLASS A CLASS B CLASS C
________________________ ______________________ _______________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_______________________ _______________________
1995 1996 1995 1996 1996*
___________ __________ __________ __________ _______________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 92,136 75,223 96,542 57,381 49
Shares issued for
dividends reinvested. 97,778 108,052 24,656 31,283 2
Shares redeemed........ (636,330) (458,438) (86,401) (63,720) -
___________ __________ __________ __________ _______________________
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (446,416) (275,163) 34,797 24,944 51
=========== ========== ========== ========== =======================
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Texas Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager has
undertaken from May 1, 1995 to waive receipt of the management fee payable to it
by the Series until such time as the net assets of the Series exceed $100
million, regardless of whether they remain at that level. The management fee
waived, pursuant to the undertaking, amounted to $464,591 for the year ended
April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $87,651 was
charged to the Series for the Class B shares and $6 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $167,350, $43,826 and $2 were
charged to Class A, Class B and Class C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $11,727 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $40,754,684 and $45,945,727, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $1,393,360, consisting of $2,110,926 gross unrealized appreciation and
$717,566 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Texas Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Texas Series at April 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the indicated years, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP - Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
________________ ______________
<S> <C> <C>
VIRGINIA-84.5%
Alexandria Redevelopment and Housing Authority,
Multi-Family Housing Mortgage Revenue (Buckingham Village Apartments)
6.125%, 7/1/2021........................................................ $ 3,000,000 $ 2,941,260
Augusta County Industrial Development Authority, HR
(Augusta Hospital Corp. Project) 7%, 9/1/2021 (Prerefunded 9/1/2001) (a) 2,750,000 3,081,898
Capital Region Airport Commission, Airport Revenue
(Richmond International Airport Projects) 5.625%, 7/1/2025 (Insured; AMBAC) 3,000,000 2,843,670
Charlottesville-Albemarle Airport Authority, Airport Revenue Refunding:
6.125%, 12/1/2009....................................................... 450,000 432,738
6.125%, 12/1/2013....................................................... 350,000 335,807
Chesapeake, Water and Sewer System Revenue, Refunding 6.50%, 7/1/2012....... 1,000,000 1,049,240
Chesapeake Bay Bridge and Tunnel District, General Resolution Revenue,
Refunding 5%, 7/1/2022 (Insured; MBIA).................................. 5,410,000 4,767,779
Chesapeake Hospital Authority, Hospital Facility Revenue, Refunding
(Chesapeake General Hospital) 5.25%, 7/1/2018 (Insured; MBIA)........... 1,000,000 906,920
Community Housing Finance Corp. Arlington County,
Collateralized Mortgage Revenue, Refunding (Colonial Village Project)
6.25%, 6/1/2022 (Insured; FHA).......................................... 1,000,000 1,001,360
Covington-Alleghany County Industrial Development Authority,
Hospital Facility Revenue (Alleghany Regional Hospital)
6.875%, 4/1/2022 (Prerefunded 4/1/2002) (a)............................. 1,000,000 1,106,940
Fairfax County Park Authority, Park Facilities Revenue
6.625%, 7/15/2020....................................................... 2,665,000 2,710,545
Fairfax County Water Authority, Water Revenue:
5%, 4/1/2016............................................................ 2,000,000 1,806,900
7.561%, 4/1/2029 (b,c).................................................. 2,000,000 1,710,000
Hanover County Industrial Development Authority, HR
(Memorial Regional Medical Center Project) 5.50%, 8/15/2025 (Insured; MBIA) 1,000,000 930,670
Harrisonburg Redevelopment and Housing Authority, MFHR, Refunding
(Hanover Crossing Apartments Project) 6.35%, 3/1/2023................... 2,000,000 2,003,800
Industrial Development Authority of Albermarle County,
HR, Refunding (Martha Jefferson Hospital):
5.875%, 10/1/2013..................................................... 2,360,000 2,263,098
5.50%, 10/1/2020...................................................... 1,500,000 1,333,425
Industrial Development Authority of the City of Williamsburg,
Hospital Facility Revenue (Williamsburg Community Hospital) 5.75%, 10/1/2022 2,000,000 1,794,360
Industrial Development Authority of Giles County,
Exempt Facility Revenue (Hoechst Celanese Corp. Project)
5.95%, 12/1/2025........................................................ 3,000,000 2,919,690
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ _____________
VIRGINIA (CONTINUED)
Industrial Development Authority of the County of Henrico,
SWDR (Browning-Ferris Industries of South Atlantic, Inc. Project)
5.45%, 1/1/2014......................................................... $ 3,500,000 $ 3,312,855
Industrial Development Authority of the County of Prince William:
Hospital Facility Revenue (Potomac Hospital Corp. of Prince William)
6.85%, 10/1/2025...................................................... 1,000,000 1,043,820
HR, Refunding (Prince William Hospital)
5.625%, 4/1/2012...................................................... 1,000,000 944,700
Industrial Development Authority of the Town of West Point,
SWDR (Chesapeake Corp. Project) 6.375%, 3/1/2019........................ 2,500,000 2,431,825
Nelson County Service Authority, Water and Sewer Revenue, Refunding
5.50%, 7/1/2018 (Insured; FGIC)......................................... 1,750,000 1,648,430
Norfolk Redevelopment and Housing Authority, Educational Facility Revenue
(Tidewater Community College Campus) 5.875%, 11/1/2015.................. 1,000,000 976,210
Prince William County Park Authority, Revenue
6.875%, 10/15/2016...................................................... 3,000,000 3,195,630
Rector and Visitors of the University of Virginia, General Revenue Pledge
5.375%, 6/1/2020........................................................ 4,370,000 4,068,776
Richmond Industrial Development Authority, HR (Retreat Hospital)
7.35%, 7/1/2021 (Prerefunded 7/1/2001) (a).............................. 1,900,000 2,144,283
Richmond Metropolitan Authority, Expressway Revenue, Refunding
6.375%, 7/15/2016 (Insured; FGIC)....................................... 1,500,000 1,564,980
Southeastern Public Service Authority, Revenue
5.125%, 7/1/2013 (Insured; MBIA)........................................ 7,850,000 7,339,593
Upper Occoquan Sewer Authority, Regional Sewer Revenue:
6.50%, 7/1/2017 (Insured; MBIA) (Prerefunded 7/1/2001) (a).............. 1,000,000 1,098,140
5%, 7/1/2025 (Insured; MBIA)............................................ 4,000,000 3,508,920
Virginia Beach Development Authority
Nursing Home Revenue (Sentara Life Care Corp.) 7.75%, 11/1/2021......... 1,000,000 1,096,670
Virginia Housing Development Authority:
Commonwealth Mortgage:
6.20%, 7/1/2021....................................................... 3,255,000 3,221,929
6.85%, 1/1/2027....................................................... 2,000,000 2,040,300
Multi-Family Refunding 5.90%, 11/1/2017................................. 2,000,000 1,957,120
U. S. RELATED-15.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,006,080
Commonwealth of Puerto Rico:
5.40%, 7/1/2025......................................................... 3,000,000 2,717,010
(Public Improvement) 6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)......... 1,000,000 1,122,000
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ______________
U. S. RELATED (CONTINUED)
Puerto Rico Highway and Transportation Authority, Highway Revenue:
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. $ 2,000,000 $ 2,224,780
5.50%, 7/1/2026......................................................... 5,000,000 4,597,650
Virgin Islands Public Finance Authority, Revenue, Refunding, Matching Fund
Loan Notes
7.25%, 10/1/2018........................................................ 1,500,000 1,578,405
______________
TOTAL INVESTMENTS (cost $92,283,183)........................................ $91,780,206
==============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ _____________ ___________________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 31.5%
AA Aa AA 20.6
A A A 35.2
BBB Baa BBB 11.0
Not Rated (e) Not Rated (e) Not Rated (e) 1.7
___________
100.0%
===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse Floater Security of the interest rate is subject to change
periodically.
(c) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1996, this security amounted to $1,710,000 or 1.8% of net assets.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $92,283,183)-see statement...................................... $91,780,206
Cash.................................................................... 1,031,926
Interest receivable..................................................... 1,530,159
Receivable for shares of Beneficial Interest subscribed................. 208,537
Prepaid expenses........................................................ 3,900
_______________
94,554,728
LIABILITIES:
Due to Distributor...................................................... $32,981
Payable for shares of Beneficial Interest redeemed...................... 14,191
Accrued expenses........................................................ 72,788 119,960
____________ _______________
NET ASSETS.................................................................. $94,434,768
===============
REPRESENTED BY:
Paid-in capital......................................................... $95,195,136
Accumulated net realized (loss) on investments.......................... (257,391)
Accumulated net unrealized (depreciation) on investments-Note 3......... (502,977)
_______________
NET ASSETS at value......................................................... $94,434,768
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 3,759,009
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 2,036,179
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 10,194
===============
NET ASSET VALUE per share:
Class A Shares
($61,149,373 / 3,759,009 shares)...................................... $16.27
===============
Class B Shares
($33,119,613 / 2,036,179 shares)...................................... $16.27
===============
Class C Shares
($165,782 / 10,194 shares)............................................ $16.26
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,783,574
EXPENSES:
Management fee-Note 2(a).............................................. $ 522,229
Shareholder servicing costs-Note 2(c)................................. 315,653
Distribution fees-Note 2(b)........................................... 157,882
Professional fees..................................................... 18,106
Prospectus and shareholders' reports.................................. 15,763
Custodian fees........................................................ 10,760
Registration fees..................................................... 1,648
Trustees' fees and expenses-Note 2(d)................................. 1,264
Miscellaneous......................................................... 116,338
______________
TOTAL EXPENSES.................................................. 1,159,643
Less-management fee waived due to
undertaking-Note 2(a)............................................. 522,229
______________
NET EXPENSES.................................................... 637,414
_____________
INVESTMENT INCOME-NET........................................... 5,146,160
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,771,595
Net unrealized (depreciation) on investments............................ (539,154)
_____________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,232,441
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $6,378,601
=============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
_____________________________________
1995 1996
_____________ _____________
OPERATIONS:
Investment income-net................................................... $ 5,219,359 $ 5,146,160
Net realized gain (loss) on investments................................. (1,651,777) 1,771,595
Net unrealized appreciation (depreciation) on investments for the year.. 1,713,847 (539,154)
_____________ _____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 5,281,429 6,378,601
_____________ _____________
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (3,761,772) (3,546,219)
Class B shares........................................................ (1,457,587) (1,598,256)
Class C shares........................................................ - (1,685)
In excess of net realized gain on investments:
Class A shares........................................................ (120,788) -
Class B shares........................................................ (53,700) -
_____________ _____________
TOTAL DIVIDENDS................................................... (5,393,847) (5,146,160)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 7,081,776 4,126,648
Class B shares........................................................ 5,599,985 5,468,182
Class C shares........................................................ - 171,138
Dividends reinvested:
Class A shares........................................................ 2,086,577 1,849,325
Class B shares........................................................ 818,920 812,093
Class C shares........................................................ - 1,041
Cost of shares redeemed:
Class A shares........................................................ (11,840,016) (8,185,998)
Class B shares........................................................ (2,926,642) (2,280,799)
_____________ _____________
INCREASE IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... 820,600 1,961,630
_____________ _____________
TOTAL INCREASE IN NET ASSETS.................................... 708,182 3,194,071
NET ASSETS:
Beginning of year....................................................... 90,532,515 91,240,697
_____________ _____________
End of year............................................................. $91,240,697 $94,434,768
============= =============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
____________________________________________________________________________________________
CLASS A CLASS B CLASS C
__________________________ ____________________________________ ________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
__________________________ ____________________________________
1995 1996 1995 1996 1996*
____________ ___________ _______________ _______________ ________________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold.......... 447,976 249,234 356,143 328,113 10,131
Shares issued for
dividends reinvested 132,774 111,225 52,168 48,831 63
Shares redeemed...... (761,303) (494,748) (187,333) (137,908) -
____________ ___________ _______________ _______________ ________________________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING.... (180,553) (134,289) 220,978 239,036 10,194
============ =========== =============== =============== ========================
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Virginia Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc., (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $148,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1996. If not
applied, the carryover expires in fiscal 2003.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager has
undertaken from May 1, 1995 to waive receipt of the management fee payable to it
by the Series until such time as the net assets of the Series exceed $100
million, regardless of whether they remain at that level. The management fee
waived, pursuant to the undertaking, amounted to $522,229 for the year ended
April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $39 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $157,606 was
charged to the Series for the Class B shares and $276 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the year ended April 30, 1996, $158,482, $78,803 and $92
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Service Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $19,409 for the period from December 1,
1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $49,693,408 and $47,684,106, respectively.
At April 30, 1996, accumulated net unrealized depreciation on investments
was $502,977, consisting of $2,070,929 gross unrealized appreciation and
$2,573,906 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Virginia Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Virginia Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(ERNST & YOUNG LLP..... SIGNATURE LOGO)
New York, New York
June 5, 1996
<PAGE>
__________________________________________________________________________
PREMIER NEW YORK MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS C SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
APRIL 1, 1996
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Premier New York Municipal Bond Fund (the "Fund"), dated April 1, 1996, as it
may be revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . B-12
Management Agreement . . . . . . . . . . . . . . . . . . . B-15
Purchase of Shares . . . . . . . . . . . . . . . . . . . . B-17
Distribution Plan and Shareholder Services Plan. . . . . . B-19
Redemption of Shares . . . . . . . . . . . . . . . . . . . B-20
Shareholder Services . . . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value . . . . . . . . . . . . . B-25
Dividends, Distributions and Taxes . . . . . . . . . . . . B-25
Portfolio Transactions . . . . . . . . . . . . . . . . . . B-27
Performance Information. . . . . . . . . . . . . . . . . . B-28
Information About the Fund . . . . . . . . . . . . . . . . B-30
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors. . . . . . . . . . . B-30
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . B-31
Appendix B . . . . . . . . . . . . . . . . . . . . . . . . B-44
Financial Statements . . . . . . . . . . . . . . . . . . . B-53
Report of Independent Auditors . . . . . . . . . . . . . . B-63
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the Fund"
and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal Obligations
by ratings for the fiscal year ended November 30, 1995, computed on a monthly
basis, was as follows:
Fitch Moody's Standard
Investors Investors & Poor's
Service, L.P. Service, Inc. Ratings Group Percentage
("Fitch") or ("Moody's") or ("S&P") of Value
AAA Aaa AAA 17.9%
AA Aa AA 13.2
A A A 31.9
BBB Baa BBB 30.7
BB Ba BB 2.9
F-1 MIG 1/P-1 SP-1/A-1 1.3
Not Rated Not Rated Not Rated 2.1(1)
100.0%
_____________________________________________________
1 Included under the Not Rated category are securities comprising 2.1%
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 Baa/BBB rating category.
Municipal Obligations. The term "Municipal Obligations" generally includes
debt obligations issued to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and water
and sewer works. Other public purposes for which Municipal Obligations may be
issued include refunding outstanding obligations, obtaining funds for general
operating expenses and lending such funds to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, industrial, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal; the interest paid on such
obligations may be exempt from Federal income tax, although current tax laws
place substantial limitations on the size of such issues. Such obligations are
considered to be Municipal Obligations if the interest paid thereon qualifies as
exempt from Federal income tax in the opinion of bond counsel to the issuer.
There are, of course, variations in the security of Municipal Obligations, both
within a particular classification and between classifications.
Floating and variable rate demand obligations are tax exempt obligations
ordinarily having stated maturities in excess of one year, but which permit the
holder to demand payment of principal at any time or at specified intervals. The
issuer of such obligations ordinarily has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders thereof. The interest rate on a floating rate demand obligation is based
on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a variable
rate demand obligation is adjusted automatically at specified intervals.
The yields on Municipal Obligations are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions in the Municipal Obligations market, size of a particular offering,
maturity of the obligation, and rating of the issue. The imposition of the
Fund's management fee, as well as other operating expenses, including fees paid
under the Fund's Shareholder Services Plan and, with respect to Class B and
Class C shares, the Distribution Plan, will have the effect of reducing the
yield to investors.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation ordinarily is backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. The staff of the Securities and Exchange Commission
currently considers certain lease obligations to be illiquid. Determination as
to the liquidity of such securities is made in accordance with guidelines
established by the Fund's Board. Pursuant to such guidelines, the Board has
directed the Manager to monitor carefully the Fund's investment in such
securities with particular regard to (1) the frequency of trades and quotes for
the lease obligation; (2) the number of dealers willing to purchase or sell the
lease obligation and the number of other potential buyers; (3) the willingness
of dealers to undertake to make a market in the lease obligation; (4) the nature
of the marketplace trades including the time needed to dispose of the lease
obligation, the method of soliciting offers and the mechanics of transfer; and
(5) such other factors concerning the trading market for the lease obligation as
the Manager may deem relevant. In addition, in evaluating the liquidity and
credit quality of a lease obligation that is unrated, the Fund's Board has
directed the Manager to consider (a) whether the lease can be cancelled; (b)
what assurance there is that the assets represented by the lease can be sold;
(c) the strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (d) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of nonappropriation"); (e) the
legal recourse in the event of failure to appropriate; and (f) such other
factors concerning credit quality as the Manager may deem relevant. Accordingly,
not more than 15% of the value of the Fund's net assets will be invested in
lease obligations that are illiquid and in other illiquid securities.
The Fund will purchase tender option bonds only when it is satisfied that
the custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the underlying
Municipal Obligations and that payment of any tender fees will not have the
effect of creating taxable income for the Fund. Based on the tender option bond
agreement, the Fund expects to be able to value the tender option bond at par;
however, the value of the instrument will be monitored to assure that it is
valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the Fund,
an issue of rated Municipal Obligations may cease to be rated or its rating may
be reduced below the minimum required for purchase by the Fund. Neither event
will require the sale of such Municipal Obligations by the Fund, but the Manager
will consider such event in determining whether the Fund should continue to hold
the Municipal Obligations. To the extent that the ratings given by Moody's, S&P
or Fitch for Municipal Obligations may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use comparable
ratings as standards for its investments in accordance with the investment
policies contained in the Fund's Prospectus and this Statement of Additional
Information. The ratings of Moody's, S&P and Fitch represent their opinions as
to the quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and are
not absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Manager also will evaluate
these securities.
Illiquid Securities. Where a substantial market of qualified institutional
buyers develops for certain restricted securities purchased by the Fund pursuant
to Rule 144A under the Securities Act of 1933, as amended, the Fund intends to
treat such securities as liquid securities in accordance with procedures
approved by the Fund's Board. Because it is not possible to predict with
assurance how the market for restricted securities pursuant to Rule 144A will
develop, the Fund's Board has directed the Manager to monitor carefully the
Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified institutional
buyers cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in the Fund's investments during such period.
Taxable Investments. Securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities include U.S. Treasury securities, which
differ in their interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S. Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. Principal and interest rates may fluctuate based on generally
recognized reference rates or the relationship of rates. While the U.S.
Government provides financial support to such U.S. Government sponsored agencies
or instrumentalities, no assurance can be given that it will always do so, since
it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes issued
to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate. Investments in time deposits generally are limited to
London branches of domestic banks that have total assets in excess of one
billion dollars. Time deposits which may be held by the Fund will not benefit
from insurance from Bank Insurance Fund or the Savings Association Insurance
Fund administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
In a repurchase agreement, the Fund buys a security, and at the time of
sale, the seller agrees to repurchase the obligation at a mutually agreed upon
time and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the seller's
obligation to repurchase is secured by the value of the underlying security. The
Fund's custodian or subcustodian will have custody of, and will hold in a
segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the Securities
and Exchange Commission to be loans by the Fund. In an attempt to reduce the
risk of incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements only with domestic banks with total assets in excess of
one billion dollars or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type in
which the Fund may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease below
resale price. Repurchase agreements could involve risks in the event of a
default or insolvency of the other party to the agreement, including possible
delays or restrictions upon the Fund's ability to dispose of the underlying
securities.
Management Policies
Short-Selling. Until the Fund closes its short position or replaces the
borrowed security, it will: (a) maintain a segregated account, containing cash
or U.S. Government securities, at such a level that the amount deposited in the
account plus 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.
Lending Portfolio Securities. In connection with its securities lending
transactions, the Fund may return to the borrower or a third party which is
unaffiliated with the Fund, and which is acting as a "placing broker," a part of
the interest earned from the investment of collateral received for securities
loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable interest
on the loan, as well as any interest or other distributions payable on the
loaned securities, and any increase in market value; and (5) the Fund may pay
only reasonable custodian fees in connection with the loan.
Derivatives. The Fund may invest in Derivatives (as defined in the Fund's
Prospectus) for a variety of reasons, including to hedge certain market risks,
to provide a substitute for purchasing or selling particular securities or to
increase potential income gain. Derivatives may provide a cheaper, quicker or
more specifically focused way for the Fund to invest than "traditional"
securities would.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with Derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
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, such as the Chicago Board of Trade. Engaging in these
transactions involves risk of loss to the Fund which could adversely affect the
value of the Fund's net assets. Although the Fund intends to purchase or sell
futures contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market,
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate cash or high quality
money market instruments in connection with its commodities transactions in an
amount generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting the Fund's ability otherwise to
invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase or
sell an amount of a specific debt security at a future date at a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to interest rate futures contracts. 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.
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.
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.
Futures Developments. The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and any
other Derivatives which are not presently contemplated for use by the Fund or
which are not currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
Forward Commitments. Municipal Obligations and other securities purchased
on a forward commitment or when-issued basis are subject to changes in value
(generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a forward
commitment or when-issued basis may expose the Fund to risks because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be higher
than that obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully invested
may result in greater potential fluctuation in the value of the Fund's net
assets and its net asset value per share.
Investment Considerations and Risks
Investing in New York Municipal Obligations. Each investor should consider
carefully the special risks inherent in the Fund's investment in New York
Municipal Obligations. These risks result from the financial condition of New
York State and certain of its public bodies and municipalities, including New
York City. Beginning in early 1975, New York State, New York City and other
State entities faced serious financial difficulties which jeopardized the credit
standing and impaired the borrowing abilities of such entities and contributed
to high interest rates on, and lower market prices for, debt obligations issued
by them. A recurrence of such financial difficulties or a failure of certain
financial recovery programs could result in defaults or declines in the market
values of various New York Municipal Obligations in which the Fund may invest.
If there should be a default or other financial crisis relating to New York
State, New York City, a State or City agency, or a State municipality, the
market value and marketability of outstanding New York Municipal Obligations in
the Fund's portfolio and the interest income to the Fund could be adversely
affected. Moreover, the national recession and the significant slowdown in the
New York and regional economies in the early 1990's added substantial
uncertainty to estimates of the State's tax revenues, which, in part, caused the
State to incur cash-basis operating deficits in the General Fund and issue
deficit notes during the fiscal periods 1989 through 1992. The State's financial
operations improved, however, during the 1993 and 1994 fiscal years. After
reflecting a 1993 year-end deposit to the refund reserve account of $671
million, reported 1993 General Fund receipts were $45 million higher than
originally projected in April 1992. The State completed the 1994 fiscal year
with operating surpluses of $914 million. The State reported a General Fund
operating deficit of $1.426 billion for the 1995 fiscal year. There can be no
assurance that New York will not face substantial potential budget gaps in
future years. In January 1992, Moody's lowered from A to Baa1 the ratings on
certain appropriation-backed debt of New York State and its agencies. The
State's general obligation, State-guaranteed and New York State Local Government
Assistance Corporation bonds continue to be rated A by Moody's. In January 1992,
S&P lowered from A to A- its ratings of New York State general obligation bonds
and stated that it continues to assess the ratings outlook as negative. The
ratings of various agency debt, State moral obligations, contractual
obligations, lease purchase obligations and State guarantees also were lowered.
In February 1991, Moody's lowered its rating on New York City's general
obligation bonds from A to Baa1 and in July 1995, S&P lowered its rating on such
bonds from A- to BBB+. The rating changes reflected the rating agencies'
concerns about the financial condition of New York State and City, the heavy
debt load of the State and City, and economic uncertainties in the region.
Investors should review "Appendix A" which more fully sets forth these and other
risk factors.
Lower Rated Bonds. The Fund is permitted to invest in securities rated Ba
by Moody's or BB by S&P or Fitch and as low as the lowest rating assigned by
Moody's, S&P or Fitch. Such bonds, though higher yielding, are characterized by
risk. See "Description of the Fund--Investment Considerations and Risks--Lower
Rated Bonds" in the Prospectus for a discussion of certain risks and "Appendix
B" for a general description of Moody's, S&P and Fitch ratings of Municipal
Obligations. Although ratings may be useful in evaluating the safety of interest
and principal payments, they do not evaluate the market value risk of these
bonds. The Fund will rely on the Manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by Moody's, S&P and Fitch to
be, 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 could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any persons concerning the acquisition of such securities,
and the Manager will review carefully the credit and other characteristics
pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon bonds and pay-in-kind bonds, in which the Fund may
invest up to 5% of its total assets. Pay-in-kind bonds pay interest through the
issuance of additional securities. Zero coupon securities and pay-in-kind or
delayed interest bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Fund will realize no cash until
the cash payment date unless a portion of such securities are sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment. See
"Dividends, Distribution and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 10 as
fundamental policies, which cannot be changed without approval by the holders of
a majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Fund's outstanding voting shares. Investment restriction
number 11 is not a fundamental policy and may be changed by vote of a majority
of the Fund's Board members at any time. The Fund may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Prospectus and those
arising out of transactions in futures and options.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) based on the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any additional investments. Transactions in futures and
options and the entry into short sales transactions do not involve any borrowing
for purposes of this restriction.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure borrowings for temporary or emergency purposes. The deposit of assets
in escrow in connection with the writing of covered put and call options and the
purchase of securities on a when-issued or delayed-delivery basis and collateral
arrangements with respect to initial or variation margin for futures contracts
and options on futures contracts or indices will not be deemed to be pledges of
the Fund's assets.
4. Purchase securities on margin, but the Fund may make margin deposits in
connection with transactions in futures, including those related to indices, and
options on futures or indices.
5. 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.
6. 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.
7. Make loans to others except through the purchase of qualified debt
obligations and the entry into repurchase agreements referred to above and in
the Fund's Prospectus; 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 Trustees.
8. Invest more than 25% of its total assets in the securities of issuers in
any single industry; provided that there shall be no such limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
11. 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 that are not subject to the
demand feature described in the Fund's Prospectus and floating and variable rate
demand obligations as to which no secondary market exists and the Fund cannot
exercise the demand feature described in the Fund's Prospectus on less than
seven days' notice), if, in the aggregate, more than 15% of the value of its net
assets would be so invested.
For purposes of Investment Restriction No. 8, industrial development bonds,
where the payment of principal and interest is the ultimate responsibility of
companies within the same industry, are grouped together as an "industry."
If a percentage restriction is adhered to at the time of investment, a
later increase in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of Fund shares in certain states. Should the Fund
determine that a commitment is no longer in the best interest of the Fund and
its shareholders, the Fund reserves the right to revoke the commitment by
terminating the sale of Fund shares in the state involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Board member who is deemed to be an "interested person" of the
Fund, as defined in the 1940 Act, is indicated by an asterisk.
Board Members of the Fund
CLIFFORD L. ALEXANDER, JR., Board Member. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to 1981,
Mr. Alexander served as Secretary of the Army and Chairman of the
Board of the Panama Canal Company, and from 1975 to 1977, he was a
member of the Washington, D.C. law firm of Verner, Liipfert,
Bernhard, McPherson and Alexander. He is a director of American Home
Products Corporation, The Dun & Bradstreet Corporation, MCI
Communications Corporation and Mutual of America Life Insurance
Company. He is 62 years old and his address is 400 C Street, N.E.,
Washington, D.C. 20002.
PEGGY C. DAVIS, Board Member. Shad Professor of Law, New York University
School of Law. Professor Davis has been a member of the New York
University law faculty since 1983. Prior to that time, she served
for three years as a judge in the courts of New York State; was
engaged for eight years in the practice of law, working in both
corporate and non-profit sectors; and served for two years as a
criminal justice administrator in the government of the City of New
York. She writes and teaches in the fields of evidence,
constitutional theory, family law, social sciences and the law, legal
process and professional methodology and training. She is 53 years
old and her address is c/o New York University School of Law, 249
Sullivan Street, New York, New York 10012.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. He
is Chairman of the Board of Directors of Noel Group, Inc, a venture
capital company; a trustee of Bucknell University; and a director of
the Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway, Inc., a manufacturer and marketer of industrial
threads, specialty yarns and home furnishings and fabrics, Curtis
Industries, Inc. a national distributor of security products,
chemicals, and automotive and other hardware and Staffing Resources,
Inc. He is 52 years old and his address is 200 Park Avenue, New
York, New York 10166.
ERNEST KAFKA, Board Member. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents. Since
1981, he has served as an Instructor at the New York Psychoanalytic
Institute and, prior thereto, held other teaching positions. He is
Associate Clinical Professor of Psychiatry at Cornell Medical School.
For more than the past five years, Dr. Kafka has held numerous
administrative positions, including President of The New York
Psychoanalytic Society, and has published many articles on subjects
in the field of psychoanalysis. He is 63 years old and his address
is 23 East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, Board Member. Chairman and Chief Executive Officer of SBK
Associates, which provides research and consulting services to
financial institutions. Dr. Klaman was President of the National
Association of Mutual Savings Banks until November 1983, President of
the National Council of Savings Institutions until June 1985, Vice
Chairman of Golembe Associates and BEI Golembe, Inc. until 1989, and
Chairman Emeritus of BEI Golembe, Inc. until November 1992. He also
served as an Economist to the Board of Governors of the Federal
Reserve System and on several Presidential Commissions, and has held
numerous consulting and advisory positions in the fields of economics
and housing finance. He is 76 years old and his address is 431-B
Dedham Street, The Gables, Newton Center, Massachusetts 02159.
NATHAN LEVENTHAL, Board Member. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for Operations
of New York City from September 1979 to March 1984 and Commissioner
of the Department of Housing Preservation and Development of New York
City from February 1978 to September 1979. Mr. Leventhal was an
associate and then a member of the New York law firm of Poletti
Freidin Prashker Feldman and Gartner from 1974 to 1978. He was
Commissioner of Rent and Housing Maintenance for New York City from
1972 to 1973. Mr. Leventhal serves as Chairman of Citizens Union, an
organization which strives to reform and modernize city and state
governments. He is 53 years old and his address is 70 Lincoln Center
Plaza, New York, New York 10023-6583.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the Board
members of the Fund who are not "interested persons" of the Fund, as defined in
the 1940 Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund for the fiscal year ended November 30, 1995,
and by all other funds in the Dreyfus Family of Funds for which such person is a
Board member (the number of which is set forth in parenthesis next to each Board
member's total compensation) for the year ended December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
(3) (5)
(2) Pension or (4) Total Compensation
(1) Aggregate Retirement Benefits Estimated Annual from Fund and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund* Fund's Expenses Retirement Board Member
- --------------- ------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Clifford L. Alexander, Jr. $2,500 none none $ 94,386 (17)
Peggy C. Davis $2,500 none none $ 81,636 (15)
Joseph S. DiMartino $2,985 none none $448,618 (94)
Ernest Kafka $2,500 none none $ 81,136 (15)
Saul B. Klaman $2,500 none none $ 81,886 (15)
Nathan Leventhal $2,500 none none $ 81,636 (15)
_________________________
* Amount does not include reimbursed expenses for attending Board meetings, which amounted to $176 for all Board members as a
group.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Executive
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The
Boston Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an Associate at Ropes & Gray. He is 31 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to
August 1994, he was manager of the High Performance Fabric Division
of Springs Industries Inc. He is 34 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September
1992 to August 1994, he was an attorney with the Board of Governors
of the Federal Reserve System. He is 31 years old.
ELIZABETH A. BACHMAN, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years
old.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in
the Corporate Finance and Treasury areas. He is 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From 1984 to July 1994, he was
Assistant Vice President in the Mutual Fund Accounting Department of
the Manager. He is 60 years old.
MARGARET M. PARDO, Assistant Secretary. Legal Assistant with the
Distributor and an officer of other investment companies advised or
administered by the Manager. From June 1992 to April 1995, she was a
Medical Coordination Officer at ORBIS International. Prior to June
1992, she worked as Program Coordinator at Physicians World
Communications Group. She is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares of beneficial interest outstanding on March 20, 1996.
The following entities owned of record 5% or more of the Fund's shares
outstanding as of March 20, 1996: Class A - BHC Securities, 2005 Market St., Fl.
1200, Philadelphia, PA 19103-7042 - 29.8%: Class C - Premier Mutual Fund
Services, Inc., 1 Exchange Place, Boston, MA 02109- 2809 - 100.0%. A shareholder
who beneficially owned, directly or indirectly, 25% or more of the Fund's voting
securities may be deemed to be a "control person" (as defined in the 1940 Act)
of the Fund.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was approved by shareholders
on August 3, 1994 and was last approved by the Fund's Board, including a
majority of the Board members who are not "interested persons" (as defined in
the 1940 Act) of any party to the Agreement, at a meeting held on July 19, 1995.
The Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board or by vote of the holders of a majority of the Fund's shares, or, on not
less than 90 days' notice, by the Manager. The Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: Howard
Stein, Chairman of the Board and Chief Executive Officer; W. Keith Smith, Vice
Chairman of the Board; Christopher M. Condron, President, Chief Operating
Officer and a director; Stephen E. Canter, Vice Chairman, Chief Investment
Officer and a director; Lawrence S. Kash, Vice Chairman-Distribution and a
director; Philip L. Toia, Vice Chairman-Operations and Administration and a
director; William T. Sandalls, Jr., Senior Vice President and Chief Financial
Officer; Barbara E. Casey, Vice President-Dreyfus Retirement Services; Diane M.
Coffey, Vice President-Corporate Communications; Elie M. Genadry, Vice
President-Institutional Sales; William F. Glavin, Jr., Vice President-Corporate
Development; Mark N. Jacobs, Vice President, General Counsel and Secretary; Mary
Beth Leibig, Vice President-Human Resources; Jeffrey N. Nachman, Vice
President-Mutual Fund Accounting; Andrew S. Wasser, Vice President-Information
Services; Maurice Bendrihem, Controller; Elvira Oslapas, Assistant Secretary;
and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene
and Julian M. Smerling, directors.
The Manager manages the Fund's portfolio of investments in accordance with
the stated policies of the Fund, subject to the approval of the Fund's Board.
The Manager is responsible for investment decisions, and provides the Fund with
portfolio managers who are authorized by the Fund's Board to execute purchases
and sales of securities. The Fund's portfolio managers are Joseph P. Darcy, A.
Paul Disdier, Douglas J. Gaylor, Karen M. Hand, Stephen C. Kris, Richard J.
Moynihan, Jill C. Shaffro, L. Lawrence Troutman, Samuel J. Weinstock and Monica
S. Wieboldt. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for the Fund as well as for other funds advised by the
Manager. All purchases and sales are reported for the Board's review at the
meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and promotional
expenditures, using its own resources, as it from time to time deems
appropriate.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses borne by
the Fund include without limitation, the following: taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Board members who are not
officers, directors or employees or holders of 5% or more of the outstanding
voting securities of the Manager, Securities and Exchange Commission fees and
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
independent pricing services, costs of maintaining the Fund's existence, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders, costs of shareholders' reports and meetings and any
extraordinary expenses. In addition, shares of each Class are subject to an
annual service fee and Class B and Class C shares are subject to an annual
distribution fee. See "Distribution Plan and Shareholder Services Plan."
As compensation for the Manager's services to the Fund, the Fund has agreed
to pay the Manager a monthly management fee at the annual rate of .55 of 1% of
the value of the Fund's average daily net assets. For the fiscal years ended
November 30, 1993, 1994 and 1995, the management fees payable amounted to
$870,354, $1,185,186 and $1,118,961, respectively, which amounts were reduced by
$282,869, $86,817 and $0, respectively, pursuant to various undertakings in
effect in 1993 and 1994, resulting in net fees paid to the Manager of $587,485
in fiscal 1993, $1,098,369 in fiscal 1994 and $1,118,961 in fiscal 1995.
The Manager has agreed that if in any fiscal year the aggregate expenses of
the Fund, exclusive of taxes, brokerage fees, interest on borrowings and (with
the prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed the expense
limitation of any state having jurisdiction over the Fund, the Fund may deduct
from the payment to be made to the Manager under the Agreement, or the Manager
will bear, such excess expense to the extent required by state law. Such
deduction or payment, if any, will be estimated daily, and reconciled and
effected or paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a best
efforts basis pursuant to an agreement dated August 24, 1994. The Distributor
also acts as distributor for the other funds in the Premier Family of Funds, the
Dreyfus Family of Funds and for certain other investment companies. In some
states, certain financial institutions effecting transactions in Fund shares may
be required to register as dealers pursuant to state law.
For the fiscal year ended November 30, 1995, the Distributor retained
$21,770 from sales loads on Class A shares and $192,587 from contingent deferred
sales charges ("CDSC") on Class B shares. For the period August 24, 1994 through
November 30, 1994, the Distributor retained $8,174 from the sales loads on Class
A shares and $132,566 from the CDSC on Class B shares. For the period December
1, 1993 through August 23, 1994 and for the fiscal year ended November 30, 1993,
Dreyfus Service Corporation, as the Fund's distributor during such periods,
retained $50,856 and $138,876, respectively, from sales loads on Class A shares,
and $131,696 and $32,366, respectively, from CDSCs on Class B shares. For the
period from September 11, 1995 through November 30, 1995, no amount was retained
from CDSCs on Class C shares.
Sales Loads--Class A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the"Code")) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k), and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the offering price
of the Fund's Class A shares. The example assumes a purchase of Class A shares
of the Fund aggregating less than $50,000 subject to the schedule of sales
charges set forth in the Fund's Prospectus at a price based upon the net asset
value of the Class A shares on November 30, 1995.
Net Asset Value per Share. . . . . . . . . $14.93
Per Share Sales Charge - 4.5% of offering
price
(4.7% of net asset value per share). . . . .70
------
Per Share Offering Price to the Public . . $15.63
======
Using Federal Funds. Dreyfus Transfer, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund may attempt to
notify the investor upon receipt of checks drawn on banks that are not members
of the Federal Reserve System as to the possible delay in conversion into
Federal Funds and may attempt to arrange for a better means of transmitting the
money. If the investor is a customer of a securities dealer (Selected Dealer")
and his order to purchase Fund shares is paid for other than in Federal Funds,
the Selected Dealer, acting on behalf of its customer, will complete the
conversion into, or itself advance, Federal Funds generally on the business day
following receipt of the customer order. The order is effective only when so
converted and received by the Transfer Agent. An order for the purchase of Fund
shares placed by an investor with sufficient Federal Funds or a cash balance in
his brokerage account with a Selected Dealer will become effective on the day
that the order, including Federal Funds, is received by the Transfer Agent.
TeleTransfer Privilege. TeleTransfer purchase orders may be made at any
time. Purchase orders received by 4:00 P.M., New York time, on any business day
that the Transfer Agent and the New York Stock Exchange are open for business
will be credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 P.M., New York
time, on any business day the Transfer Agent and the New York Stock Exchange are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the New York Stock Exchange is not open for business), will be credited to
the shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the TeleTransfer Privilege, the initial
payment for purchase of Fund shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account Application
or Shareholder Services Form on file. If the proceeds of a particular redemption
are to be wired to an account at any other bank, the request must be in writing
and signature-guaranteed. See "Redemption of Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Distribution Plan and
Shareholder Services Plan."
Class B and Class C shares are subject to a Distribution Plan and Class A,
Class B and Class C shares are subject to a Shareholder Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the Securities and
Exchange Commission under the 1940 Act provides, among other things, that an
investment company may bear expenses of distributing its shares only pursuant to
a plan adopted in accordance with the Rule. The Fund's Board has adopted such a
plan (the "Distribution Plan") with respect to Class B and Class C shares,
pursuant to which the Fund pays the Distributor for distributing Class B and
Class C shares. The Fund's Board believes that there is a reasonable likelihood
that the Distribution Plan will benefit the Fund and holders of Class B and
Class C shares.
A quarterly report of the amounts expended under the Distribution Plan, and
the purposes for which such expenditures were incurred, must be made to the
Board for its review. In addition, the Distribution Plan provides that it may
not be amended to increase materially the costs which holders of Class B or
Class C shares may bear for distribution pursuant to the Distribution Plan
without the approval of such shareholders and that other material amendments of
the Distribution Plan must be approved by the Board, and by the Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund and
have no direct or indirect financial interest in the operation of the
Distribution Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Distribution 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 Distribution Plan. The Distribution Plan was last so
approved at a meeting held on July 19, 1995. As to each such Class, the
Distribution Plan may be terminated 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 Distribution Plan, or by vote of the
holders of a majority of such Class of shares.
For the fiscal year ended November 30, 1995, the Fund paid the Distributor
$299,916, with respect to Class B, and $8, with respect to Class C, under the
Distribution Plan.
Shareholder Services Plan. The Fund has adopted a Shareholder Services
Plan, pursuant to which the Fund pays the Distributor for the provision of
certain services to the holders of Class A, Class B and Class C shares. 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 such shareholder accounts. Under the Shareholder Service Plan, the
Distributor may make payments to certain financial institutions (which may
include banks), Selected Dealers and other financial industry professionals
(collectively, "Service Agents") in respect of these services.
A quarterly report of the amounts expended under the Shareholder Services
Plan, and the purposes for which such expenditures were incurred, must be made
to the Board for its review. In addition, the Shareholder Services Plan provides
that material amendments must be approved by the Fund's Board and by the Board
members who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
the Shareholder Services Plan or in any agreements entered into in connection
with the Shareholder Services Plan by vote cast in person at a meeting called
for the purpose of considering such amendments. The Shareholder Services Plan is
subject to annual approval by such vote of the Board members cast in person at a
meeting called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was last so approved on July 19, 1995. As to each
Class of shares, the Shareholder Services Plan is terminable at any time by vote
of a majority of the Board members who are not "interested persons" and who have
no direct or indirect financial interest in the operation of the Shareholder
Services Plan or in any agreements entered into in connection with the
Shareholder Services Plan.
For the fiscal year ended November 30, 1995, the Fund paid the Distributor
$358,656, with respect to Class A, $149,961, with respect to Class B, and $1,
with respect to Class C, under the Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Check Redemption Privilege--Class A. An investor may indicate on the
Account Application, Shareholder Services Form or by later written request that
the Fund provide Redemption Checks ("Checks") drawn on the investor's Fund
account. Checks will be sent only to the registered owner(s) of the account and
only to the address of record. The Account Application, Shareholder Services
Form or later written request must be manually signed by the registered
owner(s). Checks may be made payable to the order of any person in an amount of
$500 or more. When a Check is presented to the Transfer Agent for payment, the
Transfer Agent, as the investor's agent, will cause the Fund to redeem a
sufficient number of full and fractional Class A shares in the investor's
account to cover the amount of the Check. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the investor.
Investors generally will be subject to the same rules and regulations that apply
to checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the Class A shares
in an investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a TeleTransfer transaction
will be effected through the Automated Clearing House ("ACH") system unless more
prompt transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two business
days after receipt of the redemption request. See "Purchase of
Shares--TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each owner 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.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or in part in securities or other assets in case
of an emergency or any time a cash distribution would impair the liquidity of
the Fund to the detriment of the existing shareholders. In such event, the
securities would be valued in the same manner as the Fund's portfolio is valued.
If the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closings), (b) when trading
in the markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission so that disposal
of the Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Class A, Class B and Class C shares of the Fund may be
exchanged for shares of the respective Class of certain other funds advised or
administered by the Manager. Shares of the same Class of such funds purchased by
exchange will be purchased on the basis of relative net asset value per share as
follows:
A. Class A shares of funds purchased without a sales load may be
exchanged for Class A shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales load
may be exchanged without a sales load for Class A shares of
other funds sold without a sales load.
C. Class A shares of funds purchased with a sales load, Class A
shares of funds acquired by a previous exchange from Class A
shares purchased with a sales load, and additional Class A
shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein
as "Purchased Shares") may be exchanged for Class A shares of
other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at
the time the Purchased Shares were acquired), without giving
effect to any reduced loads, the difference will be deducted.
D. Class B or Class C shares of any fund may be exchanged for the
same Class of shares of other funds without a sales load.
Class B or Class C shares of any fund exchanged for the same
Class of shares of another fund will be subject to the higher
applicable CDSC of the two exchanged funds and, for purposes of
calculating CDSC rates and conversion periods, will be deemed to
have been held since the date the Class B or Class C shares
being exchanged were initially purchased.
To accomplish an exchange under item C above, an investor's Service Agent
must notify the Transfer Agent of the investor's prior ownership of such Class A
shares and the investor's account number.
To request an exchange, the investor's Service Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically, unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. By using the Telephone Exchange Privilege,
the investor authorizes the Transfer Agent to act on telephonic exchange
instructions from any person representing himself or herself to be the investor
or a representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for shares of the same Class of the fund into which the exchange is
being made. For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") with only one participant, the
minimum initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum initial
investment is $100 if the plan has at least $2,500 invested among shares of the
same Class of the funds in the Dreyfus Family of Funds. To exchange shares held
in personal retirement plans, the shares exchanged must have a current value of
at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an investor to
purchase, in exchange for Class A, Class B or Class C shares of the Fund, shares
of the same Class of another fund in the Premier Family of Funds or the Dreyfus
Family of Funds. This Privilege is available only for existing accounts. Shares
will be exchanged on the basis of relative net asset value as described above
under "Fund Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if his account falls below the amount
designated to be exchanged under this Privilege. In this case, an investor's
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Auto-Exchange transaction. Shares held
under IRA and other retirement plans are eligible for this Privilege. Exchanges
of IRA shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to all
other retirement accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchanges service or the
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the investor,
the Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan. Class B or Class C
shares withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC.
Dividend Sweep. Dividend Sweep allows investors to invest dividends or
dividends and capital gain distributions, if any, from the Fund in shares of the
same Class of another fund in the Premier Family of Funds or the Dreyfus Family
of Funds of which the investor is a shareholder. Shares of the same Class of
other funds purchased pursuant to the privilege will be purchased on the basis
of relative net asset value per share as follows:
A. Dividends and distributions paid with respect to Class A shares
by a fund may be invested without imposition of a sales load in
Class A shares of other funds that are offered without a sales
load.
B. Dividends and distributions paid with respect to Class A shares
by a fund which does not charge a sales load may be invested in
Class A shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and distributions paid with respect to Class A shares
by a fund which charges a sales load may be invested in Class A
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load
charged by the Fund from which dividends or distributions are
being swept, without giving effect to any reduced loads, the
difference will be deducted.
D. Dividends and distributions paid with respect to Class B or
Class C shares by a fund may be invested without imposition of
any applicable CDSC in the same Class of shares of other funds
and the relevant Class of shares of such other funds will be
subject on redemption to any applicable CDSC.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. The Fund's investments are valued 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) and fees pursuant to the Shareholder
Services Plan and, with respect to the Class B and Class C shares only, the
Distribution Plan, are accrued daily and are taken into account for the purpose
of determining the net asset value of the relevant Class of shares. Because of
the difference in operating expenses incurred by each Class, the per share net
asset value of each Class will differ.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions and
Taxes."
Management believes that the Fund has qualified as a "regulated investment
company" under the Code for the fiscal year ended November 30, 1995, and the
Fund intends to continue to so qualify if such qualification is in the best
interests of its shareholders. As a regulated investment company, the Fund will
pay no Federal income tax on net investment income and net realized capital
gains to the extent that such income and gains are distributed to shareholders
in accordance with applicable provisions of the Code. To qualify as a regulated
investment company, the Fund must distribute to its shareholders at least 90% of
its net income (consisting of net investment income from tax exempt obligations
and taxable obligations, if any, and net short-term capital gains), must derive
less than 30% of its annual gross income from gain on the sale of securities
held for less than three months, and must meet certain asset diversification and
other requirements. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.
Any dividend or distribution paid shortly after an investor's purchase may
have the effect of reducing the net asset value of his shares below the cost of
his investment. Such a distribution would be a return on investment in an
economic sense although taxable as stated in the Prospectus. In addition, the
Code provides that if a shareholder has not held his shares for more than six
months (or such shorter period as the Internal Revenue Service may prescribe by
regulation) and has received an exempt-interest dividend with respect to such
shares, any loss incurred on the sale of such shares will be disallowed to the
extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, all or a portion of the gains
realized from the disposition of certain market discount bonds will be treated
as ordinary income under Section 1276 of the Code. In addition, all or a portion
of the gain realized from engaging in "conversion transactions" may be treated
as ordinary income under Section 1258 of the Code. "Conversion transactions" are
defined to include certain forward, futures, option and "straddle" transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss the Fund realizes from certain
financial futures and options transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss will
arise upon exercise or lapse of such futures and options as well as from closing
transactions. In addition, any such futures and options remaining unexercised at
the end of the Fund's taxable year will be treated as sold for their then fair
market value, resulting in additional gain or loss to the Fund characterized in
the manner described above.
Offsetting positions held by the Fund involving certain futures and options
transactions may be considered, for tax purposes, to constitute "straddles."
"Straddles" are defined to include "offsetting positions" in actively traded
personal property. The tax treatment of "straddles" is governed by Sections 1092
and 1258 of the Code, which, in certain circumstances, overrides or modifies the
provisions of Sections 1256 and 988 of the Code. As such, all or a portion of
any short or long-term capital gain from certain "straddle" transactions may be
recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain futures or options transactions, such "straddles" would be
characterized as "mixed straddles" if the futures or options transactions
comprising a part of such "straddles" were governed by Section 1256 of the Code.
The Fund may make one or more elections with respect to "mixed straddles."
Depending on which election is made, if any, the results to the Fund may differ.
If no election is made, to the extent the "straddle" rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result of
the "straddle" and conversion transaction rules, short-term capital losses on
"straddle" positions may be recharacterized as long-term capital losses and
long-term capital gains may be treated as short-term capital gains or ordinary
income.
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.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Usually no brokerage commissions, as such,
are paid by the Fund for such purchases and sales, although the price paid
usually includes an undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter, and purchases of after-market
securities from dealers ordinarily are executed at a price between the bid and
asked price. No brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of the Manager that the receipt and study of such
services should not reduce the overall expenses of its research department.
The Fund's portfolio turnover rate for the fiscal years ended November 30,
1994 and 1995 was 31.76% and 74.11%, respectively. The Fund anticipates that its
annual portfolio turnover rate generally will not exceed 100%, but the turnover
rate will not be a limiting factor when the Fund deems it desirable to sell or
purchase securities. Therefore, depending upon market conditions, the Fund's
annual portfolio turnover rate may exceed 100% in particular years.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
Current yield for the 30-day period ended November 30, 1995, was 4.56% for
Class A, 4.25% for Class B and 4.00% for Class C. Current yield is computed
pursuant to a formula which operates as follows: The amount of the Fund's
expenses accrued for the 30-day period (net of reimbursements) is subtracted
from the amount of the dividends and interest earned (computed in accordance
with regulatory requirements) by the Fund during the period. That result is then
divided by the product of: (a) the average daily number of shares outstanding
during the period that were entitled to receive dividends, and (b) the maximum
offering price per share in the case of Class A or the net asset value per share
in the case of Class B or Class C on the last day of the period less any
undistributed earned income per share reasonably expected to be declared as a
dividend shortly thereafter. The quotient is then added to 1, and that sum is
raised to the 6th power, after which 1 is subtracted. The current yield is then
arrived at by multiplying the result by 2.
Based upon a combined 1995 Federal, New York State and New York City
personal tax rate of 47.05%, the tax equivalent yield for the 30-day period
ended November 30, 1995 for Class A was 8.61%, for Class B was 8.03% and for
Class C was 7.55%. Tax equivalent yield is computed by dividing that portion of
the current yield (calculated as described above) which is tax exempt by 1 minus
a stated tax rate and adding the quotient to that portion, if any, of the yield
of the Fund that is not tax exempt.
The tax equivalent yield noted above represents the application of the
highest Federal, New York State and New York City marginal personal income tax
rates presently in effect. For Federal income tax purposes, a 39.60% tax rate
has been used. For New York State and New York City personal income tax
purposes, tax rates of 7.875% and 4.46%, respectively, have been used. The tax
equivalent yield figure, however, does not reflect the potential effect of any
state or local (including, but not limited to, county, district or city, other
than New York City) taxes, including applicable surcharges. In addition, there
may be pending legislation which could affect such stated 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.
The average annual total return for the 1, 5 and 8.915 year periods ended
November 30, 1995 for Class A was 15.52%, 8.49% and 7.54%, respectively. The
average annual total return for the 1 and 2.877 year periods ended November 30,
1995 for Class B was 17.20% and 6.76%, respectively. The average annual total
return for the period September 11, 1995 (commencement of initial offering of
Class C) through November 30, 1995 for Class C was 10.06%. Average annual total
return is calculated by determining the ending redeemable value of an investment
purchased at net asset value (maximum offering price in the case of Class A) per
share 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. A
Class' average annual total return figures calculated in accordance with such
formula provides that in the case of Class A the maximum sales load has been
deducted from the hypothetical initial investment at the time of purchase or in
the case of Class B or Class C the maximum applicable CDSC has been paid upon
redemption at the end of the period.
The total return for Class A for the period December 31, 1986 (commencement
of operations) through November 30, 1995 was 91.25%. Based on net asset value
per share, the total return for Class A was 100.30% for this period. The total
return for Class B for the period January 15, 1993 (commencement of initial
offering of Class B shares) through November 30, 1995 was 20.70%. Without giving
effect to the applicable CDSC, the total return for Class B was 22.70% for this
period. The total return for Class C for the period September 11, 1995
(commencement of initial offering of Class C shares) through November 30, 1995
was 2.15%. Without giving effect to the applicable CDSC, the total return for
Class C was 3.15% for this period. Total return is calculated by subtracting the
amount of the Fund's net asset value (maximum offering price in the case of
Class A) per share at the beginning of a stated period from the net asset value
per share at the end of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing the result by the
maximum offering price per share at the beginning of the period. Total return
also may be calculated based on the net asset value per share at the beginning
of the period instead of the maximum offering price per share at the beginning
of the period for Class A shares or without giving effect to any applicable CDSC
at the end of the period for Class B or Class C shares. In such cases, the
calculation would not reflect the deduction of the sales charge which, if
reflected, would reduce the performance quoted.
From time to time, the Fund may use hypothetical tax equivalent yields or
charts in its advertising. These hypothetical yields or charts will be used for
illustrative purposes only and not as representative of the Fund's past or
future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or events,
including those relating to or arising from actual or proposed tax legislation.
From time to time, advertising materials for the Fund also may refer to
statistical or other information concerning trends relating to investment
companies, as compiled by industry associations such as the Investment Company
Institute. From time to time, advertising materials for the Fund also may refer
to Morningstar ratings and related analysis supporting such rating.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio managers and may refer to, or
include commentary by a portfolio manager relating to investment strategy, asset
growth, current or past business, political, economic or financial conditions
and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Shares have no
preemptive or subscription rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
The Manager's legislative efforts led to the 1976 Congressional Amendment
to the Code permitting an incorporated mutual fund to pass through tax exempt
income to its shareholders. The Manager offered to the public the first
incorporated tax exempt fund and currently manages or administers over twenty
five billion dollars in tax exempt assets.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for the maintenance of shareholder account records for the Fund,
the handling of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these services,
the Transfer Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the Fund during the month, and is
reimbursed for certain out-of-pocket expenses. The Bank of New York, 90
Washington Street, New York, New York 10286, is the Fund's custodian. Neither
the Transfer Agent nor The Bank of New York has any part in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
as counsel for the Fund, has rendered its opinion as to certain legal matters
regarding the due authorization and valid issuance of the shares being sold
pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The financial condition of New York State (the "State") and certain of its
public bodies (the "Agencies") and municipalities, particularly New York City
(the "City"), could affect the market values and marketability of New York
Municipal Obligations which may be held by the Fund. The following information
constitutes only a brief summary, does not purport to be a complete description,
and is based on information drawn from official statements relating to
securities offerings of the State, the City and the Municipal Assistance
Corporation for the City of New York ("MAC") available as of the date of this
Statement of Additional Information. While the Fund has not independently
verified such information, it has no reason to believe that such information is
not correct in all material respects.
A national recession commenced in mid-1990. The downturn continued through
the remainder of the 1990-91 fiscal year, and was followed by a period of weak
economic growth during the remainder of the 1991 calendar year. For the calendar
year 1992, the national economy continued to recover, although at a rate below
all post-war recoveries. The recession was more severe in the State than in
other parts of the nation, owing to a significant retrenchment in the financial
services industry, cutbacks in defense spending, and an overbuilt real estate
market. The State economy remained in recession until 1993, when employment
growth resumed. Since early 1993, the State has gained approximately 100,000
jobs. The State's economy expanded modestly during 1995. Although industries
that export goods and services abroad are expected to benefit from the lower
dollar, growth will be slowed by government cutbacks at all levels. On an
average annual basis, employment growth in 1995 was estimated to be about the
same as 1994. Both personal income and wages were estimated to have recorded
moderate gains in 1995. Employment growth is expected to slow significantly in
1996 as the pace of national economic growth slackens, entire industries
experience consolidations, and governmental employment continues to shrink.
Personal income is estimated to increase by 4.0% in 1996.
The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, more than two months after the start of the fiscal
year. Prior to adoption of the budget, the Legislature enacted appropriations
for disbursements considered to be necessary for State operations and other
purposes, including all necessary appropriations for debt service. The State
Financial Plan for 1995-96 fiscal year was formulated on June 20, 1995 and is
based on the State's budget as enacted by the Legislature and signed into law by
the Governor.
The 1995-96 budget was the first to be enacted in the administration of the
Governor, who assumed office on January 1. It was the first budget in over half
a century which proposed and, as enacted, projected an absolute
year-over-decline in General Fund disbursements. Spending for State operations
was projected to drop even more sharply, by 4.6%. Nominal spending from all
State funding sources (i.e., excluding Federal aid) was proposed to increase by
only 2.5% from the prior fiscal year, in contrast to the prior decade when such
spending growth averaged more than 6.0% annually.
In his Executive Budget, the Governor indicated that in the 1995-96 fiscal
year, the State Financial Plan, based on then-current law governing spending and
revenues, would be out of balance by almost $4.7 billion, as a result of the
projected structural deficit resulting from the ongoing disparity between
sluggish growth in receipts, the effect of prior-year tax changes, and the rapid
acceleration of spending growth; the impact of unfunded 1994-95 initiatives,
primarily for local aid programs; and the use of one-time solutions, primarily
surplus funds from the prior year, to fund recurring spending in the 1994-95
budget. The Governor proposed additional tax cuts, to spur economic growth and
provide relief for low and middle-income tax payers, which were larger than
those ultimately adopted, and which added $240 million to the then projected
imbalance or budget gap, bringing their total to approximately $5 billion.
This gap was projected to be closed in the 1995-96 State Financial Plan
based on the enacted budget, through a series of actions, mainly spending
reductions and cost containment measures and certain reestimates that were
expected to be recurring, but also through the use of one-time solutions.
The General Fund was projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds were
projected to be $33.110 billion, a decrease of $48 million from total receipts
in the prior fiscal year. Total General Fund disbursements and transfers to
other funds were projected to be $33.055 billion, a decrease of $344 million
from the total amount disbursed in the prior fiscal year.
The State Financial Plan was based upon forecasts of national and State
economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the State
economies. Many uncertainties exist in forecasts of both the national and State
economies, including consumer attitudes toward spending, Federal financial and
monetary policies, the availability of credit and the condition of the world
economy, which could have an adverse effect on the State. There can be no
assurance that the State economy will not experience worse-than-predicted
results, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
The State issued its second quarterly update to the cash-basis 1995- 96
State Financial Plan (the "Mid-Year Update") on October 26, 1995. Revisions have
been made to estimates of both receipts and disbursements based on: (1) updated
economic forecasts for both the nation and the State, (2) an analysis of actual
receipts and disbursements through the first six months of the fiscal year, and
(3) an assessment of changing program requirements and cost savings initiatives.
The Mid-Year Update projects continued balance in the State's 1995-96 Financial
Plan, with estimated receipts reduced by a net $71 million and estimated
disbursements reduced by a net $30 million. The resulting General Fund balance
decreases to $172 million in the Mid-Year Update, reflecting the expected use of
$41 million from the Contingency Reserve Fund for payment of litigation and
disallowance expenses.
On October 2, 1995, the State Comptroller released a report entitled
"Comptroller's Report on the Financial Condition of New York State 1995" in
which he identified several risks to the State Financial Plan and reaffirmed his
estimate that the State faces a potential imbalance in receipts and
disbursements of at least $2.7 billion for the State's 1996- 97 fiscal year and
at least $3.9 billion for the State's 1997-98 fiscal year.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions to
align recurring receipts and disbursements in future fiscal years.
On June 6, 1990, Moody's changed its ratings on all the State's outstanding
general obligation bonds from A1 to A. On March 26, 1990 and January 13, 1992,
S&P changed its ratings on all of the State's outstanding general obligation
bonds from AA- to A and from A to A-, respectively. In February 1991, Moody's
lowered its rating on the City's general obligation bonds from A to Baa1 and in
July 1995, S&P lowered its rating on such bonds from A- to BBB+. Ratings reflect
only the respective views of such organizations, and their concerns about the
financial condition of New York State and City, the debt load of the State and
City and any economic uncertainties about the region. There is no assurance that
a particular rating will continue for any given period of time or that any such
rating will not be revised downward or withdrawn entirely if, in the judgment of
the agency originally establishing the rating, circumstances so warrant.
(1) The State, Agencies and Other Municipalities. During the mid-1970s,
some of the Agencies and municipalities (in particular, the City) faced
extraordinary financial difficulties, which affected the State's own financial
condition. These events, including a default on short-term notes issued by the
New York State Urban Development Corporation ("UDC") in February 1975, which
default was cured shortly thereafter, and a continuation of the financial
difficulties of the City, created substantial investor resistance to securities
issued by the State and by some of its municipalities and Agencies. For a time,
in late 1975 and early 1976, these difficulties resulted in a virtual closing of
public credit markets for State and many State related securities.
In response to the financial problems confronting it, the State developed
and implemented programs for its 1977 fiscal year that included the adoption of
a balanced budget on a cash basis (a deficit of $92 million that actually
resulted was financed by issuing notes that were paid during the first quarter
of the State's 1978 fiscal year). In addition, legislation was enacted limiting
the occurrence of additional so-called "moral obligation" and certain other
Agency debt, which legislation does not, however, apply to MAC debt.
State Financial Plan--GAAP-Basis Results--1995-96 Update. The State issued
its first update to the GAAP-basis Financial Plan for the State's 1995-96 fiscal
year on September 1, 1995. The September GAAP-basis update projected a General
Fund operating surplus of $401 million. The prior projection of the 1995-96
GAAP-basis State Financial Plan, issued in March 1995 as part of the 1995-96
Executive Budget, projected an operating surplus in the General Fund of $800
million. The change to the projection primarily reflects the impact of
legislative changes to the 1995-96 Executive Budge, as well as increases in
projected accruals for certain local assistance programs (primarily Medicaid).
Total revenues in the General Fund are projected at $31.871 billion,
consisting of $29.625 billion in tax revenues and $2.246 billion in
miscellaneous revenue. Total expenditures in the General Fund are projected at
$32.444 billion, including $22.678 billion for grants to local governments,
$8.037 billion for State operations, $1.711 billion for general State charges,
and $18 million for debt service. Compared to the projections made in March,
expenditures for grants to local governments are substantially increased,
primarily because of legislative changes to the 1995-96 Executive Budget and
increased projected accruals for Medicaid.
For all governmental funds, the summary GAAP-basis Financial Plan shows an
excess of revenues and other financing sources over expenditures and other
financing uses of $359 million.
GAAP-Basis Results--1994-95 Fiscal Year. The State's Combined Balance Sheet
as of March 31, 1995 showed an accumulated deficit in its combined governmental
funds of $1.666 billion reflecting liabilities of $14.778 billion and assets of
$13.112 billion. This accumulated governmental funds deficit includes a $3.308
billion accumulated deficit in the General Fund, as well as accumulated
surpluses in the special Revenue and Debt Service fund types of $877 million and
$1.753 billion, respectively, and a $988 million accumulated deficit in the
Capital Projects fund type.
The State completed its 1994-95 fiscal year with a combined Governmental
Funds operating deficit of $1.791 billion, which included operating deficits in
the General Fund of $1.426 billion, in the Capital Projects Funds of $366
million, and in the Debt Service Funds of $38 million. There is an operating
surplus in the Special Revenue Funds of $39 million.
GAAP-Basis Results--1993-94 Fiscal Year. The State reported a General Fund
operating surplus of $914 million for the 1993-94 fiscal year, as compared to an
operating surplus of $2.065 billion for the prior fiscal year. The 1993-94
fiscal year surplus reflects several major factors, including the cash basis
surplus recorded in 1993-94, the use of $671 million of the 1992-93 surplus to
fund operating expenses in 1993-94, net proceeds of $575 million in bonds issued
by the New York Local Government Assistance Corporation ("LGAC") and the
accumulation of a $265 million balance in the Contingency Reserve Fund ("CRF").
Revenues increased $543 million (1.7%) over prior fiscal year revenues with the
largest increase occurring in personal income taxes. Expenditures increased
$1.659 billion (5.6%) over the prior fiscal year, with the largest increase
occurring in State aid for social services programs.
The Special Revenue fund and Debt Service fund ended 1993-94 with operating
surpluses of $149 million and $23 million, respectively. The Capital Projects
fund ended with an operating deficit of $35 million.
GAAP-Basis Results--1992-93 Fiscal Year. The State completed its 1992-93
fiscal year with a GAAP-basis operating surplus of $2.065 billion in the General
Fund and an accumulated deficit of $2.551 billion. The Combined Statement of
Revenues, Expenditures and Changes in Fund Balances reported total revenues of
$31.085 billion, total expenditures of $29.337 billion, and net other financing
sources and uses of $317 million. The surplus primarily reflects the 1992-93
cash-basis surplus and the net proceeds of $881 million in bonds issued by LGAC.
The Special Revenue, Debt Service and Capital Projects fund types ended the
1992-93 fiscal year with GAAP-basis operating surpluses of $131 million, $381
million, and $57 million, respectively.
State Financial Plan--Cash-Basis Results--General Fund. The General Fund is
the principal operating fund of the State and is used to account for all
financial transactions, except those required to be accounted for in another
fund. It is the State's largest fund and receives almost all State taxes and
other resources not dedicated to particular purposes. General Fund moneys are
also transferred to other funds, primarily to support certain capital projects
and debt service payments in other fund types.
The General Fund is projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds are projected
to be $33.110 billion, a decrease of $48 million from total receipts in the
prior fiscal year. Total General Fund disbursements and transfers to other funds
are projected to be $33.055 billion, a decrease of $344 million from the total
amount disbursed in the prior fiscal year.
New York State's financial operations have improved during recent fiscal
years. During the period 1989-90 through 1991-92, the State incurred General
Fund operating deficits that were closed with receipts from the issuance of tax
and revenue anticipation notes ("TRANs"). First, the national recession, and
then the lingering economic slowdown in the New York and regional economy,
resulted in repeated shortfalls in receipts and three budget deficits. For its
1992-93, 1993-94 and 1994-95 fiscal years, the State recorded balanced budgets
on a cash basis, with substantial fund balances in 1992-93 and 1993-94, and
smaller fund balance in 1994-95, as described below.
New York State ended its 1994-95 fiscal year with the General fund in
balance. The closing fund balance of $158 million reflects $157 million in the
Tax Stabilization Reserve Fund and $1 million in the Contingency Reserve Fund
("CRF"). The CRF was established in State Fiscal year 1993- 94, funded partly
with surplus monies, to assist the State in financing the 1994-95 fiscal year
costs of extraordinary litigation known or anticipated at that time; the opening
fund balance in State fiscal year 1994-95 was $265 million. The $241 million
change in the fund balance reflects the use of $264 million in the CRF as
planned, as well as the required deposit of $23 million to the Tax Stabilization
Reserve Fund. In addition, $278 million was on deposit in the tax refund reserve
account, $250 million of which was deposited at the end of the State's 1994-95
fiscal year to continue the process of restructuring the State's cash flow as
part of the New York Local Government Assistance Corporation ("LGAC") program.
Compared to the State Financial Plan for 1994-1995 as formulated on June
16, 1994, reported receipts fell short of original projections by $1.163
billion, primarily in the categories of personal income and business taxes. Of
this amount, the personal income tax accounts for $800 million, reflecting weak
estimated tax collections and lower withholding due to reduced wage and salary
growth, more severe reductions in brokerage industry bonuses than projected
earlier, and deferral of capital gains realizations in anticipation of potential
Federal tax changes. Business taxes fell short by $373 million, primarily
reflecting lower payments from banks as substantial overpayments of 1993
liability depressed net collections in the 1994-95 fiscal year. These shortfalls
were offset by better performance in the remaining taxes, particularly the user
taxes and fees, which exceeded projections by $210 million. Of this amount, $277
million was attributable to certain restatements for accounting treatment
purposes pertaining to the CRF and LGAC; these restatements had no impact on
balance in the General Fund.
Disbursements were also reduced from original projections by $848 million.
After adjusting for the net impact of restatements relating to the CRF and LGAC
which raised disbursements by $38 million, the variance is $886 million. Well
over two-thirds of this variance is in the category of grants to local
governments, primarily reflecting the conservative nature of the original
estimates of projected costs for social services and other programs. Lower
education costs are attributable to the availability of $110 million in
additional lottery proceeds and the use of LGAC bond proceeds.
The spending reductions also reflect $188 million in actions initiated in
January 1995 by the Governor to reduce spending to avert a potential gap in the
1994-95 State Financial Plan. These actions included savings from a hiring
freeze, halting the development of certain services, and the suspension of
non-essential capital projects. These actions, together with $71 million in
other measures comprised the Governor's $259 million gap-closing plan, submitted
to the Legislature in connection with the 1995-96 Executive Budget.
The State ended its 1993-94 fiscal year with a balance of $1.140 billion in
the tax refund reserve account, $265 million in the CRF and $134 million in its
tax stabilization reserve fund. These fund balances were primarily the result of
an improving national economy, State employment growth, tax collections that
exceeded earlier projections and disbursements that were below expectations.
Before the deposit of $1.140 billion in the tax refund reserve account,
General Fund receipts in 1993-94 exceeded those originally projected when the
State Financial Plan for the year was formulated on April 16, 1993 by $1.002
billion. Greater-than-expected receipts in the personal income tax, the bank
tax, the corporation franchise tax and the estate tax accounted for most of this
variance, and more than offset weaker-than-projected collections from the sales
and use tax and miscellaneous receipts. The higher receipts resulted, in part,
because the New York economy performed better than forecasted. Employment growth
started in the first quarter of the State's 1993-94 year, and although this
lagged the national economic recovery, the growth in New York began earlier than
forecasted. The New York economy exhibited signs of strength in the service
sector, in construction, and in trade.
Disbursements and transfer from the General Fund were $303 million below
the level projected in April 1993, an amount that would have been $423 million
had the State not accelerated the payment of Medicaid billings, which in the
April 1993 State Financial Plan were planned to be deferred into the 1994-95
fiscal year. Compared to the estimates included in the State Financial Plan
formulated in April 1993, disbursements were lower for Medicaid, capital
projects, and debt service (due to refundings). In addition, $114 million of
school and payments were funded from the proceeds of LGAC bonds. Disbursements
were higher-than-expected for general support for public schools. The State also
made the first of six required payments to the State of Delaware related to the
settlement of Delaware's litigation against the State regarding the disposition
of abandoned property receipts.
During the 1993-94 fiscal year, the State also established and funded the
CRF as a way to assist the State in financing the cost of litigation affecting
the State. The CRF was initially funded with a transfer of $100 million
attributable to the positive margin recorded in the 1992-93 fiscal year. In
addition, the State augmented this initial deposit with $132 million on debt
service savings attributable to the refinancing of State and public authority
bonds during 1993-94. A year-end transfer of $36 million was also made to the
CRF, which, after a disbursement for authorized fund purposes, brought the CRF
balance at the end of 1993-94 to $265 million. This amount was $165 million
higher than the amount originally targeted for this reserve fund.
The State ended the 1992-93 fiscal year with a balance on a cash basis of
$671 million in the General Fund that was deposited in the tax refund reserve
account and $67 million in the Tax Stabilization Fund.
After reflecting a 1992-93 year-end deposit to the refund reserve account
of $671 million, reported 1992-93 General Fund receipts were $45 million higher
than originally projected in April 1992. If not for that year-end transaction,
which had the effect of reducing 1992-93 receipts by $671 million and making
those receipts available in 1993-94, General Fund receipts would have been $716
million higher than originally projected.
During its 1989-90, 1990-91 and 1991-92 fiscal years, the State incurred
cash-basis operating deficits in the General Fund of $775 million, $1.081
billion and $575 million, respectively, prior to the issuance of short-term
TRANs, owing to lower-than-projected receipts.
Cash-Basis Results--Other Governmental Funds. Activity in the three other
governmental funds has remained relatively stable over the last three fiscal
years, with Federally-funded programs comprising approximately two- thirds of
these funds. The most significant change in the structure of these funds has
been the redirection, beginning in the 1993-94 fiscal year, of a portion of
transportation-related revenues from the General Fund to two new dedicated funds
in the Special Revenue and Capital Projects Fund types. These revenues totalling
$676 million in the 1994-95 fiscal year were used to support the capital
programs of the Department of Transportation and the Metropolitan Transportation
Authority ("MTA").
The Special Revenue Funds account for State receipts from specific sources
that are legally restricted in use to specified purposes and include all moneys
received from the Federal government. Total receipts in Special Revenue Funds
are projected at $25.547 billion in the State's 1995-96 fiscal year.
Disbursements from Special Revenue Funds are projected to be $26.002 billion for
the State's 1995-96 fiscal year.
The Capital Projects Funds are used to finance the acquisition and
construction of major capital facilities and to aid local government units and
Agencies in financing capital constructions. Federal grants for capital
projects, largely highway-related, are projected to account for 24% of the
$4.170 billion in total projected receipts in Capital Projects Funds in the
State's 1995-96 fiscal year. Total disbursements for capital projects are
projected to be $4.160 billion during the State's 1995-96 fiscal year.
The Debt Service Funds serve to fulfill State debt service on long-term
general obligation State debt and other State lease/purchase and contractual
obligation financing commitments. Total receipts in Debt Service Funds are
projected to reach $2.409 billion in the State's 1995-96 fiscal year. Total
disbursements from Debt Service Funds for debt service, lease/purchase and
contractual obligation financing commitments are projected to be $2.506 billion
for the 1995-96 fiscal year.
State Borrowing Plan. The State anticipates that its capital programs will
be financed, in part, through borrowings by the State and public authorities in
the 1995-96 fiscal year. The State expects to issue $248 million in general
obligation bonds (including $70 million for purposes of redeeming outstanding
BANs) and $186 million in general obligation commercial paper. The Legislature
has also authorized the issuance of up to $33 million in COPs during the State's
1995-96 fiscal year for equipment purchases and $14 million for capital
purposes. The projection of the State regarding its borrowings for the 1995-96
fiscal year may change if circumstances require.
In addition, the LGAC is authorized to provide net proceeds of up to $529
million during the 1995-96 fiscal year to redeem notes sold in June 1995.
State Agencies. The fiscal stability of the State is related, at least in
part, to the fiscal stability of its localities and various of its Agencies.
Various Agencies have issued bonds secured, in part, by non-binding statutory
provisions for State appropriations to maintain various debt service reserve
funds established for such bonds (commonly referred to as "moral obligation"
provisions).
At September 30, 1994, there were 18 Agencies that had outstanding debt of
$100 million or more. The aggregate outstanding debt, including refunding bonds,
of these 18 Agencies was $70.3 billion as of September 30, 1994. As of March 31,
1995, aggregate Agency debt outstanding as State-supported debt was $27.9
billion and as State-related was $36.1 billion. Debt service on the outstanding
Agency obligations normally is paid out of revenues generated by the Agencies'
projects or programs, but in recent years the State has provided special
financial assistance, in some cases on a recurring basis, to certain Agencies
for operating and other expenses and for debt service pursuant to moral
obligation indebtedness provisions or otherwise. Additional assistance is
expected to continue to be required in future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to meet
their obligations could result in a default by one or more of such Agencies. If
a default were to occur, it would likely have a significant effect on the
marketability of obligations of the State and the Agencies. These Agencies are
discussed below.
The New York State Housing Finance Agency ("HFA") provides financing for
multifamily housing, State University construction, hospital and nursing home
development, and other programs. In general, HFA depends upon mortgagors in the
housing programs it finances to generate sufficient funds from rental income,
subsidies and other payments to meet their respective mortgage repayment
obligations to HFA, which provide the principal source of funds for the payment
of debt service on HFA bonds, as well as to meet operating and maintenance costs
of the projects financed. From January 1, 1976 through March 31, 1987, the State
was called upon to appropriate a total of $162.8 million to make up deficiencies
in the debt service reserve funds of HFA pursuant to moral obligation
provisions. The State has not been called upon to make such payments since the
1986-87 fiscal year and no payments are anticipated during the 1995-96 fiscal
year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975, because
a substantial number of these housing program mortgagors are unable to make full
payments on their mortgage loans. Through a subsidiary, UDC is currently
attempting to increase its rate of collection by accelerating its program of
foreclosures and by entering into settlement agreements. UDC has been, and will
remain, dependent upon the State for appropriations to meet its operating
expenses. The State also has appropriated money to assist in the curing of a
default by UDC on notes which did not contain the State's moral obligation
provision.
The MTA oversees New York City's subway and bus lines by its affiliates,
the New York City Transit Authority and the Manhattan and Bronx Surface Transit
Operating Authority (collectively, the "TA"). Through MTA's subsidiaries, the
Long Island Rail Road Company, the Metro-North Commuter Railroad Company and the
Metropolitan Suburban Bus Authority, the MTA operates certain commuter rail and
bus lines in the New York metropolitan area. In addition, the Staten Island
Rapid Transit Authority, an MTA subsidiary, operates a rapid transit line on
Staten Island. Through its affiliated agency, the Triborough Bridge and Tunnel
Authority (the "TBTA"), the MTA operates certain toll bridges and tunnels.
Because fare revenues are not sufficient to finance the mass transit portion of
these operations, the MTA has depended and will continue to depend for operating
support upon a system of State, local government and TBTA support and, to the
extent available, Federal operating assistance, including loans, grants and
subsidies. If current revenue projections are not realized and/or operating
expenses exceed current projections, the TA or commuter railroads may be
required to seek additional State assistance, raise fares or take other actions.
Over the past several years the State has enacted several taxes--including
a surcharge on the profits of banks, insurance corporations and general business
corporations doing business in the 12-county region (the "Metropolitan
Transportation Region") served by the MTA and a special .25% regional sales and
use tax--that provide additional revenues for mass transit purposes, including
assistance to the MTA. In addition, since 1987, State law has required that the
proceeds of .25% mortgage recording tax paid on certain mortgages in the
Metropolitan Transportation Region be deposited in a special MTA fund for
operating or capital expenses. Further, in 1993, the State dedicated a portion
of certain additional State petroleum business tax receipts to fund operating or
capital assistance to the MTA. For the 1995-96 State fiscal year, total State
assistance to the MTA is estimated at approximately $1.1 billion.
In 1981, the State Legislature authorized procedures for the adoption,
approval and amendment of a five-year plan for the capital program designed to
upgrade the performance of the MTA's transportation systems and to supplement,
replace and rehabilitate facilities and equipment, and also granted certain
additional bonding authorization therefor.
On April 5, 1993, the Legislature approved, and the Governor subsequently
signed into law, legislation authorizing a five-year $9.56 billion capital plan
for the MTA for 1992-1996. The MTA has received approval of the 1992-1996
Capital Program based on this legislation from the MTA Capital Program Review
Board (the "CPRB"), as State law requires. This is the third five-year plan
since the Legislature authorized procedures for the adoption, approval and
amendment of a five-year plan in 1981 for a capital program designed to upgrade
the performance of the MTA's transportation systems and to supplement, replace
and rehabilitate facilities and equipment. The MTA, the TBTA and the TA are
collectively authorized to issue an aggregate of $3.1 billion of bonds (net of
certain statutory exclusions) to finance a portion of the 1992-96 Capital
Program. The 1992-96 Capital Program was expected to be financed in significant
part through dedication of the State petroleum business tax receipts.
There can be no assurance that such governmental actions will be taken,
that sources currently identified will not be decreased or eliminated, or that
the 1992-1996 Capital Program will not be delayed or reduced. If the MTA capital
program is delayed or reduced because of funding shortfalls or other factors,
ridership and fare revenues may decline, which could, among other things, impair
the MTA's ability to meet its operating expenses without additional State
assistance.
The cities, towns, villages and school districts of the State are political
subdivisions of the State with the powers granted by the State Constitution and
statutes. As the sovereign, the State retains broad powers and responsibilities
with respect to the government, finances and welfare of these political
subdivisions, especially in education and social services. In recent years the
State has been called upon to provide added financial assistance to certain
localities.
Other Localities. Certain localities in addition to the City could have
financial problems leading to requests for additional State assistance during
the State's 1995-96 fiscal year and thereafter. The potential impact on the
State of such actions by localities is not included in the projections of the
State receipts and disbursements in the State's 1995-96 fiscal year.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1993, the total indebtedness of all localities in
the State, other than the City, was approximately $17.7 billion. A small portion
(approximately $105 million) of this indebtedness represented borrowing to
finance budgetary deficits and was issued pursuant to enabling State
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than the City authorized by State law to issue debt to finance deficits during
the period that such deficit financing is outstanding. Fifteen localities had
outstanding indebtedness for deficit financing at the close of their fiscal year
ending in 1993.
Certain proposed Federal expenditure reductions would reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities to
increase local revenues to sustain those expenditures. If the State, the City or
any of the Agencies were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of notes
and bonds issued by localities within the State could be adversely affected.
Localities also face anticipated and potential problems resulting from certain
pending litigation, judicial decisions and long-range economic trends. The
longer-range, potential problems of declining city population, increasing
expenditures and other economic trends could adversely affect localities and
require increasing State assistance in the future.
Because of significant fiscal difficulties experienced from time to time by
the City of Yonkers, a Financial Control Board was created by the State in 1984
to oversee Yonkers' fiscal affairs. Future actions taken by the Governor or the
State Legislature to assist Yonkers in this crisis could result in the
allocation of State resources in amounts that cannot yet be determined.
Certain litigation pending against the State or its officers or employees
could have a substantial or long-term adverse effect on State finances. Among
the more significant of these litigations are those that involve: (i) the
validity and fairness of agreements and treaties by which various Indian tribes
transferred title to the State of approximately six million acres of land in
central New York; (ii) certain aspects of the State's Medicaid rates and
regulations, including reimbursements to providers of mandatory and optional
Medicaid services; (iii) contamination in the Love Canal area of Niagara Falls;
(iv) a challenge to the State's practice of reimbursing certain Office of Mental
Health patient-care expenses with clients' Social Security benefits; (v) a
challenge to the methods by which the State reimburses localities for the
administrative costs of food stamp programs; (vi) a challenge to the State's
possession of certain funds taken pursuant to the State's Abandoned Property
law; (vii) alleged responsibility of State officials to assist in remedying
racial segregation in the City of Yonkers; (viii) an action, in which the State
is a third party defendant, for injunctive or other appropriate relief,
concerning liability for the maintenance of stone groins constructed along
certain areas of Long Island's shoreline; (ix) actions challenging the
constitutionality of legislation enacted during the 1990 legislative session
which changed the actuarial funding methods for determining contributions to
State employee retirement systems; (x) an action against State and City
officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain proper
housing; (xi) an action challenging legislation enacted in 1990 which had the
effect of deferring certain employer contributions to the State Teachers'
Retirement System and reducing State aid to school districts by a like amount;
(xii) a challenge to the constitutionality of financing programs of the Thruway
Authority authorized by Chapters 166 and 410 of the Laws of 1991 (described
below in this Part); (xiii) a challenge to the constitutionality of financing
programs of the Metropolitan Transportation Authority and the Thruway Authority
authorized by Chapter 56 of the Laws of 1993 (described below in this Part);
(xiv) challenges to the delay by the State Department of Social Services in
making two one-week Medicaid payments to the service providers; (xv) challenges
by commercial insurers, employee welfare benefit plans, and health maintenance
organizations to provisions of Section 2807-c of the Public Health Law which
impose 13%, 11% and 9% surcharges on inpatient hospital bills and a bad debt and
charity care allowance on all hospital bills paid by such entities; (xvi)
challenges to the promulgation of the State's proposed procedure to determine
the eligibility for and nature of home care services for Medicaid recipients;
(xvii) a challenge to State implementation of a program which reduces Medicaid
benefits to certain home-relief recipients; and (xviii) challenges to the
rationality and retroactive application of State regulations recelebrating
nursing home Medicaid rates.
Adverse developments or decisions in such cases could affect the ability of
the State to maintain a balanced 1995-96 State Financial Plan.
(2) New York City. In the mid-1970s, the City had large accumulated past
deficits and until recently was not able to generate sufficient tax and other
ongoing revenues to cover expenses in each fiscal year. However, the City's
operating results for the fiscal year ending June 30, 1995 were balanced in
accordance with GAAP, the thirteenth consecutive year in which the City achieved
balanced operating results in accordance with GAAP. The City's ability to
maintain balanced operating results in future years is subject to numerous
contingencies and future developments.
The City's economy, whose rate of growth slowed substantially over the past
three years, is currently in recession. During the 1990 and 1991 fiscal years,
as a result of the slowing economy, the City has experienced significant
shortfalls in almost all of its major tax sources and increases in social
services costs, and has been required to take actions to close substantial
budget gaps in order to maintain balanced budgets in accordance with the
Financial Plan.
In 1975, the City became unable to market its securities and entered a
period of extraordinary financial difficulties. In response to this crisis, the
State created MAC to provide financing assistance to the City and also enacted
the New York State Financial Emergency Act for the City of New York (the
"Emergency Act") which, among other things, created the Financial Control Board
(the "Control Board") to oversee the City's financial affairs and facilitate its
return to the public credit markets. The State also established the Office of
the State Deputy Comptroller ("OSDC") to assist the Control Board in exercising
its powers and responsibilities. On June 30, 1986, the Control Board's powers of
approval over the City Financial Plan were suspended pursuant to the Emergency
Act. However, the Control Board, MAC and OSDC continue to exercise various
monitoring functions relating to the City's financial condition. The City
prepares and operates under a four-year financial plan which is submitted
annually to the Control Board for review and which the City periodically
updates.
The City's independently audited operating results for each of its fiscal
years from 1981 through 1995 show a General Fund surplus reported in accordance
with GAAP. The City has eliminated the cumulative deficit in its net General
Fund position.
According to a recent OSDC economic report, the City's economy was slow to
recover from the recession and is expected to experience a weak employment
situation, and moderate wage and income growth, during the 1995-96 period. Also,
Financial Plan reports of OSDC, the Control Board, and the City Comptroller have
variously indicated that many of the City's balanced budgets have been
accomplished, in part, through the use of non-recurring resource, tax and fee
increases, personnel reductions and additional State assistance; that the City
has not yet brought its long-term expenditures in line with recurring revenues;
that the City's proposed gap-closing programs, if implemented, would narrow
future budget gaps; that these programs tend to rely heavily on actions outside
the direct control of the City; and that the City is therefore likely to
continue to face futures projected budget gaps requiring the City to reduce
expenditures and/or increase revenues. According to the most recent staff
reports of OSDC, the Control Board and the City Comptroller during the four-year
period covered by the current Financial Plan, the City is relying on obtaining
substantial resources from initiatives needing approval and cooperation of its
municipal labor unions, Covered Organizations, and City Council, as well as the
State and Federal governments, among others, and there can be no assurance that
such approval can be obtained.
The City requires certain amounts of financing for seasonal and capital
spending purposes. The City has issued $1.75 billion of notes for seasonal
financing purposes during the 1994 fiscal year. The City's capital financing
program projects long-term financing requirements of approximately $17 billion
for the City's fiscal years 1995 through 1998 for the construction and
rehabilitation of the City's infrastructure and other fixed assets. The major
capital requirement include expenditures for the City's water supply system, and
waste disposal systems, roads, bridges, mass transit, schools and housing. In
addition, the City and the Municipal Water Finance Authority issued about $1.8
billion in refunding bonds in the 1994 fiscal year.
State Economic Trends. The State historically has been one of the
wealthiest states in the nation. For decades, however, the State has grown more
slowly than the nation as a whole, gradually eroding its relative economic
position. Statewide, urban centers have experienced significant changes
involving migration of the more affluent to the suburbs and an influx of
generally less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the calendar years
1984 through 1991, the State's rate of economic expansion was somewhat slower
than that of the nation. In the 1990-91 recession, the economy of the State, and
that of the rest of the Northeast, was more heavily damaged than that of the
nation as a whole and has been slower to recover. The total employment growth
rate in the State has been below the national average since 1984. The
unemployment rate in the State dipped below the national rate in the second half
of 1981 and remained lower until 1991; since then, it has been higher. According
to data published by the U.S. Bureau of Economic Analysis, during the past ten
years, total personal income in the State rose slightly faster than the national
average only from 1986 through 1988.
APPENDIX B
Description of S&P, Moody's & Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded as
safe. This rating describes the third strongest capacity for payment of debt
service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between "A" and "BBB" rating is that the latter shows
more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal 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 interest and repayment 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 designation 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 sign (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to pay
principal and interest.
SP-3
The issuers of these municipal notes exhibit speculative capacity to pay
principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Issues assigned an A rating 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.
A-1
This designation 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.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
A-3
Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what generally are known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and therefore not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
categories below B. The modifier 1 indicates a ranking for the security in the
higher end of a rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates a ranking in the lower end of a rating category.
Municipal Note Ratings
Moody's ratings for state 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.
MIG 3/VMIG 3
This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4
This designation denotes adequate quality. Protection commonly regarded as
required of an investment security is present and, although not distinctly or
predominantly speculative, there is specific risk.
Commercial Paper Ratings
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 range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirements for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have 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 a satisfactory degree
of assurance for timely payments, but the margin of safety is not as great as
the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS NOVEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.5% AMOUNT VALUE
--------- ---------
<S> <C> <C>
NEW YORK-93.0%
Albany Industrial Development Agency, Lease Revenue:
(New York State Assembly Building Project) 7.75%, 1/1/2010.............. $ 1,000,000 $ 1,117,070
(New York State Department of Health Building Project) 7.25%, 10/1/2010. 1,455,000 1,576,536
Metropolitan Transportation Authority, Commuter Facilities:
6.125%, 7/1/2014 (Insured; MBIA)........................................ 2,990,000 3,192,184
Service Contract:
5.40%, 7/1/2006....................................................... 3,315,000 3,318,812
5.75%, 7/1/2007....................................................... 5,000,000 5,148,550
7.50%, 7/1/2016 (Prerefunded 7/1/2000) (a)............................ 1,350,000 1,559,398
New York City:
6%, 2/15/2015........................................................... 5,000,000 5,009,550
5.50%, 10/1/2016........................................................ 4,850,000 4,566,081
6.625%, 2/15/2025....................................................... 4,240,000 4,475,702
6.625%, 8/1/2025........................................................ 5,090,000 5,362,417
New York City Housing Development Corp., Mortgage Revenue
(South Williamsburg Cooperative) 7.90%, 2/1/2023 (Insured; SONYMA)...... 740,000 798,963
New York City Industrial Development Agency:
Civic Facility Revenue (YMCA of Greater New York Project) 8%, 8/1/2016.. 1,500,000 1,622,235
Special Facility Revenue:
(American Airlines Inc. Project) 6.90%, 8/1/2024...................... 2,000,000 2,154,840
(Terminal One Group Association Project) 6%, 1/1/2008................. 6,360,000 6,531,466
New York City Municipal Water Finance Authority, Water and Sewer Systems
Revenue:
5.50%, 6/15/2019 (Insured; MBIA)........................................ 4,000,000 3,986,800
Refunding 6%, 6/15/2010................................................. 4,100,000 4,412,092
State of New York 5.625%, 10/1/2020......................................... 7,265,000 7,342,663
New York State Dormitory Authority, Revenues:
(Consolidated City University System):
5.75%, 7/1/2007....................................................... 3,965,000 4,074,553
5.75%, 7/1/2007 (Insured; AMBAC)...................................... 3,150,000 3,385,872
5.75%, 7/1/2009 (Insured; AMBAC)...................................... 3,000,000 3,190,830
7.625%, 7/1/2020 (Prerefunded 7/1/2000) (a)........................... 750,000 870,210
5.375%, 7/1/2025...................................................... 5,500,000 5,459,410
(Cornell University) 7.375%, 7/1/2030................................... 1,200,000 1,347,996
(State University Educational Facilities):
7.70%, 5/15/2012 (Prerefunded 5/15/2000) (a).......................... 1,000,000 1,159,770
6.75%, 5/15/2021 (Prerefunded 5/15/2002) (a).......................... 3,400,000 3,916,970
Refunding:
5.25%, 5/15/2004.................................................. 2,415,000 2,406,789
5.375%, 5/15/2007 (Insured; FGIC)................................. 6,000,000 6,239,460
5.50%, 5/15/2008.................................................. 1,740,000 1,742,279
5.25%, 5/15/2010.................................................. 5,870,000 5,687,854
5.25%, 5/15/2011.................................................. 5,000,000 4,817,900
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------- -------
NEW YORK (CONTINUED)
New York State Dormitory Authority, Revenues (continued):
(State University Educational Facilities) (continued):
Refunding (continued):
5.875%, 5/15/2011 (Insured; FGIC)................................. $ 5,000,000 $ 5,374,700
(Upstate Community Colleges) 5.625%, 7/1/2014........................... 2,500,000 2,449,100
New York State Energy Research and Development Authority,
Electric Facilities Revenue:
(Consolidated Edison Co. Project):
7.25%, 11/1/2024.................................................. 1,250,000 1,337,325
7.125%, 12/1/2029................................................. 5,000,000 5,552,900
(Long Island Lighting Co. Project):
7.15%, 6/1/2020................................................... 5,590,000 5,745,905
7.15%, 2/1/2022................................................... 5,585,000 5,740,766
6.90%, 8/1/2022................................................... 3,000,000 3,056,580
New York State Environmental Facilities Corp.:
State Water Pollution Control Revolving Fund Revenue:
7.20%, 3/15/2011...................................................... 1,500,000 1,648,935
(Pilgrim State Sewer Project) 6.30%, 3/15/2016........................ 3,000,000 3,200,970
Water Facilities Revenue (Jamaica Water Supply Provence) 7.625%, 4/1/2029 500,000 550,660
New York State Housing Finance Agency, Revenue:
Health Facilities, Refunding (New York City) 7.90%, 11/1/1999........... 1,000,000 1,118,970
Service Contract Obligation 7.30%, 3/15/2021 (Prerefunded 9/15/2001) (a) 1,000,000 1,170,720
New York State Medical Care Facilities Finance Agency, Revenue, Insured
Mortgage:
6.05%, 2/15/2015 (Insured; FHA)......................................... 3,000,000 3,074,340
(Hospital and Nursing Home) 7.45%, 8/15/2031 (Insured; FHA)............. 1,000,000 1,107,680
(Saint Luke's Roosevelt Hospital Center)
7.45%, 2/15/2029 (Insured; FHA) (Prerefunded 2/15/2000) (a)........... 500,000 571,480
New York State Mortgage Agency, Revenue, Homeownership Mortgage:
6.45%, 10/1/2020........................................................ 2,895,000 2,986,829
7.95%, 4/1/2022......................................................... 1,650,000 1,759,065
8.05%, 4/1/2022......................................................... 545,000 584,218
6.65%, 10/1/2025........................................................ 2,000,000 2,079,520
New York State Power Authority, Revenue and General Purpose
7%, 1/1/2018 (Prerefunded 1/1/2010) (a)................................. 1,940,000 2,304,914
New York State Thruway Authority, Service Contract Revenue
(Local Highway and Bridge):
6.25%, 4/1/2006....................................................... 6,450,000 6,738,186
7.25%, 1/1/2010....................................................... 1,000,000 1,143,610
New York State Urban Development Corp., Revenue:
7.50%, 4/1/2020......................................................... 1,000,000 1,163,340
(Alfred Technology Resources Inc. Project) 7.875%, 1/1/2020............. 1,000,000 1,120,360
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------- --------
NEW YORK (CONTINUED)
New York State Urban Development Corp., Revenue (continued):
(Correctional Capital Facilities):
6.10%, 1/1/2011....................................................... $ 4,000,000 $ 4,090,320
7.50%, 1/1/2018 (Prerefunded 1/1/2001) (a)............................ 1,000,000 1,163,350
Refunding 6.50%, 1/1/2011 (Insured; FSA).............................. 3,190,000 3,614,302
(Onondaga County Convention Project) 7.875%, 1/1/2020................... 1,475,000 1,735,795
Port Authority of New York and New Jersey (Consolidated Ninety Third Series)
6.125%, 6/1/2094........................................................ 5,000,000 5,428,100
Rensselaer County Industrial Development Agency, IDR (Albany International Corp.)
7.55%, 6/1/2007 (LOC; Norstar Bank) (b)................................. 1,500,000 1,729,050
Triborough Bridge and Tunnel Authority:
(Convention Center Project) 7.25%, 1/1/2010............................. 1,000,000 1,164,680
Revenue:
6%, 1/1/2012.......................................................... 2,000,000 2,167,140
General Purpose, Refunding 5%, 1/1/2015............................... 2,770,000 2,656,402
Special Obligation 6.25%, 1/1/2012 (Insured; AMBAC)..................... 4,000,000 4,274,440
U.S. RELATED-5.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,061,460
Puerto Rico Housing Finance Corp., MFMR
7.50%, 4/1/2022 (LOC; Government Development Bank) (b).................. 1,665,000 1,780,085
Puerto Rico Industrial Medical Educational and Environmental Pollution Control
Facilities Financing Authority, HR, Refunding (Saint Luke's Hospital Project)
6.25%, 6/1/2010......................................................... 1,100,000 1,140,700
Puerto Rico Public Buildings Authority, Public Education and Health
Facilities
Revenue:
(Guaranteed Government Facilities) 6.25%, 7/1/2011 (Insured; AMBAC)... 3,875,000 4,321,129
Refunding 5.70%, 7/1/2009 (Guaranteed; Commonwealth of Puerto Rico).. 2,235,000 2,343,911
---------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $196,159,758)..................................................... $207,727,189
===========
SHORT-TERM MUNICIPAL INVESTMENTS-1.5%
NEW YORK:
New York City, VRDN:
3.85% (LOC; Chemical Bank) (b,c)........................................ $ 1,000,000 $ 1,000,000
3.80% (Insured; MBIA, SBPA; Bank Austria Aktiengesellschaf) (c)......... 2,200,000 2,200,000
---------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $3,200,000)....................................................... $ 3,200,000
===========
TOTAL INVESTMENTS-100.0%
(cost $199,359,758)..................................................... $210,927,189
===========
</TABLE>
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFMR Multi-Family Mortgage Revenue
FSA Financial Security Assurance SBPA Standby Bond Purchase Agreement
HR Hospital Revenue SONYMA State of New York Mortgage Agency
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
LOC Letter of Credit
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ------- ------ ------------------ --------------------
<S> <C> <C> <C>
AAA Aaa AAA 29.6%
AA Aa AA 12.2
A A A 26.5
BBB Baa BBB 22.8
BB Ba BB 5.4
F1 Mig1 SP1 1.5
Not Rated (e) Not Rated (e) Not Rated (e) 2.0
____
100.0%
======
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard and
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Fund may invest.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $199,359,758)-see statement..................................... $210,927,189
Cash.................................................................... 3,790,239
Interest receivable..................................................... 3,652,024
Receivable for investment securities sold............................... 2,214,767
Receivable for shares of Beneficial Interest subscribed................. 318,375
Prepaid expenses........................................................ 8,717
-----------
220,911,311
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $95,453
Due to Distributor...................................................... 70,374
Payable for investment securities purchased............................. 7,065,668
Payable for shares of Beneficial Interest redeemed...................... 519,747
Accrued expenses........................................................ 79,227 7,830,469
----------- ------------
NET ASSETS ................................................................ $213,080,842
============
REPRESENTED BY:
Paid-in capital......................................................... $201,559,772
Accumulated net realized (loss) on investments.......................... (46,361)
Accumulated net unrealized appreciation on investments-Note 3........... 11,567,431
-----------
NET ASSETS at value......................................................... $213,080,842
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 9,793,284
============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 4,478,577
============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 69
=============
NET ASSET VALUE per share:
Class A Shares
($146,206,554 / 9,793,284 shares)..................................... $14.93
=======
Class B Shares
($66,873,258 / 4,478,577 shares)...................................... $14.93
=======
Class C Shares
($1,030 / 69 shares).................................................. $14.93
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED NOVEMBER 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,618,590
EXPENSES:
Management fee-Note 2(a).............................................. $1,118,961
Shareholder servicing costs-Note 2(c)................................. 640,346
Distribution fees-Note 2(b)........................................... 299,924
Professional fees..................................................... 51,182
Prospectus and shareholders' reports.................................. 31,529
Custodian fees........................................................ 22,800
Trustees' fees and expenses-Note 2(d)................................. 14,929
Registration fees..................................................... 11,887
Miscellaneous......................................................... 28,723
---------
TOTAL EXPENSES.................................................. 2,220,281
---------
INVESTMENT INCOME-NET........................................... 10,398,309
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 452,878
Net unrealized appreciation on investments.............................. 26,991,860
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 27,444,738
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $37,843,047
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30,
--------------------------------------
1994 1995
-------------- -----------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 11,007,481 $ 10,398,309
Net realized gain (loss) on investments................................. (496,878) 452,878
Net unrealized appreciation (depreciation) on investments for the year.. (28,073,679) 26,991,860
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (17,563,076) 37,843,047
------------ -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (8,423,637) (7,565,208)
Class B shares........................................................ (2,583,844) (2,833,091)
Class C shares........................................................ -- (10)
Net realized gain on investments:
Class A shares........................................................ (1,134,769) --
Class B shares........................................................ (324,799) --
------------ ------------
TOTAL DIVIDENDS................................................... (12,467,049) (10,398,309)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 25,099,805 9,960,037
Class B shares........................................................ 24,583,764 12,795,103
Class C shares........................................................ -- 1,000
Dividends reinvested:
Class A shares........................................................ 7,067,611 5,506,451
Class B shares........................................................ 2,377,696 2,200,257
Class C shares........................................................ -- 10
Cost of shares redeemed:
Class A shares........................................................ (36,119,325) (26,739,496)
Class B shares........................................................ (11,178,627) (9,034,959)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... 11,830,924 (5,311,597)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... (18,199,201) 22,133,141
NET ASSETS:
Beginning of year....................................................... 209,146,902 190,947,701
------------ ------------
End of year............................................................. $190,947,701 $213,080,842
============= ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------ ----------------------- ------------------
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30, PERIOD ENDED
------------------------------ ------------------------ NOVEMBER 30,
CAPITAL SHARE TRANSACTIONS: 1994 1995 1994 1995 1995*
--------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Shares sold............. 1,722,934 698,060 1,695,749 893,122 68
Shares issued for
dividends reinvested.. 494,805 386,165 166,946 154,097 1
Shares redeemed......... (2,576,898) (1,893,114) (806,806) (637,271) --
--------- -------- --------- -------- --------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING (359,159) (808,889) 1,055,889 409,948 69
========= ========== ========= ========= =========
* From September 11, 1995 (commencement of initial offering) to November
30, 1995.
See notes to financial statements.
</TABLE>
PREMIER NEW YORK MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated April 1, 1996.
See notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act") as
a non-diversified open-end management investment company. Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's shares.
The Distributor, located at One Exchange Place, Boston, Massachusetts 02109, is
a wholly-owned subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund administration services, which in turn is a wholly-owned subsidiary
of FDI Holdings, Inc., the parent company of which is Boston Institutional
Group, Inc. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
The Fund offers Class A, Class B and Class C shares. Class A shares are
subject to a sales charge imposed at the time of purchase, Class B shares are
subject to a contingent deferred sales charge imposed at the time of redemption
on redemptions made within five years of purchase and Class C shares are subject
to a contingent deferred sales charge imposed at the time of redemption on
redemptions made within one year of purchase. Other differences between the
three Classes include the services offered to and the expenses borne by each
Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, it is
the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $44,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1995. If not
applied, the carryover expires in fiscal 2002.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the average daily
value of the Fund's net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. There was no expense
reimbursement for the year ended November 30, 1995.
Effective December 1, 1995, Dreyfus Transfer, Inc., a wholly-owned
subsidiary of the Manager, serves as the Fund's Transfer and Dividend Disbursing
Agent.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended November 30, 1995, $299,916 was
charged to the Fund for the Class B shares and $8 was charged to the Fund for
the Class C shares.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. 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. The Distributor may make payments to Service Agents in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended November 30, 1995, $358,656, $149,961 and $1
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended November 30, 1995
amounted to $147,142,617 and $147,800,047, respectively.
At November 30, 1995, accumulated net unrealized appreciation on
investments was $11,567,431, consisting of $11,682,647 gross unrealized
appreciation and $115,216 gross unrealized depreciation.
At November 30, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting purposes
(see the Statement of Investments).
PREMIER NEW YORK MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER NEW YORK MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities of
Premier New York Municipal Bond Fund, including the statement of investments, as
of November 30, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier New York Municipal Bond Fund at November 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
[Ernst and Young LLP signature logo]
New York, New York
January 2, 1996
<PAGE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier California
Municipal Bond Fund. For its annual reporting period ended January 31, 1996,
your Fund earned a total return, including bond price changes, interest income
and capital gain distributions, of 14.15% for Class A shares, 13.55% for Class B
shares and, from their inception on June 2, 1995, an aggregate actual total
return of 5.28% for Class C shares.* Income dividends, exempt from Federal and
State of California personal income taxes, of approximately $.665 per share for
Class A shares, $.599 per share for Class B shares and $.374 for Class C shares
were paid to shareholders.** This is equivalent to a tax-free distribution rate
per share of 4.80% for Class A shares, 4.52% for Class B shares and 4.22% for
Class C shares.***
THE ECONOMY
On January 31, the last day of the Fund's reporting period, the Federal
Reserve Board once again lowered the Federal Funds rate another quarter of a
point to 5.25%. The Federal Funds rate is the rate of interest that the nation's
banks charge each other for overnight loans and is a key benchmark for all other
short-term interest rates. The Federal Reserve also reduced the Discount Rate,
the rate that the Fed charges banks for loans, by a quarter of a point to 5.0%.
The reduction in interest rates was a continuation of the easing monetary policy
of the Fed, a stance that has prevailed since last July.
Mounting evidence that economic growth has been slowing, combined with
favorable inflation reports, indicate that the threat of recession outweighs
near-term worries of a resurgence in price inflation. The Consumer Price Index
rose only 2.5% in 1995, the lowest rate in nearly a decade. It also marked the
fourth consecutive year that the CPI rose less than 3%. The consumer sector of
the economy was of increasing concern to economic policy makers. The consumer
sector comprises two-thirds of the nation's economic activity, and retail sales
reports in December revealed the worst holiday season since the 1990-91
recession. Personal income growth remains sluggish. The Conference Board, an
independent business group, reported that the Board's index of consumer
confidence declined sharply in January as consumers worried about Federal budget
negotiations and the recent flurry of layoff announcements by major
corporations.
Industrial production is only moderate. Output of the nation's factories
crept up 0.1% in December. The annual rate of production slowed to 0.8% in the
fourth quarter of 1995, compared with 3.2% for the previous three months. For
the full calendar year, output rose 3.2%, little more than half the 5.9% rate in
1994.
There are strong indications that inflation is under control. Until
mid-year 1995, fear of inflation was the overriding concern of the Federal
Reserve. Now the focus seems to have shifted to actions designed to avoid
recession. Since last July, the Fed has moved three times to lower interest
rates. If more signs of economic weakness emerge, short-term interest rates may
continue to be lowered.
MARKET ENVIRONMENT
Municipal bonds have benefited from a noteworthy bull market for the past
year. We believe the outlook remains favorable due to sluggishness in the
economy and little inflationary pressure. If these conditions continue, the
Federal Reserve Board may have reason to lower rates further which would be
positive for the bond market. Recently however, Fed Chairman Alan Greenspan
remarked that he believes the economy is growing at an acceptable level. The
market has taken this statement to mean that no additional easing is on the
horizon, and has reacted by lowering the prices of fixed-income investments. The
most positive common element in the various market outlooks for long-term bonds
is that inflation continues to be subdued with few notable threats looming.
The continuing saga of the budget stalemate is an additional concern to
market participants and has contributed to the market's volatility. However, if
the President and Congress can reach an accord to achieve a balanced budget, it
would have strong positive ramifications for the fixed income markets.
THE PORTFOLIO
During the year we have maintained a long duration in the Fund, which was
set early on in response to our perception of a slowing of the economy. Our
primary tasks this year focused on protection of principal, liquidity and the
distribution of a high level of tax exempt income to our shareholders. As the
year progressed, we attempted to move away from a fairly defensive posture to a
more aggressive one which emphasized purchasing discount coupon bonds. We
believe this was a logical offset to the many higher coupon premium bonds
previously held by the Fund.
Going forward, we expect to continue on this path to strive for a blended
balance within the portfolio. With inflation low, a sluggish but resilient
economy, and the Federal Reserve Board's outstanding track record to date, we do
not envision a dramatic end to the positive environment that has permitted
long-term investments to flourish. We therefore will continue to maintain a
fully-invested position with strong credit quality.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund and
in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
February 15, 1996
New York, NY
* Total return includes the reinvestment of dividends and any capital gains
paid, without taking into consideration the initial sales charge in the case of
Class A shares or the applicable contingent deferred sales charge imposed on
redemptions in the case of Class B and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT)
for certain shareholders. Capital gains may be subject to state and local taxes.
Income may be subject to some state and local taxes for non-California
residents.
*** Distribution rate per share is based upon dividends per share paid from
net investment income during the period, divided by the maximum offering price
per share at the end of the period in the case of Class A shares, or the net
asset value per share at the end of the period in the case of Class B and Class
C shares, adjusted for capital gain distributions. The distribution rate per
share for Class C shares is annualized.
PREMIER CALIFORNIA MUNICIPAL BOND FUND JANUARY 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER CALIFORNIA
MUNICIPAL BOND FUND CLASS A SHARES AND THE LEHMAN BROTHERS MUNICIPAL BOND
INDEX
[Exhibit A:
$20,786
Lehman Brothers
Municipal Bond Index*
Dollars
$19,103
Premier California
Municipal Bond Fund
(Class A Shares)
*Source: Lehman Brothers]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
___________________________________________________________ __________________________________________________________
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 1/31/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 1/31/96 Redemption Redemption*
___________ ________ _________ ___________________ ______ _________
<S> <C> <C> <C> <C> <C>
1 Year 14.15% 8.98% 1 Year 13.55% 10.55%
5 Year 8.41 7.41 From Inception (1/15/93) 7.19 6.62
From Inception (11/10/86) 7.80 7.26
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
___________________________________________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming No Charge Upon
PERIOD ENDED 1/31/96 Redemption Redemption**
___________ ________ _________
From Inception (6/2/95) 5.28% 4.28%
</TABLE>
Past performance is not predictive of future performance. The above graph
compares a $10,000 investment made in Class A shares of Premier California
Municipal Bond Fund on 11/10/86 (Inception Date) to a $10,000 investment made in
the Lehman Brothers Municipal Bond Index on that date. For comparative purposes,
the value of the Index on 10/31/86 is used as the beginning value on 11/10/86.
All dividends and capital gain distributions are reinvested. Performance for
Class B and Class C shares will vary from the performance of Class A shares
shown above due to differences in charges and expenses.
The Fund invests primarily in California municipal securities and its
performance shown in the line graph takes into account the maximum initial sales
charge on Class A shares and all other applicable fees and expenses. Unlike the
Fund, the Lehman Brothers Municipal Bond Index is an unmanaged total return
performance benchmark for the long-term, investment-grade, geographically
unrestricted tax exempt bond market, calculated by using municipal bonds
selected to be representative of the municipal market overall. The Index does
not take into account charges, fees and other expenses. Also, unlike the Fund
which principally limits investments to California municipal obligations, the
Index is not State specific. These factors can contribute to the Index
potentially outperforming the Fund. Further information relating to Fund
performance, including expense reimbursements, if applicable, is contained in
the Financial Highlights section of the Prospectus and elsewhere in this report.
* Maximum contingent deferred sales charge for Class B shares is 3% and is
reduced to 0% after five years.
**Maximum contingent deferred sales charge for Class C shares is 1% within
one year of the date of purchase.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-92.6% AMOUNT VALUE
<S> <C> <C>
_______ _______
CALIFORNIA-86.5%
Anaheim Public Financing Authority, Tax Allocation Revenue
(Redevelopment Project Alpha) 6.45%, 12/28/2018 (Insured; MBIA)......... $ 4,000,000 $ 4,413,280
Antelope Valley Hospital District, Insured COP 7.30%, 1/1/2006.............. 2,400,000 2,576,376
California:
6.90%, 4/1/2005......................................................... 2,000,000 2,339,100
5.25%, 10/1/2011........................................................ 5,250,000 5,221,912
6.125%, 10/1/2011....................................................... 2,875,000 3,238,285
5.25%, 10/1/2018........................................................ 7,200,000 6,976,872
California Department of Water Resources, Revenue
(Central Valley Project) 4.75%, 12/1/2025............................... 3,120,000 2,810,184
California Educational Facilities Authority, Revenue, Refunding
(Saint Mary's College) 5%, 10/1/2012.................................... 4,000,000 3,752,120
California Health Facilities Financing Authority, Revenue
(Saint Francis Memorial Hospital) 5.875%, 11/1/2023..................... 4,500,000 4,555,170
California Housing Finance Agency, Home Mortgage Revenue:
6.70%, 8/1/2025......................................................... 2,000,000 2,074,040
7.50%, 8/1/2029......................................................... 1,135,000 1,188,390
8%, 8/1/2029............................................................ 525,000 556,852
7.60%, 8/1/2030......................................................... 1,605,000 1,703,467
7.70%, 8/1/2030......................................................... 1,200,000 1,272,072
California Pollution Control Financing Authority, SWDR (North County Recycling
Center) 6.75%, 7/1/2011 (LOC; Union Bank of Switzerland) (a)............ 2,500,000 2,533,700
California Public Works Board, LR:
(Secretary of State):
6.75%, 12/1/2012...................................................... 3,475,000 3,805,855
6.50%, 12/1/2008 (b).................................................. 1,400,000 1,639,932
(University of California Projects) 5.50%, 6/1/2014..................... 8,000,000 8,003,920
California Statewide Communities Development Authority, COP, Revenue,
Refunding
(Pacific Homes) 5.90%, 4/1/2009......................................... 4,340,000 4,515,596
Compton, COP, Refunding 7.50%, 8/1/2015 (LOC; Mitsui Trust and Banking) (a). 2,000,000 2,135,060
Contra Costa County, Water District Revenue 6%, 10/1/2011 (Insured; MBIA) (b) 1,725,000 1,855,048
Escondido Unified School District, Refunding 5.125%, 9/1/2015 (Insured; FGIC) (c) 1,500,000 1,470,870
Eureka Public Financing Authority, Tax Allocation Revenue, Refunding
(Eureka Redevelopment Projects) 6.25%, 11/1/2011 (Insured; CGIC)........ 2,000,000 2,169,260
Fairfield, Water Revenue, Refunding 5.375%, 4/1/2017 (Insured; AMBAC) (c)... 5,250,000 5,253,675
Fontana Redevelopment Agency, Tax Allocation Revenue
(North Fontana Redevelopment Project) 7.25%, 9/1/2020................... 4,250,000 4,607,595
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2030................................................... 40,000,000 4,660,400
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
Long Beach, Harbor Revenue 5.25%, 5/15/2025 (Insured; MBIA)................. $ 3,000,000 $ 2,876,490
Los Angeles, Wastewater Systems Revenue
7.10%, 2/1/2021 (Insured; MBIA, Prerefunded 2/1/1999) (d)............... 2,200,000 2,447,984
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue
5.25%, 7/1/2023 (Insured; AMBAC)........................................ 5,000,000 4,854,800
Los Angeles Harbor Department, Revenue 7.60%, 10/1/2018..................... 750,000 867,728
Madera County, COP (Valley Children's Hospital):
6.25%, 3/15/2006 (Insured; MBIA)........................................ 2,250,000 2,508,435
6.50%, 3/15/2009 (Insured; MBIA)........................................ 3,370,000 3,848,439
Menlo Park Community Development Agency, Tax Allocation, Refunding
(Las Pulgas Community Development Project) 6.55%, 10/1/2011 (Insured;
AMBAC)..................................................................... 2,000,000 2,301,000
Monrovia Redevelopment Agency, Tax Allocation, Refunding
(Central Redevelopment Project) 6.70%, 5/1/2021 (Insured; AMBAC)........ 2,000,000 2,204,640
Mount Shasta, HR, COP (Mercy Medical Center)
7.25%, 7/1/2019 (Prerefunded 7/1/1999) (d).............................. 1,855,000 2,088,229
Nevada County, COP (Western Nevada Co. Solid Waste-McCourtney Road Landfill)
7.50%, 6/1/2021......................................................... 2,200,000 2,270,840
Northern California Power Agency, Public Power Revenue, Refunding
(Hydroelectric Project No. 1):
6.30%, 7/1/2018....................................................... 6,000,000 6,845,640
7.15%, 7/1/2024....................................................... 4,415,000 4,785,507
Orange County, Special Tax (Community Facilities District No. 87):
7.75%, 8/15/2014........................................................ 2,375,000 2,437,296
7.80%, 8/15/2015 (Prerefunded 8/15/2000) (d)............................ 2,000,000 2,337,780
Orange Cove, Irrigation District Revenue, COP
(Rehabilitation Project) 7.25%, 2/1/2012................................ 3,000,000 3,195,870
Pittsburg Public Financing Authority, Wastewater Revenue, Refunding
5.125%, 6/1/2015 (Insured; FGIC)........................................ 2,700,000 2,628,747
Richmond Joint Powers Financing Authority, Revenue 7.25%, 5/15/2013......... 1,500,000 1,684,605
Riverside County, SFMR 7.80%, 5/1/2021 (Collateralized; GNMA)............... 1,250,000 1,612,438
Roseville, Special Tax (Community Facilities District No. 1) 7.70%, 9/1/2020 2,000,000 2,081,240
Sacramento County, Special Tax (Community Facilities District No. 1):
8.20%, 12/1/2010........................................................ 2,250,000 2,434,815
8.25%, 12/1/2020........................................................ 2,000,000 2,163,180
Sacramento Municipal Utility District, Electric Revenue 7.875%, 8/15/2016... 2,900,000 3,248,899
Sacramento Schools Insurance Authority, Revenue
(Workers Compensation Program) 5.75%, 6/1/2003.......................... 3,930,000 4,126,028
San Diego County Water Authority, Water Revenue, COP 5.607%, 4/23/2008 (b).. 4,000,000 4,223,680
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
San Diego Public Facilities Financing Authority, Sewer Revenue
5%, 5/15/2015 (Insured; FGIC)........................................... $ 3,010,000 $ 2,906,787
San Joaquin Hills Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2022................................................... 15,000,000 2,998,050
San Jose - Santa Clara Water Financing Authority, Sewer Revenue
5.375%, 11/15/2015 (Insured; FGIC)...................................... 1,125,000 1,124,899
Simi Valley, Single Family Residential Mortgage Revenue 7.625%, 8/1/2022 (e) 2,000,000 1,200,000
Southern California Rapid Transit District, COP
(Worker's Compensation Fund) 6%, 7/1/2010............................... 2,045,000 2,167,168
University of California, Revenue, Refunding (Multiple Purpose Projects):
5%, 9/1/2014 (Insured; AMBAC)........................................... 4,000,000 3,879,760
5%, 9/1/2023 (Insured; AMBAC)........................................... 8,500,000 8,020,600
Vista, MFHR (Vista Hacienda Project) 6.95%, 4/1/2017........................ 3,000,000 3,191,490
Waterford Public Financing Authority, Revenue 8.20%, 9/15/2020.............. 2,615,000 2,087,764
U.S. RELATED-6.1%
Puerto Rico Commonwealth Highway and Transportation Authority, Revenue
5.50%, 7/1/2013......................................................... 7,250,000 7,400,800
Puerto Rico Electric Power Authority, Power Revenue, Refunding 7.125%, 7/1/2014 2,000,000 2,181,900
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,000,000 3,260,550
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $185,744,249)................... $195,823,109
=======
SHORT-TERM MUNICIPAL INVESTMENTS-7.4%
CALIFORNIA-6.4%
California Pollution Control Financing Authority, RRR, VRDN:
(Delano Project) 3.25% (LOC; ABN-Amro Bank) (a,f)....................... $ 4,600,000 $ 4,600,000
(Ultra Power-Rocklin):
3.90% (LOC; Bank of America National Trust and Savings Association) (a,f) 1,200,000 1,200,000
3.90% (LOC; Bank of America National Trust and Savings Association) (a,f) 1,800,000 1,800,000
Santa Clara Transportation District, Crossover Revenue, VRDN
3.75% (LOC; Sumitomo Bank) (a,f)........................................ 5,800,000 5,800,000
U.S. RELATED-1.0%
Puerto Rico Electric Power Authority, Power Revenue 3.24%, 7/1/2023 (g)..... 2,200,000 2,200,000
_________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $15,600,000)...................................................... $ 15,600,000
=======
TOTAL INVESTMENTS-100.0%
(cost $201,344,249)..................................................... $211,423,109
</TABLE>
<TABLE>
<CAPTION>
=======
PREMIER CALIFORNIA MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
CGIC Capital Guaranty Insurance Corporation Insurance Corporation
COP Certificate of Participation MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
GNMA Government National Mortgage Association SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
LR Lease Revenue
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (H) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
____ ____ __________ ___________
AAA Aaa AAA 40.9%
AA Aa AA 4.5
A A A 32.5
BBB Baa BBB 8.8
D D D .6
F1 MIG1, VMIG1 & P1 SP1, A1 6.3
Not Rated (i) Not Rated (i) Not Rated (i) 6.4
____
100.0%
====
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) Wholly held by the custodian in a segregated account as collateral
for when-issued securities.
(c) Purchased on a delayed delivery or when-issued basis.
(d) 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.
(e) Non-income producing security; interest payments in default.
(f) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(g) Inverse floater security - the interest rate is subject to change
periodically.
(h) Fitch currently provides creditworthiness information for a limited
number of investments.
(i) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's, have been determined by the Manager to be of comparable quality
to those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $201,344,249)-see statement..................................... $211,423,109
Cash.................................................................... 1,733,868
Interest receivable..................................................... 2,876,499
Receivable for shares of Beneficial Interest subscribed................. 14,321
Prepaid expenses........................................................ 6,790
_______
216,054,587
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 96,128
Due to Distributor...................................................... 52,761
Payable for investment securities purchased............................. 9,043,987
Payable for shares of Beneficial Interest redeemed...................... 84,051
Accrued expenses........................................................ 59,674 9,336,601
______ _________
NET ASSETS ................................................................ $206,717,986
===========
REPRESENTED BY:
Paid-in capital......................................................... $194,276,770
Accumulated undistributed net realized gain on investments.............. 2,362,356
Accumulated net unrealized appreciation on investments-Note 3........... 10,078,860
_______
NET ASSETS at value......................................................... $206,717,986
=======
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 14,277,414
=======
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,659,307
=======
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 81
=======
NET ASSET VALUE per share:
Class A Shares
($185,187,120 / 14,277,414 shares).................................... $12.97
=======
Class B Shares
($21,529,815 / 1,659,307 shares)...................................... $12.98
=======
Class C Shares
($1,051 / 81 shares).................................................. $12.98
=======
See notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED JANUARY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,901,785
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,152,436
Shareholder servicing costs-Note 2(c)................................. 662,327
Distribution fees-Note 2(b)........................................... 102,037
Professional fees..................................................... 54,939
Trustees' fees and expenses-Note 2(d)................................. 35,811
Custodian fees........................................................ 24,327
Registration fees..................................................... 7,191
Prospectus and shareholders' reports.................................. 3,223
Miscellaneous......................................................... 22,278
______
TOTAL EXPENSES.................................................... 2,064,569
______
INVESTMENT INCOME-NET............................................. 10,837,216
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,212,253
Net unrealized appreciation on investments.............................. 10,659,485
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 16,871,738
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $27,708,954
==========
See notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JANUARY 31,
________________________________
1995 1996
_______ _______
OPERATIONS:
Investment income-net................................................... $ 13,051,960 $ 10,837,216
Net realized gain on investments........................................ 1,759,018 6,212,253
Net unrealized appreciation (depreciation) on investments for the year.. (27,102,766) 10,659,485
_______ _______
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (12,291,788) 27,708,954
_______ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (12,067,054) (9,879,785)
Class B shares........................................................ (984,906) (957,402)
Class C shares........................................................ - (29)
Net realized gain on investments:
Class A shares........................................................ (1,316,480) (4,193,091)
Class B shares........................................................ (128,731) (474,312)
Class C shares........................................................ - (23)
_______ _______
TOTAL DIVIDENDS................................................... (14,497,171) (15,504,642)
_______ _______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 12,980,330 7,850,834
Class B shares........................................................ 6,515,990 2,433,172
Class C shares........................................................ _ 1,000
Dividends reinvested:
Class A shares........................................................ 6,079,502 6,858,326
Class B shares........................................................ 709,931 978,162
Class C shares........................................................ - 52
Cost of shares redeemed:
Class A shares........................................................ (47,805,009) (32,515,537)
Class B shares........................................................ (3,113,197) (2,012,025)
_______ _______
(DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... (24,632,453) (16,406,016)
_______ _______
TOTAL (DECREASE) IN NET ASSETS.............................. (51,421,412) (4,201,704)
NET ASSETS:
Beginning of year....................................................... 262,341,102 210,919,690
_______ _______
End of year............................................................. $210,919,690 $206,717,986
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ _____________________________ _______
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31, YEAR ENDED
_____________________________ _____________________________
JANUARY 31,
CAPITAL SHARE TRANSACTIONS: 1995 1996 1995 1996 1996*
<S> <C> <C> <C> <C> <C>
Shares sold............. 1,040,833 611,979 506,103 191,459 77
Shares issued for dividends
reinvested............ 489,182 534,099 57,245 76,108 4
Shares redeemed......... (3,847,929) (2,546,673) (252,804) (157,990) -
_______ _______ _______ _______ ______
NET INCREASE (DECREASE)
IN SHARES
`OUTSTANDING...... (2,317,914) (1,400,595) 310,544 109,577 81
======= ======= ======== ======= ========
*From June 2, 1995 (commencement of initial offering) to January 31, 1996.
See notes to financial statements.
</TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Fund's financial statements. CLASS A SHARES
<TABLE>
<CAPTION>
____________________________________________________________
YEAR ENDED JANUARY 31,
____________________________________________________________
PER SHARE DATA: 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $12.23 $12.58 $12.80 $13.64 $12.24
____ ____ ____ ____ ____
INVESTMENT OPERATIONS:
Investment income-net........................ .82 .80 .77 .72 .67
Net realized and unrealized gain (loss)
on investments............................. .36 .39 .94 (.80) 1.02
____ ____ ____ ____ ____
TOTAL FROM INVESTMENT OPERATIONS........... 1.18 1.19 1.71 (.08) 1.69
____ ____ ____ ____ ____
DISTRIBUTIONS:
Dividends from investment income-net......... (.82) (.80) (.77) (.72) (.67)
Dividends from net realized gain on investments (.01) (.17) (.10) (.60) (.29)
____ ____ ____ ____ ____
TOTAL DISTRIBUTIONS........................ (.83) (.97) (.87) (1.32) (.96)
____ ____ ____ ____ ____
Net asset value, end of year................. $12.58 $12.80 $13.64 $12.24 $12.97
==== ==== ==== ==== ====
TOTAL INVESTMENT RETURN*......................... 10.02% 9.78% 13.62% (4.34%) 14.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .47% .65% .78% .90% .93%
Ratio of net investment income to average net assets 6.62% 6.30% 5.71% 5.72% 5.22%
Decrease reflected in above expense ratios due to
undertakings by the Manager................ .48% .28% .15% .02% .-
Portfolio Turnover Rate...................... 10.29% 36.54% 26.69% 37.39% 92.42%
Net Assets, end of year (000's Omitted)...... $218,703 $224,555 $245,435 $191,939 $185,187
*Exclusive of sales load.
See notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Fund's financial statements.
CLASS B SHARES CLASS C SHARES
________________________________________ ________
YEAR ENDED
YEAR ENDED JANUARY 31, JANUARY 31,
____________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
_____ _____ _____ ______ _______
Net asset value, beginning of year........... $12.69 $12.81 $13.64 $12.25 $12.98
______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net........................ .03 .69 .65 .60 .37
Net realized and unrealized gain (loss) on investments .12 .93 (.79) 1.02 .29
______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS........... .15 1.62 (.14) 1.62 .66
______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net......... (.03) (.69) (.65) (.60) (.37)
Dividends from net realized gain on investments .- (.10) (.60) (.29) (.29)
______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........................ (.03) (.79) (1.25) (.89) (.66)
______ ______ ______ ______ ______
Net asset value, end of year................. $12.81 $13.64 $12.25 $12.98 $12.98
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN (3)...................... 25.98%(4) 12.91% (4.77%) 13.55% 7.90%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... 1.07%(4) 1.31% 1.42% 1.45% 4.42%(4)
Ratio of net investment income to average
net assets................................. 4.92%(4) 4.90% 5.17% 4.69% 4.31%(4)
Decrease reflected in above expense ratios due to
undertakings by the Manager................ .13%(4) .13% .02% .- .-
Portfolio Turnover Rate...................... 36.54% 26.69% 37.39% 92.42% 92.42%
Net Assets, end of year (000's Omitted)...... $325 $16,906 $18,981 $21,530 $1
(1) From January 15, 1993 (commencement of initial offering) to January 31, 1993.
(2) From June 2, 1995 (commencement of initial offering) to January 31, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
See notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier California Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company. The Fund's investment objective is to maximize current
income exempt from Federal and, where applicable, from State personal income
taxes to the extent consistent with the preservation of capital. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager is
a direct subsidiary of Mellon Bank. N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, if any,
it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the average daily
value of the Fund's net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. The most stringent state
expense limitation applicable to the Fund presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the average value of the Fund's net assets in accordance with California "blue
sky" regulations. There was no expense reimbursement for the year ended January
31, 1996.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc., a
wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. Such compensation amounted to $11,891 for the period from December 1, 1995
through January 31, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $11,623 during the year ended January 31, 1996 from commissions earned
on sales of the Fund's shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. For the period ended January 31, 1996, $102,032 was
charged to the Fund for the Class B shares and $5 was charged to the Fund for
the Class C shares.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor, at
an annual rate of .25 of 1 % of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. 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. The Distributor may make payments to Service Agents in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the period ended January 31, 1996, $472,817, $51,016 and $2
were charged to Class A, B and C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended January 31, 1996 amounted
to $188,136,590 and $215,416,205, respectively.
At January 31, 1996, accumulated net unrealized appreciation on investments
was $10,078,860, consisting of $11,535,635 gross unrealized appreciation and
$1,456,775 gross unrealized depreciation.
At January 31, 1996, 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).
PREMIER CALIFORNIA MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER CALIFORNIA MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities of
Premier California Municipal Bond Fund, including the statement of investments,
as of January 31, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier California Municipal Bond Fund at January 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
[Ernst and Young LLP signature logo]
New York, New York
March 5, 1996
PREMIER CALIFORNIA MUNICIPAL BOND FUND
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund hereby makes the following
designations regarding its fiscal year ended January 31, 1996.
-all the dividends paid from investment income-net are "exempt-interest
dividends" (not subject to regular Federal, and for individuals who are
California residents, California personal income taxes), and
-the Fund hereby designates $.0510 per share as a long-term capital gain
distribution paid on September 29, 1995. The Fund also designates $.0546 per
share as a long-term capital gain distribution of the $.2421 per share paid on
December 6, 1995.
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Fund's taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997.
[Dreyfus lion "d" logo]
PREMIER CALIFORNIA
MUNICIPAL BOND FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 023/613/663AR9601
[Dreyfus logo]
Annual Report
Premier California
Municipal Bond Fund
January 31, 1996
<PAGE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier California
Municipal Bond Fund. For its semi-annual reporting period ended July 31, 1996,
your Fund produced a total return, including bond price changes and interest
income, of - .55% for Class A shares, - .80% for Class B shares and - .77% for
Class C shares.* Income dividends, exempt from Federal and State of California
personal income taxes, of approximately $.315 per share for Class A shares,
$.282 per share for Class B shares and $.266 per share for Class C shares were
paid to shareholders.** This is equivalent to an annualized tax-free
distribution rate per share of 4.79% for Class A shares, 4.50% for Class B
shares and 4.23% for Class C shares.
THE ECONOMY
Strong second-quarter growth, a tightening labor market and signs of upward
pressure on wages have, in the words of Chairman Alan Greenspan, placed the
Federal Reserve Board (the "Fed") in a state of "heightened surveillance"
regarding signs of potentially higher inflation. So far, inflation reports have
been benign. Through July 31, the Consumer Price Index rose 3.0% for the
preceding 12 months, generally consistent with its trend over the past several
years. Wholesale prices have been similarly well-behaved, while commodity
prices have been in decline since early spring. As favorable as these reports
have been, the Fed looks deeper into the economy for signs of strain that could
result in increased inflation. Before the Fed began its last round of interest
rate increases in early 1994, there was little actual evidence of inflation.
Yet, concerned that a number of indicators suggested that inflation could surge
later on, the Federal Reserve applied the monetary brakes. Now it seems that the
Fed's attention is drawn to indications that continued strong reports of job
growth and rising wages may fuel unacceptable increases in the rate of
inflation. The investment markets have been anticipating a Fed tightening. (The
last rise in the Federal Funds rate occurred on February 1, 1995. Since then all
of the moves by the Fed have been to lower rates; the last reduction to 5.25%
occurred on January 31, 1996.)
Investor fears that the Fed would raise short-term interest rates resulted
in a rise in long-term interest rates of a full percentage point since January.
Ironically, this rise might have stayed the Fed's hand from being more
aggressive. The effect of the rise on consumer spending and housing, according
to one growing view, may contribute to a moderation of economic growth over the
second half of the year. Yet, little evidence of a potential slowdown has
emerged so far. Higher mortgage rates have not tempered growth in the housing
market and construction starts of new homes are at their highest level since
April 1994. Retail sales growth remains solid despite rises in consumer
installment debt and credit card delinquencies. On the manufacturing side of the
economy, industrial production continues to gain without any sign of strain to
keep up with demand. Capacity utilization (83.2% of potential output at midyear)
remains below the 85% level that most economists believe indicates a potential
for inflationary bottlenecks. Still, we remain alert to signs of inflationary
pressures that might trigger a rise in interest rates.
MARKET ENVIRONMENT
The municipal market experienced a dramatic decline beginning in the first
quarter of 1996. Precipitating this decline was the surprising growth in
employment and brisk increase in retail sales. The market reaction to the growth
in these numbers was swift and sure. In a matter of weeks, interest rates as
measured by long-maturity U.S. Government bonds rose from below 6% to above 7%-a
rise of about 16% in yield. This negative price action pulled municipals down in
value also, albeit to a somewhat lesser extent. Inflation, however, has yet to
show any troubling rise with staying power. Each harmful statistic indicating a
return to inflation is quickly followed by data suggesting a slowing economy and
a falling or stable inflationary trend.
Beginning in April, the market began to stabilize in this new, lower
trading range. Recently, the market moved out of this range to the upside-a-
positive development. While we are pleased to see this movement to higher price
levels, the market remains vulnerable to further downward pressure should
further economic strength appear. Economic weakness, on the other hand, would
prove beneficial to long-term security prices, relieving immediate fears of
renewed inflation. Additionally, on a positive note, the municipal market
continues to benefit from lower supplies of new issues and less discussion of a
flat tax, both of which had produced weakness in prior periods.
THE PORTFOLIO
At the beginning of 1996 the Fund was largely composed of defensive coupon
bonds, many of which had short calls. As the year progressed, we systematically
took profits by selling these short call bonds since the market in general
appeared uneasy. We then invested these funds in discount bonds with very good
structural characteristics. This has provided the Fund with a more favorable
balance of premium bonds and discount bonds and further allowed the Fund to
achieve the necessary balance as we moved through the first half of the year.
The duration of the Fund has remained relatively unchanged. Our primary task
this year has focused on the protection of principal, enhancing liquidity, and
the distribution of a high level of tax exempt income to our shareholders.
Moving forward, our thought is to continue with the theme of maintaining a
balance within the portfolio. While we are mindful of the risks associated with
additional declines, we believe that much of the market correction is behind us
and we will operate in a relative range. We are further encouraged by the recent
market moves to higher levels. It remains to be seen, however, how the market
reacts to the upcoming presidential elections as we close in on the end of the
calendar year.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund and
in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
August 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price at the end of the period in the case of Class A shares or the net
asset value per share at the end of the period in the case of Class B and Class
C shares.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS JULY 31, 1996 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.6% AMOUNT VALUE
<S> <C> <C>
CALIFORNIA-92.0%
Anaheim Public Financing Authority, Tax Allocation Revenue
(Redevelopment Project Alpha) 6.45%, 12/28/2018 (Insured; MBIA)......... $ 4,000,000 $ 4,241,360
Antelope Valley Hospital District, Insured COP 7.30%, 1/1/2006.............. 2,400,000 2,537,376
California:
6.90%, 4/1/2005......................................................... 2,000,000 2,268,200
5.25%, 10/1/2011........................................................ 5,250,000 5,102,580
6.125%, 10/1/2011 (a)................................................... 2,875,000 3,099,566
5.25%, 10/1/2018........................................................ 7,200,000 6,687,720
5.90%, 3/1/2025......................................................... 1,500,000 1,505,175
California Educational Facilities Authority, Revenue, Refunding (Saint Mary's College)
5%, 10/1/2012........................................................... 4,000,000 3,641,440
California Health Facilities Financing Authority, Revenue
(Saint Francis Memorial Hospital) 5.875%, 11/1/2023..................... 4,500,000 4,434,570
California Housing Finance Agency, Home Mortgage Revenue:
6.15%, 8/1/2016......................................................... 3,000,000 3,002,520
6.70%, 8/1/2025......................................................... 1,960,000 2,019,564
7.50%, 8/1/2029......................................................... 1,105,000 1,150,581
8%, 8/1/2029............................................................ 445,000 469,279
7.60%, 8/1/2030......................................................... 1,550,000 1,634,336
7.70%, 8/1/2030......................................................... 905,000 951,246
California Pollution Control Financing Authority, SWDR (North County Recycling
Center) 6.75%, 7/1/2011 (LOC; Union Bank of Switzerland) (b)............ 2,500,000 2,805,575
California Public Works Board, LR:
(Secretary of State):
6.50%, 12/1/2008...................................................... 1,400,000 1,567,440
6.75%, 12/1/2012...................................................... 3,475,000 3,754,564
(University of California Projects) 5.50%, 6/1/2014..................... 8,000,000 7,721,840
California Statewide Communities Development Authority, COP, Revenue, Refunding
(Pacific Homes) 5.90%, 4/1/2009......................................... 2,340,000 2,351,583
Compton, COP, Refunding 7.50%, 8/1/2015 (LOC; Mitsui Trust and Banking) (b). 2,000,000 2,110,760
Contra Costa County, Water District Revenue 6%, 10/1/2011 (Insured; MBIA)... 1,475,000 1,538,145
Escondido Unified School District, Refunding 5.125%, 9/1/2015 (Insured; FGIC) 3,250,000 3,028,805
Eureka Public Financing Authority, Tax Allocation Revenue, Refunding
(Eureka Redevelopment Projects) 6.25%, 11/1/2011 (Insured; CGIC)........ 2,000,000 2,097,800
Fairfield, Water Revenue, Refunding 5.375%, 4/1/2017 (Insured; AMBAC)....... 9,250,000 8,859,835
Fontana Redevelopment Agency, Tax Allocation Revenue
(North Fontana Redevelopment Project) 7.25%, 9/1/2020................... 4,250,000 4,256,630
Fremont Unified School District, Alameda County:
5.875%, 8/1/2016 (Insured; MBIA)........................................ 2,000,000 2,006,840
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31,
1996 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
Fremont Unified School District, Alameda County (continued):
5.50%, 9/1/2019 (Insured; FGIC)......................................... $ 2,085,000 $ 2,014,860
Fresno, Sewer Revenue 5%, 9/1/2023 (Insured; MBIA).......................... 2,000,000 1,791,440
Long Beach, Harbor Revenue 5.25%, 5/15/2025 (Insured; MBIA)................. 3,000,000 2,752,470
Los Angeles Harbor Department, Revenue 6.25%, 8/1/2026 (Insured; MBIA)...... 2,320,000 2,371,898
Madera County, COP (Valley Children's Hospital):
6.25%, 3/15/2006 (Insured; MBIA)........................................ 2,250,000 2,428,695
6.50%, 3/15/2009 (Insured; MBIA)........................................ 3,370,000 3,700,968
Metropolitan Water District, Southern California Waterworks Revenue, Refunding
6%, 7/1/2005 (Insured; MBIA)............................................ 5,000,000 5,413,900
Monrovia Redevelopment Agency, Tax Allocation, Refunding
(Central Redevelopment Project) 6.70%, 5/1/2021 (Insured; AMBAC)........ 2,000,000 2,148,560
Mount Shasta, HR, COP (Mercy Medical Center)
7.25%, 7/1/2019 (Prerefunded 7/1/1999) (c).............................. 1,830,000 2,013,256
Nevada County, COP (Western Nevada Co. Solid Waste-McCourtney Road Landfill)
7.50%, 6/1/2021......................................................... 2,200,000 2,228,908
Northern California Power Agency, Public Power Revenue, Refunding
(Hydroelectric Project No. 1):
6.30%, 7/1/2018....................................................... 6,000,000 6,506,160
7.15%, 7/1/2024....................................................... 4,395,000 4,617,607
Orange County, Special Tax (Community Facilities District No. 87):
7.75%, 8/15/2014........................................................ 2,375,000 2,427,274
7.80%, 8/15/2015 (Prerefunded 8/15/2000) (c)............................ 2,000,000 2,274,720
Orange Cove, Irrigation District Revenue, COP (Rehabilitation Project)
7.25%, 2/1/2012......................................................... 3,000,000 3,154,170
Pittsburg Public Financing Authority, Wastewater Revenue, Refunding
5.125%, 6/1/2015 (Insured; FGIC)........................................ 2,700,000 2,517,507
Richmond Joint Powers Financing Authority, Revenue
7.25%, 5/15/2013 (Prerefunded 5/15/2000) (c)............................ 1,500,000 1,667,700
Riverside County, SFMR 7.80%, 5/1/2021 (Collateralized; GNMA)............... 1,250,000 1,507,200
Roseville, Special Tax (Community Facilities District No. 1) 7.70%, 9/1/2020 2,000,000 2,068,460
Sacramento County, Special Tax (Community Facilities District No. 1):
8.20%, 12/1/2010........................................................ 2,250,000 2,427,570
8.25%, 12/1/2020........................................................ 2,000,000 2,136,520
San Diego County Water Authority, Water Revenue, COP 5.681%, 4/23/2008...... 4,000,000 4,106,760
San Diego Public Facilities Financing Authority, Sewer Revenue
5%, 5/15/2015 (Insured; FGIC)........................................... 3,010,000 2,763,782
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31, 1996 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
CALIFORNIA (CONTINUED)
San Jose - Santa Clara Water Financing Authority, Sewer Revenue
5.375%, 11/15/2015 (Insured; FGIC)...................................... $ 1,125,000 $ 1,080,540
Simi Valley, Single Family Residential Mortgage Revenue 7.625%, 8/1/2022 (d) 1,537,444 737,973
Southern California Rapid Transit District, COP (Worker's Compensation Fund)
6%, 7/1/2010............................................................ 2,045,000 2,124,591
University of California, Revenue:
Hospital - UC Davis Medical Center 5.75%, 7/1/2012 (Insured; AMBAC)..... 5,000,000 5,088,250
Refunding (Multiple Purpose Projects) 5%, 9/1/2023 (Insured; AMBAC)..... 8,500,000 7,435,205
Vista, MFHR (Vista Hacienda Project) 6.95%, 4/1/2017........................ 3,000,000 3,129,720
Waterford Public Financing Authority, Revenue 8.20%, 9/15/2020.............. 2,615,000 2,229,680
West Covina Redevelopment Agency, Community Facilities District, Special Tax
6%, 9/1/2022 (e)........................................................ 3,000,000 2,947,440
U.S. RELATED-6.6%
Puerto Rico Commonwealth Highway and Transportation Authority, Revenue
5.50%, 7/1/2013......................................................... 7,250,000 7,269,430
Puerto Rico Electric Power Authority, Power Revenue, Refunding 7.125%, 7/1/2014 2,000,000 2,158,840
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,000,000 3,151,500
___________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $183,215,234)................... $187,238,884
=============
SHORT-TERM MUNICIPAL INVESTMENTS-1.4%
U.S. RELATED:
Puerto Rico Commonwealth Government Development Bank, VRDN 3.20% (f)........ $ 1,900,000 $ 1,900,000
Puerto Rico Electric Power Authority, Power Revenue 3.41%, 7/1/2023 (g)..... 800,000 800,000
___________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $2,700,000).................... $ 2,700,000
=============
TOTAL INVESTMENTS-100.0% (cost $185,915,234)................................ $189,938,884
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LR Lease Revenue
CGIC Capital Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
FGIC Financial Guaranty Insurance Company MFHR Multi-Family Housing Revenue
GNMA Government National Mortgage Association SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (H) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
<S> <C> <C> <C>
AAA Aaa AAA 40.9%
AA Aa AA 4.5
A A A 32.5
BBB Baa BBB 8.8
DDD D D .6
F1 MIG1, VMIG1 & P1 SP1, A1 6.3
Not Rated (i) Not Rated (i) Not Rated (i) 6.4
______
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly held by the custodian in a segregated account as collateral
for when-issued securities.
(b) Secured by letters of credit.
(c) 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.
(d) Non-income producing security; interest payments in default.
(e) Purchased on a when-issued basis.
(f) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(g) Inverse floater security - the interest rate is subject to change
periodically.
(h) Fitch currently provides creditworthiness information for a limited
number of investments.
(i) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's, have been determined by the Manager to be of comparable quality
to those rated securities in which the Fund may invest.
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996 (UNAUDITED)
ASSETS:
<S> <C>
Investments in securities, at value
(cost $185,915,234)-see statement..................................... $189,938,884
Interest receivable..................................................... 2,979,904
Receivable for shares of Beneficial Interest subscribed................. 30,000
Prepaid expenses........................................................ 5,739
_____________
192,954,527
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 93,558
Due to Distributor...................................................... 48,921
Payable for investment securities purchased............................. 2,925,750
Payable for shares of Beneficial Interest redeemed...................... 57,492
Accrued expenses and other liabilities.................................. 157,493 3,283,214
____________
NET ASSETS ................................................................ $189,671,313
==============
REPRESENTED BY:
Paid-in capital......................................................... $183,520,316
Accumulated undistributed investment income-net......................... 161,221
Accumulated undistributed net realized gain on investments.............. 1,966,126
Accumulated net unrealized appreciation on investments-Note 3........... 4,023,650
_____________
NET ASSETS at value......................................................... $189,671,313
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 13,387,819
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,659,969
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 26,919
==============
NET ASSET VALUE per share:
Class A Shares
($168,437,611 / 13,387,819 shares).................................... $12.58
=======
Class B Shares
($20,894,352 / 1,659,969 shares)...................................... $12.59
=======
Class C Shares
($339,350 / 26,919 shares)............................................ $12.61
=======
See independent accountants' review report and notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 5,932,687
EXPENSES:
Management fee-Note 2(a).............................................. $ 531,628
Shareholder servicing costs-Note 2(c)................................. 295,279
Distribution fees-Note 2(b)........................................... 52,041
Professional fees..................................................... 22,803
Trustees' fees and expenses-Note 2(d)................................. 14,173
Custodian fees........................................................ 10,561
Prospectus and shareholders' reports.................................. 7,352
Registration fees..................................................... 1,903
Miscellaneous......................................................... 8,970
__________
TOTAL EXPENSES.................................................... 944,710
__________
INVESTMENT INCOME-NET............................................. 4,987,977
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS-Note 3:
Net realized (loss) on investments...................................... $ (396,230)
Net unrealized (depreciation) on investments............................ (6,055,210)
__________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (6,451,440)
__________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $(1,463,463)
=============
See independent accountants' review report and notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
JANUARY 31, JULY 31, 1996
1996 (UNAUDITED)
______________ ____________
OPERATIONS:
Investment income-net................................................ $ 10,837,216 $ 4,987,977
Net realized gain (loss) on investments.............................. 6,212,253 (396,230)
Net unrealized appreciation (depreciation) on investments for the period 10,659,485 (6,055,210)
______________ ____________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 27,708,954 (1,463,463)
______________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares..................................................... (9,879,785) (4,356,112)
Class B shares..................................................... (957,402) (469,376)
Class C shares..................................................... (29) (1,268)
Net realized gain on investments:
Class A shares..................................................... (4,193,091) _
Class B shares..................................................... (474,312) _
Class C shares..................................................... (23) _
______________ ____________
TOTAL DIVIDENDS................................................ (15,504,642) (4,826,756)
______________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares..................................................... 7,850,834 3,213,965
Class B shares..................................................... 2,433,172 771,834
Class C shares..................................................... 1,000 334,104
Dividends reinvested:
Class A shares..................................................... 6,858,326 1,962,243
Class B shares..................................................... 978,162 307,702
Class C shares..................................................... 52 1,214
Cost of shares redeemed:
Class A shares..................................................... (32,515,537) (16,284,860)
Class B shares..................................................... (2,012,025) (1,062,656)
______________ ____________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS. (16,406,016) (10,756,454)
______________ ____________
TOTAL (DECREASE) IN NET ASSETS............................... (4,201,704) (17,046,673)
NET ASSETS:
Beginning of period.................................................. 210,919,690 206,717,986
______________ ____________
End of period (including undistributed investment income-net of
$161,221 on July 31, 1996)......................................... $206,717,986 $189,671,313
=============== =================
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
__________________________________________________________________________________________
CLASS A CLASS B
___________________________________ ___________________________________________
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
JANUARY 31, JULY 31, 1996 JANUARY 31, JULY 31, 1996
1996 (UNAUDITED) 1996 (UNAUDITED)
____________ _____________ ____________ ______________
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C> <C> <C>
Shares sold................... 611,979 255,777 191,459 61,198
Shares issued for
dividends reinvested........ 534,099 156,520 76,108 24,538
Shares redeemed.......... (2,546,673) (1,301,892) (157,990) (85,074)
____________ _____________ ____________ ______________
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING.. (1,400,595) (889,595) 109,577 662
============ ============ ============ ===============
SHARES
_____________________________________
CLASS C
_____________________________________
YEAR ENDED SIX MONTHS ENDED
JANUARY 31, JULY 31, 1996
1996* (UNAUDITED)
____________ _____________
CAPITAL SHARE TRANSACTIONS
(CONTINUED):
Shares sold.................. 77 26,742
Shares issued for
dividends reinvested........ 4 96
Shares redeemed............. _ _
____________ _____________
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING.. 81 26,838
============== =============
* From June 2, 1995 (commencement of initial offering) to January 31, 1996.
See independent accountants' review report and notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Fund's financial statements.
CLASS A SHARES
___________________________________________________________
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31, 1996
___________________________________________________________
PER SHARE DATA: 1992 1993 1994 1995 1996 (UNAUDITED)
_____ ______ ______ ______ ______ _______________
Net asset value, beginning of period.. $12.23 $12.58 $12.80 $13.64 $12.24 $12.97
_____ ______ ______ ______ ______ _______
INVESTMENT OPERATIONS:
Investment income-net................. .82 .80 .77 .72 .67 .33
Net realized and unrealized gain (loss)
on investments...................... .36 .39 .94 (.80) 1.02 (.41)
_____ ______ ______ ______ ______ _______
TOTAL FROM INVESTMENT OPERATIONS.... 1.18 1.19 1.71 (.08) 1.69 (.08)
_____ ______ ______ ______ ______ _______
DISTRIBUTIONS:
Dividends from investment income-net.. (.82) (.80) (.77) (.72) (.67) (.31)
Dividends from net realized gain
on investments...................... (.01) (.17) (.10) (.60) (.29) .-
_____ ______ ______ ______ ______ _______
TOTAL DISTRIBUTIONS................. (.83) (.97) (.87) (1.32) (.96) (.31)
_____ ______ ______ ______ ______ _______
Net asset value, end of period........ $12.58 $12.80 $13.64 $12.24 $12.97 $12.58
======= ====== ======= ====== ======== ========
TOTAL INVESTMENT RETURN(1)................ 10.02% 9.78% 13.62% (4.34%) 14.15% (1.10%)(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .47% .65% .78% .90% .93% .91%(2)
Ratio of net investment income to average
net assets.......................... 6.62% 6.30% 5.71% 5.72% 5.22% 5.16%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager.. .48% .28% .15% .02% .- .-
Portfolio Turnover Rate............... 10.29% 36.54% 26.69% 37.39% 92.42% 28.14%(3)
Net Assets, end of period (000's Omitted) $218,703 $224,555 $245,435 $191,939 $185,187 $168,438
(1) Exclusive of sales load.
(2) Annualized.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Fund's financial statements.
CLASS B SHARES CLASS C SHARES
_______________________________________________________ ________________________________
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31, 1996 JANUARY 31, JULY 31, 1996
_____________________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 (UNAUDITED) 1996(2) (UNAUDITED)
______ ______ _____ ______ ____________ ____________ ____________
Net asset value,
beginning of period $12.69 $12.81 $13.64 $12.25 $12.98 $12.98 $12.98
______ ______ _____ _____ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net .03 .69 .65 .60 .29 .37 .27
Net realized and
unrealized gain (loss)
on investments... .12 .93 (.79) 1.02 (.40) .29 (.37)
______ ______ _____ _____ ______ ______ ______
TOTAL FROM
INVESTMENT
OPERATIONS... .15 1.62 (.14) 1.62 (.11) .66 (.10)
______ ______ _____ _____ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net....... (.03) (.69) (.65) (.60) (.28) (.37) (.27)
Dividends from net realized
gain on investments .- (.10) (.60) (.29) .- (.29) .-
______ ______ _____ _____ ______ ______ ______
TOTAL DISTRIBUTIONS (.03) (.79) (1.25) (.89) (.28) (.66) (.27)
______ ______ _____ _____ ______ ______ ______
Net asset value,
end of period.... $12.81 $13.64 $12.25 $12.98 $12.59 $12.98 $12.61
====== ======= ====== ====== ====== ======== ==========
TOTAL INVESTMENT RETURN(3) 25.98%(4) 12.91% (4.77%) 13.55% (1.60%)(4) 7.90%(4) (1.54%)(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets....... 1.07%(4) 1.31% 1.42% 1.45% 1.42%(4) 4.42%(4) 2.13%(4)
Ratio of net investment income
to average net assets 4.92%(4) 4.90% 5.17% 4.69% 4.64%(4) 4.31%(4) 4.31%(4)
Decrease reflected in above
expense ratios due to
undertakings by
the Manager...... .13%(4) .13% .02% .- .- .- .-
Portfolio Turnover Rate 36.54% 26.69% 37.39% 92.42% 28.14%(5) 92.42% 28.14%(5)
Net Assets, end of period
(000's Omitted).. $325 $16,906 $18,981 $21,530 $20,894 $1 $339
(1) From January 15, 1993 (commencement of initial offering) to January 31, 1993.
(2) From June 2, 1995 (commencement of initial offering) to January 31, 1996.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
See independent accountants' review report and notes to financial statements.
</TABLE>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier California Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a diversified, open-end management
investment company. The Fund's investment objective is to maximize current
income exempt from Federal and, where applicable, from State personal income
taxes to the extent consistent with the preservation of capital. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager is
a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, if any,
it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Fund's average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. The most stringent state
expense limitation applicable to the Fund presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the average value of the Fund's net assets in accordance with California "blue
sky" regulations. There was no expense reimbursement for the six months ended
July 31, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $13,186 during the six months ended July 31, 1996 from commissions
earned on sales of the Fund's shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the six months ended July 31, 1996, $51,823 was
charged to the Fund for the Class B shares and $218 was charged to the Fund for
the Class C shares.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor, at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. 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. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the six months ended July 31, 1996, $215,665, $25,911 and
$73 were charged to Class A, B and C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $34,392 during the six months ended July 31, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the six months ended July 31, 1996
amounted to $53,323,732 and $55,438,059, respectively.
At July 31, 1996, accumulated net unrealized appreciation on investments
was $4,023,650, consisting of $6,209,176 gross unrealized appreciation and
$2,185,526 gross unrealized depreciation.
At July 31, 1996, 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).
PREMIER CALIFORNIA MUNICIPAL BOND FUND
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER CALIFORNIA MUNICIPAL BOND FUND
We have reviewed the accompanying statement of assets and liabilities of
Premier California Municipal Bond Fund, including the statement of investments,
as of July 31, 1996, and the related statements of operations and changes in net
assets and financial highlights for the six month period ended July 31, 1996.
These financial statements and financial highlights are the responsibility of
the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements and financial highlights taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of changes in net assets for the year ended January 31,
1996 and financial highlights for each of the five years in the period ended
January 31, 1996 and in our report dated March 5, 1996, we expressed an
unqualified opinion on such statement of changes in net assets and financial
highlights.
[Ernst & Young LLP signature logo]
New York, New York
September 6, 1996
PREMIER CALIFORNIA
MUNICIPAL BOND FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. PCCSA967
Semi-Annual Report
Premier California
Municipal Bond Fund
July 31, 1996
[lion2/hres logo]
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier State
Municipal Bond Fund - Connecticut Series. For its annual reporting period ended
April 30, 1996, your Series produced a total return of 6.85% for Class A shares,
6.20% for Class B shares and, since their inception on August 15, 1995, 3.78%
for Class C shares.* Income dividends exempt from Federal and Connecticut State
personal income taxes of approximately $.659 for Class A shares, $.596 for Class
B shares and $.400 for Class C shares were paid.** This amounts to an annualized
tax-free distribution rate per share of 5.28%, 5.00% and 4.72% for Class A,
Class B and Class C shares respectively.***
THE ECONOMY
Concerns that the economy was heading toward recession were eased by the
recent release of brighter-than-expected reports on employment and consumer
spending. Consequently, the Federal Reserve Board refrained from making any
further reductions in the Federal Funds rate; the last easing of this benchmark
interest rate occurred on January 31. In reaction to the more optimistic
economic news (and the related fears of a potential rekindling of inflation),
long-term interest rates as measured by 30-year Treasury bonds have risen nearly
one percentage point since February.
The rosier outlook for the economy was spearheaded by reports of large
gains in employment for two consecutive months (February and March).
Furthermore, personal income and expenditures data indicated that consumers
continued to spend, despite their present high level of installment credit.
Retail sales reports have correspondingly edged higher, confirming a modest
recovery in consumer spending from its year-end slump.
Supporting the growing consensus that the economy has picked up steam were
reports of slow but steady growth in the manufacturing sector. After adjusting
data for the 17-day General Motors strike, industrial output rose modestly. New
orders for durable goods, a closely watched indicator of future hiring and
production, also posted gains.
Despite the economy's apparent recovery from its year-end pause, inflation
has remained under control. Through March of this year, the Consumer Price Index
rose at an annual rate of 2.8%. There appear to be few signs of inflationary
pressure in the economy. Factories are running at a relatively comfortable rate
of capacity (82.5%), markedly below this expansion's peak of 85.1% reached over
a year ago. With major industries trying to reduce inventories, there is little
to suggest that product pricing will surge upwards. Reflecting this absence of
so-called pipeline inflationary pressure, price increases at both the wholesale
and production levels of the economy remained similarly under control. We
believe the cautionary stance of the Federal Reserve regarding additional
reductions in interest rates combined with the fiscal restraint from reduced
government spending should serve as additional moderating forces against any
resurgence in inflation.
We are mindful, however, of a potential change in what has been a benign
inflation picture. The recent rise in oil prices, along with strength in other
commodity prices such as grain, is not to be dismissed lightly. While they may
be only aberrations of a temporary nature, they also could represent early
warning signs of a fundamental change in inflation which will be seen later in
the year.
MARKET ENVIRONMENT
The bond market has recently risen from its lows and is showing stable to
improving signs. This is in reaction to a favorable Producer Price Index report
and, to some extent, a better-than-expected "beige book" survey from the Fed
which showed "moderate" growth coupled with "generally subdued" price increases.
These reports, in conjunction with recently released declining retail sales
figures, are changing the mood of the market. This change in market sentiment
reflects a shift in the stance of the Federal Reserve. The Fed, recently viewed
as moving from easing to tightening, could be on hold for a while. It is
possible that the Fed might be slow to tighten after being severely criticized
in 1994 when they tightened preemptively, without overt evidence of an inflation
problem.
The municipal market has outperformed Treasuries lately, shaking off the
residual effects of the flat tax proposal. Although not at the level it saw
before the flat tax proposal, which was 81% of Treasuries for long insured paper
in early 1995, the 87% current level is an improvement from recent readings
which had been in the low 90s. The municipal market is also benefiting from a
forward supply calendar that needs a 40-50 basis point drop in rates for 30% of
it to be brought to market. These rate-sensitive issues are usually refinancings
of earlier bonds.
THE PORTFOLIO
The portfolio has stayed fully invested during this choppy time in the
market. We have been trying to improve call features on many holdings through
swap opportunities or new purchases in the primary market. Many of these issues
are insured and carry superior market liquidity should we need to change our
strategy later. At present, however, we remain comfortable with our security
selections. We are encouraged by the positive supply pattern developing
(mentioned above) and the upcoming June and July interest payment and maturity
dates. These are critical dates when investors potentially seek to reinvest
large sums of money into the municipal market.
Included in this report is a series of detailed statements about your
Series' holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Series
and in The Dreyfus Corporation.
Sincerely,
(Richard J. Moynihan - Signature)
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
May 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders. Income may be subject to some state and local taxes for
non-Connecticut residents.
*** Annualized distribution rate per share is based upon dividends per
share paid from net investment income during the period, divided by the
maximum offering price, in the case of Class A shares, or the net asset value
per share, in the case of Class B and Class C shares, at the end of the
period.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT APRIL 30, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER STATE
MUNICIPAL BOND FUND, CONNECTICUT SERIES CLASS A SHARES AND THE LEHMAN
BROTHERS MUNICIPAL BOND INDEX
$20,644
Lehman Brothers
Municipal Bond Index*
Dollars
$18,512
Premier State Municipal
Bond Fund, Connecticut
Series (Class A Shares)
*Source: Lehman Brothers
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 4/30/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 4/30/96
Redemption Redemption*
<S> <C> <C> <C> <C> <C>
1 Year 6.85% 2.08% 1 Year 6.20% 3.20%
5 Year 7.13 6.15 From Inception (1/15/93) 5.21 4.66
From Inception (5/28/87) 7.70 7.14
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
_______________________________________________________________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming No Charge Upon
PERIOD ENDED 4/30/96 Redemption Redemption**
_________________________ _________________ _______________________
From Inception (8/15/95) 3.78% 2.78%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class A shares of
Premier State Municipal Bond Fund, Connecticut Series on 5/28/87 (Inception
Date) to a $10,000 investment made in the Lehman Brothers Municipal Bond
Index on that date. For comparative purposes, the value of the Index on
5/31/87 is used as the beginning value on 5/28/87. All dividends and capital
gain distributions are reinvested. Performance for Class B and Class C shares
will vary from the performance of Class A shares shown above due to
differences in charges and expenses.
The Series invests primarily in Connecticut municipal securities and its
performance shown in the line graph takes into account the maximum initial
sales charge on Class A shares and all other applicable fees and expenses.
Unlike the Series, the Lehman Brothers Municipal Bond Index is an unmanaged
total return performance benchmark for the long-term, investment-grade,
geographically unrestricted tax exempt bond market, calculated by using
municipal bonds selected to be representative of the municipal market
overall. The Index does not take into account charges, fees and other
expenses. Also, unlike the Fund which principally limits investments to
Connecticut municipal obligations, the Index is not State specific. These
factors can contribute to the Index potentially outperforming the Series.
Further information relating to Series performance, including expense
reimbursements, if applicable, is contained in the Financial Highlights
section of the Prospectus and elsewhere in this report.
* Maximum contingent deferred sales charge for Class B shares is 3% and is
reduced to 0% after five years.
**Maximum contingent deferred sales charge for Class C shares is 1% within
one year of the date of purchase.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
Principal
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
<S> <C> <C>
CONNECTICUT-79.4%
Connecticut:
6.90%, 3/15/2009 (Prerefunded 3/15/2000) (a)............................ $ 3,000,000 $ 3,298,410
5.50%, 3/15/2010........................................................ 3,000,000 3,007,020
6.875%, 7/15/2010 (Prerefunded 7/15/2000) (a)........................... 7,100,000 7,838,329
6.75%, 3/1/2011 (Prerefunded 3/1/2001) (a).............................. 3,000,000 3,318,540
5.50%, 5/15/2014........................................................ 2,000,000 1,951,920
5.375%, 10/1/2014....................................................... 6,500,000 6,242,795
5.50%, 5/15/2015........................................................ 3,000,000 2,912,100
Special Tax Obligation Revenue (Transportation Infrastructure):
Refunding 5.375%, 9/1/2008............................................ 2,500,000 2,504,275
6.80%, 12/1/2009 (Prerefunded 12/1/1999) (a).......................... 3,000,000 3,283,560
7.125%, 6/1/2010...................................................... 8,400,000 9,676,296
6.75%, 6/1/2011 (Prerefunded 6/1/2003) (a)............................ 8,500,000 9,466,365
Connecticut Clean Water Fund, Revenue:
7%, 1/1/2011 (Prerefunded 1/1/2001) (a)................................. 6,700,000 7,230,975
5.125%, 5/1/2018........................................................ 5,500,000 5,013,855
Connecticut Development Authority, Revenue:
First Mortgage Gross
(Elim Park Baptist Home Inc. Project) 9%, 12/1/2020................... 3,565,000 3,790,130
Health Care:
(Jerome Home Project) 8%, 11/1/2019................................... 1,940,000 2,018,395
(Masonic Charity Foundation of Connecticut) 6.50%, 8/1/2020 (Insured; AMBAC) 4,150,000
4,284,626
Life Care Facilities (Seabury Project):
Refunding 8.75%, 9/1/2006............................................. 1,625,000 1,615,965
10%, 9/1/2021......................................................... 11,175,000 11,805,941
Pollution Control
(Pfizer Inc. Project) 6.55%, 2/15/2013................................ 2,000,000 2,114,540
Water Facilities, Refunding
(Bridgeport Hydraulic Project) 5.60%, 6/1/2028 (Insured; MBIA)........ 2,600,000 2,398,916
Connecticut Health and Educational Facilities Authority, Revenue:
7%, 1/1/2020 (Insured; MBIA)............................................ 3,000,000 3,233,880
(Bridgeport Hospital, Connie Lee) 5.375%, 7/1/2025..................... 2,125,000 1,917,345
(Cherry Brook Nursing Center Project) 6%, 11/1/2022 (Insured; AMBAC).... 4,600,000 4,614,858
(Danbury Hospital) 6.50%, 7/1/2014 (Insured; MBIA)...................... 3,250,000 3,394,138
(Day Kimball Hospital) 5.375%, 7/1/2026 (Insured; FSA).................. 2,000,000 1,825,200
(Greenwich Academy) 5.75%, 3/1/2026 (Insured; FSA)...................... 3,130,000 3,027,962
(Greenwich Hospital) 5.80%, 7/1/2026 (Insured; MBIA).................... 9,365,000 9,110,740
(Hartford University):
6.75%, 7/1/2012....................................................... 3,500,000 3,507,175
8%, 7/1/2018 (Prerefunded 7/1/2003) (a)............................... 3,075,000 3,430,409
6.80%, 7/1/2022....................................................... 8,500,000 8,421,970
(Johnson Evergreen Corp.) 8.50%, 7/1/2022............................... 4,500,000 4,725,630
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ______________
CONNECTICUT (CONTINUED)
Connecticut Health and Educational Facilities Authority, Revenue (continued):
(Lawrence and Memorial Hospital)
7%, 7/1/2020 (Insured; MBIA) (Prerefunded 7/1/2000) (a)............... $ 2,500,000 $ 2,770,975
(Lutheran General Health Care System) 7.375%, 7/1/2019.................. 1,400,000 1,641,066
(Mansfield Nursing Center Project) 6%, 11/1/2022 (Insured; AMBAC)....... 2,700,000 2,708,721
(Middlesex Hospital) 6.25%, 7/1/2022 (Insured; MBIA).................... 2,500,000 2,542,050
(New Britain Memorial Hospital) 7.75%, 7/1/2022......................... 16,000,000 16,851,520
(Norwalk Hospital) 6.25%, 7/1/2022 (Insured; MBIA)...................... 3,600,000 3,681,540
(Nursing Home Program-Noble Horizon) 6%, 11/1/2022 (Insured; AMBAC)..... 1,500,000 1,504,845
(Quinnipiac College):
6%, 7/1/2013.......................................................... 6,545,000 6,077,883
7.75%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 1,000,000 1,116,680
(Refunding- Saint Francis Hospital and Medical Center)
6.20%, 7/1/2022 (Insured; MBIA)....................................... 1,725,000 1,757,430
(Sacred Heart University):
6.50%, 7/1/2016....................................................... 2,000,000 1,985,340
5.80%, 7/1/2023....................................................... 1,700,000 1,472,642
6.625%, 7/1/2026...................................................... 3,000,000 2,953,470
(Saint Raphael Hospital) 6.625%, 7/1/2014 (Insured; AMBAC).............. 2,500,000 2,629,050
(Taft School) 7.375%, 7/1/2020 (Prerefunded 7/1/2000) (a)............... 1,150,000 1,276,236
(William W. Backus Hospital):
6%, 7/1/2012.......................................................... 1,500,000 1,459,800
6.375%, 7/1/2022...................................................... 2,250,000 2,235,578
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
7.20%, 11/15/2008....................................................... 10,280,000 10,648,744
5.60%, 5/15/2014........................................................ 4,000,000 3,816,520
6.45%, 5/15/2022........................................................ 6,000,000 6,023,280
6.70%, 11/15/2022....................................................... 26,000,000 26,523,120
6.75%, 11/15/2023....................................................... 6,000,000 6,192,000
6.05%, 11/15/2025....................................................... 9,065,000 8,809,820
Connecticut Municipal Electric Energy Cooperative, Power Supply System
Revenue,
Refunding:
5%, 1/1/2011 (Insured; MBIA).......................................... 4,660,000 4,344,844
5%, 1/1/2012 (Insured; MBIA).......................................... 2,000,000 1,858,980
5%, 1/1/2013 (Insured; MBIA).......................................... 2,000,000 1,843,400
Eastern Connecticut Resource Recovery Authority, Solid Waste Revenue
(Wheelabrator Lisbon Project):
5.50%, 1/1/2014....................................................... 10,000,000 9,111,900
5.50%, 1/1/2020....................................................... 7,250,000 6,429,518
New Haven
7.40%, 8/15/2011........................................................ 1,500,000 1,623,930
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30,1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
CONNECTICUT (CONTINUED)
South Central Connecticut Regional Water Authority, Water Systems Revenue
5.75%, 8/1/2012 (Insured; FGIC)......................................... $ 6,000,000 $ 6,031,440
Stamford 6.60%, 1/15/2010................................................... 2,750,000 3,078,653
Stratford 7.30%, 3/1/2012 (Prerefunded 3/1/2001) (a)........................ 1,130,000 1,267,826
University of Connecticut 5%, 2/1/2015 (Insured; FGIC)...................... 1,250,000 1,135,825
U. S. RELATED-20.6%
Commonwealth of Puerto Rico 5.40%, 7/1/2025................................. 13,000,000 11,773,710
Puerto Rico:
(Public Improvement):
7.70%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 3,000,000 3,409,710
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)............................ 6,000,000 6,732,000
Refunding 5.50%, 7/1/2013 .............................................. 3,000,000 2,852,670
Puerto Rico Aqueduct and Sewer Authority, Revenue 6%, 7/1/2009.............. 7,250,000 7,435,310
Puerto Rico Electric Power Authority, Power Revenue 7%, 7/1/2021
(Prerefunded 7/1/2001) (a).............................................. 6,775,000 7,607,038
Puerto Rico Highway and Transportation Authority, Highway Revenue:
6.673%, 7/1/2010 (b).................................................... 3,200,000 2,872,000
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. 5,000,000 5,561,950
5.25%, 7/1/2020 (Insured; FSA).......................................... 1,750,000 1,596,998
5.50%, 7/1/2026......................................................... 5,000,000 4,597,650
Puerto Rico Industrial Medical and Environmental Pollution Control Facilities
Financing
Authority, Revenue (Motorola Inc. Project) 6.75%, 1/1/2014.............. 2,000,000 2,168,160
Puerto Rico Ports Authority, Special Facilities Revenue (American Airlines)
6.30%, 6/1/2023......................................................... 2,000,000 2,013,040
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities, Refunding 5.75%, 7/1/2015............................ 8,000,000 7,628,880
University of Puerto Rico, University Revenue:
5.50%, 6/1/2015 (Insured; MBIA)......................................... 5,000,000 4,881,449
5.25%, 6/1/2025 (Insured; MBIA)......................................... 3,400,000 3,136,295
Virgin Islands Public Finance Authority, Revenue, Refunding
7.25%, 10/1/2018........................................................ 2,000,000 2,104,539
_____________
TOTAL INVESTMENTS (cost $360,448,142)....................................... $370,758,285
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation FSA Financial Security Assurance
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
<S> <C> <C> <C>
AAA Aaa AAA 36.3%
AA Aa AA 28.3
A A A 14.8
BBB Baa BBB 13.2
Not Rated (d) Not Rated (d) Not Rated (d) 7.4
____________
100.0%
============
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse floater security - the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $360,448,142)-see statement..................................... $370,758,285
Interest receivable..................................................... 7,846,808
Receivable for shares of Beneficial Interest subscribed................. 133,395
Prepaid expenses........................................................ 9,644
________________
378,748,132
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 163,199
Due to Distributor...................................................... 90,636
Due to Custodian........................................................ 16,924,558
Payable for shares of Beneficial Interest redeemed...................... 66,590
Accrued expenses........................................................ 99,532 17,344,515
________________ _______________
NET ASSETS ................................................................ $361,403,617
===============
REPRESENTED BY:
Paid-in capital......................................................... $347,570,572
Accumulated undistributed net realized gain on investments.............. 3,522,902
Accumulated net unrealized appreciation on investments-Note 3........... 10,310,143
_______________
NET ASSETS at value......................................................... $361,403,617
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 27,023,443
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,265,372
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 84,734
===============
NET ASSET VALUE per share:
Class A Shares
($321,558,697/ 27,023,443 shares)..................................... $11.90
===============
Class B Shares
($38,837,586 / 3,265,372 shares)...................................... $11.89
===============
Class C Shares
($1,007,334 / 84,734 shares).......................................... $11.89
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $23,749,936
EXPENSES:
Management fee-Note 2(a).............................................. $ 2,045,864
Shareholder servicing costs-Note 2(c)................................. 1,147,331
Distribution fees-Note 2(b)........................................... 191,582
Professional fees..................................................... 56,898
Custodian fees........................................................ 38,166
Prospectus and shareholders' reports.................................. 19,462
Trustees' fees and expenses-Note 2(d)................................. 5,501
Registration fees..................................................... 2,800
Miscellaneous......................................................... 126,118
_______________
TOTAL EXPENSES.................................................... 3,633,722
______________
INVESTMENT INCOME-NET............................................. 20,116,214
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 5,701,419
Net unrealized (depreciation) on investments............................ (1,150,970)
________________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 4,550,449
_______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $24,666,663
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
__________________________________________
1995 1996
__________________ ________________
OPERATIONS:
Investment income-net................................................... $ 21,655,899 $ 20,116,214
Net realized gain (loss) on investments................................. (1,973,798) 5,701,419
Net unrealized (depreciation) on investments for the year............... (287,865) (1,150,970)
__________________ _________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 19,394,236 24,666,663
__________________ _________________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (19,881,887) (18,231,897)
Class B shares........................................................ (1,774,012) (1,877,253)
Class C shares........................................................ _ (7,064)
__________________ ________________
TOTAL DIVIDENDS................................................... (21,655,899) (20,116,214)
__________________ _________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 15,947,221 14,645,030
Class B shares........................................................ 5,896,601 5,468,178
Class C shares........................................................ _ 1,023,317
Dividends reinvested:
Class A shares........................................................ 11,434,147 10,502,564
Class B shares........................................................ 1,240,658 1,298,271
Class C shares........................................................ _ 6,163
Cost of shares redeemed:
Class A shares........................................................ (53,507,884) (43,749,996)
Class B shares........................................................ (3,788,582) (3,727,309)
Class C shares........................................................ _ (1,996)
_________________ ______________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (22,777,839) (14,535,778)
_________________ ________________
TOTAL (DECREASE) IN NET ASSETS.................................. (25,039,502) (9,985,329)
NET ASSETS:
Beginning of year....................................................... 396,428,448 371,388,946
_________________ ________________
End of year............................................................. $371,388,946 $361,403,617
================== =================
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________________
CLASS A CLASS B CLASS C
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
1995 1996 1995 1996 1996*
_______________ ____________ __________ __________ _______________
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C> <C> <C> <C>
Shares sold............ 1,373,091 1,212,141 503,373 453,771 84,387
Shares issued for
dividends reinvested. 983,180 869,313 106,773 107,482 515
Shares redeemed........ (4,637,620) (3,626,051) (329,539) (309,036) (168)
_______________ ____________ __________ __________ _______________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (2,281,349) (1,544,597) 280,607 252,217 84,734
=============== ============ ========== ========== ===============
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
CLASS A SHARES
YEAR ENDED APRIL 30,
PER SHARE DATA: 1992 1993 1994 1995 1996
___________ _________ _________ _________ __________
Net asset value, beginning of year........... $11.28 $11.45 $12.26 $11.81 $11.76
___________ _________ _________ _________ __________
INVESTMENT OPERATIONS:
Investment income-net........................ .72 .71 .68 .67 .66
Net realized and unrealized gain (loss)
on investments............................. .17 .81 (.42) (.05) .14
___________ _________ _________ _________ __________
TOTAL FROM INVESTMENT OPERATIONS........... .89 1.52 .26 .62 .80
___________ _________ _________ _________ __________
DISTRIBUTIONS:
Dividends from investment income-net......... (.72) (.71) (.68) (.67) (.66)
Dividends from net realized gain on investments .- .- (.03) .- .-
___________ _________ _________ _________ __________
TOTAL DISTRIBUTIONS........................ (.72) (.71) (.71) (.67) (.66)
___________ ________ _________ _________ __________
Net asset value, end of year................. $11.45 $12.26 $11.81 $11.76 $11.90
TOTAL INVESTMENT RETURN*......................... 8.14% 13.62% 1.92% 5.47% 6.85%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .52% .69% .80% .89% .92%
Ratio of net investment income to average
net assets................................. 6.30% 5.93% 5.44% 5.77% 5.45%
Decrease reflected in above expense ratios
due to undertakings by the Manager......... .41% .21% .09% .01% .-
Portfolio Turnover Rate...................... 8.53% 24.22% 10.83% 10.48% 28.83%
Net Assets, end of year (000's Omitted)...... $280,305 $360,020 $364,182 $335,964 $321,559
*Exclusive of sales load.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
CLASS B SHARES CLASS C SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
_________ ______ ______ ______ ________________________________
Net asset value, beginning of year.... $11.89 $12.26 $11.80 $11.76 $11.84
_________ ______ ______ ______ ________________________________
INVESTMENT OPERATIONS:
Investment income-net................. .18 .61 .61 .60 .40
Net realized and unrealized gain (loss)
on investments...................... .37 (.43) (.04) .13 .05
_________ ______ ______ ______ ________________________________
TOTAL FROM INVESTMENT OPERATIONS.... .55 .18 .57 .73 .45
_________ ______ ______ ______ _______________________________
DISTRIBUTIONS:
Dividends from investment income-net.. (.18) (.61) (.61) (.60) (.40)
Dividends from net realized gain
on investments...................... .- (.03) .- .- .-
_________ ______ ______ ______ ______________________________
TOTAL DISTRIBUTIONS................. (.18) (.64) (.61) (.60) (.40)
_________ ______ ______ ______ ______________________________
Net asset value, end of year.......... $12.26 $11.80 $11.76 $11.89 $11.89
_______ ______ ______ ______ ______________________________
TOTAL INVESTMENT RETURN(3)................ 16.08%(4) 1.26% 4.99% 6.20% 5.31%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.12%(4) 1.36% 1.41% 1.44% 1.64%(4)
Ratio of net investment income to average
net assets.......................... 4.57%(4) 4.78% 5.21% 4.92% 4.31%(4)
Decrease reflected in above expense ratios
due to undertakings by the Manager.. .12%(4) .08% .01% .- .-
Portfolio Turnover Rate............... 24.22% 10.83% 10.48% 28.83% 28.83%
Net Assets, end of year (000's Omitted) $9,492 $32,246 $35,425 $38,838 $1,007
(1) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Connecticut Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $1,837 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $190,357 was
charged to the Series for the Class B shares and $1,225 was charged to the
Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended April 30, 1996, $834,351, $95,178 and $409
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $59,649 for the period
from December 1, 1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
annual fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $109,381,501 and $106,401,513, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $10,310,143, consisting of $14,959,283 gross unrealized appreciation and
$4,649,140 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Connecticut Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Connecticut Series at April 30, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(Ernst & Young LLP - Signature)
New York, New York
June 5, 1996
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended April 30,
1996 as "exempt-interest dividends" (not subject to regular Federal and, for
individuals who are Connecticut residents, Connecticut personal income taxes).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997
PREMIER STATE MUNICIPAL
BOND FUND, CONNECTICUT SERIES
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 064/623AR964
(Dreyfus Logo)
Annual Report
Premier State
Municipal Bond Fund
Connecticut Series
April 30, 1996
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier State
Municipal Bond Fund - Florida Series. For its annual reporting period ended
April 30, 1996, your Series produced a total return of 6.63% for Class A shares,
6.01% for Class B shares and, since their inception on August 15, 1995, 3.34%
for Class C shares.* Income dividends exempt from Federal personal income taxes
of approximately $.789 for Class A shares, $.713 for Class B shares and $.476
for Class C shares were paid.** This amounts to an annualized tax-free
distribution rate per share of 5.12%, 4.84% and 4.55% for Class A, Class B and
Class C shares respectively.***
THE ECONOMY
Concerns that the economy was heading toward recession were eased by the
recent release of brighter-than-expected reports on employment and consumer
spending. Consequently, the Federal Reserve Board refrained from making any
further reductions in the Federal Funds rate; the last easing of this benchmark
interest rate occurred on January 31. In reaction to the more optimistic
economic news (and the related fears of a potential rekindling of inflation),
long-term interest rates as measured by 30-year Treasury bonds have risen nearly
one percentage point since February.
The rosier outlook for the economy was spearheaded by reports of large
gains in employment for two consecutive months (February and March).
Furthermore, personal income and expenditures data indicated that consumers
continued to spend, despite their present high level of installment credit.
Retail sales reports have correspondingly edged higher, confirming a modest
recovery in consumer spending from its year-end slump.
Supporting the growing consensus that the economy has picked up steam were
reports of slow but steady growth in the manufacturing sector. After adjusting
data for the 17-day General Motors strike, industrial output rose modestly. New
orders for durable goods, a closely watched indicator of future hiring and
production, also posted gains.
Despite the economy's apparent recovery from its year-end pause, inflation
has remained under control. Through March of this year, the Consumer Price Index
rose at an annual rate of 2.8%. There appear to be few signs of inflationary
pressure in the economy. Factories are running at a relatively comfortable rate
of capacity (82.5%), markedly below this expansion's peak of 85.1% reached over
a year ago. With major industries trying to reduce inventories, there is little
to suggest that product pricing will surge upwards. Reflecting this absence of
so-called pipeline inflationary pressure, price increases at both the wholesale
and production levels of the economy remained similarly under control. We
believe the cautionary stance of the Federal Reserve regarding additional
reductions in interest rates combined with the fiscal restraint from reduced
government spending should serve as additional moderating forces against any
resurgence in inflation.
We are mindful, however, of potential change in what has been a benign
inflation picture. The recent rise in oil prices, along with strength in other
commodity prices such as grain, is not to be dismissed lightly. While they may
be only aberrations of a temporary nature, they also could represent early
warning signs of a fundamental change in inflation which will be seen later in
the year.
MARKET ENVIRONMENT
In the beginning of the fiscal year we cautiously embraced the market's
performance and its favorable impact on the Series. We were, however, wary of
the bond market's strength and its dependence on continued low inflation. We
remained fully invested to a large extent during this improved market, but alert
to the stimulating effect of easing monetary policy and the possibility of
rekindling inflation.
The market subsequently experienced a dramatic downturn late in the first
quarter of 1996. This weakness continued to be more pronounced than the market
anticipated, despite some marginal improvement recently. The expectations of
faster economic growth combined with rising commodity prices raised the prospect
of future inflation.
The most recent market peak in prices was in mid-February, with yields on
good quality long bonds around 5.30%. By early April, prices had declined and
yield levels had risen to 5.80%. Markets rarely move in one direction over an
extended period of time, therefore we are optimistic that much of the market
correction is behind us. We remain cautious, however, awaiting confirmation of a
market bottom before pursuing a more aggressive strategy.
THE PORTFOLIO
The Series has maintained a somewhat defensive stance, given recent market
conditions, but has attempted to purchase more discount coupons to enhance
performance as we move forward. However, there has been a limited supply of
specialty state paper available to maneuver to an ideal goal. In addition, many
issuers have previously attained financing for their capital programs so overall
new issuance remains diminished compared to previous years. This drought,
combined with market uncertainty, has resulted in a constricted trading market.
Giving consideration to these factors, the Series made it a priority to
purchase a number of discount bonds in both the primary and secondary markets.
We are continuing with this strategy, since the portfolio was largely defensive,
in order to contend with the market's tenuous overtones. By the end of the
second fiscal quarter, however, the market showed indications of possibly
trending upward. As this scenario unfolded, the discount bonds purchased earlier
in the year soon reached premium levels and the portfolio was once again seeking
ways to bolster performance. This strategy was well-founded since the bond
market incrementally gained positive momentum through year-end. However, as the
market seemed to be nearing a new high, availability of quality structured
discount bonds faded and the Series focused on selling holdings with short calls
and short maturities. In addition, as bonds seemed to reach peak levels, the
Series sold premium bonds and took profits as we sensed an end to the rally.
The economy is at a virtual crossroads where growth is concerned. Going
forward, we anticipate periods of market volatility until the rate of economic
growth is ascertained. We are attempting to increase our cash position to
capitalize on a potential rebound early on, but once again are maintaining a
generally defensive posture with an eye toward improving the structure of the
bonds held in the portfolio. The Series is conservatively positioned, which we
believe will help it deal with the uncertainty in the economy and the negative
side of volatility should economic growth expand rapidly.
Our primary tasks are to protect principal, maintain liquidity and
distribute a high level of current tax exempt income to you, our shareholders.
These factors continue to motivate our portfolio management decisions. The high
level of volatility exhibited by the market in recent years underscores the need
to maintain a disciplined and longer-term perspective.
Included in this report is a series of detailed statements about your
Series' holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the
Series and in The Dreyfus Corporation.
Sincerely,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
May 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders. Capital gain distributions are subject to taxes.
***Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price in the case of Class A shares or the net asset value per share
in the case of Class B or Class C shares, at the end of the period, adjusted
for capital gain distributions.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES APRIL 30, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER STATE
MUNICIPAL BOND FUND, FLORIDA SERIES CLASS A SHARES AND THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX
[Exhibit A]
$21,580
Premier State Municipal
Bond Fund, Florida
Series (Class A Shares)
Dollars
$20,644
Lehman Brothers
Municipal Bond Index*
[Exhibit A]
*Source: Lehman Brothers
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 4/30/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 4/30/96 Redemption Redemption
<S> <C> <C> <C> <C> <C>
1 Year 6.63% 1.85% 1 Year 6.01% 3.02%
5 Year 7.62 6.63 From Inception (1/15/93) 5.57 5.03
From Inception (5/28/87) 9.57 9.00
</TABLE>
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming No Charge Upon
PERIOD ENDED 4/30/96 Redemption Redemption**
From Inception (8/15/95) 3.34% 2.35%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class A shares of
Premier State Municipal Bond Fund, Florida Series on 5/28/87 (Inception Date) to
a $10,000 investment made in the Lehman Brothers Municipal Bond Index on that
date. For comparative purposes, the value of the Index on 5/31/87 is used as the
beginning value on 5/28/87. All dividends and capital gain distributions are
reinvested. Performance for Class B and Class C shares will vary from the
performance of Class A shares shown above due to differences in charges and
expenses.
The Series invests primarily in Florida municipal securities and its
performance shown in the line graph takes into account the maximum initial sales
charge on Class A shares and all other applicable fees and expenses. Unlike the
Series, the Lehman Brothers Municipal Bond Index is an unmanaged total return
performance benchmark for the long-term, investment-grade, geographically
unrestricted tax exempt bond market, calculated by using municipal bonds
selected to be representative of the municipal market overall. The Index does
not take into account charges, fees and other expenses. Also, unlike the Fund
which principally limits investments to Florida municipal obligations, the Index
is not State specific. These factors can contribute to the Index potentially
outperforming the Series. Further information relating to Series performance,
including expense reimbursements, if applicable, is contained in the Financial
Highlights section of the Prospectus and elsewhere in this report.
* Maximum contingent deferred sales charge for Class B shares is 3% and is
reduced to 0% after five years.
**Maximum contingent deferred sales charge for Class C shares is 1% within
one year of the date of purchase.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
<S> <C> <C>
FLORIDA-95.7%
Alachua County Health Facilities Authority, Health Facilities Revenue, Refunding
(Santa Fe Healthcare Facilities Project) 7.60%, 11/15/2013.............. $ 3,500,000 $ 3,998,750
Arcadia, Water and Sewer Revenue 7.75%, 12/1/2021........................... 2,190,000 2,352,542
Brevard County Health Facilities Authority, HR
(Holmes Regional Medical Center Project) 5.70%, 10/1/2008............... 4,585,000 4,701,963
Broward County Health Facilities Authority, Revenue, Refunding
(Broward County Nursing Home) 7.50%, 8/15/2020 (LOC; Allied Irish Bank) (a) 1,000,000 1,058,270
Charlotte County, Health Care Facilities Revenue
(Charlotte Community Mental Health Project) 9.25%, 7/1/2020............. 1,635,000 1,795,917
Clay County Housing Finance Authority, SFMR
8.20%, 6/1/2021 (Collateralized; GNMA).................................. 670,000 703,453
Dade County:
Aviation Revenue:
6.55% 10/1/2013 (Insured; MBIA)....................................... 4,225,000 4,434,898
(Miami International Airport) 5.75%, 10/1/2013 (Insured; MBIA)........ 10,000,000 9,950,500
Refunding (Seaport) 5.125%, 10/1/2021 (Insured; MBIA)................... 7,500,000 6,780,225
Water and Sewer Systems Revenue 6.25%, 10/1/2011 (Insured; FGIC)........ 2,115,000 2,288,684
Dade County Health Facilities Authority, HR
(South Shore Hospital and Medical Center) 7.60%, 8/1/2024 (Insured; FHA) 2,345,000 2,528,426
Dade County Housing Finance Authority, Revenue, Refunding:
MFMR (Cutler Meadows Apartment) 6.50%, 7/1/2022 (Insured; FHA).......... 1,785,000 1,804,260
SFMR 6.70%, 4/1/2028 (Collateralized: FNMA & GNMA)...................... 4,500,000 4,540,905
Duval County Housing Finance Authority, SFMR:
7.85%, 12/1/2022 (Collateralized; GNMA)................................. 2,625,000 2,765,464
7.70%, 9/1/2024 (Collateralized; GNMA).................................. 1,460,000 1,534,460
Escambia County Housing Finance Authority, SFMR 7.80%, 4/1/2022............. 1,090,000 1,144,380
Florida, Refunding (Jacksonville Transportation) 5.30%, 7/1/2018............ 2,000,000 1,849,000
Florida Board of Education, Capital Outlay, Refunding:
5.80%, 6/1/2010......................................................... 2,000,000 2,045,080
5%, 6/1/2015............................................................ 10,300,000 9,284,317
5.125%, 6/1/2022........................................................ 4,000,000 3,543,640
Florida Division of Bond Finance Department, General Services Revenues
(Department of Natural Resources-Preservation 2000)
5.75%, 7/1/2013 (Insured; AMBAC)........................................ 7,695,000 7,726,626
Florida Housing Finance Agency:
(Brittany Rosemont Apartments) 7%, 2/1/2035............................. 6,000,000 6,357,360
Multi-Family Housing (Driftwood Terrace Project)
7.65%, 12/20/2031 (Collateralized; GNMA).............................. 3,440,000 3,645,815
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
FLORIDA (CONTINUED)
Florida Housing Finance Agency (continued):
Single Family Mortgage, Refunding 6.65%, 1/1/2024....................... $ 2,415,000 $ 2,445,984
(Turtle Creek Apartment Projects) 6.10%, 5/1/2016 (Insured; AMBAC)...... 1,000,000 1,000,840
Florida Municipal Power Agency, Revenue (All Requirements Power Supply
Project)
5.10%, 10/1/2025 (Insured; AMBAC)....................................... 5,000,000 4,434,800
Florida Turnpike Authority, Turnpike Revenue, Refunding:
5%, 7/1/2013 (Insured; FGIC)............................................ 3,750,000 3,435,788
5%, 7/1/2019 (Insured; FGIC)............................................ 3,000,000 2,666,280
Gainesville, Utility System Revenue, Refunding 5.20%, 10/1/2026............. 5,000,000 4,491,500
Greater Orlando Aviation Authority, Airport Facilities Revenue, Refunding:
5.50%, 10/1/2008 (Insured; AMBAC)....................................... 5,940,000 5,949,207
5.50%, 10/1/2013 (Insured; AMBAC)....................................... 2,750,000 2,648,498
Highlands County Health Facilities Authority, Revenue (Adventist Sunbelt Hospital)
7%, 11/15/2014.......................................................... 1,500,000 1,621,155
Hillsborough, Capital Improvement Program, Revenue, Refunding
5%, 8/1/2015 (Insured; FGIC)............................................ 3,325,000 3,009,690
Hillsborough County, Utility Revenue, Refunding:
6.625%, 8/1/2011........................................................ 4,000,000 4,247,320
7%, 8/1/2014............................................................ 4,765,000 5,116,514
Hillsborough County Aviation Authority, Revenue, Refunding (Delta Airlines):
6.80%, 1/1/2024......................................................... 2,500,000 2,570,150
7.75%, 1/1/2024......................................................... 1,500,000 1,587,435
Indian Trace Community Development District, Water and Sewer Revenue
8.50%, 4/1/1997......................................................... 151,000 155,681
Jacksonville, Excise Taxes Revenue, Refunding 6.50%, 10/1/2013 (Insured; AMBAC) 5,000,000 5,293,350
Jacksonville, Water and Sewer Revenue 5%, 10/1/2020 (Insured; MBIA)......... 3,000,000 2,668,800
Jacksonville Health Facilities Authority, HR, Refunding (Saint Luke's Hospital)
7.125%, 11/15/2020...................................................... 6,700,000 7,201,428
Lake County Resource Recovery, IDR, Refunding (NRG/Recovery Group)
5.85%, 10/1/2009........................................................ 6,000,000 5,790,600
Marion County Hospital District, Revenue, Refunding
(Munroe Regional Medical Center) 6.25%, 10/1/2012 (Insured; FGIC)....... 3,000,000 3,124,200
North Miami, Educational Facilities Revenue (Johnson & Whales University Project)
6.10%, 4/1/2013......................................................... 5,000,000 4,883,850
North Miami Health Facilities Authority, Health Facilities Revenue
(Villa Maria Nursing Housing Project) 7.50%, 9/1/2012................... 2,670,000 2,888,326
Orange County, Solid Waste Facilities Revenue 6.375%, 10/1/2007 (Insured; FGIC) 4,910,000 5,293,226
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
FLORIDA (CONTINUED)
Orange County Health Facilities Authority, Health Facilities Revenue
(Mental Health Service Project) 9.25%, 7/1/2020 (Prerefunded 7/1/2000) (b) $ 3,780,000 $ 4,459,379
Osceola County Industrial Development Authority, Revenue
(Community Provider Pooled Loan Program) 7.75%, 7/1/2017................ 5,235,000 5,295,674
Palm Bay, Utility Revenue, Refunding (Palm Bay Utility Corp. Project)
5%, 10/1/2022 (Insured; MBIA)........................................... 5,300,000 4,662,039
Palm Beach County:
Solid Waste Industrial Development Revenue:
(Okeelanta Power LP Project) 6.85%, 2/15/2021......................... 11,000,000 10,862,830
(Osceola Power LP) 6.85%, 1/1/2014.................................... 5,800,000 5,737,824
Water and Sewer Revenue 5%, 10/1/2010 (Insured; MBIA)................... 4,320,000 4,084,042
Palm Beach County Housing Finance Authority, Single Family Mortgage
Purchase Revenue 6.55%, 4/1/2027........................................ 2,750,000 2,770,900
Pinellas County, PCR, Refunding (Florida Power Corp.) 7.20%, 12/1/2014...... 3,000,000 3,203,820
Pinellas County Housing Finance Authority, SFMR:
7.70%, 8/1/2022......................................................... 2,810,000 2,949,207
(Multi-County Program) 6.70%, 2/1/2028 (Insured; FHA)................... 5,000,000 5,060,050
Polk County Industrial Development Authority, IDR
(IMC Fertilizer) 7.525% 1/1/2015........................................ 10,000,000 10,355,200
Reedy Creek, Improvement District 5%, 6/1/2019 (Insured; AMBAC)............. 3,325,000 2,963,539
Saint Lucie County, SWDR (Florida Power and Light Co. Project)
7.15%, 2/1/2023......................................................... 4,000,000 4,318,040
Sarasota County, Utility System Revenue, Refunding
5.25%, 10/1/2016 (Insured; FGIC)........................................ 1,000,000 931,800
Sunrise, Special Tax District Number 1, Refunding
6.375%, 11/1/2021 (LOC; Bayerische Hypotheken-und Weschel Bank) (a)..... 2,500,000 2,570,400
Tampa, Water and Sewer Revenue 5.125%, 10/1/2017 (Insured; FGIC)............ 1,000,000 908,090
U.S. RELATED-4.3%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 5,000,000 5,015,200
Virgin Islands Public Finance Authority, Revenue, Refunding 7.25%, 10/1/2018 5,400,000 5,682,258
__________
TOTAL INVESTMENTS (cost $247,491,507)....................................... $251,189,849
============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FNMA Federal National Mortgage Association MFMR Multi-Family Mortgage Revenue
GNMA Government National Mortgage Association PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
<S> <C> <C> <C>
AAA Aaa AAA 50.3%
AA Aa AA 15.3
A A A 2.6
BBB Baa BBB 10.5
BB Ba BB 5.8
Not Rated (d) Not Rated (d) Not Rated (d) 15.5
_______
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) 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.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $247,491,507)-see statement..................................... $251,189,849
Receivable for investment securities sold............................... 4,063,458
Interest receivable..................................................... 3,753,959
Receivable for shares of Beneficial Interest subscribed................. 28,830
Prepaid expenses........................................................ 19,543
____________
259,055,639
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 115,542
Due to Distributor...................................................... 63,611
Due to Custodian........................................................ 3,819,244
Payable for shares of Beneficial Interest redeemed...................... 461,014
Accrued expenses........................................................ 59,907 4,519,318
____________ ____________
NET ASSETS ................................................................ $254,536,321
==============
REPRESENTED BY:
Paid-in capital......................................................... $245,312,787
Accumulated undistributed net realized gain on investments.............. 5,525,192
Accumulated net unrealized appreciation on investments-Note 3........... 3,698,342
_____________
NET ASSETS at value......................................................... $254,536,321
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 15,710,599
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,867,187
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 2,430
===============
NET ASSET VALUE per share:
Class A Shares
($227,478,154 / 15,710,599 shares).................................... $14.48
========
Class B Shares
($27,023,005 / 1,867,187 shares)...................................... $14.47
========
Class C Shares
($35,162 / 2,430 shares).............................................. $14.47
========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $17,013,955
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,504,679
Shareholder servicing costs-Note 2(c)................................. 855,159
Distribution fees-Note 2(b)........................................... 134,701
Professional fees..................................................... 78,027
Custodian fees........................................................ 29,329
Prospectus and shareholders' reports.................................. 6,418
Trustees' fees and expenses-Note 2(d)................................. 3,746
Registration fees..................................................... 1,892
Miscellaneous......................................................... 18,676
__________
TOTAL EXPENSES.................................................. 2,632,627
__________
INVESTMENT INCOME-NET........................................... 14,381,328
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,336,711
Net unrealized (depreciation) on investments............................ (2,819,982)
__________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 3,516,729
__________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $17,898,057
=============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
_____________ ___________
OPERATIONS:
Investment income-net................................................... $ 16,368,966 $ 14,381,328
Net realized gain on investments........................................ 4,410,983 6,336,711
Net unrealized (depreciation) on investments for the year............... (2,782,324) (2,819,982)
_____________ ___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 17,997,625 17,898,057
_____________ ___________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (15,149,356) (13,092,008)
Class B shares........................................................ (1,219,610) (1,288,976)
Class C shares........................................................ _ (344)
Net realized gain on investments:
Class A shares........................................................ (716,166) (3,306,553)
Class B shares........................................................ (65,057) (370,770)
Class C shares........................................................ _ (14)
_____________ __________
TOTAL DIVIDENDS................................................... (17,150,189) (18,058,665)
_____________ __________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 12,537,474 9,844,149
Class B shares........................................................ 5,009,096 4,401,949
Class C shares........................................................ _ 36,586
Dividends reinvested:
Class A shares........................................................ 5,971,345 6,539,239
Class B shares........................................................ 509,461 644,364
Class C shares........................................................ _ 107
Cost of shares redeemed:
Class A shares........................................................ (56,564,392) (41,280,587)
Class B shares........................................................ (2,889,736) (3,176,969)
_____________ __________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (35,426,752) (22,991,162)
_____________ __________
TOTAL (DECREASE) IN NET ASSETS.................................. (34,579,316) (23,151,770)
NET ASSETS:
Beginning of year....................................................... 312,267,407 277,688,091
_____________ __________
End of year............................................................. $277,688,091 $254,536,321
============ ===============
</TABLE>
<TABLE>
<CAPTION>
SHARES
CLASS A CLASS B CLASS C
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
1995 1996 1995 1996 1996*
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C> <C> <C> <C>
Shares sold............ 877,487 658,995 350,773 295,615 2,423
Shares issued for dividends
reinvested........... 419,064 437,472 35,744 43,121 7
Shares redeemed........ (3,988,619) (2,776,392) (202,194) (214,088) _
_________ ________ ________ __________ _______
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (2,692,068) (1,679,925) 184,323 124,648 2,430
============ ============ ========== ========== ============
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
CLASS A SHARES
__________________________________________________________
YEAR ENDED APRIL 30,
__________________________________________________________
PER SHARE DATA: 1992 1993 1994 1995 1996
_____ _____ _____ _____ ____
Net asset value, beginning of year........... $13.93 $14.33 $15.02 $14.43 $14.51
_____ _____ ____ _____ ____
INVESTMENT OPERATIONS:
Investment income-net........................ .95 .92 .85 .81 .79
Net realized and unrealized gain (loss)
on investments............................ .41 .86 (.51) .12 .17
_____ _____ _____ _____ ____
TOTAL FROM INVESTMENT OPERATIONS........... 1.36 1.78 .34 .93 .96
_____ _____ _____ _____ ____
DISTRIBUTIONS:
Dividends from investment income-net......... (.95) (.92) (.85) (.81) (.79)
Dividends from net realized gain on investments (.01) (.17) (.04) (.04) (.20)
Dividends in excess of net realized gain
on investments............................. .- .- (.04) .- .-
_____ ____ _____ _____ ____
TOTAL DISTRIBUTIONS........................ (.96) (1.09) (.93) (.85) (.99)
____ _____ _____ _____ ____
Net asset value, end of year................. $14.33 $15.02 $14.43 $14.51 $14.48
========= ====== ======= ====== =========
TOTAL INVESTMENT RETURN*......................... 10.09% 12.84% 2.14% 6.71% 6.63%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .52% .69% .80% .90% .91%
Ratio of net investment income to
average net assets......................... 6.65% 6.21% 5.61% 5.67% 5.29%
Decrease reflected in above expense ratios due to
undertakings by the Manager................ .41% .21% .10% .01% -
Portfolio Turnover Rate...................... 20.99% 33.18% 20.84% 50.62% 54.37%
Net Assets, end of year (000's Omitted)...... $245,474 $299,775 $289,791 $252,406 $227,478
*Exclusive of sales load.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
CLASS B SHARES CLASS C SHARES
_____________________________________-
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
_____________________________________-
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
___- ___- ___- ___- __________
Net asset value, beginning of year.... $14.59 $ 15.01 $14.42 $14.51 $14.65
______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net................. .24 .77 .73 .71 .48
Net realized and unrealized gain (loss)
on investments...................... .42 (.51) .13 .16 .02
______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.... .66 .26 .86 .87 .50
______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net.. (.24) (.77) (.73) (.71) (.48)
Dividends from net realized gain
on investments...................... .- (.04) (.04) (.20) (.20)
Dividends in excess of net realized gain
on investments...................... .- (.04) .- .- .-
______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS................. (.24) (.85) (.77) (.91) (.68)
______ ______ ______ ______ ______
Net asset value, end of year.......... $15.01 $14.42 $14.51 $14.47 $14.47
====== ======= ====== ======= =======
TOTAL INVESTMENT RETURN(3)................ 15.60%(4) 1.54% 6.21% 6.01% 4.69%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.12%(4) 1.34% 1.41% 1.41% 1.99%(4)
Ratio of net investment income to average
net assets.......................... 4.87%(4) 4.91% 5.13% 4.77% 4.20%(4)
Decrease reflected in above expense ratios
due to undertakings by the Manager.. .12%(4) .09% .01% .- .-
Portfolio Turnover Rate............... 33.18%2 0.84% 50.62% 54.37% 54.37%
Net Assets, end of year (000's Omitted) $5,916 $22,476 $25,282 $27,023 $35
(1) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering twelve
series including the Florida Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State income taxes, without undue risk. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $2,593 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended April 30, 1996, $134,640 was
charged to the Series for the Class B shares and $61 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the year ended April 30, 1996, $616,605, $67,320 and $20
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $44,055 for the period from December 1,
1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996 amounted
to $144,987,747 and $171,615,659, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $3,698,342, consisting of $7,261,047 gross unrealized appreciation and
$3,562,705 gross unrealized depreciation.
At April 30, 1996, 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).
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Florida Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier State Municipal Bond Fund, Florida Series at April 30, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the indicated years, in conformity with generally accepted accounting
principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby makes the following
designations regarding its fiscal year ended April 30, 1996:
-all the dividends paid from investment income-net are "exempt-interest
dividends" (not subject to regular Federal income tax and, for individuals who
are Florida residents, not subject to taxation by Florida), and
-the Series hereby designates $.135 per share as a long-term capital gain
distribution of the $.2024 per share paid on December 6, 1995.
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997.
[Dreyfus lion "d" logo]
Premier State Municipal
Bond Fund, Florida Series
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 051/615AR964
[Dreyfus logo]
Annual Report
Premier State
Municipal Bond Fund
Florida Series
April 30, 1996
<PAGE>
PREMIER NEW YORK MUNICIPAL BOND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier New York
Municipal Bond Fund. For its annual reporting period ended November 30, 1995,
your Fund's Class A and Class B shares produced total returns of 20.93% and
20.20%, respectively.* Income dividends exempt from Federal, New York State
and New York City personal income taxes were approximately $.750 per share
for Class A shares and $.674 per share for Class B shares.** This amounts to
tax-free distribution rates per share of 4.80% and 4.51%, respectively.***
Class C shares, from their inception on September 11, 1995, through
November 30, produced a total return of 3.15%.* Tax exempt income dividends
of approximately $.139 per share were paid,** amounting to an annualized
tax-free distribution rate per share of 4.19%.***
THE ECONOMY
Modest economic growth and low inflation have spurred a dramatic,
year-long rally in the bond market. The Federal Reserve Board's recent
reduction of the Federal Funds rate confirmed what investors had already
suspected: that inflation, at least for the near future, is under control.
Now questions abound regarding the duration of the economic recovery and the
possibility of recession.
The economic recovery of the mid-1990s has been productivity-driven.
Corporations implemented extraordinary cost control measures that, while
dramatically improving bottom line earnings, now contribute to the slow rate of
employment growth. Job creation is a significant factor that affects consumer
spending, and a major component of economic activity. New job creation,
currently running at the slowest pace of the post-World War II era, is worrisome
to us. Indeed, wages and salaries grew at under 3% over the past year, barely
keeping pace with inflation. Still, surveys indicate that consumers remain
optimistic, despite evidence that their spending is being affected by the slow
growth in disposable income. Recent reports on retail sales confirm this
reticence in spending.
It was concern about lagging economic growth that prompted the Federal
Reserve to ease the Federal Funds rate two times in 1995: first in July and then
again in December. The housing market and new home construction were helped
earlier this year by low interest rates, though recently both have exhibited
signs of weakness. Business capital spending, another engine of economic growth,
has been solid. Exports remain another bright area of the economy. Because of
the new competitiveness of American businesses abroad, the U.S. trade deficit
continues to shrink. Through September, the trade deficit with Japan narrowed
for the sixth consecutive month. Exports, while a relatively small component of
overall economic activity in this country, provide an important support for the
job market. However, if U.S. products lose competitiveness in world markets,
foreign orders may go elsewhere and jobs could be lost here.
MARKET ENVIRONMENT
Municipal bonds have enjoyed a dramatic bull market for the past 12 months.
Current business sluggishness may result in further Fed easing next year,
particularly if the Clinton Administration and Congress can arrive at a
meaningful budget agreement. Of course, a balanced Federal budget should be
beneficial to the bond market since it could mean a reduction in the issuance of
government securities. A similar supply situation exists in the municipal bond
market. The redemption of existing municipal bonds has outpaced the rate of new
issuance for two years, and is expected to recur in 1996.
Overall, we remain confident in our optimistic view of the municipal bond
market. Yet we are mindful of the stimulative effect of easing monetary policy.
Therefore, we are watchful for any signs of a revival of inflationary pressures.
THE PORTFOLIO
This year's impressive price move has more than offset 1994's decline. In
view of both the municipal market's strong showing and the degree of volatility
exhibited in bond prices, we elected to take a slightly more conservative
investment approach during the second half of 1995 when it looked as though the
underlying economic fundamentals were improving. During that time, we elected to
"book some profits" and take a more cautious approach until a clearer economic
picture developed.
Since then, the economy has softened further, inflation remains low and the
employment picture is not improving significantly. This is what prompted the
Federal Reserve Board to adopt a more accommodative posture at its December
meeting. Should the economic picture not brighten in the weeks ahead, we believe
further rate reductions could happen in 1996.
The current environment provides us with the opportunity to rebalance the
Fund so that it continues to own those securities which will provide superior
performance and income generating potential. We expect that the issuance of
bonds in New York will continue to be modest next year. This will provide a
positive technical impetus, but will also challenge us in our search for
appropriate securities. Our trading activity will continue to concentrate on
incorporating bonds in the Fund that possess desirable liquidity, call and
coupon characteristics.
The high level of volatility exhibited by the market in recent years
underscores the need to maintain a disciplined and long-term focus. Solid market
performance thus far in 1995 has rewarded the patient investor.
Our primary task - to maximize current income exempt from Federal, New York
State and New York City personal income taxes to the extent consistent with
preservation of capital - continues to guide our portfolio management decisions.
Included in this report is a series of detailed statements about your
Fund's holdings and financial condition. We hope they are informative. Please
know that we appreciate greatly your continued confidence in the Fund and in The
Dreyfus Corporation.
Very truly yours,
(Richard J. Moynihan Signature logo)
Richard J. Moynihan
Director, Municipal Portfolio Management
December 21, 1995
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the case
of Class A shares or the applicable contingent deferred sales charge imposed on
redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT)
for certain shareholders. Income may be subject to some state and local taxes
for non-New York residents. Capital gains, if any, may be subject to Federal,
state and local taxes.
*** Distribution rate per share is based upon dividends per share paid from
net investment income during the period, divided by the maximum offering price
per share at the end of the period in the case of Class A shares or net asset
value in the case of Class B and Class C shares.
PREMIER NEW YORK MUNICIPAL BOND FUND NOVEMBER 30, 1995
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER NEW YORK
MUNICIPAL BOND FUND CLASS A SHARES AND THE LEHMAN BROTHERS MUNICIPAL BOND
INDEX
Dollars
$20,092
Lehman Brothers
Municipal Bond Index*
$19,125
Premier New York
Municipal Bond Fund
(Class A Shares)
*Source: Lehman Brothers
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming Charge Upon
PERIOD ENDED 11/30/95 Sales Charge Sales Charge (4.5%) PERIOD ENDED 11/30/95 Redemption Redemption*
____________________ __________________ ___________________ _____________________- ___________ ____________________
<S> <C> <C> <C> <C> <C>
1 Year 20.93% 15.52% 1 Year 20.20% 17.20%
5 Years 9.49 8.49 From Inception (1/15/93) 7.37 6.76
From Inception (12/31/86) 8.10 7.54
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming No Charge Upon
PERIOD ENDED 11/30/95 Redemption Redemption**
From Inception (9/11/95) 3.15% 2.15%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class A shares of
Premier New York Municipal Bond Fund on 12/31/86 (Inception Date) to a
$10,000 investment made in the Lehman Brothers Municipal Bond Index on that
date. All dividends and capital gain distributions are reinvested.
Performance for Class B shares and Class C shares will vary from the
performance of Class A shares shown above due to differences in charges and
expenses.
The Fund invests primarily in New York municipal securities and its
performance shown in the line graph takes into account the maximum initial sales
charge on Class A shares and all other applicable fees and expenses. Unlike the
Fund, the Lehman Brothers Municipal Bond Index is an unmanaged total return
performance benchmark for the long-term, investment grade, geographically
unrestricted tax exempt bond market, calculated by using municipal bonds
selected to be representative of the municipal market overall.
The Index does not take into account charges, fees and other expenses.
Also, unlike the Fund which principally limits investments to New York municipal
obligations, the Index is not state specific. These factors can contribute to
the Index potentially outperforming the Fund. Further information relating to
Fund performance, including expense reimbursements, if applicable, is contained
in the Condensed Financial Information section of the Prospectus and elsewhere
in this report.
* Maximum contingent deferred sales charge for Class B shares is 3% and is
reduced to 0% after five years.
**Maximum contingent deferred sales charge for Class C shares is 1% within
one year of the date of purchase.
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS NOVEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.5% AMOUNT VALUE
NEW YORK-93.0%
Albany Industrial Development Agency, Lease Revenue:
<S> <C> <C>
(New York State Assembly Building Project) 7.75%, 1/1/2010.............. $ 1,000,000 $ 1,117,070
(New York State Department of Health Building Project) 7.25%, 10/1/2010. 1,455,000 1,576,536
Metropolitan Transportation Authority, Commuter Facilities:
6.125%, 7/1/2014 (Insured; MBIA)........................................ 2,990,000 3,192,184
Service Contract:
5.40%, 7/1/2006....................................................... 3,315,000 3,318,812
5.75%, 7/1/2007....................................................... 5,000,000 5,148,550
7.50%, 7/1/2016 (Prerefunded 7/1/2000) (a)............................ 1,350,000 1,559,398
New York City:
6%, 2/15/2015........................................................... 5,000,000 5,009,550
5.50%, 10/1/2016........................................................ 4,850,000 4,566,081
6.625%, 2/15/2025....................................................... 4,240,000 4,475,702
6.625%, 8/1/2025........................................................ 5,090,000 5,362,417
New York City Housing Development Corp., Mortgage Revenue
(South Williamsburg Cooperative) 7.90%, 2/1/2023 (Insured; SONYMA)...... 740,000 798,963
New York City Industrial Development Agency:
Civic Facility Revenue (YMCA of Greater New York Project) 8%, 8/1/2016.. 1,500,000 1,622,235
Special Facility Revenue:
(American Airlines Inc. Project) 6.90%, 8/1/2024...................... 2,000,000 2,154,840
(Terminal One Group Association Project) 6%, 1/1/2008................. 6,360,000 6,531,466
New York City Municipal Water Finance Authority, Water and Sewer Systems
Revenue:
5.50%, 6/15/2019 (Insured; MBIA)........................................ 4,000,000 3,986,800
Refunding 6%, 6/15/2010................................................. 4,100,000 4,412,092
State of New York 5.625%, 10/1/2020......................................... 7,265,000 7,342,663
New York State Dormitory Authority, Revenues:
(Consolidated City University System):
5.75%, 7/1/2007....................................................... 3,965,000 4,074,553
5.75%, 7/1/2007 (Insured; AMBAC)...................................... 3,150,000 3,385,872
5.75%, 7/1/2009 (Insured; AMBAC)...................................... 3,000,000 3,190,830
7.625%, 7/1/2020 (Prerefunded 7/1/2000) (a)........................... 750,000 870,210
5.375%, 7/1/2025...................................................... 5,500,000 5,459,410
(Cornell University) 7.375%, 7/1/2030................................... 1,200,000 1,347,996
(State University Educational Facilities):
7.70%, 5/15/2012 (Prerefunded 5/15/2000) (a).......................... 1,000,000 1,159,770
6.75%, 5/15/2021 (Prerefunded 5/15/2002) (a).......................... 3,400,000 3,916,970
Refunding:
5.25%, 5/15/2004.................................................. 2,415,000 2,406,789
5.375%, 5/15/2007 (Insured; FGIC)................................. 6,000,000 6,239,460
5.50%, 5/15/2008.................................................. 1,740,000 1,742,279
5.25%, 5/15/2010.................................................. 5,870,000 5,687,854
5.25%, 5/15/2011.................................................. 5,000,000 4,817,900
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_____________ ____________
NEW YORK (CONTINUED)
New York State Dormitory Authority, Revenues (continued):
(State University Educational Facilities) (continued):
Refunding (continued):
5.875%, 5/15/2011 (Insured; FGIC)................................. $ 5,000,000 $ 5,374,700
(Upstate Community Colleges) 5.625%, 7/1/2014........................... 2,500,000 2,449,100
New York State Energy Research and Development Authority,
Electric Facilities Revenue:
(Consolidated Edison Co. Project):
7.25%, 11/1/2024.................................................. 1,250,000 1,337,325
7.125%, 12/1/2029................................................. 5,000,000 5,552,900
(Long Island Lighting Co. Project):
7.15%, 6/1/2020................................................... 5,590,000 5,745,905
7.15%, 2/1/2022................................................... 5,585,000 5,740,766
6.90%, 8/1/2022................................................... 3,000,000 3,056,580
New York State Environmental Facilities Corp.:
State Water Pollution Control Revolving Fund Revenue:
7.20%, 3/15/2011...................................................... 1,500,000 1,648,935
(Pilgrim State Sewer Project) 6.30%, 3/15/2016........................ 3,000,000 3,200,970
Water Facilities Revenue (Jamaica Water Supply Provence) 7.625%, 4/1/2029 500,000 550,660
New York State Housing Finance Agency, Revenue:
Health Facilities, Refunding (New York City) 7.90%, 11/1/1999........... 1,000,000 1,118,970
Service Contract Obligation 7.30%, 3/15/2021 (Prerefunded 9/15/2001) (a) 1,000,000 1,170,720
New York State Medical Care Facilities Finance Agency, Revenue, Insured
Mortgage:
6.05%, 2/15/2015 (Insured; FHA)......................................... 3,000,000 3,074,340
(Hospital and Nursing Home) 7.45%, 8/15/2031 (Insured; FHA)............. 1,000,000 1,107,680
(Saint Luke's Roosevelt Hospital Center)
7.45%, 2/15/2029 (Insured; FHA) (Prerefunded 2/15/2000) (a)........... 500,000 571,480
New York State Mortgage Agency, Revenue, Homeownership Mortgage:
6.45%, 10/1/2020........................................................ 2,895,000 2,986,829
7.95%, 4/1/2022......................................................... 1,650,000 1,759,065
8.05%, 4/1/2022......................................................... 545,000 584,218
6.65%, 10/1/2025........................................................ 2,000,000 2,079,520
New York State Power Authority, Revenue and General Purpose
7%, 1/1/2018 (Prerefunded 1/1/2010) (a)................................. 1,940,000 2,304,914
New York State Thruway Authority, Service Contract Revenue
(Local Highway and Bridge):
6.25%, 4/1/2006....................................................... 6,450,000 6,738,186
7.25%, 1/1/2010....................................................... 1,000,000 1,143,610
New York State Urban Development Corp., Revenue:
7.50%, 4/1/2020......................................................... 1,000,000 1,163,340
(Alfred Technology Resources Inc. Project) 7.875%, 1/1/2020............. 1,000,000 1,120,360
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_____________ ____________
NEW YORK (CONTINUED)
New York State Urban Development Corp., Revenue (continued):
(Correctional Capital Facilities):
6.10%, 1/1/2011....................................................... $ 4,000,000 $ 4,090,320
7.50%, 1/1/2018 (Prerefunded 1/1/2001) (a)............................ 1,000,000 1,163,350
Refunding 6.50%, 1/1/2011 (Insured; FSA).............................. 3,190,000 3,614,302
(Onondaga County Convention Project) 7.875%, 1/1/2020................... 1,475,000 1,735,795
Port Authority of New York and New Jersey (Consolidated Ninety Third Series)
6.125%, 6/1/2094........................................................ 5,000,000 5,428,100
Rensselaer County Industrial Development Agency, IDR (Albany International
Corp.)
7.55%, 6/1/2007 (LOC; Norstar Bank) (b)................................. 1,500,000 1,729,050
Triborough Bridge and Tunnel Authority:
(Convention Center Project) 7.25%, 1/1/2010............................. 1,000,000 1,164,680
Revenue:
6%, 1/1/2012.......................................................... 2,000,000 2,167,140
General Purpose, Refunding 5%, 1/1/2015............................... 2,770,000 2,656,402
Special Obligation 6.25%, 1/1/2012 (Insured; AMBAC)..................... 4,000,000 4,274,440
U.S. RELATED-5.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,061,460
Puerto Rico Housing Finance Corp., MFMR
7.50%, 4/1/2022 (LOC; Government Development Bank) (b).................. 1,665,000 1,780,085
Puerto Rico Industrial Medical Educational and Environmental Pollution
Control
Facilities Financing Authority, HR, Refunding (Saint Luke's Hospital
Project)
6.25%, 6/1/2010......................................................... 1,100,000 1,140,700
Puerto Rico Public Buildings Authority, Public Education and Health
Facilities
Revenue:
(Guaranteed Government Facilities) 6.25%, 7/1/2011 (Insured; AMBAC)... 3,875,000 4,321,129
Refunding 5.70%, 7/1/2009 (Guaranteed; Commonwealth of Puerto Rico).. 2,235,000 2,343,911
_-------_____-
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $196,159,758)..................................................... $207,727,189
==============
SHORT-TERM MUNICIPAL INVESTMENTS-1.5%
NEW YORK:
New York City, VRDN:
3.85% (LOC; Chemical Bank) (b,c)........................................ $ 1,000,000 $ 1,000,000
3.80% (Insured; MBIA, SBPA; Bank Austria Aktiengesellschaf) (c)........ 2,200,000 2,200,000
_-------_____-
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $3,200,000)....................................................... $ 3,200,000
==============
TOTAL INVESTMENTS-100.0%
(cost $199,359,758)..................................................... $210,927,189
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFMR Multi-Family Mortgage Revenue
FSA Financial Security Assurance SBPA Standby Bond Purchase Agreement
HR Hospital Revenue SONYMA State of New York Mortgage Agency
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
LOC Letter of Credit
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
___________ __________ __________________ _____________________
AAA Aaa AAA 29.6%
AA Aa AA 12.2
A A A 26.5
BBB Baa BBB 22.8
BB Ba BB 5.4
F1 Mig1 SP1 1.5
Not Rated (e) Not Rated (e) Not Rated (e) 2.0
=========
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard and
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $199,359,758)-see statement..................................... $210,927,189
Cash.................................................................... 3,790,239
Interest receivable..................................................... 3,652,024
Receivable for investment securities sold............................... 2,214,767
Receivable for shares of Beneficial Interest subscribed................. 318,375
Prepaid expenses........................................................ 8,717
______________
220,911,311
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 95,453
Due to Distributor...................................................... 70,374
Payable for investment securities purchased............................. 7,065,668
Payable for shares of Beneficial Interest redeemed...................... 519,747
Accrued expenses........................................................ 79,227 7,830,469
_______________ ______________
NET ASSETS ................................................................ $213,080,842
==============
REPRESENTED BY:
Paid-in capital......................................................... $201,559,772
Accumulated net realized (loss) on investments.......................... (46,361)
Accumulated net unrealized appreciation on investments-Note 3........... 11,567,431
______________
NET ASSETS at value......................................................... $213,080,842
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 9,793,284
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 4,478,577
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 69
==============
NET ASSET VALUE per share:
Class A Shares
($146,206,554 / 9,793,284 shares)..................................... $14.93
========
Class B Shares
($66,873,258 / 4,478,577 shares)...................................... $14.93
========
Class C Shares
($1,030 / 69 shares).................................................. $14.93
========
See notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED NOVEMBER 30, 1995
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,618,590
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,118,961
Shareholder servicing costs-Note 2(c)................................. 640,346
Distribution fees-Note 2(b)........................................... 299,924
Professional fees..................................................... 51,182
Prospectus and shareholders' reports.................................. 31,529
Custodian fees........................................................ 22,800
Trustees' fees and expenses-Note 2(d)................................. 14,929
Registration fees..................................................... 11,887
Miscellaneous......................................................... 28,723
____________
TOTAL EXPENSES.................................................. 2,220,281
____________
INVESTMENT INCOME-NET........................................... 10,398,309
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 452,878
Net unrealized appreciation on investments.............................. 26,991,860
____________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 27,444,738
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $37,843,047
============
See notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30,
___________________________________
1994 1995
_______________ _____________
OPERATIONS:
Investment income-net................................................... $ 11,007,481 $ 10,398,309
Net realized gain (loss) on investments................................. (496,878) 452,878
Net unrealized appreciation (depreciation) on investments for the year.. (28,073,679) 26,991,860
_______________ _____________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (17,563,076) 37,843,047
_______________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (8,423,637) (7,565,208)
Class B shares........................................................ (2,583,844) (2,833,091)
Class C shares........................................................ _ (10)
Net realized gain on investments:
Class A shares........................................................ (1,134,769) _
Class B shares........................................................ (324,799) _
_______________ _____________
TOTAL DIVIDENDS................................................... (12,467,049) (10,398,309)
_______________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 25,099,805 9,960,037
Class B shares........................................................ 24,583,764 12,795,103
Class C shares........................................................ _ 1,000
Dividends reinvested:
Class A shares........................................................ 7,067,611 5,506,451
Class B shares........................................................ 2,377,696 2,200,257
Class C shares........................................................ _ 10
Cost of shares redeemed:
Class A shares........................................................ (36,119,325) (26,739,496)
Class B shares........................................................ (11,178,627) (9,034,959)
_______________ _____________
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... 11,830,924 (5,311,597)
_______________ _____________
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... (18,199,201) 22,133,141
NET ASSETS:
Beginning of year....................................................... 209,146,902 190,947,701
_______________ _____________
End of year............................................................. $190,947,701 $213,080,842
=============== =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
_____________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ___________________________ __________________________
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30, PERIOD ENDED
____________________________ ___________________________ __________________________
NOVEMBER 30,
CAPITAL SHARE TRANSACTIONS: 1994 1995 1994 1995 1995*
____________ _____________ ____________ ___________ ____________________
<S> <C> <C> <C> <C> <C>
Shares sold............. 1,722,934 698,060 1,695,749 893,122 68
Shares issued for
dividends reinvested.. 494,805 386,165 166,946 154,097 1
Shares redeemed......... (2,576,898) (1,893,114) (806,806) (637,271) _
_____________ _____________ ____________ ___________ _________________
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING (359,159) (808,889) 1,055,889 409,948 69
============ ============= ============ =========== =================
* From September 11, 1995 (commencement of initial offering) to November 30, 1995.
See notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.
CLASS A SHARES
___________________________________________________________
YEAR ENDED NOVEMBER 30,
___________________________________________________________
PER SHARE DATA: 1991 1992 1993 1994 1995
_________ _________ ________ ________ _________
Net asset value, beginning of year........... $12.88 $13.56 $13.97 $14.97 $13.01
_________ _________ _________ ________ _________
INVESTMENT OPERATIONS:
Investment income-net........................ .89 .86 .80 .75 .75
Net realized and unrealized gain (loss) on
investments................................ .68 .56 1.00 (1.86) 1.92
_________ _________ ________ _________ _________
TOTAL FROM INVESTMENT OPERATIONS........... 1.57 1.42 1.80 (1.11) 2.67
_________ _________ ________ ________ _________
DISTRIBUTIONS:
Dividends from investment income-net......... (.89) (.86) (.80) (.75) (.75)
Dividends from net realized gain on investments -- (.15) -- (.10) --
_________ _________ ________ ________ _________
TOTAL DISTRIBUTIONS........................ (.89) (1.01) (.80) (.85) (.75)
_________ _________ ________ ________ _________
Net asset value, end of year................. $13.56 $13.97 $14.97 $13.01 $14.93
========= ========= ======== ======== =========
TOTAL INVESTMENT RETURN *........................ 12.63% 10.79% 13.16% (7.76%) 20.93%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .52% .72% .78% .89% .94%
Ratio of net investment income to average net assets 6.69% 6.16% 5.41% 5.25% 5.27%
Decrease reflected in above expense ratios due to
undertakings by the Manager................ .60% .34% .18% .04% --
Portfolio Turnover Rate...................... 12.45% 1 2.55% 19.55% 31.76% 74.11%
Net Assets, end of year (000's Omitted)...... $70,333 $108,247 $164,046 $137,978 $146,207
* Exclusive of sales load.
See notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.
CLASS B SHARES CLASS C SHARES
_____________________________ ______________________
YEAR ENDED NOVEMBER 30, PERIOD ENDED
______________________________ ______________________
NOVEMBER 30,
PER SHARE DATA: 1993(1) 1994 1995 1995(2)
__________ ________ _______ ___________________
Net asset value, beginning of year...................... $14.04 $14.97 $13.02 $14.61
__________ ________ ________ ___________________
INVESTMENT OPERATIONS:
Investment income-net................................... .62 .67 .67 .14
Net realized and unrealized gain (loss) on investments.. .93 (1.85) 1.91 .32
__________ _________ _______ ___________________
TOTAL FROM INVESTMENT OPERATIONS...................... 1.55 (1.18) 2.58 .46
__________ __________ ________ ____________________
DISTRIBUTIONS:
Dividends from investment income-net.................... (.62) (.67) (.67) (.14)
Dividends from net realized gain on investments......... -- (.10) -- --
__________ ________ _______ ___________________
TOTAL DISTRIBUTIONS................................... (.62) (.77) (.67) (.14)
__________ _________ _______ ___________________
Net asset value, end of year............................ $14.97 $13.02 $14.93 $14.93
========== ======== ======= ===================
TOTAL INVESTMENT RETURN (3)................................. 12.78%(4) (8.20%) 20.20% 14.19%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................. 1.34%(4) 1.44% 1.46% 1.74%(4)
Ratio of net investment income to average net assets.... 4.41%(4) 4.70% 4.72% 4.00%(4)
Decrease reflected in above expense ratios due to
undertakings by the Manager........................... .16%(4) .04% -- --
Portfolio Turnover Rate................................. 19.55%(5) 31.76% 74.11% 74.11%(5)
Net Assets, end of year (000's Omitted)................. $45,101 $52,970 $66,873 $1
(1) From January 15, 1993 (commencement of initial offering) to November 30, 1993.
(2) From September 11, 1995 (commencement of initial offering) to November 30, 1995.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
See notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act") as
a non-diversified open-end management investment company. Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's shares.
The Distributor, located at One Exchange Place, Boston, Massachusetts 02109, is
a wholly-owned subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund administration services, which in turn is a wholly-owned subsidiary
of FDI Holdings, Inc., the parent company of which is Boston Institutional
Group, Inc. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
The Fund offers Class A, Class B and Class C shares. Class A shares are
subject to a sales charge imposed at the time of purchase, Class B shares are
subject to a contingent deferred sales charge imposed at the time of redemption
on redemptions made within five years of purchase and Class C shares are subject
to a contingent deferred sales charge imposed at the time of redemption on
redemptions made within one year of purchase. Other differences between the
three Classes include the services offered to and the expenses borne by each
Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, it is
the policy of the Fund not to distribute such gain.
PREMIER NEW YORK MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $44,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1995. If not
applied, the carryover expires in fiscal 2002.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the average daily
value of the Fund's net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. There was no expense
reimbursement for the year ended November 30, 1995.
Effective December 1, 1995, Dreyfus Transfer, Inc., a wholly-owned
subsidiary of the Manager, serves as the Fund's Transfer and Dividend Disbursing
Agent.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the year ended November 30, 1995, $299,916 was
charged to the Fund for the Class B shares and $8 was charged to the Fund for
the Class C shares.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. 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. The Distributor may make payments to Service Agents in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the year ended November 30, 1995, $358,656, $149,961 and $1
were charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended November 30, 1995
amounted to $147,142,617 and $147,800,047, respectively.
At November 30, 1995, accumulated net unrealized appreciation on
investments was $11,567,431, consisting of $11,682,647 gross unrealized
appreciation and $115,216 gross unrealized depreciation.
At November 30, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting purposes
(see the Statement of Investments).
PREMIER NEW YORK MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER NEW YORK MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities of
Premier New York Municipal Bond Fund, including the statement of investments, as
of November 30, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier New York Municipal Bond Fund at November 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP Signature logo)
New York, New York
January 2, 1996
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund hereby designates all the
dividends paid from investment income-net during its fiscal year ended November
30, 1995 as "exempt-interest dividends" (not subject to regular Federal and, for
individuals who are New York residents, New York State and New York City
personal income taxes).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Fund's taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1995 calendar year on Form
1099-DIV which will be mailed by January 31, 1996.
(Dreyfus lion "d" Logo)
PREMIER NEW YORK
MUNICIPAL BOND FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 021/611AR9511
(Dreyfus Logo)
Annual Report
Premier New York
Municipal Bond Fund
November 30, 1995
<PAGE>
PREMIER NEW YORK MUNICIPAL BOND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier New York
Municipal Bond Fund. For its semi-annual reporting period ended May 31, 1996
your Fund produced a total return of -1.73% for Class A shares, -l.99% for Class
B shares and -2.11% for Class C shares.* Income dividends exempt from Federal,
New York State and New York City personal income taxes of approximately $.368,
$.329 and $.311 per share were paid for Class A, Class B and Class C shares,
respectively.** This is equivalent to an annualized tax-free distribution rate
per share of 4.90% for Class A, 4.59% for Class B and 4.33% for Class C
shares.***
THE ECONOMY
Recent economic reports show that the economy continues to recover from its
year-end 1995 pause. Spurred by a surge in consumer and business spending, the
economy grew at a moderate 2.3% during the first quarter of this year. The index
of leading economic indicators, a major forecasting index, increased for the
third consecutive month in April, the first such advance since late 1993.
Despite a sharp jump in energy prices, inflation remained in check. For the 12
months ended in May, consumer prices rose 2.9%. Giving further evidence of
moderating prices, a survey released in May by the National Business Council
revealed greater difficulty for major industrial companies to raise prices now
than six months ago.
Despite the relatively benign level of inflation, the economy's expansion
has sparked concerns that the Federal Reserve Board could raise short-term
interest rates. In reaction to this possibility, long-term rates have risen
since the beginning of the year. So far, the Fed has refrained from tightening
monetary policy, apparently interpreting economic data to mean that the economy
remains on a path of moderate growth unaccompanied by a surge in inflation.
However, the strong May employment data has some investors fearing that the Fed
will not continue to stand pat. There is now a greater consensus view that the
Fed will tighten eventually in order to prevent unacceptable levels of price
inflation from accompanying the growth in the economy. Consumers, who account
for over two thirds of our country's Gross Domestic Product (GDP), are vital
contributors to economic growth. So far, they have continued to spend, setting
aside concerns about job security and stagnating real wages in favor of current
consumption. New-home sales, an important component of consumer spending,
continued to post gains throughout the reporting period, and retail sales in
general rose 6% over the year ended April 30. Additional encouragement to
consumers occurred when the Labor Department recently reported a continuation
of the declining trend in first-time jobless claims.
On the corporate side of the economy, capacity utilization inched higher
and is now at 83.2%. While still well below the peak level (85.1%) for this
economic expansion, which was reached over a year ago, further growth in this
indicator may result in shortages that could produce higher prices. Following
the GM strike-induced slowdown in March, industrial production has risen,
bringing the year-over-year gain to a solid 3.3% through May. We remain alert to
early signs of growing inflationary pressures that might cause the Federal
Reserve to raise interest rates. To date, prices are still being kept under
control. However, we are especially watchful of the potential buildup in wage
pressures given the rising trend in both corporate output and capacity
utilization.
MARKET ENVIRONMENT
Since our last report in November 1995, tax-exempt bond yields are
approximately 1/2% higher, reflecting the weakening in bond prices in response
to the strengthening domestic economy. With long-term U.S. Government bond
yields currently in excess of 7%, and municipal bonds offering 6% (tax-exempt),
some investors are now beginning to take notice. While the stock market
continues to make new highs and attract the majority of investment dollars,
there are now indications that, going forward, bonds might again win favor with
investors. The market is trying to anticipate what the Federal Reserve will do
in light of the strong economic numbers during the first half of the year. It is
the general consensus that, should the Fed act sooner rather than later to undo
the easing moves undertaken last winter, the economy will slow and bond prices
will rally. With the Presidential election looming on the horizon, politics
could play a role in any Fed decision to change policy.
The technical picture of the municipal bond market looks very encouraging
at this time. Seasonally, we are now approaching a very heavy period for bond
maturities and redemptions; with little in the way of new issues, there will be
fewer bonds available for reinvestment. This fact is currently reflected in the
better price performance of tax exempts relative to taxable securities, and we
expect that municipal bond prices will be less volatile in the weeks ahead than
taxable bonds.
The New York market has seen tightening in quality spreads. Issues such as
New York City, which earlier produced yields which were 100% of Treasuries, are
now trading well through that ratio. Retail demand continues to be strong for
New York paper.
THE PORTFOLIO
The fixed-income market has experienced considerable volatility since
January. On an after-tax basis, the municipal market offered very attractive
returns when compared to the Treasury market. In January,15-year AAA general
obligation bonds yielded approximately 88% of Treasuries; that has since
corrected, and we have returned to ratios of approximately 81%, which represents
a more normal relationship. This volatility occurred for several reasons,
including the strong appeal of the stock market for investors' dollars; the
fallout from the default of Orange County, California (AAA prior to default);
and the ongoing concern over tax reform. The flatness in the yield curve enabled
us to move out of the long end and into the 20-year maturity range while giving
up a minimum in yield. A portion was moved into the shorter end of the market
and, as the yield curve steepens, we may again emphasize longer maturities.
Since January, we have taken a more defensive stance with the Fund. At this
point, we believe that the greater part of the downturn in the fixed income
market has probably occurred.
Our primary task - to maximize current income exempt from Federal, New York
State and New York City personal income taxes to the extent consistent with
preservation of capital - continues to guide our portfolio management decisions.
Included in this report is a series of detailed statements about your Fund's
holdings and its financial condition. We hope they are informative. Please know
that we greatly appreciate your continued confidence in the Fund and in The
Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
June 14, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and capital gains and does
not take into consideration the maximum initial sales load in the case of
Class A shares or the applicable contingent deferred sales charge imposed on
redemptions in the case of Class B and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
***Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price, in the case of Class A shares, or the net asset value per
share, in the case of Class B and Class C shares at the end of the period.
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS MAY 31, 1996 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_______ _______
NEW YORK-95.0%
<S> <C> <C>
Albany Industrial Development Agency, Lease Revenue:
(New York State Assembly Building Project) 7.75%, 1/1/2010.............. $ 1,000,000 $ 1,079,590
(New York State Department of Health Building Project) 7.25%, 10/1/2010. 1,455,000 1,522,323
Metropolitan Transportation Authority:
Commuter Facilities:
6.125%, 7/1/2014 (Insured; MBIA)...................................... 2,990,000 3,048,365
Service Contract:
5.40%, 7/1/2006................................................... 3,315,000 3,193,837
7.50%, 7/1/2016 (Prerefunded 7/1/2000) (a)........................ 1,350,000 1,514,700
Transit Facilities Revenue:
6%, 7/1/2016 (Insured; FSA)........................................... 3,000,000 2,980,800
Service Contract 5.75%, 7/1/2007...................................... 5,000,000 4,947,300
Municipal Assistance Corp. for the City of New York, Refunding 5.50%, 7/1/2007 2,250,000 2,276,888
New York City:
6.75%, 2/1/2009......................................................... 3,000,000 3,104,340
5.50%, 10/1/2016........................................................ 4,850,000 4,249,667
6.625%, 2/15/2025....................................................... 4,240,000 4,217,867
6.625%, 8/1/2025........................................................ 5,090,000 5,063,328
Refunding:
6.375%, 8/1/2004...................................................... 1,000,000 1,034,910
5.75%, 8/15/2008...................................................... 2,000,000 1,899,740
New York City Housing Development Corp., Mortgage Revenue
(South Williamsburg Cooperative) 7.90%, 2/1/2023 (Insured; SONYMA)...... 740,000 786,916
New York City Industrial Development Agency:
Civic Facility Revenue (YMCA of Greater New York Project) 8%, 8/1/2016.. 1,500,000 1,611,915
Special Facility Revenue:
(American Airlines Inc. Project) 6.90%, 8/1/2024...................... 2,000,000 2,085,040
(Terminal One Group Association, L.P. Project) 6%, 1/1/2008........... 6,360,000 6,325,529
New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue:
5.50%, 6/15/2019 (Insured; MBIA)........................................ 4,000,000 3,735,400
5.75%, 6/15/2026 (Insured; MBIA)........................................ 1,270,000 1,221,740
5.875%, 6/15/2026 (Insured; MBIA)....................................... 2,500,000 2,411,225
Refunding 6%, 6/15/2010................................................. 4,100,000 4,191,758
State of New York 5.625%, 10/1/2020......................................... 7,265,000 6,913,519
New York State Dormitory Authority, Revenues:
(Consolidated City University System):
5.75%, 7/1/2007 (Insured; AMBAC)...................................... 3,150,000 3,258,171
5.75%, 7/1/2009 (Insured; AMBAC)...................................... 3,000,000 3,059,310
5.625%, 7/1/2016...................................................... 4,000,000 3,709,520
7.625%, 7/1/2020 (Prerefunded 7/1/2000) (a)........................... 750,000 843,758
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
NEW YORK (CONTINUED)
New York State Dormitory Authority, Revenues (continued):
(Consolidated City University System) (continued):
Refunding 5.75%, 7/1/2007............................................. $ 3,965,000 $ 3,902,670
(Cornell University) 7.375%, 7/1/2030................................... 1,200,000 1,320,132
(State University Educational Facilities):
7.70%, 5/15/2012 (Prerefunded 5/15/2000) (a).......................... 1,000,000 1,126,110
6.75%, 5/15/2021 (Prerefunded 5/15/2002) (a).......................... 3,400,000 3,780,766
5.40%, 5/15/2023...................................................... 2,000,000 1,743,480
Refunding:
5.375%, 5/15/2007 (Insured; FGIC)................................. 6,000,000 6,039,360
5.50%, 5/15/2008.................................................. 1,740,000 1,667,894
5.25%, 5/15/2010.................................................. 5,870,000 5,341,230
5.25%, 5/15/2011.................................................. 5,000,000 4,538,850
5.875%, 5/15/2011 (Insured; FGIC)................................. 5,000,000 5,130,200
New York State Energy Research and Development Authority,
Electric Facilities Revenue:
(Consolidated Edison Co. Project):
7.25%, 11/1/2024.................................................. 1,250,000 1,316,363
7.125%, 12/1/2029................................................. 5,000,000 5,525,350
(Long Island Lighting Co. Project):
7.15%, 6/1/2020................................................... 2,365,000 2,337,495
7.15%, 2/1/2022................................................... 5,085,000 5,024,234
New York State Environmental Facilities Corp.:
SWDR (Occidental Petroleum Corp. Project)
6.10%, 11/1/2020 (Guaranteed; Occidental Petroleum Corp.)............. 1,000,000 954,290
State Water Pollution Control Revolving Fund Revenue:
7.20%, 3/15/2011...................................................... 1,500,000 1,631,535
(Pilgrim State Sewer Project) 6.30%, 3/15/2016........................ 3,000,000 3,154,680
Water Facilities Revenue (Jamaica Water Supply Provence) 7.625%, 4/1/2029 500,000 540,915
New York State Housing Finance Agency, Revenue:
Health Facilities, Refunding (New York City):
7.90%, 11/1/1999...................................................... 760,000 826,150
7.90%, 11/1/1999 (Prerefunded 11/1/1996) (a).......................... 125,000 127,210
6%, 11/1/2007......................................................... 4,000,000 3,909,440
Service Contract Obligation 7.30%, 3/15/2021 (Prerefunded 9/15/2001) (a) 1,000,000 1,133,880
New York State Medical Care Facilities Finance Agency, Revenue, FHA, Insured Mortgage:
6.05%, 2/15/2015........................................................ 3,000,000 2,968,230
(Hospital and Nursing Home) 7.45%, 8/15/2031............................ 1,000,000 1,085,370
(Saint Luke's Roosevelt Hospital Center)
7.45%, 2/15/2029 (Prerefunded 2/15/2000) (a).......................... 500,000 556,135
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
NEW YORK (CONTINUED)
New York State Mortgage Agency, Revenue, Homeownership Mortgage:
6.45%, 10/1/2020........................................................ $ 2,810,000 $ 2,867,605
8.05%, 4/1/2022......................................................... 545,000 577,019
6.65%, 10/1/2025........................................................ 2,000,000 2,057,100
New York State Power Authority, Revenue and General Purpose
7%, 1/1/2018 (Prerefunded 1/1/2010) (a)................................. 1,940,000 2,202,773
New York State Thruway Authority, Service Contract Revenue
(Local Highway and Bridge) 7.25%, 1/1/2010 (Prerefunded 1/1/2001) (a)... 1,000,000 1,115,110
New York State Urban Development Corp., Revenue:
(Alfred Technology Resources Inc. Project)
7.875%, 1/1/2020 (Prerefunded 1/1/2000) (a)........................... 1,000,000 1,121,520
(Correctional Capital Facilities):
6.10%, 1/1/2011....................................................... 4,000,000 3,922,640
Refunding 6.50%, 1/1/2011 (Insured; FSA).............................. 3,190,000 3,455,089
(Onondaga County Convention Project)
7.875%, 1/1/2020 (Prerefunded 1/1/2001) (a)........................... 1,475,000 1,691,161
Port Authority of New York and New Jersey (Consolidated Ninety Third Series)
6.125%, 6/1/2094........................................................ 5,000,000 5,053,700
Rensselaer County Industrial Development Agency, IDR (Albany International Corp.)
7.55%, 6/1/2007 (LOC; Norstar Bank) (b)................................. 1,500,000 1,682,430
Triborough Bridge and Tunnel Authority:
(Convention Center Project) 7.25%, 1/1/2010............................. 1,000,000 1,113,350
Revenue:
6%, 1/1/2012.......................................................... 2,000,000 2,072,840
General Purpose, Refunding 5%, 1/1/2015............................... 4,770,000 4,261,852
Special Obligation 6.25%, 1/1/2012 (Insured; AMBAC)..................... 4,000,000 4,152,360
U.S. RELATED -5.0%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,010,080
Puerto Rico Industrial Medical Educational and Environmental Pollution Control
Facilities Financing Authority, HR, Refunding (Saint Luke's Hospital Project)
6.25%, 6/1/2010......................................................... 1,100,000 1,113,442
Puerto Rico Public Buildings Authority,
Government Facilities Revenue 6.25%, 7/1/2011
(Guaranteed: Commonwealth of Puerto Rico) (Insured; AMBAC)............ 3,875,000 4,172,135
Public Education and Health Facilities Refunding 5.70%, 7/1/2009
(Guaranteed; Commonwealth of Puerto Rico)............................. 2,235,000 2,260,591
_________
TOTAL INVESTMENTS-100.0%
(cost $190,059,820)..................................................... $192,872,222
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FSA Financial Security Assurance SONYMA State of New York Mortgage Agency
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ ______ _______________ _____________________
AAA Aaa AAA 29.2%
AA Aa AA 14.0
A A A 27.5
BBB Baa BBB 23.3
BB Ba BB 3.8
Not Rated (d) Not Rated (d) Not Rated (d) 2.2
________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) 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 independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1996 (UNAUDITED)
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $190,059,820)-see statement..................................... $192,872,222
Cash.................................................................... 5,732,105
Receivable for investment securities sold............................... 4,377,054
Interest receivable..................................................... 3,568,325
Receivable for shares of Beneficial Interest subscribed................. 63,781
Prepaid expenses........................................................ 5,929
__________
206,619,416
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 96,645
Due to Distributor...................................................... 73,302
Payable for shares of Beneficial Interest redeemed...................... 271,883
Accrued expenses........................................................ 81,842 523,672
________ ____________
NET ASSETS ................................................................ $206,095,744
==============
REPRESENTED BY:
Paid-in capital......................................................... $203,515,590
Accumulated net realized (loss) on investments.......................... (232,248)
Accumulated net unrealized appreciation on investments-Note 3........... 2,812,402
___________
NET ASSETS at value......................................................... $206,095,744
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 9,576,115
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 4,824,552
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 71
==============
NET ASSET VALUE per share:
Class A Shares
($137,041,675 / 9,576,115 shares)..................................... $14.31
=======
Class B Shares
($69,053,053 / 4,824,552 shares)...................................... $14.31
=======
Class C Shares
($1,016 / 71 shares).................................................. $14.31
=======
See independent accountants' review report and notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 6,262,716
EXPENSES:
Management fee-Note 2(a).............................................. $ 581,736
Shareholder servicing costs-Note 2(c)................................. 330,442
Distribution fees-Note 2(b)........................................... 172,090
Professional fees..................................................... 25,085
Prospectus and shareholders' reports.................................. 12,165
Custodian fees........................................................ 11,235
Registration fees..................................................... 8,489
Trustees' fees and expenses-Note 2(d)................................. 7,848
Miscellaneous......................................................... 13,366
________
TOTAL EXPENSES.................................................... 1,162,456
___________
INVESTMENT INCOME-NET............................................. 5,100,260
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (185,887)
Net unrealized (depreciation) on investments............................ (8,755,029)
____________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (8,940,916)
___________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $(3,840,656)
=============
See independent accountants' review report and notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
NOVEMBER 30, MAY 31, 1996
1995 (UNAUDITED)
_______ _________
OPERATIONS:
Investment income-net................................................ $ 10,398,309 $ 5,100,260
Net realized gain (loss) on investments.............................. 452,878 (185,887)
Net unrealized appreciation (depreciation) on investments
for the period..................................................... 26,991,860 (8,755,029)
____________ __________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................................ 37,843,047 (3,840,656)
____________ __________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares..................................................... (7,565,208) (3,565,152)
Class B shares..................................................... (2,833,091) (1,535,087)
Class C shares..................................................... (10) (21)
____________ __________
TOTAL DIVIDENDS................................................ (10,398,309) (5,100,260)
____________ __________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares................................................... 9,960,037 6,017,647
Class B shares................................................... 12,795,103 7,831,911
Class C shares..................................................... 1,000 ___________
Dividends reinvested:
Class A shares..................................................... 5,506,451 2,587,904
Class B shares..................................................... 2,200,257 1,175,020
Class C shares..................................................... 10 21
Cost of shares redeemed:
Class A shares..................................................... (26,739,496) (11,787,986)
Class B shares..................................................... (9,034,959) (3,868,699)
____________ __________
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................ (5,311,597) 1,955,818
____________ __________
TOTAL INCREASE (DECREASE) IN NET ASSETS...................... 22,133,141 (6,985,098)
NET ASSETS:
Beginning of period............................................... 190,947,701 213,080,842
____________ __________
End of period..................................................... $213,080,842 $206,095,744
============= ==============
</TABLE>
PREMIER NEW YORK MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SHARES
______________________________________________________________________________
CLASS A CLASS B
__________________________________ _________________________________________
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
NOVEMBER 30, MAY 31, 1996 NOVEMBER 30, MAY 31, 1996
1995 (UNAUDITED) 1995 (UNAUDITED)
_______ _________ _______ _________
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold..................... 698,060 406,726 893,122 530,404
Shares issued for dividends reinvested 386,165 175,964 154,097 79,935
Shares redeemed................. (1,893,114) (799,859) (637,271) (264,364)
_________ __________ ________ __________
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING..... (808,889) (217,169) 409,948 345,975
============ ============= ============ =============
CLASS C
__________________________________
PERIOD ENDED SIX MONTHS ENDED
NOVEMBER 30, MAY 31, 1996
1995* (UNAUDITED)
_______ __________
CAPITAL SHARE TRANSACTIONS:
Shares sold..................... 68 _
Shares issued for dividends
reinvested.................... 1 2
Shares redeemed................. _ _
______ ______
NET INCREASE
IN SHARES OUTSTANDING..... 69 2
========= ==========
*From September 11, 1995 (commencement of initial offering) to November
30, 1995.
See independent accountants' review report and notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
CLASS A SHARES
_____________________________________________________________________________
SIX MONTHS ENDED
YEAR ENDED NOVEMBER 30, MAY 31, 1996
_______________________________________________________
PER SHARE DATA: 1991 1992 1993 1994 1995 (UNAUDITED)
______ ______ ______ ______ ______ _______
Net asset value, beginning of period.. $12.88 $13.56 $13.97 $14.97 $13.01 $14.93
______ _______ _______ _______ _______ ________
INVESTMENT OPERATIONS:
Investment income-net................. .89 .86 .80 .75 .75 .37
Net realized and unrealized gain (loss)
on investments...................... .68 .56 1.00 (1.86) 1.92 (.62)
______ ______ ______ ______ ______ ________
TOTAL FROM INVESTMENT OPERATIONS.... 1.57 1.42 1.80 (1.11) 2.67 (.25)
______ ______ _______ ______ ______ ________
DISTRIBUTIONS:
Dividends from investment income-net.. (.89) (.86) (.80) (.75) (.75) (.37)
Dividends from net realized gain
on investments...................... .- (.15) .- (.10) .- .-
______ _______ _______ _______ ______ _______
TOTAL DISTRIBUTIONS................. (.89) (1.01) (.80) (.85) (.75) (.37)
______ ______ _______ _______ _______ _________
Net asset value, end of period........ $13.56 $13.97 $14.97 $13.01 $14.93 $14.31
======= ======= ======= ====== ======= ==========
TOTAL INVESTMENT RETURN(1)................ 12.63% 10.79% 13.16% (7.76%) 20.93% (3.45%)(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .52% .72% .78% .89% .94% .93%(2)
Ratio of net investment income to
average net assets.................. 6.69% 6.16% 5.41% 5.25% 5.27% 5.00%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager.. .60% .34% .18% .04% .- .-
Portfolio Turnover Rate............... 12.45% 12.55% 19.55% 31.76% 74.11% 23.24%(3)
Net Assets, end of period (000's Omitted) $70,333 $108,247 $164,046 $137,978 $146,207 $137,042
(1) Exclusive of sales load.
(2) Annualized.
(3) Not annualized.
See independent accountants' review report and notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
CLASS B SHARES CLASS C SHARES
__________________________________________________ ______________________________________
SIX MONTHS ENDED PERIOD ENDED SIX MONTHS ENDED
YEAR ENDED NOVEMBER 30, MAY 31, 1996 NOVEMBER 30, MAY 31, 1996
_____________________________
PER SHARE DATA: 1993(1) 1994 1995 (UNAUDITED) 1995(2) (UNAUDITED)
_______ _______ _______ _________ _______ _____________
Net asset value,
beginning of period.... $14.04 $14.97 $13.02 $14.93 $14.61 $14.93
______ _______ _______ _________ _______ ________
INVESTMENT OPERATIONS:
Investment income-net.... .62 .67 .67 .33 .14 .31
Net realized and unrealized gain
(loss) on investments.. .93 (1.85) 1.91 (.62) .32 (.62)
_______ _______ _______ ______ _______ ________
TOTAL FROM INVESTMENT
OPERATIONS......... 1.55 (1.18) 2.58 (.29) .46 (.31)
_____ _____ _______ ______ _______ ________
DISTRIBUTIONS:
Dividends from investment
income-net............. (.62) (.67) (.67) (.33) (.14) (.31)
Dividends from net
realized gain
on investments......... .- (.10) .- .- .- .-
______ _______ _______ ______ _______ _________
TOTAL DISTRIBUTIONS.... (.62) (.77) (.67) (.33) (.14) (.31)
_______ _______ _______ ______ _______ ________
Net asset value, end of period $14.97 $13.02 $14.93 $14.31 $14.93 $14.31
====== ====== ======= ========= ========_ ==========
TOTAL INVESTMENT RETURN(3)... 12.78%(4) (8.20%) 20.20% (3.97%)(4) 14.19%(4) (4.21%)(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets............. 1.34%(4) 1.44% 1.46% 1.45%(4) 1.74%(4) 1.74%(4)
Ratio of net investment income
to average net assets.. 4.41%(4) 4.70% 4.72% 4.46%(4) 4.00%(4) 4.21%(4)
Decrease reflected in above
expense ratios due to
undertakings by
the Manager............ 16%(4) .04% .- .- .- .-
Portfolio Turnover Rate.. 19.55%(5) 31.76% 74.11% 23.24%(5) 74.11%(5) 23.24%(
5)
Net Assets, end of period
(000's Omitted)........ $45,101 $52,970 $66,873 $69,053 $1 $1
(1) From January 15, 1993 (commencement of initial offering) to November 30, 1993.
(2) From September 11, 1995 (commencement of initial offering) to November 30, 1995.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
See independent accountants' review report and notes to financial statements.
PREMIER NEW YORK MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier New York Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company. The Fund's investment objective is to maximize current
income exempt from Federal, New York State and New York City income taxes to the
extent consistent with the preservation of capital. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Fund offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemptions on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, it is
the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $44,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1995. If not
applied, the carryover expires in fiscal 2002.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Fund's average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. There was no expense
reimbursement for the six months ended May 31, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $1,384 during the six months ended May 31, 1996 from commissions earned
on sales of the Fund's shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Fund pays the Distributor for distributing the Fund's Class B and Class
C shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the six months ended May 31, 1996, $172,086 was
charged to the Fund for the Class B shares and $4 was charged to the Fund for
the Class C shares.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. 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. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. For the six months ended May 31, 1996, $178,381, $86,043 and $1
were charged to the Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $43,786 for the six months ended May 31, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the six months ended May 31, 1996
amounted to $47,614,447 and $53,525,174 respectively.
At May 31, 1996, accumulated net unrealized appreciation on investments was
$2,812,402, consisting of $4,714,895 gross unrealized appreciation and
$1,902,493 gross unrealized depreciation.
At May 31, 1996, 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).
PREMIER NEW YORK MUNICIPAL BOND FUND
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER NEW YORK MUNICIPAL BOND FUND
We have reviewed the accompanying statement of assets and liabilities of
Premier New York Municipal Bond Fund, including the statement of investments, as
of May 31, 1996, and the related statements of operations and changes in net
assets and financial highlights for the six month period ended May 31, 1996.
These financial statements and financial highlights are the responsibility of
the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements and financial highlights taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of changes in net assets for the year ended November
30, 1995 and financial highlights for each of the five years in the period ended
November 30, 1995 and in our report dated January 2, 1996, we expressed an
unqualified opinion on such statement of changes in net assets and financial
highlights.
[Ernst & Young LLP signature logo]
New York, New York
July 8, 1996
PREMIER NEW YORK
MUNICIPAL BOND FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 021/611SA965
Semi-Annual Report
Premier New York
Municipal Bond Fund
May 31, 1996
[lion2/hres logo]
<PAGE>
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier Insured
Municipal Bond Fund, California Series. For its annual reporting period ended
July 31, 1996, your Fund earned a total return, including bond price changes and
interest income, of 7.77% for Class A shares, 7.30% for Class B shares and,
since inception on December 4, 1995, -.07% for Class C shares.* Income
dividends, exempt from Federal and State of California personal income taxes, of
approximately $.500 per share for Class A shares, $.438 per share for Class B
shares and $.260 per share for Class C shares were paid to shareholders.** This
is equivalent to an annualized tax-free distribution rate per share of 3.99% for
Class A shares, 3.65% for Class B shares and 3.29% for Class C shares.
THE ECONOMY
Strong second-quarter growth, a tightening labor market and signs of upward
pressure on wages have, in the words of Chairman Alan Greenspan, placed the
Federal Reserve Board (the "Fed") in a state of "heightened surveillance"
regarding signs of potentially higher inflation. So far, inflation reports have
been benign. Through July, the Consumer Price Index rose 3.0% for the preceding
12 months, generally consistent with its trend over the past several years.
Wholesale prices have been similarly well-behaved, while commodity prices have
been in decline since early spring. As favorable as these reports have been, the
Fed looks deeper into the economy for signs of strain that could result in
increased inflation. Before the Fed began its last round of interest rate
increases in early 1994, there was little actual evidence of inflation. Yet,
concerned that a number of indicators suggested that inflation could surge later
on, the Federal Reserve applied the monetary brakes. Now it seems that the Fed's
attention is drawn to indications that continued strong reports of job growth
and rising wages may fuel unacceptable increases in the rate of inflation. The
investment markets have been anticipating a Fed tightening. (The last rise in
the Federal Funds rate occurred on February 1, 1995. Since then all of the moves
by the Fed have been to lower rates; the last reduction to 5.25% occurred on
January 31, 1996.)
Investor fears that the Fed would raise short-term interest rates resulted
in a rise in long-term interest rates of a full percentage point since January.
Ironically, this rise might have stayed the Fed's hand from being more
aggressive. The effect of the rise on consumer spending and housing, according
to one growing view, may contribute to a moderation of economic growth over the
second half of the year. Yet, little evidence of a potential slowdown has
emerged so far. Higher mortgage rates have not tempered growth in the housing
market and construction starts of new homes are at their highest level since
April 1994. Retail sales growth remains solid despite rises in consumer
installment debt and credit card delinquencies. On the manufacturing side of the
economy, industrial production continues to gain without any sign of strain to
keep up with demand. Capacity utilization (83.2% of potential output at midyear)
remains below the 85% level that most economists believe indicates a potential
for inflationary bottlenecks. Still, we remain alert to signs of inflationary
pressures that might trigger a rise in interest rates.
MARKET ENVIRONMENT
The municipal market experienced a dramatic decline beginning in the first
quarter of 1996. Precipitating this decline was the surprising growth in
employment and brisk increase in retail sales. The market reaction to the growth
in these numbers was swift and sure. In a matter of weeks, interest rates as
measured by long-maturity U.S. Government bonds rose from below 6% to above 7%-a
rise of about 16% in yield. This negative price action pulled municipals down in
value, albeit to a somewhat lesser extent. Inflation, however, has yet to show
any troubling rise with staying power. Each harmful statistic indicating a
return to inflation is quickly followed by data suggesting a slowing economy and
a failing or stable inflationary trend.
Beginning in April, the market began to stabilize in this new, lower
trading range. Recently, the market moved out of this range to the upside-a-
positive development. While we are pleased to see this movement to higher price
levels, the market remains vulnerable to further downward pressure should
further economic strength appear. Economic weakness, on the other hand, would
prove beneficial to long-term security prices, relieving immediate fears of
renewed inflation. On a positive note, the municipal market continues to benefit
from lower supplies of new issues and less discussion of a flat tax, both of
which had produced weakness in prior periods.
THE PORTFOLIO
At the beginning of 1996 the Fund was largely composed of defensive coupon
bonds, many of which had short calls. As the year progressed, we systematically
took profits by selling these short call bonds since the market in general
appeared uneasy. We then invested these funds in discount bonds with very good
structural characteristics. This has provided the Fund with a more favorable
balance of premium bonds and discount bonds and further allowed the Fund to
achieve the necessary balance as we moved through the first half of the year.
The duration of the Fund has remained relatively unchanged. Our primary task
this year has focused on the protection of principal, enhancing liquidity, and
the distribution of a high level of tax exempt income to our shareholders.
Our thought moving forward is to continue with the theme of maintaining a
balance within the portfolio. While we are mindful of the risks associated with
additional declines, we believe that much of the market correction is behind us
and we will operate in a relative range. We are further encouraged by the recent
market moves to higher levels. It remains to be seen, however, how the market
reacts to the upcoming presidential elections as we close in on the end of the
calendar year.
Included in this report is a series of detailed statements about your
Series' holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund and
in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
August 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price at the end of the period in the case of Class A shares or the
net asset value per share at the end of the period in the case of Class B and
Class C shares.
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES Y 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER INSURED
MUNICIPAL BOND FUND, CALIFORNIA SERIES CLASS A SHARES AND CLASS B SHARES AND
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
[Exhibit A:
$11,475
Lehman Brothers
Municipal Bond Index*
Dollars
$10,760
Premier Insured Municipal Bond Fund, California Series (Class B Shares)
$10,600
Premier Insured Municipal Bond Fund, California Series (Class A Shares)
*Source: Lehman Brothers]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
______________________________ _____________________________
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 7/31/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 7/31/96 Redemption Redemption*
____________________ _______________ __________________ ____________________ ___________ ___________
<S> <C> <C> <C> <C> <C>
1 Year 7.77% 2.96% 1 Year 7.30% 4.30%
From Inception (8/19/93) 3.60 1.99 From Inception (8/19/93) 3.13 2.51
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
______________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming Charge Upon
PERIOD ENDED 7/31/96 No Redemption Redemption**
____________________ ________ _________
From Inception (12/4/95) (0.07)% (1.05%)
</TABLE>
Past performance is not predictive of future performance. The above graph
compares a $10,000 investment made in each of the Class A shares and Class B
shares of Premier Insured Municipal Bond Fund, California Series on 8/19/93
(Inception Date) to a $10,000 investment made in the Lehman Brothers Municipal
Bond Index on that date. For comparative purposes, the value of the Index on
8/31/93 is used as the beginning value on 8/19/93. All dividends and capital
gain distributions are reinvested. Performance for Class C shares will vary from
the performance of Class A and Class B shares shown above due to differences in
charges and expenses. The Series invests primarily in California municipal
securities, which are insured as to the timely payment of principal and interest
by recognized insurers of municipal securities. The Series performance shown in
the line graph takes into account the maximum initial sales charge on Class A
shares and the maximum contingent deferred sales charge on Class B shares and
all other applicable fees and expenses. Unlike the Series, the Lehman Brothers
Municipal Bond Index is an unmanaged total return performance benchmark for the
long-term, investment grade, geographically unrestricted tax exempt bond market,
calculated by using municipal bonds selected to be representative of the
municipal market overall; however, the bonds in the Index generally are not
insured. The Index does not take into account charges, fees and other expenses.
Also, unlike the Series which principally limits investments to California
municipal obligations, the Index is not State specific. These factors can
contribute to the Index potentially outperforming the Series. Further
information relating to Series performance, including expense reimbursements, if
applicable, is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report. Neither the Series shares nor the market value of
its portfolio securities are insured.
*The maximum contingent deferred sales charge for Class B shares is 3%
and is reduced to 0% after five years.
** The maximum contingent deferred sales charge for Class C shares is
1% for shares redeemed within one year of the date of purchase.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
STATEMENT OF INVESTMENTS JULY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
______ ______
<S> <C> <C>
Burbank Wastewater Treatment, Revenue 5.50%, 6/1/2025 (Insured; FGIC)....... $ 500,000 $ 481,435
California 6.60%, 2/1/2010 (Insured; AMBAC)................................. 400,000 449,076
California Health Facilities Financing Authority, Revenue
(Children's Hospital of San Diego) 6.50%, 7/1/2020 (Insured; MBIA)...... 200,000 218,816
California Maritime Infrastructure Authority, Airport Revenue
(San Diego Unified Port District Airport) 5%, 11/1/2020 (Insured; AMBAC) 250,000 224,263
California State University, Fresno Association Inc., Revenue
Auxiliary Residence (Student Project) 6.25%, 2/1/2017 (Insured; MBIA)... 300,000 310,308
Campbell Unified School District 6.25%, 8/1/2019 (Insured; MBIA)........... 500,000 515,935
Central Coast Water Authority, Revenue (Water Project Regional Facilities)
6.60%, 10/1/2022 (Insured; AMBAC)....................................... 200,000 215,580
East Bay Municipal Utility District, Wastewater Treatment System Revenue,
Refunding
5.55%, 6/1/2020 (Insured; AMBAC)........................................ 200,000 188,892
Fairfield, Water Revenue, Refunding 5.375%, 4/1/2017 (Insured; AMBAC)....... 250,000 239,455
Fresno, Sewer Revenue (Fowler Avenue Project) 6.25%, 8/1/2011 (Insured; AMBAC) 500,000 523,465
Port Oakland, Port Revenue 6.50%, 11/1/2016 (Insured; MBIA)................. 200,000 209,522
Riverside County Transportation Commission, Sales Tax Revenue
5.75%, 6/1/2008 (Insured; AMBAC)........................................ 300,000 313,746
San Diego County, COP, Regional Communications System
5.50%, 8/15/2013 (Insured; AMBAC)....................................... 400,000 392,408
San Francisco, City and County Airports Commission, International Airport
Revenue:
6.25%, 5/1/2012 (Insured; FGIC)......................................... 150,000 156,432
5.70%, 5/1/2026 (Insured; MBIA) ........................................ 500,000 489,090
San Mateo County Joint Powers Financing Authority, LR (Capital Projects)
5.75%, 7/15/2017 (Insured; FSA)......................................... 200,000 200,074
University of California, Revenues, Hospital-UC Davis Medical Center
5.75%, 7/1/2012 (Insured; AMBAC)........................................ 500,000 508,825
Victor, Elementary School District, Zero Coupon, 6/1/2015 (Insured; MBIA)... 1,000,000 329,050
_____
TOTAL INVESTMENTS (cost $5,848,930)......................................... $5,966,372
=====
</TABLE>
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
SUMMARY OF ABBREVIATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation FSA Financial Security Assurance
COP Certificate of Participation LR Lease Revenue
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
Insurance Corporation
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (A) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_________ _______ __________ ____________
AAA Aaa AAA 100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Fitch currently provides creditworthiness information for a limited
number of investments.
(b) At July 31, 1996, 41.9% of the Series' net assets are insured by
AMBAC and 28.4% are insured by MBIA.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $5,848,930)-see statement....................................... $5,966,372
Cash.................................................................... 747,178
Receivable for investment securities sold............................... 460,286
Interest receivable..................................................... 104,083
Receivable for shares of Beneficial Interest subscribed................. 20,000
Prepaid expenses........................................................ 27,779
Due from The Dreyfus Corporation........................................ 573
_____
7,326,271
LIABILITIES:
Due to Distributor...................................................... $ 3,251
Accrued expenses and other liabilities.................................. 30,663 33,914
____ _____
NET ASSETS.................................................................. $7,292,357
=====
REPRESENTED BY:
Paid-in capital......................................................... $7,269,619
Accumulated net realized (loss) on investments.......................... (94,704)
Accumulated net unrealized appreciation on investments-Note 3........... 117,442
_____
NET ASSETS at value......................................................... $7,292,357
=====
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 264,003
=====
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 345,382
=====
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 84
=====
NET ASSET VALUE per share:
Class A Shares
($3,156,089 / 264,003 shares)......................................... $11.95
=====
Class B Shares
($4,135,263 / 345,382 shares)......................................... $11.97
=====
Class C Shares
($1,005.40 / 84 shares)............................................... $11.97
=====
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $388,923
EXPENSES:
Management fee-Note 2(a).............................................. $ 39,781
Shareholder servicing costs-Note 2(c)................................. 33,012
Distribution fees-Note 2(b)........................................... 19,357
Organization expenses................................................. 11,040
Prospectus and shareholders' reports.................................. 6,167
Registration fees..................................................... 5,049
Custodian fees........................................................ 1,127
Professional fees..................................................... 979
Trustees' fees and expenses-Note 2(d)................................. 877
Miscellaneous......................................................... 7,367
_____
TOTAL EXPENSES.................................................. 124,756
Less-reduction in management fee due to undertakings-Note 2(a)........ 19,320
_____
NET EXPENSES.................................................... 105,436
____-
INVESTMENT INCOME-NET........................................... 283,487
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized (loss) on investments...................................... $ (83,146)
Net unrealized appreciation on investments.............................. 334,442
_____
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.................. 251,296
____-
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $534,783
=====
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
______________________________
1995 1996
______ ______
OPERATIONS:
Investment income-net................................................... $ 317,088 $ 283,487
Net realized (loss) on investments...................................... (11,558) (83,146)
Net unrealized appreciation on investments for the year................. 67,281 334,442
______ ______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 372,811 534,783
______ ______
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (157,005) (141,525)
Class B shares........................................................ (160,083) (141,941)
Class C shares........................................................ - (21)
______ ______
TOTAL DIVIDENDS................................................... (317,088) (283,487)
______ ______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 2,395,751 239,140
Class B shares........................................................ 1,798,008 748,137
Class C shares........................................................ _ 1,000
Dividends reinvested:
Class A shares........................................................ 52,720 42,498
Class B shares........................................................ 99,361 106,237
Class C shares........................................................ _ 21
Cost of shares redeemed:
Class A shares........................................................ (441,885) (780,827)
Class B shares........................................................ (771,920) (633,353)
______ ______
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... 3,132,035 (277,147)
______ ______
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 3,187,758 (25,851)
NET ASSETS:
Beginning of year....................................................... 4,130,450 7,318,208
______ ______
End of year............................................................. $7,318,208 $7,292,357
====== ======
</TABLE>
<TABLE>
<CAPTION>
SHARES
_____________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________________ ____________
YEAR ENDED JULY 31, YEAR ENDED JULY 31, YEAR ENDED
____________________________ ____________________________ JULY 31,
CAPITAL SHARE TRANSACTIONS: 1995 1996 1995 1996 1996*
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Shares sold............. 211,279 19,872 158,840 62,126 82
Shares issued for dividends
reinvested............ 4,664 3,545 8,762 8,868 2
Shares redeemed......... (38,340) (64,393) (69,492) (53,525) _
______ ______ ______ ______ ______
NET INCREASE
(DECREASE) IN SHARES
OUTSTANDING..... 177,603 (40,976) 98,110 17,469 84
====== ====== ====== ====== ======
*From December 4, 1995 (commencement of initial offering) to July 31,
1996.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES
________________-________________
YEAR ENDED JULY 31,
________________-________________
PER SHARE DATA: 1994(1) 1995 1996
______ ____ _____
<S> <C> <C> <C>
Net asset value, beginning of year.................................... $12.50 $11.56 $11.56
______ ______ ____
INVESTMENT OPERATIONS:
Investment income-net................................................. .62 .64 .50
Net realized and unrealized gain (loss) on investments................ (.94) ._ .39
____ ____ ____
TOTAL FROM INVESTMENT OPERATIONS.................................... (.32) .64 .89
____ ____ ____
DISTRIBUTIONS;
Dividends from investment income-net.................................. (.62) (.64) (.50)
____ ____ ____
Net asset value, end of year.......................................... $11.56 $11.56 $11.95
==== ==== ====
TOTAL INVESTMENT RETURN(2)................................................ (2.79%)(3) 5.80% 7.77%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .- .08% 1.18%
Ratio of net investment income to average net assets.................. 5.30%(3) 5.56% 4.20%
Decrease reflected in above expense ratios due to undertakings
by the Manager (limited to the expense limitation provision
of the management agreement)........................................ 2.50%(3) 1.49% .26%
Portfolio Turnover Rate............................................... .- 3.86% 58.47%
Net Assets, end of year (000's Omitted)............................... $1,473 $3,525 $3,156
(1) From August 19, 1993 (commencement of operations) to July 31, 1994.
(2) Exclusive of sales load.
(3) Annualized.
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Series' financial statements.
CLASS B SHARES CLASS C SHARES
______________ ______________ _________
YEAR ENDED
YEAR ENDED JULY 31, JULY 31,
____________________________
PER SHARE DATA: 1994(1) 1995 1996 1996(2)
______ _____ _____ ______
Net asset value, beginning of year...................... $12.50 $11.57 $11.57 $12.24
______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net................................... .56 .58 .44 .26
Net realized and unrealized gain (loss) on investments.. (.93) .- .40 (.27)
_____ ____ _____ ____
TOTAL FROM INVESTMENT OPERATIONS...................... (.37) .58 .84 (.01)
_____ _____ _____ ____
DISTRIBUTIONS;
Dividends from investment income-net.................... (.56) (.58) (.44) (.26)
_____ _____ _____ _____
Net asset value, end of year............................ $11.57 $11.57 $11.97 $11.97
==== ==== ==== ====
TOTAL INVESTMENT RETURN(3).................................. (3.20%)(4) 5.27% 7.30% (.11%)(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................. .50%(4) .57% 1.70% 2.04%(4)
Ratio of net investment income to average net assets.... 4.78%(4) 5.10% 3.66% 3.19%(4)
Decrease reflected in above expense ratios due to undertakings
by the Manager (limited to the expense limitation provision
of the management agreement).......................... 2.50%(4) 1.55% .27% 1.21%(4)
Portfolio Turnover Rate................................. .- 3.86% 58.47% 58.47%
Net Assets, end of year (000's Omitted)................. $2,658 $3,793 $4,135 $1
(1) From August 19, 1993 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier Insured Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering six
series including the California Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State personal income taxes to the extent consistent with the
preservation of capital. The Dreyfus Corporation ("Manager ") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $17,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to July 31, 1996. The carryover
does not include net realized securities losses from November 1, 1995 through
July 31, 1996 which are treated, for Federal income tax purposes, as arising in
fiscal 1997. If not applied, the carryover expires in fiscal 2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. The most stringent state
expense limitation applicable to the Series presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the value of the Series' average daily net assets in accordance with California
"blue sky" regulations. However, the Manager had undertaken from August 1, 1995
through September 28, 1995, to reduce the management fee and reimburse such
excess expenses paid by the Series, to the extent that the Series' aggregate
expenses (exclusive of certain expenses as described above) exceeded specified
annual percentages of the Series' average daily net assets. The Manager has
currently undertaken from September 29, 1995 through September 30, 1996, to
reduce the management fee and reimburse such excess expenses paid by the Series,
to the extent that the Series' aggregate annual expenses (excluding 12b-1
distribution plan fees and certain expenses as described above) exceed an annual
rate of 1.25% of the value of the Series' average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to $19,320
during the year ended July 31, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $258 during the year ended July 31, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the period ended July 31, 1996, $19,352 was
charged to the Series for the Class B shares and $5 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the period ended July 31, 1996, $8,404, $9,676 and $2
were charged to the Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $2,214 during the period ended July 31,
1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended July 31, 1996 amounted to
$3,725,154 and $4,391,372 , respectively.
At July 31, 1996, accumulated net unrealized appreciation on investments
was $117,442, consisting of $139,052 gross unrealized appreciation and $21,610
gross unrealized depreciation.
At July 31, 1996, 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).
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier Insured Municipal Bond Fund,
California Series (one of the Series constituting the Premier Insured Municipal
Bond Fund) as of July 31, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier Insured Municipal Bond Fund, California Series at July 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
September 4, 1996
PREMIER INSURED MUNICIPAL BOND FUND, CALIFORNIA SERIES
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended July 31,
1996 as "exempt-interest dividends" (not subject to regular Federal and, for
individuals who are California residents, California personal income taxes).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997.
PREMIER INSURED MUNICIPAL
BOND FUND, CALIFORNIA SERIES
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 076/629AR967
[Dreyfus lion/2hres logo]
Annual Report
Premier Insured
Municipal Bond Fund
California Series
July 31, 1996
<PAGE>
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier Insured
Municipal Bond Fund, Connecticut Series. For its annual reporting period ended
July 31, 1996, your Series produced a total return, including bond price changes
and interest income, of 5.01% for Class A shares, 4.40% for Class B shares and,
since their inception on December 4, 1995, -.87% for Class C shares.* Income
dividends, exempt from Federal and State of Connecticut personal income taxes,
of approximately $.613 per share for Class A shares, $.546 per share for Class B
shares and $.332 per share for Class C shares, were paid to shareholders.** This
is equivalent to a tax-free annualized distribution rate per share of 4.50% for
Class A shares, 4.20% for Class B shares and 3.88% for Class C shares.
THE ECONOMY
Strong second-quarter growth, a tightening labor market and signs of upward
pressure on wages have, in the words of Chairman Alan Greenspan, placed the
Federal Reserve Board (the "Fed") in a state of "heightened surveillance"
regarding signs of potentially higher inflation. So far, inflation reports have
been benign. Through July, the Consumer Price Index rose 3.0% for the preceding
12 months, generally consistent with its trend over the past several years.
Wholesale prices have been similarly well-behaved while commodity prices have
been in decline since early spring. As favorable as these reports have been, the
Fed looks deeper into the economy for signs of strain that could result in
increased inflation. Before the Fed began its last round of interest rate
increases in early 1994, there was little actual evidence of inflation.
Investor fears that the Fed would raise short-term interest rates resulted
in a rise in long-term interest rates of a full percentage point since January.
Ironically, this rise might have stayed the Fed's hand from being more
aggressive. The effect of the rise in interest rates on consumer spending and
housing, according to one growing view, may contribute to a moderation of
economic growth over the second half of the year. Yet, little evidence of a
potential slowdown has emerged so far. Higher mortgage rates have not tempered
growth in the housing market and construction starts of new homes are at their
highest level since April 1994. Retail sales growth remains solid despite rises
in consumer installment debt and credit card delinquencies. On the manufacturing
side of the economy, industrial production continues to gain without any sign of
strain to keep up with demand. Capacity utilization (83.2% of potential output
at midyear) remains below the 85% level that most economists believe indicates a
potential for inflationary bottlenecks. Still, we remain alert to signs of
inflationary pressures that might trigger a rise in interest rates.
MARKET ENVIRONMENT
The municipal market experienced a dramatic decline beginning in the first
quarter of 1996. Precipitating this decline was the surprising growth in
employment and brisk increase in retail sales. The market reaction to the growth
in these numbers was swift and punitive. In a matter of weeks, interest rates as
measured by long-maturity U.S. Government bonds rose from below 6% to above 7%-a
rise of about 16% in yield. This negative price action pulled municipals down in
value, albeit to a somewhat lesser extent. Inflation, however, has yet to show
any troubling rise with staying power. Each harmful statistic indicating a
return to inflation has been followed by data suggesting a slowing economy and a
falling or stable inflationary trend.
Beginning in April, the market began to stabilize in this new, lower
trading range. Recently, the market moved out of this range to the upside-a
positive development. While we are pleased to see this movement to higher price
levels, the market remains vulnerable to further downward pressure should
further economic strength appear. Economic weakness, on the other hand, would
prove beneficial to long-term security prices, relieving immediate fears of
renewed inflation. On a positive note, the municipal market continues to benefit
from lower supplies of new issues and less discussion of a flat tax, both of
which had produced price weakness in prior periods.
THE PORTFOLIO
We entered 1996 aggressively positioned with a long-duration portfolio. Our
expectation was that the economy, and therefore inflation, would remain subdued.
We expected the market to respond primarily to the continued flow of low
inflationary data. With this rate expectation and structure, the portfolio was
more vulnerable to the downturn which occurred.
We have not altered the structure of the portfolio since the downturn in
March. We still have an aggressive structure-poised to benefit should the
inflationary fears prove unsubstantiated. We are further encouraged by the
recent market moves to the higher levels mentioned previously.
While mindful of the risks of additional declines, we believe that much of
the market correction is behind us. We are ready to take strong defensive action
should the market begin to decline again. A first warning of such a move would
come with a decline back to the market lows experienced in June.
Our primary tasks-to earn a high level of current income to the extent
consistent with the preservation of capital, while maintaining the highest
levels of credit quality-continue to guide our portfolio management decisions.
Included in this report is a series of detailed statements about your
Series' holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Series
and in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
August 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price at the end of the period in the case of Class A shares or the net
asset value per share at the end of the period in the case of Class B and Class
C shares.
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES JULY 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER INSURED
MUNICIPAL BOND FUND, CONNECTICUT SERIES CLASS A SHARES AND CLASS B SHARES AND
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
[Exhibit A:
Dollars
$11,739
Lehman Brothers
Municipal Bond Index*
$11,354
Premier Insured Municipal Bond Fund, Connecticut Series (Class B Shares)
$11,162
Premier Insured Municipal Bond Fund, Connecticut Series (Class A Shares)
*Source: Lehman Brothers]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
______________________________ _____________________________
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 7/31/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 7/31/96 Redemption Redemption*
____________________ _____________ __________________ ____________________ ______ _________
<S> <C> <C> <C> <C> <C>
1 Year 5.01% 0.29% 1 Year 4.40% 1.40%
From Inception (5/4/94) 7.18 5.00 From Inception (5/4/94) 6.63 5.81
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
______________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming Charge Upon
PERIOD ENDED 7/31/96 No Redemption Redemption**
_____________________ ________ _________
From Inception (12/4/95) (0.87)% (1.84%)
</TABLE>
Past performance is not predictive of future performance. The above graph
compares a $10,000 investment made in each of the Class A shares and Class B
shares of Premier Insured Municipal Bond Fund, Connecticut Series on 5/4/94
(Inception Date) to a $10,000 investment made in the Lehman Brothers Municipal
Bond Index on that date. For comparative purposes, the value of the Index on
4/30/94 is used as the beginning value on 5/4/94. All dividends and capital gain
distributions are reinvested. Performance for Class C shares will vary from the
performance of Class A and Class B shares shown above due to differences in
charges and expenses. The Series invests primarily in Connecticut municipal
securities, which are insured as to the timely payment of principal and interest
by recognized insurers of municipal securities. The Series performance shown in
the line graph takes into account the maximum initial sales charge on Class A
shares and the maximum contingent deferred sales charge on Class B shares and
all other applicable fees and expenses. Unlike the Series, the Lehman Brothers
Municipal Bond Index is an unmanaged total return performance benchmark for the
long-term, investment grade, geographically unrestricted tax exempt bond market,
calculated by using municipal bonds selected to be representative of the
municipal market overall; however, the bonds in the Index generally are not
insured. The Index does not take into account charges, fees and other expenses.
Also, unlike the Series which principally limits investments to Connecticut
municipal obligations, the Index is not State specific. These factors can
contribute to the Index potentially outperforming the Series. Further
information relating to Series performance, including expense reimbursements, if
applicable, is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report. Neither the Series shares nor the market value of
its portfolio securities are insured.
*The maximum contingent deferred sales charge for Class B shares is 3%
and is reduced to 0% after five years.
** The maximum contingent deferred sales charge for Class C shares is
1% for shares redeemed within one year of the date of purchase.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS JULY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_______ ______
<S> <C> <C>
Cheshire:
5.80%, 8/15/2010 (Insured; FGIC)........................................ $ 500,000 $ 515,215
5.85%, 8/15/2011 (Insured; FGIC)........................................ 675,000 696,121
Columbia:
5.75%, 4/1/2014 (Insured; MBIA)......................................... 320,000 325,459
5.75%, 4/1/2015 (Insured; MBIA)......................................... 320,000 324,173
Connecticut:
Airport Revenue, Refunding 7.20%, 10/1/1997 (Insured; FGIC)............. 220,000 227,918
COP (Middletown Courthouse Facilities Project)
5.90%, 12/15/2001 (Insured; MBIA)..................................... 250,000 265,237
Special Tax Obligation Revenue (Transportation Infrastructure)
5.65%, 4/1/2013 (Insured; FGIC)....................................... 1,500,000 1,501,965
Connecticut Development Authority:
Governmental LR 6.60%, 6/15/2014 (Insured; MBIA)........................ 350,000 379,925
Health Care Revenue (Masonic) 6.50%, 8/1/2020 (Insured; AMBAC).......... 250,000 261,932
Water Facility Revenue, Refunding:
(Bridgeport Hydraulic) 5.60%, 6/1/2028 (Insured; MBIA)................ 700,000 671,384
(Connecticut Water Co. Project) 5.875%, 9/1/2022 (Insured; AMBAC)..... 250,000 247,027
Connecticut Health and Educational Facilities Authority, Revenue:
(Bridgeport Hospital) 6.625%, 7/1/2018 (Insured; MBIA).................. 700,000 746,025
(Connecticut College) 6.625%, 7/1/2011 (Insured; MBIA).................. 200,000 217,184
(Danbury Hospital):
6.50%, 7/1/2014 (Insured; MBIA)....................................... 250,000 265,737
5.375%, 7/1/2023 (Insured; AMBAC)..................................... 2,000,000 1,875,760
(Day Kimball Hospital) 5.375%, 7/1/2026 (Insured; FSA).................. 1,000,000 935,220
(Lawrence and Memorial Hospital) 6.25%, 7/1/2022 (Insured; MBIA)........ 285,000 310,590
(Loomis Chaffee School Project):
6%, 7/1/2015 (Insured; MBIA).......................................... 715,000 731,338
6%, 7/1/2025 (Insured; MBIA).......................................... 1,000,000 1,013,130
(Manchester Memorial Hospital) 5.75%, 7/1/2022 (Insured; MBIA).......... 100,000 97,562
(Mansfield Nursing) 5.875%, 11/1/2012 (Insured; AMBAC).................. 500,000 510,860
(Middlesex Hospital) 6.25%, 7/1/2022 (Insured; MBIA).................... 1,000,000 1,020,870
(New Britain General Hospital):
6.125%, 7/1/2014 (Insured; AMBAC)..................................... 1,000,000 1,035,250
6%, 7/1/2024 (Insured; AMBAC)......................................... 200,000 200,804
(Newington Children's Hospital):
6.05%, 7/1/2010 (Insured; MBIA)....................................... 235,000 244,311
6.10%, 7/1/2011 (Insured; MBIA)....................................... 250,000 259,880
6.25%, 7/1/2015 (Insured; MBIA)....................................... 500,000 517,710
(Norwalk Hospital) 6.25%, 7/1/2022 (Insured; MBIA)...................... 260,000 268,076
(Nursing-Noble Horizon) 6%, 11/1/2022 (Insured; AMBAC).................. 500,000 501,880
(Refunding-Hospital of Saint Raphael) 6.625%, 7/1/2014 (Insured; AMBAC). 250,000 267,295
(Refunding-Sharon Health Care Project) 6.25%, 11/1/2021 (Insured; AMBAC) 500,000 516,175
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
Connecticut Health and Educational Facilities Authority, Revenue (continued):
(Saint Francis Hospital and Medical Center) 5%, 7/1/2023 (Insured; FGIC) $ 2,760,000 $ 2,425,184
Connecticut Housing Finance Authority
(Housing Mortgage Finance Program):
6.20%, 5/15/2012 (Insured; MBIA)...................................... 1,000,000 1,022,990
6.40%, 5/15/2015 (Insured; MBIA)...................................... 1,000,000 1,035,160
6.125%, 5/15/2018 (Insured; MBIA)..................................... 1,655,000 1,675,009
6.30%, 5/15/2024 (Insured; MBIA)...................................... 1,000,000 1,016,050
Derby 5.90%, 5/15/2010 (Insured; AMBAC)..................................... 615,000 643,856
East Hampton:
5.80%, 7/15/2010 (Insured; FGIC)........................................ 295,000 304,697
5.90%, 7/15/2011 (Insured; FGIC)........................................ 320,000 332,013
Meriden 5.50%, 11/15/2001 (Insured; MBIA)................................... 250,000 264,100
New Haven:
5.75%, 2/15/2012 (Insured; FGIC)........................................ 500,000 510,485
Air Rights Parking Facility Revenue 6.50%, 12/1/2015 (Insured; MBIA).... 500,000 535,925
Plainfield 5.80%, 8/1/2001 (Insured; MBIA).................................. 250,000 266,770
Regional School District Number 5:
5.90%, 1/15/2010 (Insured; MBIA)........................................ 280,000 290,223
5.90%, 1/15/2011 (Insured; MBIA)........................................ 320,000 330,582
Waterbury, Refunding 4.90%, 4/15/2002 (Insured; FGIC)....................... 280,000 281,711
Woodstock:
5.85%, 2/15/2009 (Insured; FGIC)........................................ 345,000 360,822
6%, 2/15/2013 (Insured; FGIC)........................................... 340,000 354,521
______
TOTAL INVESTMENTS (cost $27,911,704)........................................ $28,602,111
======
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LR Lease Revenue
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (A) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
________ _______ _________________ ____________
AAA Aaa AAA 100.0%
====
NOTES TO STATEMENT OF INVESTMENTS:
(a) Fitch currently provides creditworthiness information for a limited
number of investments.
(b) At July 31, 1996, 26.2% of the Series' net assets are insured by
FGIC and 49.2% are insured by MBIA.
(c) At July 31, 1996, the Series' had $11,999,189 (41.9% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $27,911,704)-see statement...................................... $28,602,111
Interest receivable..................................................... 311,319
Prepaid expenses........................................................ 8,032
______
28,921,462
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 13,869
Due to Distributor...................................................... 13,656
Due to Custodian........................................................ 218,471
Payable for shares of Beneficial Interest redeemed...................... 2,265
Accrued expenses and other liabilities.................................. 50,054 298,315
______ ______
NET ASSETS ................................................................ $28,623,147
======
REPRESENTED BY:
Paid-in capital......................................................... $27,869,122
Accumulated undistributed net realized gain on investments.............. 63,618
Accumulated net unrealized appreciation on investments-Note 3........... 690,407
______
NET ASSETS at value......................................................... $28,623,147
======
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 856,775
======
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,334,918
======
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 13,319
======
NET ASSET VALUE per share:
Class A Shares
($11,117,393 / 856,775 shares)........................................ $12.98
======
Class B Shares
($17,332,932 / 1,334,918 shares)...................................... $12.98
======
Class C Shares
($172,822 / 13,319 shares)............................................ $12.98
======
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $1,720,866
EXPENSES:
Management fee-Note 2(a).............................................. $165,914
Shareholder servicing costs-Note 2(c)................................. 101,772
Distribution fees-Note 2(b)........................................... 89,382
Auditing fees......................................................... 43,025
Legal fees............................................................ 12,607
Trustees' fees and expenses-Note 2(d)................................. 3,918
Registration fees..................................................... 3,812
Custodian fees........................................................ 3,370
Prospectus and shareholders' reports.................................. 2,596
Miscellaneous......................................................... 12,895
_____
TOTAL EXPENSES.................................................. 439,291
Less-reduction in management fee due to undertakings-Note 2(a)........ 36,681
_____
NET EXPENSES.................................................... 402,610
_____
INVESTMENT INCOME-NET........................................... 1,318,256
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $ 83,650
Net unrealized appreciation on investments.............................. 7,914
____-
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 91,564
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,409,820
=====
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
_______________________________
1995 1996
_______ ______
OPERATIONS:
Investment income-net................................................... $ 1,170,030 $ 1,318,256
Net realized gain (loss) on investments................................. (20,032) 83,650
Net unrealized appreciation on investments for the year................. 543,616 7,914
______ ______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 1,693,614 1,409,820
______ ______
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (586,262) (575,778)
Class B shares........................................................ (583,768) (740,873)
Class C shares........................................................ _ (1,605)
______ ______
TOTAL DIVIDENDS................................................... (1,170,030) (1,318,256)
______ ______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 6,196,536 1,488,845
Class B shares........................................................ 11,068,365 2,773,704
Class C shares........................................................ _- 171,568
Dividends reinvested:
Class A shares........................................................ 320,037 266,864
Class B shares........................................................ 359,096 483,988
Class C shares........................................................ _- 1,605
Cost of shares redeemed:
Class A shares........................................................ (2,682,798) (3,172,879)
Class B shares........................................................ (2,076,477) (2,544,794)
______ ______
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... 13,184,759 (531,099)
______ ______
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 13,708,343 (439,535)
NET ASSETS:
Beginning of year....................................................... 15,354,339 29,062,682
______ ______
End of year............................................................. $29,062,682 $28,623,147
====== ======
</TABLE>
<TABLE>
<CAPTION>
SHARES
____________________________________________________________________________
CLASS A CLASS B CLASS C
_______________________________ ________________________________ ______________
YEAR ENDED
YEAR ENDED JULY 31, YEAR ENDED JULY 31, JULY 31,
________________________________ ________________________________ ______________
1995 1996 1995 1996 1996*
_______ _______ _______ _______ _______
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C> <C> <C> <C>
Shares sold............ 490,513 114,141 875,988 212,187 13,193
Shares issued for dividends
reinvested........... 25,429 20,292 28,348 36,852 126
Shares redeemed........ (216,046) (239,044) (164,414) (195,936) _
_______ _______ _______ _______ ______
NET INCREASE
(DECREASE) IN SHARES
OUTSTANDING.... 299,896 (104,611) 739,922 53,103 13,319
======= ======= ======= ======= =======
*From December 4, 1995 (commencement of initial offering) to July 31,
1996.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES
_________________________________
YEAR ENDED JULY 31,
_________________________________
PER SHARE DATA: 1994(1) 1995 1996
______ ______ ______
<S> <C> <C> <C>
Net asset value, beginning of year.................................... $12.50 $12.76 $12.95
_______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net................................................. .19 .72 .61
Net realized and unrealized gain on investments....................... .26 .19 .03
_____ ____ ____
TOTAL FROM INVESTMENT OPERATIONS.................................... .45 .91 .64
____ ____ ____
DISTRIBUTIONS;
Dividends from investment income-net.................................. (.19) (.72) (.61)
___- ___- ___-
Net asset value, end of year.......................................... $12.76 $12.95 $12.98
==== ==== ====
TOTAL INVESTMENT RETURN(2)................................................ 3.61%(3) 7.43% 5.01%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .- .07% 1.03%
Ratio of net investment income to average net assets.................. 5.17%(4) 5.66% 4.66%
Decrease reflected in above expense ratios due to undertakings
by the Manager (limited to the expense limitation provision
of the management agreement)........................................ 2.50%(4) 1.10% .13%
Portfolio Turnover Rate............................................... .- 5.33% 30.21%
Net Assets, end of year (000's Omitted)............................... $8,438 $12,451 $11,117
(1) From May 5, 1994 (commencement of operations) to July 31, 1994.
(2) Exclusive of sales load.
(3) Not annualized.
(4) Annualized.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
____________________________ _________
YEAR ENDED
YEAR ENDED JULY 31, JULY 31,
____________________________
PER SHARE DATA: 1994(1) 1995 1996 1996(2)
_____ _____ _____ ______
<S> <C> <C> <C> <C>
Net asset value, beginning of year...................... $12.50 $12.76 $12.96 $13.43
______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net................................... .17 .65 .55 .33
Net realized and unrealized gain (loss) on investments.. .26 .20 .02 (.45)
____ _____ _____ ____
TOTAL FROM INVESTMENT OPERATIONS...................... .43 .85 .57 (.12)
____ _____ _____ ____
DISTRIBUTIONS;
Dividends from investment income-net.................... (.17) (.65) (.55) (.33)
_____ _____ _____ ____
Net asset value, end of year............................ $12.76 $12.96 $12.98 $12.98
==== ==== ==== ====
TOTAL INVESTMENT RETURN(3).................................. 3.49%(4) 6.95% 4.40% (1.32%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................. .50%(5) .58% 1.54% 1.98%(5)
Ratio of net investment income to average net assets.... 4.77%(5) 5.11% 4.15% 3.94%(5)
Decrease reflected in above expense ratios due to undertakings
by the Manager (limited to the expense limitation provision
of the management agreement).......................... 2.50%(5) 1.09% .12% .-
Portfolio Turnover Rate................................. .- 5.33% 30.21% 30.21%
Net Assets, end of year (000's Omitted)................. $6,916 $16,612 $17,333 $173
(1) From May 5, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4) Not annualized.
(5) Annualized.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier Insured Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering six
series including the Connecticut Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State personal income taxes to the extent consistent with the
preservation of capital. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. The most stringent state
expense limitation applicable to the Series presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the value of the Series' average daily net assets in accordance with California
"blue sky" regulations. However, the Manager had undertaken from August 1, 1995
through September 28, 1995, to reduce the management fee and reimburse such
excess expenses paid by the Series, to the extent that the Series' aggregate
expenses (exclusive of certain expenses as described above) exceeded specified
annual percentages of the value of the Series' average daily net assets. The
Manager has currently undertaken from September 29, 1995 through September 30,
1996, to reduce the management fee and reimburse such excess expenses paid by
the Series, to the extent that the Series' aggregate annual expenses (excluding
12b-1 distribution plan fees and certain expenses as described above) exceed an
annual rate of 1.25% of the value of the Series' average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to $36,681
during the year ended July 31, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the period ended July 31, 1996, $89,077 was
charged to the Series for the Class B shares and $305 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the period ended July 31, 1996, $30,775, $44,538 and $102
were charged to the Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $9,453 during the period ended July 31,
1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended July 31, 1996 amounted to
$9,341,682 and $8,972,919, respectively.
At July 31, 1996, accumulated net unrealized appreciation on investments
was $690,407, consisting of $808,051 gross unrealized appreciation and $117,644
gross unrealized depreciation.
At July 31, 1996, 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).
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier Insured Municipal Bond Fund,
Connecticut Series (one of the Series constituting the Premier Insured Municipal
Bond Fund) as of July 31, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier Insured Municipal Bond Fund, Connecticut Series at July 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
September 4, 1996
PREMIER INSURED MUNICIPAL BOND FUND, CONNECTICUT SERIES
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended July 31,
1996 as "exempt-interest dividends" (not subject to regular Federal and, for
individuals who are Connecticut residents, Connecticut personal income taxes).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997.
PREMIER INSURED MUNICIPAL
BOND FUND, CONNECTICUT SERIES
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 129/377AR967
[Dreyfus lion/2hres logo]
Annual Report
Premier Insured
Municipal Bond Fund
Connecticut Series
July 31, 1996
<PAGE>
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier Insured
Municipal Bond Fund, Florida Series. For its annual reporting period ended July
31, 1996, your Series earned a total return, including bond price changes and
interest income, of 6.48% for Class A shares, 5.89% for Class B shares and,
since inception on December 4, 1995, -1.00% for Class C shares.* Income
dividends, exempt from Federal personal income taxes, of approximately $.629 per
share for Class A shares, $.564 per share for Class B shares and $.341 per share
for Class C shares, were paid to shareholders.** This is equivalent to a
tax-free annualized distribution rate per share of 4.51% for Class A shares,
4.24% for Class B shares and 3.89% for Class C shares.
THE ECONOMY
Strong second-quarter growth, a tightening labor market and signs of upward
pressure on wages have, in the words of its Chairman Alan Greenspan, placed the
Federal Reserve Board (the "Fed") in a state of heightened surveillance
regarding signs of potentially higher inflation. So far, inflation reports have
been benign. Through July 31, the Consumer Price Index rose 3.0% for the
preceding 12 months, generally consistent with its trend over the past several
years. Wholesale prices have been similarly well-behaved , while commodity
prices have been in decline since early spring. As favorable as these reports
have been, the Fed looks deeper into the economy for signs of strain that could
result in increased inflation. Before the Fed began its last round of interest
rate increases in early 1994, there was little actual evidence of inflation.
Investor fears that the Fed would raise short-term interest rates resulted
in a rise in long-term interest rates of a full percentage point since January.
Ironically, this rise might have stayed the Fed's hand from being more
aggressive. The rise in interest rates, according to one growing view, may
contribute to a moderation of growth of consumer spending and housing, and so of
economic growth generally over the second half of the year. Yet, little evidence
of a potential slowdown has emerged so far. Higher mortgage rates have not
tempered growth in the housing market and construction starts of new homes are
at their highest level since April 1994. Retail sales growth remains solid
despite rises in consumer installment debt and credit card delinquencies. On the
manufacturing side of the economy, industrial production continues to gain
without any sign of strain to keep up with demand. Capacity utilization (83.2%
of potential output at midyear) remains below the 85% level that most economists
believe indicates a potential for inflationary bottlenecks. Still, we remain
alert to signs of inflationary pressures that might trigger further increases in
interest rates.
MARKET ENVIRONMENT
The municipal market experienced a dramatic decline beginning in the first
quarter of 1996. Precipitating this decline was the surprising growth in
employment and brisk increase in retail sales. The market reaction to the growth
in these numbers was swift. In a matter of weeks, interest rates as measured by
long-maturity U.S. Government bonds rose from below 6% to above 7%-a rise of
about 16% in yield. This negative price action pulled municipals down in value,
albeit to a somewhat lesser extent. Inflation, however, has yet to show any
troubling rise with staying power. Each harmful statistic indicating a return to
inflation has been followed by data suggesting a slowing economy and a falling
or stable inflationary trend.
Beginning in April, the market began to stabilize in the new, lower trading
range. More recently, the market has moved out of this range to the upside-a
positive development. While we are pleased to see this movement to higher price
levels, the market remains vulnerable to further downward pressure should
further economic strength appear. Economic weakness, on the other hand, would
prove beneficial to long-term security prices, relieving immediate fears of
renewed inflation. On a positive note, the municipal market continues to benefit
from lower supplies of new issues and less discussion of a flat tax, both of
which had produced price weakness in prior periods.
THE PORTFOLIO
We entered 1996 aggressively positioned with a long-duration portfolio. Our
expectation was that the economy, and therefore inflation, would remain subdued.
Furthermore we expected the market to respond primarily to the continued flow of
low inflationary data. With this rate expectation and structure, the portfolio
was more vulnerable to the downturn which occurred.
We have not altered the structure of the portfolio since the downturn in
March. We still have an aggressive structure-poised to benefit should the
inflationary fears prove unsubstantiated. We are further encouraged by the
recent market moves to the higher levels mentioned previously.
While mindful of the risks of additional declines, we believe that much of
the market correction is behind us. We are ready to take strong defensive action
should the market begin to decline again.
Our primary tasks-to earn a high level of current income to the extent
consistent with the preservation of capital, while maintaining the highest
levels of credit quality-continue to guide our portfolio management decisions.
Included in this report is a series of detailed statements about your
Series's holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund and
in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
August 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price at the end of the period in the case of Class A shares or the
net asset value per share at the end of the period in the case of Class B and
Class C shares.
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES JULY 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER INSURED
MUNICIPAL BOND FUND, FLORIDA SERIES CLASS A SHARES AND CLASS B SHARES AND THE
LEHMAN BROTHERS MUNICIPAL BOND INDEX
[Exhibit A:
Dollars
$11,739
Lehman Brothers
Municipal Bond Index*
$11,634
Premier Insured
Municipal Bond Fund,
Florida Series
(Class B Shares)
$11,427
Premier Insured
Municipal Bond Fund,
Florida Series
(Class A Shares)
*Source: Lehman Brothers]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
______________________________ _____________________________-
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 7/31/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 7/31/96 Redemption Redemption*
____________________ _______________ __________________ ____________________ ___________ _______________
<S> <C> <C> <C> <C> <C>
1 Year 6.48% 1.66 % 1 Year 5.89% 2.89%
From Inception (5/3/94) 8.30 6.11 From Inception (5/3/94) 7.77 6.96
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
______________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming No Charge Upon
PERIOD ENDED 7/31/96 Redemption Redemption**
_______________________ ________ _________
From Inception (12/4/95) (1.00)% (1.96)%
</TABLE>
Past performance is not predictive of future performance. The above graph
compares a $10,000 investment made in each of the Class A shares and Class B
shares of Premier Insured Municipal Bond Fund, Florida Series on 5/3/94
(Inception Date) to a $10,000 investment made in the Lehman Brothers Municipal
Bond Index on that date. For comparative purposes, the value of the Index on
4/30/94 is used as the beginning value on 5/3/94. All dividends and capital gain
distributions are reinvested. Performance for Class C shares will vary from the
performance of Class A and Class B shares shown above due to differences in
charges and expenses. The Series invests primarily in Florida municipal
securities, which are insured as to the timely payment of principal and interest
by recognized insurers of municipal securities. The Series performance shown in
the line graph takes into account the maximum initial sales charge on Class A
shares and the maximum contingent deferred sales charge on Class B shares and
all other applicable fees and expenses. Unlike the Series, the Lehman Brothers
Municipal Bond Index is an unmanaged total return performance benchmark for the
long-term, investment grade, geographically unrestricted tax exempt bond market,
calculated by using municipal bonds selected to be representative of the
municipal market overall; however, the bonds in the Index generally are not
insured. The Index does not take into account charges, fees and other expenses.
Also, unlike the Series which principally limits investments to Florida
municipal obligations, the Index is not State specific. These factors can
contribute to the Index potentially outperforming the Series. Further
information relating to Series performance, including expense reimbursements, if
applicable, is contained in the Financial Highlights section of the Prospectus
and elsewhere in this report. Neither the Series shares nor the market value of
its portfolio securities are insured.
*The maximum contingent deferred sales charge for Class B shares is 3%
and is reduced to 0% after five years.
** The maximum contingent deferred sales charge for Class C shares is
1% for shares redeemed within one year of the date
of purchase.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS JULY 31,1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.6% AMOUNT VALUE
_______ ______
<S> <C> <C>
Boca Raton Community Redevelopment Agency, Tax Increment Revenue
(Mizner Park Project) 5.875%, 3/1/2013 (Insured; FGIC).................. $ 250,000 $ 254,265
Brevard County, IDR (NUI Corp. Project) 6.40%, 10/1/2024 (Insured; AMBAC)... 1,000,000 1,052,170
Broward County Tourist Development, Special Tax Revenue, Refunding
(Convention Center) 5.60%, 10/1/2009 (Insured; AMBAC)................... 350,000 355,530
Celebration Community Development District, Special Assessment
6.10%, 5/1/2016 (Insured; MBIA)......................................... 500,000 516,185
Collier County, Capital Improvement Revenue, Refunding
6%, 10/1/2012 (Insured; MBIA)........................................... 1,000,000 1,042,810
Collier County Water - Sewer District, Water Revenue, Refunding
5%, 7/1/2016 (Insured; FGIC)............................................ 1,000,000 920,030
Dade County:
Aviation Revenue 6.125%, 10/1/2020 (Insured; MBIA)...................... 1,000,000 1,018,840
Public Facilities Revenue, Refunding (Jackson Memorial Hospital)
5.625%, 6/1/2018 (Insured; MBIA)...................................... 250,000 244,448
Water and Sewer Systems Revenue 5.50%, 10/1/2025 (Insured; FGIC)........ 2,500,000 2,410,175
Dade County Housing Finance Authority, MFMR, Refunding
(Lincoln Fields Apartments) 6.25%, 7/1/2024 (Insured; MBIA)............. 600,000 606,672
Dade County School Board, COP 5.50%, 5/1/2025 (Insured; AMBAC).............. 1,475,000 1,420,292
Escambia County, Sales Tax Revenue, Refunding 5.80%, 1/1/2015 (Insured; FGIC) 500,000 501,785
Florida Board of Education, Capital Outlay 5.80%, 6/1/2024 (Insured; FGIC).. 1,000,000 1,002,990
Florida Correctional Privatization Commission, COP:
(Bay County Correctional Facility Project) 6%, 8/1/2015 (Insured; MBIA). 250,000 253,280
(Glades County Correctional Facility) 6%, 8/1/2014 (Insured; MBIA)...... 350,000 368,809
Florida Department of General Services Division, Facilities Management
Revenue
6.125%, 9/1/2023 (Insured; AMBAC)....................................... 1,000,000 1,031,540
Florida Division of Bond Finance Department, General Services Revenues:
(Department of Environmental-Preservation 2000)
5.75%, 7/1/2013 (Insured; AMBAC)...................................... 1,000,000 1,013,140
(Department of Natural Resources-Preservation 2000)
5.80%, 7/1/2013 (Insured; FSA)........................................ 700,000 708,239
Florida Housing Finance Agency, Single Family Mortgage
6.65%, 7/1/2026 (Insured; MBIA)......................................... 1,820,000 1,869,559
Florida Municipal Power Agency, Revenue (All Requirements Power Supply
Project)
5.10%, 10/1/2025 (Insured; AMBAC)....................................... 1,000,000 907,860
Florida Turnpike Authority, Turnpike Revenue, Refunding
5%, 7/1/2019 (Insured; FGIC)............................................ 1,000,000 904,510
Fort Pierce Utilities Authority, Revenue, Refunding
5.25%, 10/1/2016 (Insured; AMBAC)....................................... 500,000 476,360
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31,1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
Gainesville, Guaranteed Entitlement Revenue, Refunding
5.50%, 8/1/2017 (Insured; AMBAC)........................................ $ 750,000 $ 736,718
Hillsborough County Aviation Authority, Revenue (Tampa International
Airport):
5.375%, 10/1/2023 (Insured; FGIC)....................................... 1,000,000 938,900
Refunding 5.50%, 10/1/2013 (Insured; FGIC).............................. 500,000 493,675
Hillsborough County Industrial Development Authority:
IDR (University Community Hospital) 5.80%, 8/15/2024 (Insured; MBIA).... 500,000 498,270
PCR, Refunding (Tampa Electric Company Project)
6.25%, 12/1/2034 (Insured; MBIA)...................................... 1,000,000 1,036,480
Hillsborough County Port District, Special Revenue, Refunding
(Tampa Port Authority) 6%, 6/1/2020 (Insured; FSA)...................... 1,000,000 1,003,460
Hollywood, Water and Sewer Revenue, Refunding 5.50%, 10/1/2015 (Insured; FGIC) 500,000 492,685
Jacksonville Health Facilities Authority, HR
(Memorial Regional Rehabilitation Center Project)
6.625%, 5/1/2022 (Insured; MBIA)........................................ 500,000 557,360
Lee County, Tourist Development Tax Revenue, Refunding
5.625%, 10/1/2011 (Insured; FGIC)....................................... 250,000 253,102
Miami Health Facilities Authority, Health Facilities Revenue, Refunding
(Mercy Hospital Project) 5.125%, 8/15/2020 (Insured; AMBAC)............. 200,000 182,246
Miramar:
Public Service Tax Revenue 6.15%, 10/1/2024 (Insured; FGIC)............. 1,000,000 1,026,970
Water Improvement Assessment Revenue 5.60%, 10/1/2024 (Insured; FGIC)... 200,000 195,686
Okeechobee, Water and Sewer Revenue
6.50%, 1/1/2017 (Insured; MBIA, Prerefunded 1/1/2003) (a)............... 1,220,000 1,359,568
Orange County, Tourist Development Tax Revenue:
6.50%, 10/1/2019 (Insured; AMBAC)....................................... 1,000,000 1,064,650
6%, 10/1/2024 (Insured; MBIA)........................................... 200,000 202,790
Orlando and Orange County Expressway Authority, Expressway Revenue,
Refunding:
(Junior Lien) 5.25%, 7/1/2019 (Insured; FGIC)........................... 250,000 234,027
(Senior Lien) 5.50%, 7/1/2018 (Insured; FGIC)........................... 200,000 196,368
Osceola County School Board, COP 5.75%, 6/1/2014 (Insured; AMBAC)........... 250,000 250,630
Polk County School Board, COP (Master Lease Program)
5.875%, 1/1/2015 (Insured; MBIA)........................................ 1,000,000 1,013,120
Seminole County School Board, COP 6.125%, 7/1/2019 (Insured; MBIA).......... 325,000 333,232
Tampa, Revenue (Allegany Health Systems - Saint Joseph)
6.50%, 12/1/2023 (Insured; MBIA)........................................ 1,000,000 1,058,120
Tampa Sports Authority, Sales Tax Revenue (Tampa Bay Arena Project)
5.75%, 10/1/2025 (Insured; MBIA)........................................ 1,000,000 1,013,410
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31,1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
Venice, Utility Revenue, Refunding 5.50%, 7/1/2014 (Insured; MBIA).......... $ 500,000 $ 495,200
Volusia County, Sales Tax Improvement Revenue 5.75%, 10/1/2013 (Insured; MBIA) 500,000 505,635
______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $32,676,810).................... $34,021,791
======
SHORT-TERM MUNICIPAL INVESTMENTS-1.4%
U.S. RELATED;
Puerto Rico Commonwealth, Government Development Bank, VRDN
3.25% (LOC; Credit Suisse) (b,c) (cost $500,000)........................ $ 500,000 $ 500,000
======
TOTAL INVESTMENTS-100.0% (cost $33,176,810)................................. $34,521,791
======
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance MFMR Multi-Family Mortgage Revenue
HR Hospital Revenue PCR Pollution Control Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
________ _______ ________________ ___________________
AAA Aaa AAA 98.6%
F-1+ & F-1 MIG1, VMIG1 & P1 SP1 & A1 1.4
____
100.0%
====
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Securities payable on demand. The interest rate, which is subject to
change, is based upon prime rates or an index of market interest rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) At July 31, 1996, 28.3% of the Series' net assets are insured by
FGIC and 40.3% are insured by MBIA.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $33,176,810)-see statement...................................... $34,521,791
Interest receivable..................................................... 484,464
Prepaid expenses........................................................ 9,252
______
35,015,507
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 16,522
Due to Distributor...................................................... 14,971
Due to Custodian........................................................ 36,606
Payable for shares of Beneficial Interest redeemed...................... 165,747
Accrued expenses and other liabilities.................................. 55,926 289,772
______ ______
NET ASSETS ................................................................ $34,725,735
======
REPRESENTED BY:
Paid-in capital......................................................... $32,850,681
Accumulated undistributed net realized gain on investments.............. 530,073
Accumulated net unrealized appreciation on investments-Note 3........... 1,344,981
______
NET ASSETS at value......................................................... $34,725,735
======
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 1,243,656
======
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,371,066
======
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 75
======
NET ASSET VALUE per share:
Class A Shares
($16,515,051 / 1,243,656 shares)...................................... $13.28
======
Class B Shares
($18,209,688 / 1,371,066 shares)...................................... $13.28
======
Class C Shares
($996 / 75 shares).................................................... $13.28
======
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $2,240,447
EXPENSES:
Management fee-Note 2(a).............................................. $213,934
Shareholder servicing costs-Note 2(c)................................. 133,574
Distribution fees-Note 2(b)........................................... 99,886
Auditing fees......................................................... 64,062
Legal fees............................................................ 11,548
Prospectus and shareholders' reports.................................. 8,732
Trustees' fees and expenses-Note 2(d)................................. 4,783
Custodian fees........................................................ 4,189
Registration fees..................................................... 2,472
Miscellaneous......................................................... 13,800
____-
TOTAL EXPENSES.................................................... 556,980
Less-reduction in management fee due to undertakings-Note 2(a)........ 55,951
____-
NET EXPENSES...................................................... 501,029
_____
INVESTMENT INCOME-NET............................................. 1,739,418
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $544,013
Net unrealized appreciation on investments.............................. 234,447
____-
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 778,460
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $2,517,878
=====
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
________________________________
1995 1996
_______ ______
OPERATIONS:
Investment income-net................................................... $ 1,778,772 $ 1,739,418
Net realized gain (loss) on investments................................. (13,940) 544,013
Net unrealized appreciation on investments for the year................. 1,006,080 234,447
______ ______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 2,770,912 2,517,878
______ ______
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (908,374) (892,605)
Class B shares........................................................ (870,398) (846,788)
Class C shares........................................................ _- (25)
______ ______
TOTAL DIVIDENDS................................................... (1,778,772) (1,739,418)
______ ______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 10,509,582 1,538,063
Class B shares........................................................ 10,076,918 1,792,518
Class C shares........................................................ _- 1,000
Dividends reinvested:
Class A shares........................................................ 247,303 263,295
Class B shares........................................................ 207,188 213,415
Class C shares........................................................ _- 25
Cost of shares redeemed:
Class A shares........................................................ (2,204,011) (5,172,213)
Class B shares........................................................ (1,737,649) (5,505,499)
______ ______
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS................................ 17,099,331 (6,869,396)
______ ______
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 18,091,471 (6,090,936)
NET ASSETS:
Beginning of year....................................................... 22,725,200 40,816,671
______ ______
End of year............................................................. $40,816,671 $34,725,735
====== ======
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________
CLASS A CLASS B CLASS C
___________________________ ____________________________ __________
YEAR ENDED
YEAR ENDED JULY 31, YEAR ENDED JULY 31, JULY 31,
___________________________ ____________________________
1995 1996 1995 1996 1996*
_______ _______ ______ _______ _______
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C> <C> <C> <C>
Shares sold............ 835,533 115,320 788,466 134,247 73
Shares issued for dividends
reinvested........... 19,412 19,649 16,298 15,934 2
Shares redeemed........ (173,967) (386,026) (141,512) (406,174) _-
______- ______- ______ ______- ______-
NET INCREASE
(DECREASE) IN SHARES
OUTSTANDING.... 680,978 (251,057) 663,252 (255,993) 75
======= ======= ======= ======= =======
*From December 4, 1995 (commencement of initial offering) to July 31,
1996.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Series' financial statements.
CLASS A SHARES
__________________________________
YEAR ENDED JULY 31,
__________________________________
PER SHARE DATA: 1994(1) 1995 1996
<S> <C> <C> <C>
Net asset value, beginning of year.................................... $12.50 $12.79 $13.07
INVESTMENT OPERATIONS:
Investment income-net................................................. .19 .73 .63
Net realized and unrealized gain on investments....................... .29 .28 .21
____ _____ ____
TOTAL FROM INVESTMENT OPERATIONS.................................... .48 1.01 .84
____ _____ ____
DISTRIBUTIONS;
Dividends from investment income-net.................................. (.19) (.73) (.63)
_____ _____ ____
Net asset value, end of year.......................................... $12.79 $13.07 $13.28
==== ==== ====
TOTAL INVESTMENT RETURN(2)................................................ 3.83%(3) 8.24% 6.48%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .- .09% 1.04%
Ratio of net investment income to average net assets.................. 5.11%(4) 5.72% 4.70%
Decrease reflected in above expense ratios due to undertakings by the Manager 2.06%(4) 1.02% .14%
Portfolio Turnover Rate............................................... .- .78% 12.70%
Net Assets, end of year (000's Omitted)............................... $10,405 $19,541 $16,515
(1) From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) Exclusive of sales load.
(3) Not annualized.
(4) Annualized.
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
CLASS B SHARES CLASS C SHARES
____________________________ _________
YEAR ENDED
YEAR ENDED JULY 31, JULY 31,
____________________________
PER SHARE DATA: 1994(1) 1995 1996 1996(2)
____ ______ ______ _______
Net asset value, beginning of year..................... $12.50 $12.78 $13.08 $13.76
______ _______ _______ _______
INVESTMENT OPERATIONS:
Investment income-net................................... .17 .67 .56 .34
Net realized and unrealized gain (loss) on investments.. .28 .30 .20 (.48)
____ _____ _____ _____
TOTAL FROM INVESTMENT OPERATIONS...................... .45 .97 .76 (.14)
____ _____ _____ ____
DISTRIBUTIONS;
Dividends from investment income-net.................... (.17) (.67) (.56) (.34)
_____ _____ _____ ____
Net asset value, end of year............................ $12.78 $13.08 $13.28 $13.28
==== ==== ==== ====
TOTAL INVESTMENT RETURN(3).................................. 3.62%(4) 7.86% 5.89% (1.51%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................. .50%(5) .59% 1.52% 1.86%(5)
Ratio of net investment income to average net assets.... 4.62%(5) 5.20% 4.23% 3.78%(5)
Decrease reflected in above expense ratios due to
undertakings by the Manager........................... 2.02%(5) 1.00% .15% .-
Portfolio Turnover Rate................................. .- 78% 12.70% 12.70%
Net Assets, end of year (000's Omitted)................. $12,320 $21,275 $18,210 $1
(1) From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4) Not annualized.
(5) Annualized.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier Insured Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering six
series, including the Florida Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State personal income taxes to the extent consistent with the
preservation of capital. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. The most stringent state
expense limitation applicable to the Series presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the value of the Series' average daily net assets in accordance with California
"blue sky" regulations. However, the Manager had undertaken from August 1, 1995
through September 28, 1995 to reduce the management fee and reimburse such
excess expenses paid by the Series, to the extent that the Series' aggregate
expenses (exclusive of certain expenses as described above) exceeded specified
annual percentages of the Series' average daily net assets. The Manager has
currently undertaken from September 29, 1995 through September 30, 1996 to
reduce the management fees paid by, or reimburse such excess expenses of the
Series, to the extent that the Series' aggregate annual expenses (excluding
12b-1 distribution plan fees and certain expenses as described above) exceed an
annual rate of 1.25% of the value of the Series' average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to $55,951
during the year ended July 31, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the period ended July 31, 1996, $99,881 was
charged to the Series for the Class B shares and $5 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the period ended July 31, 1996, $47,301, $49,940 and $2
were charged to Class A, B and C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $11,171 during the period ended July 31,
1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended July 31, 1996, amounted
to $4,910,070 and $11,354,360, respectively.
At July 31, 1996, accumulated net unrealized appreciation on investments
was $1,344,981, consisting of $1,468,556 gross unrealized appreciation and
$123,575 gross unrealized depreciation.
At July 31, 1996, 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).
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER INSURED MUNICIPAL BOND FUND, FLORIDA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier Insured Municipal Bond Fund,
Florida Series (one of the series constituting the Premier Insured Municipal
Bond Fund) as of July 31, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier Insured Municipal Bond Fund, Florida Series at July 31, 1996, the
results of its operations for the period then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
September 4, 1996
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended July 31,
1996 as "exempt-interest dividends" (not subject to regular Federal income tax
and, for individuals who are Florida residents, not subject to taxation by
Florida).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997.
PREMIER INSURED MUNICIPAL
BOND FUND, FLORIDA SERIES
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 378/379AR967
[Dreyfus lion/2hres logo]
Annual Report
Premier Insured
Municipal Bond Fund
Florida Series
July 31, 1996
<PAGE>
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier Insured
Municipal Bond Fund, New Jersey Series. For its annual reporting period ended
July 31, 1996, your Series produced a total return, including bond price changes
and interest income, of 5.31% for Class A shares, 4.79% for Class B shares and,
since their inception on December 4, 1995, -.80% for Class C shares.* Income
dividends, exempt from Federal and State of New Jersey personal income taxes, of
approximately $.588 per share for Class A shares, $.523 per share for Class B
shares and $.323 per share for Class C shares were paid to shareholders.** This
is equivalent to a tax-free annualized distribution rate per share of 4.38% for
Class A shares, 4.08% for Class B shares and 3.83% for Class C shares.
THE ECONOMY
Strong second-quarter growth, a tightening labor market and signs of upward
pressure on wages have, in the words of Chairman Alan Greenspan, placed the
Federal Reserve Board (the "Fed") in a state of "heightened surveillance"
regarding signs of potentially higher inflation. So far, inflation reports have
been benign. Through July 31, the Consumer Price Index rose 3.0 % for the
preceding 12 months, generally consistent with its trend over the past several
years. Wholesale prices have been similarly well-behaved , while commodity
prices have been in decline since early spring. As favorable as these reports
have been, the Fed looks deeper into the economy for signs of strain that could
result in increased inflation. Before the Fed began its last round of interest
rate increases in early 1994, there was little actual evidence of inflation.
Investor fears that the Fed would raise short-term interest rates resulted
in a rise in long-term interest rates of a full percentage point since January.
Ironically, this rise might have stayed the Fed's hand from being more
aggressive. The effect of the rise in interest rates on consumer spending and
housing, according to one growing view, may contribute to a moderation of
economic growth over the second half of the year. Yet, little evidence of a
potential slowdown has emerged so far. Higher mortgage rates have not tempered
growth in the housing market and construction starts of new homes are at their
highest level since April 1994. Retail sales growth remains solid despite rises
in consumer installment debt and credit card delinquencies. On the manufacturing
side of the economy, industrial production continues to gain without any sign of
strain to keep up with demand. Capacity utilization (83.2% of potential output
at midyear) remains below the 85% level that most economists believe indicates a
potential for inflationary bottlenecks. Still, we remain alert to signs of
inflationary pressures that might trigger further increases in interest rates.
MARKET ENVIRONMENT
The municipal market experienced a dramatic decline beginning in the first
quarter of 1996. Precipitating this decline was the surprising growth in
employment and brisk increase in retail sales. The market reaction to the growth
in these numbers was swift and punitive. In a matter of weeks, interest rates as
measured by long-maturity U.S. Government bonds rose from below 6% to above 7%-a
rise of about 16% in yield. This negative price action pulled municipals down in
value, albeit to a somewhat lesser extent. Inflation, however, has yet to show
any troubling rise with staying power. Each harmful statistic indicating a
return to inflation has been followed by data suggesting a slowing economy and a
falling or stable inflationary trend.
Beginning in April, the market began to stabilize in this new, lower
trading range. Recently, the market moved out of this range to the upside-a
positive development. While we are pleased to see this movement to higher price
levels, the market remains vulnerable to further downward pressure should
further economic strength appear. Economic weakness, on the other hand, would
prove beneficial to long-term security prices, relieving immediate fears of
renewed inflation. On a positive note, the municipal market continues to benefit
from lower supplies of new issues and less discussion of a flat tax, both of
which had produced price weakness in prior periods.
THE PORTFOLIO
We entered 1996 aggressively positioned with a long-duration portfolio. Our
expectation was that the economy, and therefore inflation, would remain subdued.
We expected the market to respond primarily to the continued flow of low
inflationary data. With this rate expectation and structure, the portfolio was
more vulnerable to the downturn which occurred.
We have not altered the structure of the portfolio since the downturn in
March. We still have an aggressive structure-poised to benefit should the
inflationary fears prove unsubstantiated. We are further encouraged by the
recent market moves to the higher levels mentioned previously.
While mindful of the risks of additional declines, we believe that much of
the market correction is behind us. We are ready to take strong defensive action
should the market begin to decline again.
Our primary tasks-to earn a high level of current income to the extent
consistent with the preservation of capital, while maintaining the highest
levels of credit quality-continue to guide our portfolio management decisions.
Included in this report is a series of detailed statements about your
Series' holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the
Series and in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
August 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares and Class C shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price at the end of the period in the case of Class A shares or the net
asset value per share at the end of the period in the case of Class B and Class
C shares.
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES JULY 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER INSURED
MUNICIPAL BOND FUND, NEW JERSEY SERIES CLASS A SHARES AND CLASS B SHARES AND
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
[Exhibit A]
$11,739
Lehman Brothers
Municipal Bond Index*
Dollars
$11,175
Premier Insured
Municipal Bond Fund,
New Jersey Series
(Class B Shares)
$10,984
Premier Insured
Municipal Bond Fund,
New Jersey Series
(Class A Shares)
*Source: Lehman Brothers
[Exhibit A]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
__________________________________________________________________ _____________________________________________________
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 7/31/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 7/31 Redemption Redemption*
___________________ ________ _________________ _________________ ___________ _______________
<S> <C> <C> <C> <C> <C>
1 Year 5.31% 0.56 % 1 Year 4.79% 1.79%
From Inception (5/3/94) 6.42 4.26 From Inception (5/3/94) 5.89 5.06
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
___________________________________________________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming No Charge Upon
PERIOD ENDED 7/31/96 Redemption Redemption**
___________- ________ _________
From Inception (12/4/95) (0.80)% (1.77)%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in each of the Class A
shares and Class B shares of Premier Insured Municipal Bond Fund, New Jersey
Series on 5/3/94 (Inception Date) to a $10,000 investment made in the Lehman
Brothers Municipal Bond Index on that date. For comparative purposes, the
value of the Index on 4/30/94 is used as the beginning value on 5/3/94. All
dividends and capital gain distributions are reinvested. Performance for
Class C shares will vary from the performance of Class A and Class B shares
shown above due to differences in charges and expenses.
The Series invests primarily in New Jersey municipal securities, which are
insured as to the timely payment of principal and interest by recognized
insurers of municipal securities. The Series performance shown in the line
graph takes into account the maximum initial sales charge on Class A shares
and the maximum contingent deferred sales charge on Class B shares and all
other applicable fees and expenses. Unlike the Series, the Lehman Brothers
Municipal Bond Index is an unmanaged total return performance benchmark for
the long-term, investment grade, geographically unrestricted tax exempt bond
market, calculated by using municipal bonds selected to be representative of
the municipal market overall; however, the bonds in the Index generally are
not insured. The Index does not take into account charges, fees and other
expenses. Also, unlike the Series which principally limits investments to New
Jersey municipal obligations, the Index is not State specific. These factors
can contribute to the Index potentially outperforming the Series. Further
information relating to Series performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report. Neither the Series shares nor the
market value of its portfolio securities are insured.
*The maximum contingent deferred sales charge for Class B shares is 3%
and is reduced to 0% after five years.
** The maximum contingent deferred sales charge for Class C shares is
1% for shares redeemed within one year of the date
of purchase.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
STATEMENT OF INVESTMENTS JULY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-95.6% AMOUNT VALUE
___________ ___________
<S> <C> <C>
Board of Education of the Township of Montgomery
5.45%, 8/1/2018 (Insured; FGIC)......................................... $ 500,000 $ 488,420
Camden County Municipal Utilities Authority, Sewer Revenue, Refunding
5.125%, 7/15/2017 (Insured; FGIC)....................................... 500,000 466,525
Cape May County Industrial Pollution Control Financing Authority, Revenue
(Atlantic City Electric Co. Project)
7.20%, 11/1/2029 (Insured; MBIA)........................................ 800,000 902,496
Evesham Township Board of Education, COP
6.875%, 9/1/2011 (Insured; FGIC)........................................ 200,000 219,514
Gloucester Township Municipal Utilities Authority, Refunding
5.65%, 3/1/2018 (Insured; AMBAC)........................................ 200,000 200,610
Mercer County Improvement Authority, Solid Waste Revenue, Refunding
6.70%, 4/1/2013 (Insured; FGIC)......................................... 500,000 512,170
New Jersey Building Authority, State Building Revenue, Refunding
5%, 6/15/2017 (Insured; MBIA)........................................... 500,000 458,990
New Jersey Economic Development Authority, Revenue:
Market Transition Facility 5.80%, 7/1/2008 (Insured; MBIA)............. 350,000 361,736
Pollution Control (Public Service Electric and Gas) 6.40%, 5/1/2032 (Insured; MBIA) 365,000 379,304
(Rutgers State University - Civic Square)
6.10%, 7/1/2018 (Insured; AMBAC)...................................... 200,000 206,826
Water Facilities:
(Hackensack Water Co. Project)
Refunding 5.80%, 3/1/2024 (Insured; MBIA)......................... 350,000 351,382
(New Jersey American Water Co. Inc. Project)
6.875%, 11/1/2034 (Insured; FGIC)................................. 400,000 435,992
New Jersey Educational Facilities Authority, Revenue, Refunding:
(New Jersey Institute of Technology) 6%, 7/1/2024 (Insured; MBIA)....... 400,000 408,212
(Trenton State College):
6%, 7/1/2019 (Insured; AMBAC)......................................... 1,000,000 1,017,250
5.125%, 7/1/2024 (Insured; MBIA)...................................... 845,000 779,124
New Jersey Health Care Facilities Financing Authority, Revenue:
(General Hospital Center at Passaic) 6.75%, 7/1/2019 (Insured; FSA)..... 885,000 959,853
(Jersey Shore Medical Center) 6.25%, 7/1/2021 (Insured; AMBAC).......... 400,000 412,036
Refunding (Monmouth Medical Center):
6.25%, 7/1/2016 (Insured; CGIC)....................................... 250,000 258,855
6.25%, 7/1/2024 (Insured; CGIC)....................................... 200,000 207,084
(Saint Clares - Riverside Medical Center) 5.75%, 7/1/2014 (Insured; MBIA) 250,000 248,743
(Underwood Memorial Hospital) 5.70%, 7/1/2023 (Insured; AMBAC).......... 400,000 388,988
New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue:
6.20%, 10/1/2025 (Insured; MBIA)........................................ 450,000 448,749
6.375%, 10/1/2026 (Insured; MBIA)....................................... 230,000 232,424
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ __________
New Jersey Sports and Exposition Authority, Convention Center Luxury Tax Revenue,
Refunding 6%, 7/1/2012 (Insured; MBIA).................................. $ 500,000 $ 517,950
Passaic Valley Sewer Commissioner, Sewer System Refunding
5.75%, 12/1/2015 (Insured; AMBAC)....................................... 500,000 497,360
Passaic Valley Water Commission, Water Supply Revenue, Refunding
5%, 12/15/2022 (Insured; FGIC).......................................... 1,000,000 906,910
Port Authority of New York and New Jersey
5.20%, 7/15/2016 (Insured; AMBAC)....................................... 500,000 469,565
Salem County Industrial Pollution Control Financing Authority, Revenue,
Refunding (Atlantic City Electric) 6.15%, 6/1/2029 (Insured; FSA)....... 400,000 412,004
____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $12,985,938)...................................................... $13,149,072
=============
SHORT-TERM MUNICIPAL INVESTMENT-4.4%
U.S. RELATED;
Puerto Rico Electric Power Authority, Power Revenue 3.25% (Insured; FSA) (a)
(cost $600,000)......................................................... $ 600,000 $ 600,000
=============
TOTAL INVESTMENTS-100.0%
(cost $13,585,938)...................................................... $13,749,072
=============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guaranty Insurance Company
CGIC Capital Guaranty Insurance Company FSA Financial Security Assurance
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
Insurance Corporation
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (B) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ __________ ___________________
AAA Aaa AAA 100.0%
========
NOTES TO STATEMENT OF INVESTMENTS:
(a) Inverse Floater Security - the interest rate is subject to change
periodically.
(b) Fitch currently provides creditworthiness information for a limited
number of investments.
(c) At July 31, 1996, 36.0% of the Series' net assets are insured by
MBIA.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $13,585,938)-see statement...................................... $13,749,072
Cash.................................................................... 193,945
Interest receivable..................................................... 140,195
Receivable for shares of Beneficial Interest subscribed................. 94,998
Prepaid expenses........................................................ 7,171
__________
14,185,381
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 6,453
Due to Distributor...................................................... 6,631
Payable for shares of Beneficial Interest redeemed...................... 10,117
Accrued expenses........................................................ 34,317 57,518
__________ __________
NET ASSETS ................................................................ $14,127,863
===========
REPRESENTED BY:
Paid-in capital......................................................... $13,819,886
Accumulated undistributed net realized gain on investments.............. 144,843
Accumulated net unrealized appreciation on investments-Note 3........... 163,134
__________
NET ASSETS at value......................................................... $14,127,863
===========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 407,454
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 696,616
===========
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 473
===========
NET ASSET VALUE per share:
Class A Shares
($5,211,644 / 407,454 shares)......................................... $12.79
=======
Class B Shares
($8,910,172 / 696,616 shares)......................................... $12.79
=======
Class C Shares
($6,047 / 473 shares)................................................. $12.78
=======
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $767,023
EXPENSES:
Management fee-Note 2(a).............................................. $ 74,073
Shareholder servicing costs-Note 2(c)................................. 52,216
Distribution fees-Note 2(b)........................................... 41,682
Auditing fees......................................................... 14,745
Legal fees............................................................ 4,204
Registration fees..................................................... 3,996
Prospectus and shareholders' reports.................................. 2,861
Custodian fees........................................................ 1,987
Trustees' fees and expenses-Note 2(d)................................. 1,781
Miscellaneous......................................................... 8,036
___________
TOTAL EXPENSES.................................................... 205,581
Less-reduction in management fee due to undertakings-Note 2(a)........ 10,732
___________
NET EXPENSES...................................................... 194,849
____________
INVESTMENT INCOME-NET............................................. 572,174
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $150,113
Net unrealized (depreciation) on investments............................ (76,768)
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:.................. 73,345
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $645,519
=============
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
__________________________
1995 1996
_________ _________
OPERATIONS:
Investment income-net................................................... $ 371,134 $ 572,174
Net realized gain (loss) on investments................................. (5,270) 150,113
Net unrealized appreciation (depreciation) on investments for the year.. 221,333 (76,768)
____________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 587,197 645,519
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (176,046) (234,320)
Class B shares........................................................ (195,088) (337,766)
Class C shares........................................................ __ (88)
____________ ____________
TOTAL DIVIDENDS................................................... (371,134) (572,174)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 3,591,050 977,750
Class B shares........................................................ 5,060,548 3,045,391
Class C shares........................................................ __ 6,000
Dividends reinvested:
Class A shares........................................................ 97,360 134,625
Class B shares........................................................ 81,648 176,239
Class C shares........................................................ __ 88
Cost of shares redeemed:
Class A shares........................................................ (1,128,148) (927,041)
Class B shares........................................................ (776,686) (1,191,057)
____________ ____________
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS...... 6,925,772 2,221,995
____________ ____________
TOTAL INCREASE IN NET ASSETS.................................... 7,141,835 2,295,340
NET ASSETS:
Beginning of year....................................................... 4,690,688 11,832,523
____________ ____________
End of year............................................................. $11,832,523 $14,127,863
============= =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
______________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ___________________________ ____________
YEAR ENDED
YEAR ENDED JULY 31, YEAR ENDED JULY 31, JULY 31,
_____________________________ ___________________________ ____________
1995 1996 1995 1996 1996*
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 291,207 76,280 406,583 236,936 466
Shares issued for dividends
reinvested........... 7,845 10,439 6,544 13,678 7
Shares redeemed........ (91,442) (71,136) (62,636) (93,155) __
_______ _______ _______ _______ _______
NET INCREASE IN
SHARES
OUTSTANDING.... 207,610 15,583 350,491 157,459 473
======== ========= ========= =========== ===========
*From December 4, 1995 (commencement of initial offering) through July
31, 1996.
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
CLASS A SHARES
___________________________________
YEAR ENDED JULY 31,
___________________________________
PER SHARE DATA: 1994(1) 1995 1996
______ _____ _____
Net asset value, beginning of year.................................... $12.50 $12.58 $12.71
______ _____ _____
INVESTMENT OPERATIONS:
Investment income-net................................................. .18 .71 .59
Net realized and unrealized gain on investments....................... .08 .13 .08
______ _____ _____
TOTAL FROM INVESTMENT OPERATIONS.................................... .26 .84 .67
______ _____ _____
DISTRIBUTIONS;
Dividends from investment income-net.................................. (.18) (.71) (.59)
______ _____ _____
Net asset value, end of year.......................................... $12.58 $12.71 $12.79
======= ======= =======
TOTAL INVESTMENT RETURN(2)................................................ 2.07%(3) 7.01% 5.31%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... .- .10% 1.14%
Ratio of net investment income to average net assets.................. 5.25%(4) 5.60% 4.55%
Decrease reflected in above expense ratios
due to undertakings by the Manager (limited to the
expense limitation provision of the management agreement)........... 2.50%(4) 1.35% .08%
Portfolio Turnover Rate............................................... .- 43.48% 28.14%
Net Assets, end of year (000's Omitted)............................... $2,318 $4,981 $5,212
(1) From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) Exclusive of sales load.
(3) Not annualized.
(4) Annualized.
</TABLE>
See notes to financial statements.
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
_________________________________ ____________
YEAR ENDED
YEAR ENDED JULY 31, JULY 31,
__________________________________
PER SHARE DATA: 1994(1) 1995 1996 1996(2)
______ ______ ______ ________
<S> <C> <C> <C> <C>
Net asset value, beginning of year...................... $12.50 $12.58 $12.71 $13.21
______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net................................... .16 .65 .52 .32
Net realized and unrealized gain (loss) on investments.. .08 .13 .08 (.43)
______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS...................... .24 .78 .60 (.11)
______ ______ ______ ______
DISTRIBUTIONS;
Dividends from investment income-net.................... (.16) (.65) (.52) (.32)
______ ______ ______ ______
Net asset value, end of year............................ $12.58 $12.71 $12.79 $12.78
======= ========= ====== ========
TOTAL INVESTMENT RETURN(3).................................. 1.94%(4) 6.48% 4.79% (1.21%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................. .50%(5) .61% 1.63% 1.95%(5)
Ratio of net investment income to average net assets.... 4.69%(5) 5.00% 4.04% 3.68%(5)
Decrease reflected in above expense ratios
due to undertakings by the Manager
(limited to the expense limitation provision of
the management agreement)............................. 2.50%(5) 1.29% .08% .02%(5)
Portfolio Turnover Rate................................. .- 43.48% 28.14% 28.14%
Net Assets, end of year (000's Omitted)................. $2,373 $6,852 $8,910 $6
(1) From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4) Not annualized.
(5) Annualized.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier Insured Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering six
series, including the New Jersey Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State personal income taxes to the extent consistent with the
preservation of capital. The Dreyfus Corporation ("Manager ") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. The most stringent state
expense limitation applicable to the Series presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the average value of the Series' net assets in accordance with California "blue
sky" regulations. However, the Manager had undertaken from August 1, 1995
through September 17, 1995, to reduce the management fee and reimburse such
excess expenses paid by the Series, to the extent that the Series' aggregate
expenses (exclusive of certain expenses as described above) exceeded specified
annual percentages of the Series' average daily net assets. The Manager has
currently undertaken from September 18, 1995 through September 30, 1996, to
reduce the management fees paid by, or reimburse such excess expenses of the
Series, to the extent that the Series aggregate annual expenses (excluding 12b-1
distribution plan fees and certain expenses as described above) exceed an annual
rate of 1.25% of the value of the Series' average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to $10,732
during the year ended July 31, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the period ended July 31, 1996, $41,664 was
charged to the Series for the Class B shares and $18 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the period ended July 31, 1996, $12,831, $20,832 and $6
were charged to Class A, B and C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc., a
wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. Such compensation amounted to $4,564 during the period ended July 31,
1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended July 31, 1996, amounted
to $6,826,707 and $3,554,605 respectively.
At July 31, 1996, accumulated net unrealized appreciation on investments
was $163,134, consisting of $310,495 gross unrealized appreciation and $147,361
gross unrealized depreciation.
At July 31, 1996, 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).
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier Insured Municipal Bond Fund,
New Jersey Series (one of the Series constituting the Premier Insured Municipal
Bond Fund) as of July 31, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier Insured Municipal Bond Fund, New Jersey Series at July 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
September 4, 1996
PREMIER INSURED MUNICIPAL BOND FUND, NEW JERSEY SERIES
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended July 31,
1996 as "exempt-interest dividends" (not subject to regular Federal and, for
individuals who are New Jersey residents, New Jersey personal income taxes).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997.
PREMIER INSURED MUNICIPAL
BOND FUND, NEW JERSEY SERIES
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 380/381AR967
Annual Report
Premier Insured
Municipal Bond Fund
New Jersey Series
July 31, 1996
[lion/hres logo]
<PAGE>
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier Insured
Municipal Bond Fund, New York Series. For its annual reporting period ended July
31, 1996, your Series produced a total return, including bond price changes and
interest income, of 5.97% for Class A shares, 5.35% for Class B shares and,
since their inception on December 4, 1995, - 1.00% for Class C shares.* Income
dividends, exempt from Federal, State and City of New York personal income
taxes, of approximately $.593 per share for Class A shares, $.527 per share for
Class B shares and $.325 per share for Class C shares were paid to
shareholders.** This is equivalent to a tax-free annualized distribution rate
per share of 4.38% for Class A shares, 4.07% for Class B shares and 3.81% for
Class C shares.
THE ECONOMY
Strong second-quarter growth, a tightening labor market and signs of upward
pressure on wages have, in the words of Chairman Alan Greenspan, placed the
Federal Reserve Board (the "Fed") in a state of "heightened surveillance"
regarding signs of potentially higher inflation. So far, inflation reports have
been benign. Through July 31, the Consumer Price Index rose 3.0% for the
preceding 12 months, generally consistent with its trend over the past several
years. Wholesale prices have been similarly well-behaved , while commodity
prices have been in decline since early spring. As favorable as these reports
have been, the Fed looks deeper into the economy for signs of strain that could
result in increased inflation. Before the Fed began its last round of interest
rate increases in early 1994, there was little actual evidence of inflation.
Investor fears that the Fed would raise short-term interest rates resulted
in a rise in long-term interest rates of a full percentage point since January.
Ironically, this rise might have stayed the Fed's hand from being more
aggressive. The effect of the rise in interest rates on consumer spending and
housing, according to one growing view, may contribute to a moderation of
economic growth over the second half of the year. Yet, little evidence of a
potential slowdown has emerged so far. Higher mortgage rates have not tempered
growth in the housing market and construction starts of new homes are at their
highest level since April 1994. Retail sales growth remains solid despite rises
in consumer installment debt and credit card delinquencies. On the manufacturing
side of the economy, industrial production continues to gain without any sign of
strain to keep up with demand. Capacity utilization (83.2% of potential output
at midyear) remains below the 85% level that most economists believe indicates a
potential for inflationary bottlenecks. Still, we remain alert to signs of
inflationary pressures that might trigger a rise in interest rates.
MARKET ENVIRONMENT
The municipal market experienced a dramatic decline beginning in the first
quarter of 1996. Precipitating this decline was the surprising growth in
employment and brisk increase in retail sales. The market reaction to the growth
in these numbers was swift and punitive. In a matter of weeks, interest rates as
measured by long-maturity U.S. Government bonds rose from below 6% to above 7%-a
rise of about 16% in yield. This negative price action pulled municipals down in
value, albeit to a somewhat lesser extent. Inflation, however, has yet to show
any troubling rise with staying power. Each harmful statistic indicating a
return to inflation has been followed by data suggesting a slowing economy and a
falling or stable inflationary trend.
Beginning in April, the market began to stabilize in this new, lower
trading range. Recently, the market moved out of this range to the upside-a
positive development. While we are pleased to see this movement to higher price
levels, the market remains vulnerable to further downward pressure should
further economic strength appear. Economic weakness, on the other hand, would
prove beneficial to long-term security prices, relieving immediate fears of
renewed inflation. On a positive note, the municipal market continues to benefit
from lower supplies of new issues and less discussion of a flat tax, both of
which had produced price weakness in prior periods.
THE PORTFOLIO
We entered 1996 aggressively positioned with a long-duration portfolio. Our
expectation was that the economy, and therefore inflation, would remain subdued.
We expected the market to respond primarily to the continued flow of low
inflationary data. With this rate expectation and structure, the portfolio was
more vulnerable to the downturn which occurred.
We have not altered the structure of the portfolio since the downturn in
March. We still have an aggressive structure-poised to benefit should the
inflationary fears prove unsubstantiated. We are further encouraged by the
recent market moves to the higher levels mentioned previously.
While mindful of the risks of additional declines, we believe that much of
the market correction is behind us. We are ready to take strong defensive action
should the market begin to decline again.
Our primary tasks-to earn a high level of current income to the extent
consistent with the preservation of capital, while maintaining the highest
levels of credit quality-continue to guide our portfolio management decisions.
Included in this report is a series of detailed statements about your
Series' holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Series
and in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
August 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into account the maximum initial sales charge in the case
of Class A shares or the applicable contingent deferred sales charge imposed on
redemptions in the case of Class B shares and Class C shares. **Some income may
be subject to the Federal Alternative Minimum Tax (AMT) for certain
shareholders.
Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price at the end of the period in the case of Class A shares or the net
asset value per share at the end of the period in the case of Class B and Class
C shares.
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES JULY 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER INSURED
MUNICIPAL BOND FUND, NEW YORK SERIES CLASS A SHARES AND CLASS B SHARES AND
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
[Exhibit A]
$11,739
Lehman Brothers
Municipal Bond Index*
Dollars
$11,280
Premier Insured
Municipal Bond Fund,
New York Series
(Class B Shares)
$11,080
Premier Insured
Municipal Bond Fund,
New York Series
(Class A Shares)
*Source: Lehman Brothers
[Exhibit A]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A SHARES CLASS B SHARES
__________________________________________________________________ _____________________________________________________
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIOD ENDED 7/31/96 Sales Charge Sales Charge (4.5%) PERIOD ENDED 7/31 Redemption Redemption*
____________ ________ _________________ ________________ ___________ ______________
<S> <C> <C> <C> <C> <C>
1 Year 5.97% 1.20% 1 Year 5.35% 2.35%
From Inception (5/5/94) 6.86 4.69 From Inception (5/5/94) 6.36 5.52
ACTUAL AGGREGATE TOTAL RETURNS
CLASS C SHARES
___________________________________________________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming No Charge Upon
PERIOD ENDED 7/31/96 Redemption Redemption**
____________ ________ _________
From Inception (12/4/95) (1.00)% (1.96)%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in each of the Class A
shares and Class B shares of Premier Insured Municipal Bond Fund, New York
Series on 5/5/94 (Inception Date) to a $10,000 investment made in the Lehman
Brothers Municipal Bond Index on that date. For comparative purposes, the
value of the Index on 4/30/94 is used as the beginning value on 5/5/94. All
dividends and capital gain distributions are reinvested. Performance for
Class C shares will vary from the performance of Class A and Class B shares
shown above due to differences in charges and expenses.
The Series invests primarily in New York municipal securities, which are
insured as to the timely payment of principal and interest by recognized
insurers of municipal securities. The Series performance shown in the line
graph takes into account the maximum initial sales charge on Class A shares
and the maximum contingent deferred sales charge on Class B shares and all
other applicable fees and expenses. Unlike the Series, the Lehman Brothers
Municipal Bond Index is an unmanaged total return performance benchmark for
the long-term, investment grade, geographically unrestricted tax exempt bond
market, calculated by using municipal bonds selected to be representative of
the municipal market overall; however, the bonds in the Index generally are
not insured. The Index does not take into account charges, fees and other
expenses. Also, unlike the Series which principally limits investments to New
York municipal obligations, the Index is not State specific. These factors
can contribute to the Index potentially outperforming the Series. Further
information relating to Series performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report. Neither the Series shares nor the
market value of its portfolio securities are insured.
*The maximum contingent deferred sales charge for Class B shares is 3%
and is reduced to 0% after five years.
*The maximum contingent deferred sales charge for Class C shares is 1%
for shares redeemed within one year of the date of purchase.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
STATEMENT OF INVESTMENTS JULY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-96.0% AMOUNT VALUE
__________ __________
<S> <C> <C>
Albany Municipal Water Finance Authority, Water and Sewer
System Revenue, Refunding 5.50%, 12/1/2022 (Insured; FGIC).............. $ 1,000,000 $ 962,930
Buffalo Municipal Water Finance Authority,
Water System Revenue 5%, 7/1/2025 (Insured; FGIC)....................... 750,000 668,715
Erie County 5.50%, 6/15/2025 (Insured; FGIC)................................ 500,000 481,435
Metropolitan Transportation Authority, Revenue:
Commuter Facilities (Grand Central Terminal) 5.70%, 7/1/2024 (Insured; FSA) 550,000 542,784
Transit Facility 6.375%, 7/1/2020 (Insured; MBIA)....................... 750,000 785,295
New York City Health and Hospital Corp., Revenue, Refunding
5.75%, 2/15/2022 (Insured; AMBAC)....................................... 200,000 195,932
New York City Municipal Water Finance Authority, Water and Sewer System Revenue:
5.375%, 6/15/2019 (Insured; MBIA)....................................... 350,000 331,051
6%, 6/15/2019 (Insured; FGIC)........................................... 200,000 200,636
6.20%, 6/15/2021 (Insured; AMBAC)....................................... 600,000 617,040
5.50%, 6/15/2023 (Insured; MBIA)........................................ 500,000 479,335
New York City Transit Authority, Transit Facility Revenue (Livingston Plaza Project)
6%, 1/1/2021 (Insured; FSA)............................................. 200,000 200,384
New York State, COP (City University - John Jay College)
5.50%, 8/15/2009 (Insured; AMBAC) (Prerefunded 8/15/1996) (a)........... 200,000 204,148
New York State Dormitory Authority, Revenue:
(City University System - Third Resolution) 6.30%, 7/1/2024 (Insured; AMBAC) 500,000 520,725
(Refunding - Fordham University) 5.75%, 7/1/2015 (Insured; FGIC)........ 200,000 200,364
(Refunding - Skidmore College) 5.375%, 7/1/2023 (Insured; FSA).......... 200,000 187,832
(Rochester University) 5.90%, 7/1/2017 (Insured; MBIA).................. 950,000 951,007
(State University Educational Facilities) 5.40%, 5/15/2023 (Insured; FGIC) 600,000 570,246
New York State Energy Research and Development Authority, Revenue:
Facilities (Refunding - Con Edison Co. of New York Inc. Project)
5.25%, 8/15/2020 (Insured; MBIA)...................................... 200,000 184,248
Gas Facilities (Brooklyn Union Gas):
Refunding 5.50%, 1/1/2021 (Insured; MBIA)............................. 500,000 482,725
5.60%, 6/1/2025 (Insured; MBIA)....................................... 200,000 193,732
Pollution Control, Refunding:
(New York State Electric and Gas Corp.) 6.05%, 4/1/2034 (Insured; MBIA) 500,000 506,335
(Rochester Gas and Electric Project) 6.50%, 5/15/2032 (Insured; MBIA). 400,000 413,888
New York State Housing Finance Agency, MFMR
6.35%, 8/15/2023 (Insured; AMBAC)....................................... 500,000 510,770
New York State Medical Care Facilities Finance Agency, Revenue:
(Hospital and Nursing Home) 6.125%, 2/15/2015 (Insured; MBIA)........... 400,000 410,608
(Long Term Health Care) 6.50%, 11/1/2015 (Insured; FSA)................. 200,000 213,168
(Mental Health Service) 5.25%, 8/15/2023 (Insured; FSA)................. 220,000 200,651
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
STATEMENT OF INVESTMENTS (CONTINUED) JULY 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ __________
New York State Medical Care Facilities Finance Agency, Revenue (continued):
(Mental Health Service Facilities Improvement) 5.80%, 2/15/2019 (Insured; FSA) $ 350,000 $ 345,443
(Montefiore Medical Center):
5.75%, 2/15/2025 (Insured; AMBAC)..................................... 1,000,000 987,130
6%, 2/15/2035 (Insured; AMBAC)........................................ 500,000 500,950
(New York Hospital) 6.50%, 8/15/2029 (Insured; AMBAC)................... 500,000 528,425
(Refunding - Saint Mary's Hospital Project) 6.20%, 11/1/2014 (Insured; AMBAC) 200,000 206,438
New York State Urban Development Corporation, Revenue, Refunding
(Correctional Capital Facilities) 5.50%, 1/1/2018 (Insured; FSA)........ 280,000 271,292
Niagara Falls Bridge Commission, Toll Revenue, Refunding
5.25%, 10/1/2021 (Insured; FGIC)........................................ 200,000 186,392
Suffolk County Water Authority, Waterworks Revenue 5%, 6/1/2012 (Insured; MBIA) 200,000 186,400
____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $14,199,858).................... $14,428,454
==============
U.S. RELATED;
Puerto Rico Electric Power Authority, Power Revenue 3.25% (Insured; FSA) (b)
(cost $600,000)......................................................... $ 600,000 $ 600,000
==============
TOTAL INVESTMENTS-100% (cost $14,799,858)................................... $15,028,454
</TABLE>
<TABLE>
<CAPTION>
==============
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
FGIC Financial Guaranty Insurance Company MFMR Multi-Family Mortgage Revenue
FSA Financial Security Assurance
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ __________________ ___________________
AAA Aaa AAA 100.0%
=========
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse Floater Security _ the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) At July 31, 1996, 28.3% of the Series' net assets are insured by
AMBAC and 32.7% are insured by MBIA.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $14,799,858)-see statement...................................... $15,028,454
Interest receivable..................................................... 196,917
Prepaid expenses........................................................ 13,353
____________
15,238,724
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 6,786
Due to Distributor...................................................... 7,483
Due to Custodian........................................................ 114,478
Payable for shares of Beneficial Interest redeemed...................... 10,183
Accrued expenses and other liabilities.................................. 32,148 171,078
__________ ____________
NET ASSETS ................................................................ $15,067,646
==============
REPRESENTED BY:
Paid-in capital......................................................... $14,867,744
Accumulated net realized (loss) on investments.......................... (28,694)
Accumulated net unrealized appreciation on investments-Note 3........... 228,596
____________
NET ASSETS at value......................................................... $15,067,646
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 369,327
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 788,979
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 7,951
==============
NET ASSET VALUE per share:
Class A Shares
($4,767,941 / 369,327 shares)......................................... $12.91
=========
Class B Shares
($10,196,918 / 788,979 shares)........................................ $12.92
=========
Class C Shares
($102,787 / 7,951 shares)............................................. $12.93
=========
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $818,182
EXPENSES:
Management fee-Note 2(a).............................................. $ 78,481
Shareholder servicing costs-Note 2(c)................................. 54,269
Distribution fees-Note 2(b)........................................... 46,306
Auditing fees......................................................... 15,388
Registration fees..................................................... 10,556
Legal fees............................................................ 4,410
Prospectus and shareholders' reports.................................. 2,675
Custodian fees........................................................ 1,907
Trustees' fees and expenses-Note 2(d)................................. 1,796
Miscellaneous......................................................... 8,043
_____________
TOTAL EXPENSES.................................................... 223,831
Less-reduction in management fee due to undertakings-Note 2(a)........ 8,907
_____________
NET EXPENSES...................................................... 214,924
____________
INVESTMENT INCOME-NET............................................. 603,258
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized (loss) on investments.................................... $(15,804)
Net unrealized appreciation on investments............................ 131,041
_____________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 115,237
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $718,495
===============
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
_____________________________________
1995 1996
_____________ _____________
OPERATIONS:
Investment income-net................................................... $ 373,738 $ 603,258
Net realized (loss) on investments...................................... (12,890) (15,804)
Net unrealized appreciation on investments for the year................. 76,318 131,041
_____________ _____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 437,166 718,495
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (172,061) (228,880)
Class B shares........................................................ (201,677) (374,193)
Class C shares........................................................ __ (185)
_____________ _____________
TOTAL DIVIDENDS................................................... (373,738) (603,258)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 3,665,511 958,421
Class B shares........................................................ 5,533,055 4,434,130
Class C shares........................................................ __ 101,004
Dividends reinvested:
Class A shares........................................................ 98,623 155,716
Class B shares........................................................ 118,605 193,346
Class C shares........................................................ __ 185
Cost of shares redeemed:
Class A shares........................................................ (1,027,887) (1,190,783)
Class B shares........................................................ (1,301,859) (1,102,021)
_____________ _____________
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS...... 7,086,048 3,549,998
_____________ _____________
TOTAL INCREASE IN NET ASSETS.................................... 7,149,476 3,665,235
NET ASSETS:
Beginning of year....................................................... 4,252,935 11,402,411
_____________ _____________
End of year............................................................. $11,402,411 $15,067,646
</TABLE>
<TABLE>
<CAPTION>
============= ===============
SHARES
______________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ___________________________ ____________
YEAR ENDED
YEAR ENDED JULY 31, YEAR ENDED JULY 31, JULY 31,
_____________________________ ___________________________ ____________
1995 1996 1995 1996 1996*
_______ _______ _______ _______ _______
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C> <C> <C> <C>
Shares sold............ 292,256 73,469 441,378 340,948 7,937
Shares issued for dividends
reinvested........... 7,927 11,953 9,489 14,843 14
Shares redeemed........ (85,165) (91,724) (104,836) (84,644) __
_______ _______ _______ _______ _______
NET INCREASE
(DECREASE) IN SHARES
OUTSTANDING.... 215,018 (6,302) 346,031 271,147 7,951
========== ========= ======== ========== ==========
*From December 4, 1995 (commencement of initial offering) to July 31,
1996.
See notes to financial statements.
</TABLE>
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information has
been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES
_______________________________________
YEAR ENDED JULY 31,
_______________________________________
PER SHARE DATA: 1994(1) 1995 1996
_________ _______ _______
<S> <C> <C> <C>
Net asset value, beginning of year.................................... $12.50 $12.79 $12.75
_________ _______ _______
INVESTMENT OPERATIONS:
Investment income-net................................................. .18 .71 .59
Net realized and unrealized gain (loss) on investments................ .29 (.04) .16
_________ _______ _______
TOTAL FROM INVESTMENT OPERATIONS.................................... .47 .67 .75
_________ _______ _______
DISTRIBUTIONS;
Dividends from investment income-net.................................. (.18) (.71) (.59)
_________ _______ _______
Net asset value, end of year.......................................... $12.79 $12.75 $12.91
========= ======== ========
TOTAL INVESTMENT RETURN(2)................................................ 3.76%(3) 5.53% 5.97%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... ._ .09% 1.17%
Ratio of net investment income to average net assets.................. 5.28%(4) 5.64% 4.56%
Decrease reflected in above expense ratios due to undertakings by the Manager
(limited to the expense limitation provision of the management agreement) 2.50%(4) 1.45% .07%
Portfolio Turnover Rate............................................... ._ 2.76% 26.18%
Net Assets, end of year (000's Omitted)............................... $2,054 $4,791 $4,768
(1) From May 6, 1994 (commencement of operations) to July 31, 1994.
(2) Exclusive of sales load.
(3) Not annualized.
(4) Annualized.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
_________________________________ ____________
YEAR ENDED
YEAR ENDED JULY 31, JULY 31,
_________________________________
PER SHARE DATA: 1994(1) 1995 1996 1996(2)
______ ______ ______ ________
<S> <C> <C> <C> <C>
Net asset value, beginning of year...................... $12.50 $12.80 $12.77 $13.39
______ ______ ______ ________
INVESTMENT OPERATIONS:
Investment income-net................................... .16 .64 .53 .33
Net realized and unrealized gain (loss) on investments.. .30 (.03) .15 (.46)
______ ______ ______ ________
TOTAL FROM INVESTMENT OPERATIONS...................... .46 .61 .68 (.13)
______ ______ ______ ________
DISTRIBUTIONS;
Dividends from investment income-net.................... (.16) (.64) (.53) (.33)
______ ______ ______ ________
Net asset value, end of year............................ $12.80 $12.77 $12.92 $12.93
======== ====== ======= ========
TOTAL INVESTMENT RETURN(3).................................. 3.72%(4) 5.08% 5.35% (1.51%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................. .50%(5) .60% 1.68% 1.99%(5)
Ratio of net investment income to average net assets.... 4.87%(5) 5.02% 4.03% 2.99%(5)
Decrease reflected in above expense ratios due to undertakings
by the Manager (limited to the expense limitation provision of
the management agreement)............................. 2.50%(5) 1.39% .06% .34%(5)
Portfolio Turnover Rate................................. .- 2.76% 26.18% 26.18%
Net Assets, end of year (000's Omitted)................. $2,199 $6,611 $10,197 $103
(1) From May 6, 1994 (commencement of operations) to July 31, 1994.
(2) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(3) Exclusive of sales load.
(4) Not annualized.
(5) Annualized.
</TABLE>
See notes to financial statements.
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier Insured Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering six
series, including the New York Series (the "Series"). The Fund's investment
objective is to maximize current income exempt from Federal and, where
applicable, from State personal income taxes to the extent consistent with the
preservation of capital. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and Class C
shares. Class A shares are subject to a sales charge imposed at the time of
purchase, Class B shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within five years of
purchase and Class C shares are subject to a contingent deferred sales charge
imposed at the time of redemption on redemptions made within one year of
purchase. Other differences between the three Classes include the services
offered to and the expenses borne by each Class and certain voting rights.
The Fund accounts separately for the assets, liabilities and operations of
each series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
The Series 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 Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal Revenue
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The Series has an unused capital loss carryover of approximately $13,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to July 31, 1996. The carryover
does not include net realized securities losses from November 1, 1995 through
July 31, 1996 which are treated, for Federal income tax purposes, as arising in
fiscal 1997. If not applied the carryover expires in fiscal 2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .55 of 1% of the value of the
Series' average daily net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the Series' aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. The most stringent state
expense limitation applicable to the Series presently requires reimbursement of
expenses in any full fiscal year that such expenses (excluding distribution
expenses and certain expenses as described above) exceed 21\2% of the first $30
million, 2% of the next $70 million and 11\2% of the excess over $100 million of
the value of the Series' average daily net assets in accordance with California
"blue sky" regulations. However, the Manager had undertaken from August 1, 1995
through September 17, 1995 to reduce the management fee and reimburse such
excess expenses paid by the Series, to the extent that the Series' aggregate
expenses (exclusive of certain expenses as described above) exceeded specified
annual percentages of the Series' average daily net assets. The Manager has
currently undertaken from September 18, 1995 through September 30, 1996 to
reduce the management fees paid by, or reimburse such excess expenses of the
Series, to the extent that the Series' aggregate annual expenses (excluding
12b-1 distribution plan fees and certain expenses as described above) exceed an
annual rate of 1.25% of the value of the Series' average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to $8,907
during the year ended July 31, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average daily
net assets of Class B shares and .75 of 1% of the value of the average daily net
assets of Class C shares. During the period ended July 31, 1996, $46,260 was
charged to the Series for the Class B shares and $46 was charged to the Series
for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor at
an annual rate of .25 of 1% of the value of the average daily net assets of
Class A, Class B and Class C shares for the provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the maintenance
of shareholder accounts. The Distributor may make payments to Service Agents (a
securities dealer, financial institution or other industry professional) in
respect of these services. The Distributor determines the amounts to be paid to
Service Agents. During the period ended July 31, 1996, $12,528, $23,130 and $15
were charged to Class A, B and C shares, respectively, by the Distributor
pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Series. Such compensation amounted to $4,640 during the period ended July 31,
1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended July 31, 1996, amounted
to $7,391,303 and $3,536,274, respectively.
At July 31, 1996, accumulated net unrealized appreciation on investments
was $228,596, consisting of $310,514 gross unrealized appreciation and $81,918
gross unrealized depreciation.
At July 31, 1996, 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).
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier Insured Municipal Bond Fund,
New York Series (one of the series constituting the Premier Insured Municipal
Bond Fund) as of July 31, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premier Insured Municipal Bond Fund, New York Series at July 31, 1996, the
results of its operations for the period then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
September 4, 1996
PREMIER INSURED MUNICIPAL BOND FUND, NEW YORK SERIES
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended July 31,
1996 as "exempt-interest dividends" (not subject to regular Federal and, for
individuals who are New York residents, New York State and New York City
personal income taxes).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if any)
and capital gain distributions (if any) paid for the 1996 calendar year on Form
1099-DIV which will be mailed by January 31, 1997.
PREMIER INSURED MUNICIPAL
BOND FUND, NEW YORK SERIES
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 916/382AR967
Annual Report
Premier Insured
Municipal Bond Fund
New York Series
July 31, 1996
[lion2/hres logo]
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------
LONG-TERM MUNICIPAL INVESTMENTS--94.3% FLORIDA FLORIDA TOTAL FLORIDA FLORIDA TOTAL
SERIES SERIES SERIES SERIES
- ----------------------------------------------- ------- -------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Alachua County Health Facilities Authority,
Health Facilities Revenue, Refunding
(Santa Fe Healthcare Facilities Project) $ 3,500,000 $ - $3,500,000 $3,983,035 $ - $3,983,035
7.60%, 11/15/2013
Arcadia, Water and Sewer Revenue 7.75%, 2,190,000 - 2,190,000 2,452,625 - 2,452,625
12/1/2021
Boca Raton Community Redevelopment Agency,
Tax Increment Revenue
(Mizner Park Project) 5.875%, 3/1/2013 - 250,000 250,000 - 254,265 254,265
(Insured; FGIC)
Boynton Beach, MFHR (Clipper Clove Apartments) 2,000,000 - 2,000,000 2,006,260 - 2,006,260
6.45%, 1/1/2027
Brevard County, IDR (NUI Corp. Project) 6.40%, - 1,000,000 1,000,000 - 1,052,170 1,052,170
10/1/2024 (Insured; AMBAC)
Brevard County Health Facilities Authority, HR
(Holmes Regional Medical Center Project):
5.70%, 10/1/2008 (Insured; MBIA) 4,585,000 - 4,585,000 4,714,756 - 4,714,756
Refunding 5.625%, 10/1/2014 (Insured; 2,000,000 - 2,000,000 1,975,200 - 1,975,200
MBIA)
Broward County Health Facilities Authority,
Revenue, Refunding
(Broward County Nursing Home) 7.50%, 1,000,000 - 1,000,000 1,064,380 - 1,064,380
8/15/2020 (LOC; Allied Irish Bank)
(a)
Broward County Tourist Development, Special
Tax Revenue, Refunding
(Convention Center) 5.60%, 10/1/2009 - 350,000 350,000 - 355,530 355,530
(Insured;
AMBAC)
Celebration Community Development District,
Special Assessment
6.10%, 5/1/2016 (Insured; - 500,000 500,000 - 516,185 516,185
MBIA)
Charlotte County:
Health Care Facilities Revenue
9.25%, 1,635,000 - 1,635,000 1,794,543 - 1,794,543
7/1/2020
Utility Revenue, Refunding -
5.625%, 10/1/2021 (Insured; 3,000,000 3,000,000 2,959,980 - 2,959,980
FGIC)
Clay County Housing Finance Authority, SFMR
8.20%, 6/1/2021 (Collateralized; 670,000 - 670,000 703,915 - 703,915
GNMA)
Collier County, Capital Improvement Revenue,
Refunding
6%, 10/1/2012 (Insured; - 1,000,000 1,000,000 - 1,042,810 1,042,810
MBIA)
Collier County Water - Sewer District, Water
Revenue, Refunding
5%, 7/1/2016 (Insured; - 1,000,000 1,000,000 - 920,030 920,030
FGIC)
Dade
County:
Aviation Revenue:
6.125%, 10/1/2020 (Insured; MBIA) - 1,000,000 1,000,000 - 1,018,840 1,018,840
6.55%, 10/1/2013 (Insured; MBIA) 4,225,000 - 4,225,000 4,514,751 - 4,514,751
(Miami International Airport) 5.75%, 10,000,000 - 10,000,000 9,977,500 - 9,977,500
10/1/2013 (Insured; MBIA)
Public Facilities Revenue, Refunding
(Jackson Memorial Hospital)
5.625%, 6/1/2018 (Insured; MBIA) - 250,000 250,000 - 244,448 244,448
Refunding:
5%, 10/1/2035 (Insured; AMBAC) 3,000,000 - 3,000,000 2,648,850 - 2,648,850
(Seaport) 5.125%, 10/1/2021 (Insured MBIA) 7,500,000 - 7,500,000 6,875,250 - 6,875,250
Water and Sewer Systems Revenue:
5.50%, 10/1/2025 (Insured; FGIC) 5,000,000 2,500,000 7,500,000 4,820,350 2,410,175 7,230,525
6.25%, 10/1/2011 (Insured; FGIC) 2,115,000 - 2,115,000 2,305,096 - 2,305,096
Dade County Health Facilities Authority, HR
(South Shore Hospital and Medical Center) 2,345,000 - 2,345,000 2,546,084 - 2,546,084
7.60%, 8/1/2024 (Insured; FHA)
Dade County Housing Finance Authority,
Refunding:
MFMR (Lincoln Fields Apartments) 6.25%, - 600,000 600,000 - 606,672 606,672
7/1/2024 (Insured; MBIA)
Revenue:
MFMR (Cutler Meadows Apartment) 6.50%, 1,785,000 - 1,785,000 1,809,544 - 1,809,544
7/1/2022 (Insured; FHA)
SFMR 6.70%, 4/1/2028 (Collateralized: 4,500,000 - 4,500,000 4,564,125 - 4,564,125
FNMA & GNMA)
Dade County School Board, COP 5.50%, 5/1/2025 - 1,475,000 1,475,000 - 1,420,292 1,420,292
(Insured; AMBAC)
Duval County Housing Finance Authority, SFMR:
7.85%, 12/1/2022 (Collateralized; GNMA) 2,625,000 - 2,625,000 2,768,719 - 2,768,719
7.70%, 9/1/2024 (Collateralized; GNMA) 1,460,000 - 1,460,000 1,543,673 - 1,543,673
Escambia County, Sales Tax Revenue, Refunding - 500,000 500,000 - 501,785 501,785
5.80%, 1/1/2015 (Insured; FGIC)
Escambia County Housing Finance Authority, SFMR 1,090,000 - 1,090,000 1,155,040 - 1,155,040
7.80%, 4/1/2022
First Governmental Financing Commission,
Revenue
(Gainesville, Hollywood & St. Petersburg) 2,150,000 - 2,150,000 2,159,395 - 2,159,395
5.75%, 7/1/2016 (Insured; AMBAC)
Florida Board of Education, Capital Outlay:
5.80%, 6/1/2024 (Insured; FGIC) - 1,000,000 1,000,000 - 1,002,990 1,002,990
Refunding:
5.80%, 6/1/2010 2,000,000 - 2,000,000 2,059,780 - 2,059,780
5%, 6/1/2015 10,300,000 - 10,300,000 9,412,140 - 9,412,140
Florida Correctional Privatization
Commission, COP:
(Bay County Correctional Facility Project) - 250,000 250,000 - 253,280 253,280
6%, 8/1/2015 (Insured; MBIA)
(Glades County Correctional Facility) 6%, - 350,000 350,000 - 368,809 368,809
8/1/2014 (Insured; MBIA)
Florida Department of General Services
Division, Facilities Management Revenue
6.125%, 9/1/2023 (Insured; AMBAC) - 1,000,000 1,000,000 - 1,031,540 1,031,540
Florida Division of Bond Finance Department,
General Services Revenues:
(Department of Environmental-Preservation
2000)
5.75%, 7/1/2013 (Insured; AMBAC) - 1,000,000 1,000,000 - 1,013,140 1,013,140
(Department of Natural
Resources-Preservation 2000)
5.75%, 7/1/2013 (Insured; AMBAC) 7,695,000 - 7,695,000 7,796,112 - 7,796,112
5.80%, 7/1/2013 (Insured; FSA) - 700,000 700,000 - 708,239 708,239
Florida Housing Finance Agency:
(Brittany Rosemont Apartments) 7%, 2/1/2035 6,000,000 - 6,000,000 6,352,200 - 6,352,200
(Turtle Creek Apartment Projects) 6.10%, 1,000,000 - 1,000,000 1,006,560 - 1,006,560
5/1/2016 (Insured; AMBAC)
Single Family Mortgage, Refunding 6.65%, 2,415,000 - 2,415,000 2,465,739 - 2,465,739
1/1/2024 (Collateralized: FNMA & GNMA)
Single Family Mortgage 6.65%, 7/1/2026 - 1,820,000 1,820,000 - 1,869,559 1,869,559
(Insured; MBIA)
Florida Municipal Power Agency, Revenue (All
Requirements Power Supply Project)
5.10%, 10/1/2025 (Insured; AMBAC) - 1,000,000 1,000,000 - 907,860 907,860
Florida Turnpike Authority, Turnpike Revenue,
Refunding
5%, 7/1/2019 (Insured; FGIC) - 1,000,000 1,000,000 - 904,510 904,510
Fort Pierce Utilities Authority, Revenue,
Refunding
5.25%, 10/1/2016 (Insured; AMBAC) - 500,000 500,000 - 476,360 476,360
Gainesville, Guaranteed Entitlement Revenue,
Refunding
5.50%, 8/1/2017 (Insured; AMBAC) - 750,000 750,000 - 736,718 736,718
Gainesville, Utility System Revenue, Refunding 5,000,000 - 5,000,000 4,544,850 - 4,544,850
5.20%, 10/1/2026
Greater Orlando Aviation Authority, Airport
Facilities Revenue, Refunding
5.50%, 10/1/2013 (Insured; AMBAC) 2,750,000 - 2,750,000 2,692,993 - 2,692,993
Highlands County Health Facilities Authority,
Revenue (Adventist Sunbelt Hospital)
7%, 11/15/2014 1,500,000 - 1,500,000 1,625,535 - 1,625,535
Hillsborough, Capital Improvement Program,
Revenue, Refunding
5%, 8/1/2015 (Insured; FGIC) 3,325,000 - 3,325,000 3,066,082 - 3,066,082
Hillsborough County, Utility Revenue,
Refunding:
6.625%, 8/1/2011 4,000,000 - 4,000,000 4,267,160 - 4,267,160
7%, 8/1/2014 4,765,000 - 4,765,000 5,123,662 - 5,123,662
Hillsborough County Aviation Authority,
Revenue:
Refunding (Delta Airlines):
6.80%, 1/1/2024 2,500,000 - 2,500,000 2,572,625 - 2,572,625
7.75%, 1/1/2024 1,500,000 - 1,500,000 1,588,950 - 1,588,950
(Tampa International Airport):
5.375%, 10/1/2023 (Insured; FGIC) - 1,000,000 1,000,000 - 938,900 938,900
Refunding 5.50%, 10/1/2013 (Insured; FGIC) - 500,000 500,000 - 493,675 493,675
Hillsborough County Industrial Development
Authority:
IDR (University Community Hospital) 5.80%, - 500,000 500,000 - 498,270 498,270
8/15/2024 (Insured; MBIA)
PCR, Refunding (Tampa Electric Company
Project)
6.25%, 12/1/2034 (Insured; MBIA) - 1,000,000 1,000,000 - 1,036,480 1,036,480
Hillsborough County Port District, Special
Revenue, Refunding
(Tampa Port Authority) 6%, 6/1/2020 - 1,000,000 1,000,000 - 1,003,460 1,003,460
(Insured; FSA)
Hollywood, Water and Sewer Revenue, Refunding - 500,000 500,000 - 492,685 492,685
5.50%, 10/1/2015 (Insured; FGIC)
Indian River County, Water and Sewer Revenue 1,750,000 - 1,750,000 1,721,720 - 1,721,720
5.50%, 9/1/2016 (Insured; FGIC)
Indian Trace Community Development District,
Water and Sewer Revenue
8.50%, 4/1/1997 151,000 - 151,000 154,526 - 154,526
Jacksonville:
Excise Taxes Revenue, Refunding 5%, 3,490,000 - 3,490,000 3,220,712 - 3,220,712
10/1/2016 (Insured; FGIC)
Water and Sewer Revenue 5%, 10/1/2020 3,000,000 - 3,000,000 2,706,090 - 2,706,090
(Insured; MBIA)
Jacksonville Health Facilities Authority, HR:
(Memorial Regional Rehabilitation Center
Project)
6.625%, 5/1/2022 (Insured; MBIA) - 500,000 500,000 - 557,360 557,360
Refunding (Saint Luke's Hospital)
7.125%, 11/15/2020 6,700,000 - 6,700,000 7,279,081 - 7,279,081
Lee County, Tourist Development Tax Revenue,
Refunding
5.625%, 10/1/2011 (Insured; FGIC) - 250,000 250,000 - 253,102 253,102
Miami Health Facilities Authority, Health
Facilities Revenue, Refunding
(Mercy Hospital Project) 5.125%, 8/15/2020 - 200,000 200,000 - 182,246 182,246
(Insured; AMBAC)
Miramar:
Public Service Tax Revenue 6.15%, 10/1/2024 - 1,000,000 1,000,000 - 1,026,970 1,026,970
(Insured; FGIC)
Water Improvement Assessment Revenue 5.60%, - 200,000 200,000 - 195,686 195,686
10/1/2024 (Insured; FGIC)
North Miami, Educational Facilities Revenue
(Johnson & Whales University Project)
6.10%, 4/1/2013 5,000,000 - 5,000,000 4,924,550 - 4,924,550
North Miami Health Facilities Authority,
Health Facilities Revenue
(Villa Maria Nursing Housing Project) 7.50%, 2,670,000 - 2,670,000 2,911,955 - 2,911,955
9/1/2012
Okeechobee, Water and Sewer Revenue
6.50%, 1/1/2017 (Insured; MBIA, Prerefunded - 1,220,000 1,220,000 - 1,359,568 1,359,568
1/1/2003)(b)
Orange County, Solid Waste Facilities Revenue 4,910,000 - 4,910,000 5,307,906 - 5,307,906
6.375%, 10/1/2007 (Insured; FGIC)
Orange County, Tourist Development Tax
Revenue:
6.50%, 10/1/2019 (Insured; AMBAC) - 1,000,000 1,000,000 - 1,064,650 1,064,650
6%, 10/1/2024 (Insured; MBIA) - 200,000 200,000 - 202,790 202,790
Orange County Health Facilities Authority,
Health Facilities Revenue
(Mental Health Service Project) 9.25%, 3,735,000 - 3,735,000 4,378,690 - 4,378,690
7/1/2020 (Prerefunded 7/1/2000)(b)
Orlando and Orange County Expressway
Authority, Expressway Revenue, Refunding:
(Junior Lien) 5.25%, 7/1/2019 (Insured; FGIC) - 250,000 250,000 - 234,027 234,027
(Senior Lien) 5.50%, 7/1/2018 (Insured;FGIC) - 200,000 200,000 - 196,368 196,368
Osceola County Industrial Development
Authority, Revenue
(Community Provider Pooled Loan Program) 5,235,000 - 5,235,000 5,321,849 - 5,321,849
7.75%, 7/1/2017
Osceola County School Board, COP 5.75%, - 250,000 250,000 - 250,630 250,630
6/1/2014 (Insured; AMBAC)
Palm Bay, Utility Revenue, Refunding (Palm
Bay Utility Corp. Project)
5%, 10/1/2022 (Insured; MBIA) 5,300,000 - 5,300,000 4,761,838 - 4,761,838
Palm Beach County:
Solid Waste Industrial Development Revenue:
(Okeelanta Power LP Project) 6.85%, 11,000,000 - 11,000,000 9,975,350 - 9,975,350
2/15/2021
(Osceola Power LP) 6.85%, 5,800,000 - 5,800,000 5,330,954 - 5,330,954
1/1/2014
Water and Sewer Revenue 5%, 10/1/2010 4,320,000 - 4,320,000 4,160,462 - 4,160,462
(Insured; MBIA)
Palm Beach County Housing Finance Authority,
Single Family Mortgage Purchase Revenue
6.55%, 4/1/2027 2,750,000 - 2,750,000 2,810,857 - 2,810,857
Panama City, Water and Sewer Revenue 5.625%, 2,000,000 - 2,000,000 1,995,040 - 1,995,040
10/1/2016 (Insured; MBIA)
Pinellas County, PCR, Refunding (Florida Power 3,000,000 - 3,000,000 3,218,700 - 3,218,700
Corp.) 7.20%, 12/1/2014
Pinellas County Housing Finance Authority,
SFMR:
7.70%,8/1/2022 2,810,000 - 2,810,000 2,969,805 - 2,969,805
(Multi-County Program) 6.70%, 2/1/2028 5,000,000 - 5,000,000 5,105,350 - 5,105,350
(Insured; FHA)
Polk County Industrial Development Authority,
IDR
(IMC Fertilizer) 7.525% 1/1/2015 10,000,000 - 10,000,000 10,503,300 - 10,503,300
Polk County School Board, COP (Master Lease
Program)
5.875%, 1/1/2015 (Insured; MBIA) - 1,000,000 1,000,000 - 1,013,120 1,013,120
Reedy Creek, Improvement District 5%, 6/1/2019 9,000,000 - 9,000,000 8,141,850 - 8,141,850
(Insured; AMBAC)
Saint Lucie County, SWDR (Florida Power and
Light Co. Project)
7.15%, 2/1/2023 4,000,000 - 4,000,000 4,334,280 - 4,334,280
Sarasota County, Utility System Revenue,
Refunding:
5.25%, 10/1/2016 (Insured; FGIC) 1,000,000 - 1,000,000 949,260 - 949,260
5.25%, 10/1/2025 (Insured; FGIC) 3,500,000 - 3,500,000 3,251,290 - 3,251,290
Seminole County School Board, COP 6.125%, - 325,000 325,000 - 333,232 333,232
7/1/2019 (Insured; MBIA)
Tampa, Revenue (Allegany Health Systems -
Saint Joseph)
6.50%, 12/1/2023 (Insured; MBIA) - 1,000,000 1,000,000 - 1,058,120 1,058,120
Tampa, Water and Sewer Revenue 5.125%, 1,000,000 - 1,000,000 932,650 - 932,650
10/1/2017 (Insured; FGIC)
Tampa Sports Authority, Sales Tax Revenue
(Tampa Bay Arena Project)
5.75%, 10/1/2025 (Insured; MBIA) - 1,000,000 1,000,000 - 1,013,410 1,013,410
Venice, Utility Revenue, Refunding 5.50%, - 500,000 500,000 - 495,200 495,200
7/1/2014 (Insured; MBIA)
Volusia County, Sales Tax Improvement Revenue - 500,000 500,000 - 505,635 505,635
5.75%, 10/1/2013 (Insured; MBIA)
U.S. RELATED--3.9%
Guam Airport Authority, Revenue 6.70%, 5,000,000 - 5,000,000 5,097,050 - 5,097,050
10/1/2023
Virgin Islands Public Finance Authority, 5,400,000 - 5,400,000 5,776,164 - 5,776,164
Revenue, Refunding 7.25%, 10/1/2018
---------- ---------- ---------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $268,397,635) $241,158,738 $34,021,791 $275,180,529
========== ========== =========
SHORT-TERM MUNICIPAL INVESTMENTS--1.8%
- -----------------------------------------------
FLORIDA--1.6%
Broward County Housing Finance Authority,
MFHR
(Sanctuary Apartment Project) VRDN 3.50% $ 3,000,000 $ - $3,000,000 $3,000,000 $ - $3,000,000
(LOC; PNC Bank)(a,c)
Jacksonville, HR (Baptist Medical Center
Project) VRDN
3.70% (LOC; First Union National Bank) 1,500,000 - 1,500,000 1,500,000 - 1,500,000
(a,c)
U.S. RELATED--.2%
Puerto Rico Commonwealth, Government
Development Bank, VRDN
3.25% (LOC; Credit Suisse) (a,c) - 500,000 500,000 - 500,000 500,000
---------- ---------- ---------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $4,500,000 $ 500,000 $5,000,000
$5,000,000) ========== ========== =========
TOTAL INVESTMENTS--100.0%
(cost $240,220,825, $33,176,810 and $273,397,635, respectively) $245,658,738 $34,521,791 $280,180,529
========== ========== =========
</TABLE>
<PAGE>
SUMMARY OF ABBREVIATIONS
- -----------------------------------------------------------------
AMBAC American Municipal Bond LOC Letter
Assurance Corporation of
Credit
COP Certificate of MBIA Municipal Bond
Participation Investors
Assurance
FGIC Financial Insurance
Guaranty Corporation
Insurance
Company
FHA Federal Housing MFHR Multi-Family
Administration Housing Revenue
FNMA Federal MFMR Multi-Family
National Mortgage Revenue
Mortgage
Association
FSA Financial PCR Pollution
Security Control Revenue
Assurance
GNMA Government National SFMR Single Family
Mortgage Association Mortgage Revenue
HR Hospital SWDR Solid Waste
Revenue Disposal Revenue
IDR Industrial VRDN Variable Rate
Development Demand Notes
Revenue
<PAGE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD PERCENTAGE OF
& POOR'S VALUE
AAA Aaa AAA 59.4%
AA Aa AA 11.0
A A A 3.1
BBB Baa BBB 6.1
BB Ba BB 5.2
F1+ & F1 MIG1, SP1 1.8
VMIG1 & & A1
P1
Not Not Not 13.4
Rated (e) Rated Rated (e) ----
(e)
100.0%
NOTES TO STATEMENT OF INVESTMENTS:
- -------------------------------------------------------------------------
(A) Secured by letters of credit.
(B) 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.
(C) Securities payable on demand. The interest rate, which is subject to
change, is based upon prime rates or an index of market interest rates.
(D) Fitch currently provides creditworthiness information for a limited number
of investments.
(E) Securities which, while not rated by Fitch, Moody's or Standard & Poors,
have been determined by the Fund's Board of Trustees to be of comparable
quality to those rated securities in which the Fund may invest.
See notes to pro forma financial statements.
<PAGE>
- ---------------------------
Statement of Assets and
Liabilities
- ----------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- -------------------
July 31, 1996 Premier State Premier
(Unaudited) Insured
- -------------------
Municipal Bond Municipal Bond Pro-Forma
Fund, Fund, Combined
Florida Series Florida Series Adjustments(Note 1)
---------------- --------------- ---- ---------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at $ 245,658,738 $ 34,521,791 $ $ 280,180,529
value--see statement
Cash. 2,510,414 - 2,510,414
Interest receivable 4,366,445 484,464 4,850,909
Receivable for shares of 56,258 - 56,258
Beneficial Interest subscribed
Prepaid expenses 8,114 9,252 17,366
----------------- --------------- --- ----------------------
Total Assets. 252,599,969 35,015,507 0 287,615,476
----------------- --------------- --- ----------------------
LIABILITIES:
Due to The Dreyfus Corporation and 115,697 16,522 132,219
affiliates.
Due to Distributor 63,908 14,971 78,879
Due to Custodian - 36,606 36,606
Payable for investment securities 2,909,644 - 2,909,644
purchased.
Payable for shares of Beneficial
Interest redeemed. 980,433 165,747 1,146,180
Accrued expenses and other 37,177 55,926 93,103
liabilities
----------------- --------------- --- ----------------------
Total Liabilities. 4,106,859 289,772 0 4,396,631
----------------- --------------- --- ----------------------
NET ASSETS $ 248,493,110 $ 34,725,735 $0 $ 283,218,845
================= =============== === ======================
REPRESENTED BY:
Paid-in capital. $ 238,641,126 $ 32,850,681 $ $ 271,491,807
Accumulated undistributed net
realized gain on
investments. 4,414,071 530,073 4,944,144
Accumulated net unrealized
appreciation on
investments. 5,437,913 1,344,981 6,782,894
----------------- --------------- --- ----------------------
NET ASSETS, at value $ 248,493,110 $ 34,725,735 $0 $ 283,218,845
================= =============== === ======================
Shares of Common Stock outstanding:
Premier State Municipal Bond Fund,
Florida Series
Class A Shares 15,275,856
=================
Class B Shares 1,839,095
=================
Class C Shares 2,435
=================
Premier Insured Municipal Bond Fund,
Florida Series
Class A Shares 1,243,656
===============
Class B Shares 1,371,066
===============
Class C Shares 75
===============
NET ASSET VALUE per share:
Premier State Municipal Bond Fund,
Florida Series
Class A Shares
($221,770,533 / 15,275,856 $14.52
shares).
Class B Shares
($26,687,254 / 1,839,095 shares). $14.51
Class C Shares
($35,323 / 2,435 shares). $14.51
Premier Insured Municipal Bond Fund,
Florida Series
Class A Shares
($16,515,051 / 1,243,656 shares) $13.28
Class B Shares
($18,209,688 / 1,371,066 shares). $13.28
Class C Shares
($996 / 75 shares). $13.28
Pro forma Combined Portfolio - Class
A Shares
($238,285,584 / 16,413,256 $14.52
shares).
Pro forma Combined Portfolio - Class
B Shares
($44,896,942 / 3,094,070 shares). $14.51
Pro forma Combined Portfolio - Class
C Shares
($36,319 / 2,503 shares). $14.51
See notes to pro forma financial statements.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
- -------------------
JULY 31, 1996 PREMIER STATE PREMIER
(UNAUDITED) INSURED
- -------------------
MUNICIPAL BOND MUNICIPAL BOND PRO-FORMA
FUND, FUND, COMBINED
FLORIDA SERIES FLORIDA SERIES ADJUSTMENTS (NOTE 1)
---------------- --------------- ---- ----- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at $ 245,658,738 $ 34,521,791 $ $ 280,180,529
value--see statement
Cash. 2,510,414 - 2,510,414
Interest receivable 4,366,445 484,464 4,850,909
Receivable for shares of 56,258 - 56,258
Beneficial Interest subscribed
Prepaid expenses 8,114 9,252 17,366
----------------- --------------- --- ----------------------
TOTAL ASSETS. 252,599,969 35,015,507 0 287,615,476
----------------- --------------- --- ----------------------
LIABILITIES:
Due to The Dreyfus Corporation and 115,697 16,522 132,219
affiliates.
Due to Distributor 63,908 14,971 78,879
Due to Custodian - 36,606 36,606
Payable for investment securities 2,909,644 - 2,909,644
purchased.
Payable for shares of Beneficial
Interest redeemed. 980,433 165,747 1,146,180
Accrued expenses and other 37,177 55,926 93,103
liabilities
----------------- --------------- --- ----------------------
TOTAL LIABILITIES. 4,106,859 289,772 0 4,396,631
----------------- --------------- --- ----------------------
NET ASSETS $ 248,493,110 $ 34,725,735 $0 $ 283,218,845
================= =============== === ======================
REPRESENTED BY:
Paid-in capital. $ 238,641,126 $ 32,850,681 $ $ 271,491,807
Accumulated undistributed net
realized gain on
investments. 4,414,071 530,073 4,944,144
Accumulated net unrealized
appreciation on
investments. 5,437,913 1,344,981 6,782,894
----------------- --------------- --- ----------------------
NET ASSETS, at value $ 248,493,110 $ 34,725,735 $0 $ 283,218,845
================= =============== === ======================
Shares of Common Stock outstanding:
Premier State Municipal Bond Fund,
Florida Series
Class A Shares 15,275,856
=================
Class B Shares 1,839,095
=================
Class C Shares 2,435
=================
Premier Insured Municipal Bond Fund,
Florida Series
Class A Shares 1,243,656
===============
Class B Shares 1,371,066
===============
Class C Shares 75
===============
NET ASSET VALUE per share:
Premier State Municipal Bond Fund,
Florida Series
Class A Shares
($221,770,533 / 15,275,856 $14.52
======
shares).
Class B Shares
($26,687,254 / 1,839,095 shares). $14.51
======
Class C Shares
($35,323 / 2,435 shares). $14.51
======
Premier Insured Municipal Bond Fund,
Florida Series
Class A Shares
($16,515,051 / 1,243,656 shares) $13.28
======
Class B Shares
($18,209,688 / 1,371,066 shares). $13.28
======
Class C Shares
($996 / 75 shares). $13.28
======
Pro forma Combined Portfolio - Class
A Shares
($238,285,584 / 16,413,256 $14.52
======
shares).
Pro forma Combined Portfolio - Class
B Shares
($44,896,942 / 3,094,070 shares). $14.51
======
Pro forma Combined Portfolio - Class
C Shares
($36,319 / 2,503 shares). $14.51
======
See notes to pro forma financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
JULY 31, 1996
(UNAUDITED)
PREMIER
PREMIER STATE INSURED
MUNICIPAL MUNICIPAL
BOND BOND PRO-FORMA
FUND, FUND, COMBINED
FLORIDA FLORIDA ADJUSTMENTS (NOTE 1)
SERIES SERIES
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME $16,461,484 $ 2,240,447 $ - $ 18,701,931
EXPENSES:
Management fee. $1,462,814 $ 213,934 $ - $ 1,676,748
Shareholder servicing costs 817,647 133,574 (50,000) 901,221
Distribution fees 136,019 99,886 - 235,905
Legal fees 40,848 11,548 (10,000) 42,396
Custodian fees. 28,490 4,189 - 32,679
Auditing fees 28,389 64,062 (62,000) 30,451
Prospectus and shareholders' 7,848 8,732 (6,000) 10,580
reports
Trustees' fees and expenses 3,547 4,783 (4,500) 3,830
Registration fees 2,423 2,472 (2,472) 2,423
Miscellaneous 15,422 13,800 - 29,222
-------- ------------ ------------- -------------------
TOTAL EXPENSES 2,543,447 556,980 (134,972) 2,965,455
Less--reduction in management fee
due to
undertakings - 55,951 - 55,951
-------- ------------ ------------- -------------------
NET EXPENSES. 2,543,447 501,029 (134,972) 2,909,504
-------- ------------ ------------- -------------------
INVESTMENT INCOME--NET. 13,918,037 1,739,418 134,972 15,792,427
-------- ------------ ------------- -------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments. $6,611,320 $ 544,013 $ - $ 7,155,333
Net unrealized appreciation (7,981,760) 234,447 - (7,747,313)
(depreciation) on investments
-------- ------------ ------------- -------------------
NET REALIZED AND UNREALIZED
GAIN
(LOSS) ON INVESTMENTS (1,370,440) 778,460 - (591,980)
-------- ------------ ------------- -------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $12,547,597 $ 2,517,878 $ 134,972 $ 15,200,447
======== ============ ============= ===================
See notes to pro forma financial statements.
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
- ------------------------------------------------------------------------------
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
- ------------------------------------------------------------------------------
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF COMBINATION:
On October 31, 1996 the Boards of Premier State Municipal Bond Fund, Florida
Series ("Premier State-Florida") and Premier Insured Municipal Bond Fund,
Florida Series ("Premier Insured-Florida") approved an Agreement and Plan of
Reorganization whereby, subject to approval by the shareholders of Premier
Insured-Florida, Premier State-Florida will acquire all the assets, subject to
the liabilities, of Premier Insured-Florida, in exchange for a number of Premier
State-Florida shares equal to the pro rata net assets of Premier Insured-Florida
(the "Merger").
The Merger will be accounted for as a tax free merger of investment
companies. The unaudited pro forma statements of investments, and of assets and
liabilities reflect the financial position of the respective series of Premier
State-Florida and Premier Insured-Florida at July 31, 1996. The unaudited pro
forma statement of operations reflects the results of operations of the
respective series of Premier State-Florida and Premier Insured-Florida for the
twelve months ended July 31, 1996 and the year ended July 31, 1996,
respectively. These statements have been derived from the books and records
utilized in Premier State- Florida, and Premier Insured-Florida, under generally
accepted accounting principles. The historical cost of investment securities
will be carried forward to the surviving entity and results of operations of
Premier State-Florida for pre-combination periods will not be restated.
The pro forma statements of investments, assets and liabilities and
operations should be read in conjunction with the historical financial
statements of the Series included or incorporated by reference in the
corresponding Fund's Statement of Additional Information. The pro forma combined
financial statements are presented for information only and may not necessarily
be representative of what the actual combined financial statements would have
been had the reorganization occurred at July 31, 1996.
NOTE 2 - PORTFOLIO VALUATION:
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Trustees. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Options and financial futures on municipal and U.S. treasury
securities are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on the
national securities market on each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
NOTE 3 - CAPITAL SHARES:
The pro forma net asset value per share assumes 1,137,400, 1,254,975 and 68
additional shares of beneficial interest of Class A, Class B and Class C,
respectively, of Premier State-Florida were issued in connection with the
proposed acquisition by Premier State-Florida of the corresponding Class of
shares of Premier Insured-Florida as of July 31, 1996. The number of additional
shares issued was calculated by dividing the net assets of Premier
Insured-Florida Class A, Class B and Class C at July 31, 1996 by the net asset
value per share of Premier State-Florida Class A, Class B and Class C at July
31, 1996 of $14.52, $14.51 and $14.51 for Class A, Class B and Class C Shares,
respectively. The pro forma combined number of shares outstanding of 19,509,829
consists of the 1,137,400, 1,254,975 and 68 shares issuable to Premier
Insured-Florida Class A, Class B and Class C, respectively, as a result of the
merger and the 15,275,856, 1,839,095 and 2,435 shares of Premier State-Florida
outstanding Class A, Class B and Class C, respectively, at July 31, 1996.
NOTE 4 - PRO FORMA OPERATING EXPENSES:
Although it is anticipated that there will be an elimination of certain
duplicative expenses as a result of the proposed Merger, the actual amount of
such expenses can not be determined because it is not possible to predict the
cost of future operations. The unaudited pro forma statement of operations
reflects the anticipated adjustments to the expenses as a result of the Merger.
NOTE 5 - MERGER COSTS:
Merger costs are estimated at approximately $23,000 and are not included in
the pro forma statement of operations since these costs are not reoccurring.
These costs represent the estimated expense of Premier State-Florida and Premier
Insured-Florida carrying out their obligations under the Agreement and Plan of
Reorganization and consist of management's estimate of legal fees, accounting
fees, printing costs and mailing charges related to the proposed Merger.
NOTE 6 - FEDERAL INCOME TAXES:
Each Series has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code. After the Merger, Premier State-Florida intends to
continue to qualify as a regulated investment company, if such qualification is
in the best interests of its shareholders, by complying with the provisions
available to certain investment companies, as defined in applicable sections of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from all, or substantially all, Federal income taxes.
The identified cost of investments for the Series is substantially the same
for both financial accounting and federal income tax purposes. The tax cost of
investments will remain unchanged for the combined entity.
<PAGE>
PREMIER NEW YORK MUNICIPAL BOND FUND
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
The response to this item is incorporated by reference to Item 27 of
Part C of Post-Effective Amendment No. 15 to the Registrant's Registration
Statement on Form N-1A, filed on April 1, 1996.
ITEM 16. Exhibits - All references are to Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A, filed on September 8, 1995
(File No. 33-7497) (the "Registration Statement")
unless otherwise noted.
(1) Registrant's Amended and Restated Agreement and
Declaration of Trust is incorporated by
reference to Exhibit (1) to the Registration
Statement.
(2) Registrant's Bylaws, as amended, are
incorporated by reference to Exhibit (2) of
Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A, filed on
March 8, 1994.
(3) Not Applicable.
1(4) Form of Agreement and Plan of Reorganization.
(5) Not Applicable.
(6) Registrant's Management Agreement is
incorporated by reference to Exhibit (5) of
Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A, filed on
January 27, 1995.
(7)(a) Registrant's Distribution Agreement is
incorporated by reference to Exhibit (6)(a) of
Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A, filed on
January 27, 1995.
(7)(b) Forms of Shareholder Services Plan Agreements are incorporated
by reference to Exhibit (6)(b) to the Registration Statement.
(7)(c) Forms of Distribution Plan Agreements are incorporated by
reference to Exhibit (6)(c) to the Registration Statement.
(8) Not Applicable.
(9)(a) Registrant's Custody Agreement is incorporated
by reference to Exhibit (8)(a) to the
Registration Statement.
(9)(b) Registrant's Sub-Custodian Agreements are
incorporated by reference to Exhibit (8)(b) to
the Registration Statement.
(10) Registrant's Shareholder Services Plan is
incorporated by reference to Exhibit (9) to the
Registration Statement.
(11)(a)Opinion and consent of Stroock & Stroock & Lavan regarding
legality of issuance of shares and other matters is
incorporated by reference to Exhibit (10) to the Registration
Statement.
(11)(b)Consent of Stroock & Stroock & Lavan.
(12) Opinion and consent of Stroock & Stroock & Lavan
regarding tax matters.
(13) Not Applicable.
(14) Consent of Independent Auditors.
(15) Not Applicable.
2(16) Powers of Attorney.
(17) Form of Proxy.
1 Filed herewith as Exhibit A to the Prospectus/Proxy
Statement.
2 Incorporated by reference to the signature page hereto.
<PAGE>
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended, the reoffering prospectus will
contain the information called for by the applicable registration
form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the
applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment
is effective, and that, in determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment
shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the Registrant, in the City of New York,
State of New York, on the 9th day of December, 1996.
PREMIER NEW YORK MUNICIPAL BOND FUND
(Registrant)
By:/S/MARIE E. CONNOLLY
Marie E. Connolly, President
Each person whose signature appears below on this Registration
Statement hereby constitutes and appoints Richard W. Ingram, Elizabeth Bachman
and Douglas C. Conroy, and each of them, with full power to act without the
other, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all amendments
to this Registration Statement (including post-effective amendments and
amendments thereto), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/S/MARIE E. CONNOLLY President and Treasurer December 9, 1996
Marie E. Connolly (Principal Executive
Officer)
/S/JOHN F. TOWER, III Assistant Treasurer December 9, 1996
John F. Tower, III (Principal Financial
and Accounting Officer)
/S/JOSEPH S. DIMARTINO Trustee December 9, 1996
Joseph S. DiMartino
<PAGE>
/S/CLIFFORD L. ALEXANDER, JR. Trustee December 9, 1996
Clifford L. Alexander, Jr.
/S/PEGGY C. DAVIS Trustee December 9, 1996
Peggy C. Davis
/S/ERNEST KAFKA Trustee December 9, 1996
Ernest Kafka
/S/SAUL B. KLAMAN Trustee December 9, 1996
Saul B. Klaman
/S/NATHAN LEVENTHAL Trustee December 9, 1996
Nathan Leventhal
<PAGE>
INDEX OF EXHIBITS
(11)(b)Consent of Stroock & Stroock & Lavan
(12) Opinion and Consent of Stroock & Stroock & Lavan regarding
tax matters
(14) Consent of Independent Auditors
EXHIBIT (11)(b)
STROOCK & STROOCK & LAVAN
7 HANOVER SQUARE
NEW YORK, NEW YORK 10004
We hereby consent to the use of our legal opinion regarding the legality of
issuance of shares and other matters filed as Exhibit (10) of Post-Effective
Amendment No. 14 to the Registrant's Registration Statement on Form N-1A filed
on September 8, 1996, which opinion is incorporated by reference as an exhibit
to this Registration Statement on Form N-14. In giving such permission, we do
not admit hereby that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN
EXHIBIT (12)
December __, 1996
Premier New York Municipal Bond Fund
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
Premier Insured Municipal Bond Fund
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
Re: Registration Statement on Form N-14
(REGISTRATION NO. 333- )
Gentlemen:
You have requested our opinion as to certain Federal income tax consequences of
the reorganization contemplated by the Agreement and Plan of Reorganization,
substantially in the form included as Exhibit A to the Registration Statement on
Form N-14 of Premier New York Municipal Bond Fund (Reg. No. 333-_____) (the
"Registration Statement"), between Premier Insured Municipal Bond Fund (the
"Trust"), on behalf of its New York Series (the "Series"), and Premier New York
Municipal Bond Fund, a Massachusetts business trust (the "Fund"). You have
advised us that each of the Series and the Fund has qualified and will qualify
as a "regulated investment company" within the meaning of Subchapter M of
Chapter 1 of the Internal Revenue Code of 1986, as amended (the "Code"), for
each of its taxable years ending on or before or including the Closing Date.
In rendering this opinion, we have examined the Agreement and Plan of
Reorganization, the Registration Statement, the Amended and Restated Agreement
and Declaration of Trust of the Fund dated July 24, 1992, the Amended and
Restated Agreement and Declaration of Trust of the Trust dated April 14, 1993,
as amended December 15, 1993, the Prospectus and Statement of Additional
Information of the Fund and the Trust, incorporated by reference in the
Registration Statement, and such other documents as we have deemed necessary or
relevant for the purpose of this opinion. In issuing our opinion, we have relied
upon the representation of the Trust that its Amended and Restated Agreement and
Declaration of Trust, as amended, is the document pursuant to which it has
operated to date and that it has operated in accordance with all laws applicable
to such entity and the statements and representations made herein and in the
Registration Statement. We also have relied upon the representation of the Fund
that its Amended and Restated Agreement and Declaration of Trust is the document
pursuant to which it has operated to date and will operate following the
reorganization and that it has operated and will operate following the
reorganization in accordance with all laws applicable to such entity and the
statements and representations made herein and in the Registration Statement. As
to various questions of fact material to this opinion, where relevant facts were
not independently established by us, we have relied upon statements of, and
written information provided by, representatives of the Fund and the Trust. We
also have examined such matters of law as we have deemed necessary or
appropriate for the purpose of this opinion. We note that our opinion is based
on our examination of such law, our review of the documents described above, the
statements and representations referred to above and in the Registration
Statement and the Agreement and Plan of Reorganization, the provisions of the
Code, the regulations, published rulings and announcements thereunder, and the
judicial interpretations thereof currently in effect. Any change in applicable
law or any of the facts and circumstances described in the Registration
Statement, or inaccuracy of any statements or representations on which we have
relied, may affect the continuing validity of our opinion.
Capitalized terms not defined herein have the respective meanings given such
terms in the Agreement and Plan of Reorganization.
Based on the foregoing, it is our opinion that for Federal income tax purposes:
(a) The transfer of all or substantially all of the Series' assets in
exchange for the Fund Shares and the assumption by the Fund of certain
identified liabilities of the Series will constitute a "reorganization" within
the meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Fund upon the receipt of the
assets of the Series solely in exchange for the Fund Shares and the assumption
by the Fund of certain identified liabilities of the Series;
(c) No gain or loss will be recognized by the Series upon the transfer of
the Series' assets to the Fund in exchange for the Fund Shares and the
assumption by the Fund of certain identified liabilities of the Series or upon
the distribution of the Fund Shares to Series Shareholders in exchange for their
shares of the Series;
(d) No gain or loss will be recognized by Series Shareholders upon the
exchange of their Series shares for the Fund Shares;
(e) The aggregate tax basis for the Fund Shares received by a Series
Shareholder pursuant to the reorganization will be the same as the aggregate tax
basis of the Series shares held by such shareholder immediately prior to the
reorganization, and the holding period of the Fund Shares to be received by the
Series Shareholder will include the period during which the Series shares
exchanged therefor were held by such shareholder (provided the Series shares
were held as capital assets on the date of the reorganization); and
(f) The tax basis of the Series' assets acquired by the Fund will be the
same as the tax basis of such assets to the Series immediately prior to the
reorganization, and the holding period of the assets of the Series in the hands
of the Fund will include the period during which those assets were held by the
Series.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus/Proxy
Statement included in the Registration Statement, and to the filing of this
opinion as an exhibit to the Registration Statement, and to the filing of this
opinion as an exhibit to any application made by or on behalf of the Fund or any
distributor or dealer in connection with the registration and qualification of
the Fund or its Shares under the securities laws of any state or jurisdiction.
In giving such permission, we do not admit hereby that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933 or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN
EXHIBIT (14)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial Statements
and Experts" in the combined Prospectus/Proxy statement and to the incorporation
by reference of our reports on the financial statements of Premier Insured
Municipal Bond Fund, New York Series dated September 4, 1996 and Premier New
York Municipal Bond Fund dated January 2, 1996, in this registration Statement
(Form N-14) of Premier New York Municipal Bond Fund.
ERNST & YOUNG, LLP
New York, New York
December 6, 1996
