Registration No. 33-61327
===============================================================
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. __
[ X ] Post-Effective Amendment No. 1
(Check appropriate box or boxes)
PREMIER 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)
Daniel C. Maclean, 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.
_____________________
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 April 30, 1995 was filed on June 26, 1995.
<PAGE>
PREMIER MUNICIPAL BOND FUND
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
Form N-14 Item No. Proxy Statement/
Prospectus Caption
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Part A
Item 1. Beginning of Registration Prospectus Cover
Statement and Outside Front
Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Page
Cover Page of Prospectus
Item 3. Synopsis Information and Risk
Factors Summary
Item 4. Information About the
Transaction Letter to Shareholders;
Proposal No. 1; Certain
Differences Between the
Series and the National
Fund
Item 5. Information About the
Registrant Letter to Shareholders;
Certain Differences Between
the Series and the National
Fund
Item 6. Information About the Company
being Acquired Letter to Shareholders;
Certain Differences Between
the Series and the National
Fund
Item 7. Voting Information Letter to Shareholders;
Voting Information
Item 8. Interest of Certain Persons Not Applicable
and Experts
Item 9. Additional Information Not Applicable
Required for Reoffering by
Persons Deemed to be Under-
writers
<PAGE>
Form N-14 Item No. Proxy Statement/
Prospectus Caption
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Part B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Not Applicable
Item 12. Additional Information Statement of Additional
about the Registrant Information of Premier
Municipal Bond Fund dated
July 12, 1995<F1>
Item 13. Additional Information Statement of Additional
about the Company being Information of Premier State
Acquired Municipal Bond Fund dated
August 14, 1995<F2>
Item 14. Financial Statements Statement of Additional
Information of Premier
Municipal Bond Fund dated
July 12, 1995<F1> and
Statement of Additional
Information of Premier State
Municipal Bond Fund dated
August 14, 1995<F2>
Form N-14 Item No. Proxy Statement/
Prospectus Caption
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Part C
Item 15. Indemnification
Item 16. Exhibits
Item 17. Undertakings
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[FN] 1 Incorporated herein by reference to the Registration
Statement of the Registrant on Form N-1A dated
July 12, 1995 (File No. 33-7496).
[FN] 2 Incorporated herein by reference to the Registration
Statement of Premier State Municipal Bond Fund on Form
N-1A dated August 14, 1995 (File No. 33-10238).
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Dear Shareholder:
As a shareholder of the Arizona Series (the "Arizona Series"), the
Colorado Series (the "Colorado Series") or the Oregon Series (the "Oregon
Series" and, together with the Arizona Series and the Colorado Series, the
"Series") of Premier State Municipal Bond Fund (the "Trust"), you are
entitled to vote on the proposal described below and in the enclosed
materials.
Each Series is organized as a separate series of the Trust. Because
each Series has been unable to attract sufficient assets under management to
operate efficiently as a separate series of the Trust without significant
expense subsidization, management of the Trust has determined to recommend
termination of each Series by having each Series exchange all or
substantially all of its assets (subject to liabilities) for shares of
Premier Municipal Bond Fund (the "National Fund"). The Dreyfus Corporation
serves as each Series' and the National Fund's investment adviser.
The proposal provides that each Series exchange (the "Exchange") all
of its assets, subject to liabilities, attributable to its Class A and Class
B shares, for Class A and Class B shares, respectively, of the National Fund
(collectively, the "National Fund Shares"). Promptly thereafter, each Series
will distribute pro rata the National 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 or Class B Series shares a
number of corresponding National Fund Class A or Class B 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 January 1,
1995 will be reimbursed to such shareholders by The Dreyfus Corporation.
The investment objective of the National Fund is to maximize current
income exempt from Federal income tax to the extent consistent with the
preservation of capital; the National Fund does not invest so as to avoid
the
imposition of State income taxes for shareholders of any particular State.
The investment objective of each of the Series is to maximize current income
exempt from Federal income tax and, where applicable, from State income
taxes for residents of the States of Arizona, Colorado and Oregon, as the
case may be, without undue risk. The Series and the National Fund differ in
certain other respects which are described in the enclosed Combined Proxy
Statement/Prospectus.
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 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(s). 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
September 22, 1995
PREMIER STATE MUNICIPAL BOND FUND
(ARIZONA SERIES)
(COLORADO SERIES)
(OREGON SERIES)
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
A Special Meeting of Shareholders of each of the Arizona Series (the
"Arizona Series"), the Colorado Series (the "Colorado Series") and the
Oregon
Series (the "Oregon Series" and, together with the Arizona Series and the
Colorado Series, the "Series") of Premier State 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 Wednesday, November 15, 1995
at 11:00 a.m. for the following purposes:
1. To consider an Agreement and Plan of Reorganization (each, a
"Plan" and, collectively, the "Plans") for each Series providing for the
transfer of all or substantially all of the Series' assets, subject to
liabilities, attributable to its Class A and Class B shares, to Premier
Municipal Bond Fund (the "National Fund"), in exchange (the "Exchange") for
corresponding Class A and Class B shares of the National Fund and the
assumption by the National Fund of stated liabilities. Class A and Class B
shares of the National Fund received in the Exchange will be distributed by
each Series to its Class A and Class B shareholders, respectively, in
liquidation of the Series, after which the 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 September 15,
1995, 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
September 22, 1995
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.
TABLE OF CONTENTS
Page
Summary................................................ 3
Reasons for the Exchange............................... 7
Information about the Exchange......................... 7
Additional Information about the National Fund and Series.. 9
Voting Information..................................... 9
Financial Statements and Experts....................... 12
Other Matters.......................................... 12
Notice to Banks, Broker/Dealers and
Voting Trustees and Their Nominees.................... 12
September 22, 1995
PREMIER STATE MUNICIPAL BOND FUND
ARIZONA SERIES _ COLORADO SERIES _ OREGON SERIES
COMBINED PROXY STATEMENT/PROSPECTUS
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 15, 1995
This Combined Proxy Statement/Prospectus is furnished in connection
with a solicitation of proxies by the Board of Premier State Municipal Bond
Fund (the "Trust") on behalf of its Arizona Series (the "Arizona Series"),
Colorado Series (the "Colorado Series") and Oregon Series (the "Oregon
Series" and, together with the Arizona Series and the Colorado Series, the
"Series") to be used at the Special Meeting of Shareholders (the "Meeting")
of the Series to be held on Wednesday, November 15, 1995 at 11:00 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 (the "Proposal"). Shareholders of record at
the close of business on September 15, 1995 (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. 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.
It is proposed that each Series transfer all or substantially all of
its assets, subject to liabilities, attributable to its Class A and Class B
shares, to Premier Municipal Bond Fund (the "National Fund") in exchange
(the
"Exchange") for corresponding Class A shares ("National Fund Class A
Shares")
and Class B shares ("National Fund Class B Shares" and, together with
National Fund Class A Shares, "National Fund Shares") of the National Fund,
all as more fully described herein. Upon consummation of the Exchange,
National Fund Shares received by a Series will be distributed to its
Shareholders, with each Shareholder receiving a pro rata distribution of
National Fund Shares (or fractions thereof) for Series Shares held prior to
the Exchange. Thus, it is contemplated that each Class A and Class B
Shareholder will receive for the Shareholder's Series Shares a number of
National Fund Class A Shares and National Fund Class B Shares (or fractions
thereof), respectively, equal in value to the aggregate net asset value of
such Series Shares as of the date of the Exchange.
The National Fund is an open-end, diversified, management investment
company. The National Fund and the Series have the same investment adviser
and distributor, substantially similar investment objectives and management
policies, and differ substantively only to the extent set forth herein. The
National Fund and the Series have different primary portfolio managers, who
are described herein.
This Combined Proxy Statement/Prospectus, which should be retained
for future reference, sets forth concisely the information about the
National Fund that Shareholders should know before voting on the Proposal or
investing in the National Fund. The National Fund's prospectus dated July
12, 1995 (the "National Fund Prospectus"), the National Fund's Annual Report
for the fiscal
year ended April 30, 1995 and the Trust's prospectus dated August 14, 1995
(the "Trust Prospectus"), each accompany this Combined Proxy
Statement/Prospectus and are incorporated herein by reference.
Additional information, contained in a Statement of Additional
Information dated September 22, 1995 forming a part of the National Fund's
Registration Statement on Form N-14 (File No. 33-61327), has been filed with
the Securities and Exchange Commission and is available without charge by
calling 1-800-554-4611 or writing to the National 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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS COMBINED PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------
As of September 1, 1995, the following numbers of Series Shares were
issued and outstanding:
CLASS A CLASS B
NAME OF SERIES SHARES OUTSTANDING SHARES OUTSTANDING
Arizona Series 748,672 670,535
Colorado Series 93,482 265,716
Oregon Series 224,081 152,773
Proxy materials will be mailed to shareholders of record on or about
September 22, 1995. The Trust's principal executive offices are located at
200 Park Avenue, New York, New York 10166.
This Combined Proxy Statement/Prospectus is being used in order to
reduce the preparation, printing, handling and postage expenses that would
result from the use of a separate proxy statement/prospectus for each
Series.
Shareholders of each Series will vote separately on the Proposal. Class A
and Class B Shareholders of a Series will vote together on the Proposal.
Thus, if the Proposal is approved by one Series, and disapproved by the
other Series,
the Proposal will be implemented only for the Series that approved the
Proposal. Therefore, it is essential that Shareholders who own Series Shares
in more than one Series complete, date, sign and return EACH proxy card they
receive.
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION PROVIDING FOR THE
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF EACH SERIES TO PREMIER
MUNICIPAL BOND FUND
SUMMARY
This Summary is qualified by reference to the more complete
information contained elsewhere in this Combined Proxy Statement/Prospectus,
the National Fund Prospectus, the Trust Prospectus and the form of Agreement
and Plan of Reorganization attached to this Combined Proxy
Statement/Prospectus 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 "Act")), have 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. 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 National Fund all of the assets (subject to liabilities)
of the Series, including all securities and cash, attributable to its Class
A and Class B shares, in exchange for National Fund Class A Shares and
National
Fund Class B Shares, respectively, having an aggregate net asset value equal
to the value of the net assets of the Series' corresponding Class acquired.
Each Series will distribute all National Fund Shares received by it among
its
Shareholders so that each Class A and Class B Shareholder will receive a pro
rata distribution of National Fund Class A Shares and National Fund Class B
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, the 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
National 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 National 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 Exchange."
TAX CONSEQUENCES. As a condition to the closing of the Exchange, the
Trust and 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 National 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 National 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 Exchange_Federal Income Tax Consequences."
COMPARISON OF THE SERIES AND NATIONAL FUND. The following discussion
is a summary of certain parts of the Trust Prospectus and the National Fund
Prospectus. Information contained herein is qualified by the more complete
information set forth in the Trust Prospectus and the National Fund
Prospectus, which are incorporated herein by reference.
GENERAL _ Each Series and the National Fund are open-end, management
investment companies advised by The Dreyfus Corporation ("Dreyfus"). The
investment objectives of the National Fund and each Series are substantially
similar _ to maximize current income exempt from Federal income tax_except
that each Series also seeks income exempt from the income tax of the State
after which it is named, as described below. As a consequence, the Arizona
Series seeks to invest primarily in Municipal Obligations (as defined below)
that are exempt from State income taxes for Arizona residents. Similarly,
the
Colorado and Oregon Series seek to invest primarily in Municipal Obligations
that are exempt from State income taxes for Colorado and Oregon residents,
respectively. The National Fund is not limited in this manner and, as a
result, the dividends it pays will not be exempt from State income taxes to
residents of Arizona, Colorado or Oregon.
The management policies of each Series and the National 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
("Municipal Obligations"), the interest from which is exempt from Federal
income tax. Each Series' investments are further limited by the requirement
that, under ordinary circumstances, it invest primarily in Municipal
Obligations the interest from which is exempt from the income tax of the
State after which it is named. In all other material respects, the
management
policies of the National Fund and the Series are the same. For a more
complete discussion of each Series' and the National Fund's management
policies, see "Description of the Fund" in the Trust's and the National
Fund's Prospectus.
Each Series is a separate portfolio of the Trust, which, like the
National Fund, is an unincorporated business trust organized under the laws
of the Commonwealth of Massachusetts.
FUNDAMENTAL POLICIES _ The National Fund is a DIVERSIFIED investment company
which 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
National 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 is a
NON-DIVERSIFIED investment company, meaning that the proportion of each
Series' assets that may be invested in the securities of a single issuer is
not limited by the Act. As a diversified investment company that invests in
Municipal Obligations of more than one state, the National Fund should be
less susceptible than the Series to the risks associated with any single
economic, political or regulatory occurrence.
In all other respects, the fundamental policies and investment
restrictions of each Series and the National Fund are identical.
FEES AND EXPENSES _ The following information concerning fees and expenses
is derived from information set forth under the caption "Fee Table" in each
of the National Fund's and the Trust's Prospectus. The expense information
set forth below for the National Fund and the Series does not reflect any
fee waivers or expense reimbursement arrangements that may be or may have
been in effect.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily
net assets):
<TABLE>
<CAPTION>
NATIONAL FUND ARIZONA SERIES COLORADO SERIES
CLASS CLASS CLASS CLASS CLASS CLASS
A B A B A B
_____________________ __________-------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees .55% .55% .55% 55% .55% .55%
12b-1 Fees None .50% None .50% None .50%
Other Expenses .37% .39% .52% .55% 1.44% 1.42%
Total Fund
Operating Expenses .92% 1.44% 1.07% 1.60% 1.99% 2.47%
</TABLE>
<TABLE>
PRO FORMA FOR
NATIONAL FUND
OREGON SERIES AFTER EXCHANGE
CLASS CLASS CLASS CLASS
A B A B
_______________________- --------------------
<S> <C> <C> <C> <C>
Management Fees .55% .55% .55% .55%
12b-1 Fees None .50% None .50%
Other Expenses 1.05% 1.08% .37% .39%
Total Fund
Operating Expenses 1.60% 2.13% .92% 1.44%
EXAMPLE
An investor 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:
</TABLE>
<TABLE>
NATIONAL FUND ARIZONA SERIES COLORADO SERIES
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
_________________________- ____________---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 54 $45/15* $ 55 $46/16* $ 65 $55/25*
3 Years $ 73 $66/46* $ 78 $70/50* $105 $97/77*
5 Years $ 94 $89/79* $101 $97/87* $147 $142/132*
10 Years $153 $145** $170 $163** $266 $258**
PRO FORMA FOR
NATIONAL FUND
OREGON SERIES AFTER EXCHANGE
CLASS A CLASS B CLASS A CLASS B
__________________________ ------- -------
1 Year $ 61 $52/22* $ 54 $45/15*
3 Years $ 93 $87/67* $ 73 $66/46*
5 Years $128 $124/114* $ 94 $89/79*
10 Years $226 $220** $153 $145**
- ---------------
* Assuming no redemption of Class B 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>
Assuming the approval of the Exchange, Dreyfus, based
on
internally-developed estimates dated as of September 1, 1995,
believes that the National Fund Class A Shares initially will
have Total Fund Operating
Expenses of approximately .91% of average net assets and the
National Fund
Class B Shares initially will have Total Fund Operating Expenses
of approximately 1.43% of average net assets.
INITIAL SALES CHARGE AND CDSC _ The schedule of the initial
sales
charge
imposed on the Series' Class A shares is identical to that
imposed on National Fund Class A Shares. No initial sales charge
will be imposed on
National Fund Class A Shares received by Series Shareholders at
the time of the Exchange. The schedule of the CDSC imposed on
the Series' Class B shares
at the time of redemption is identical to that imposed on
National Fund Class
B Shares. No CDSC will be imposed on Class B shares of the
Series
upon consummation of the Exchange. For purposes of calculating
future CDSC rates and conversion periods, the National Fund
Class
B Shares received by a Series Shareholder at the time of the
Exchange will be deemed to have been held
since the date the Shareholder initially purchased the Series'
Class B shares which are the subject of the Exchange. If a
Series
Class A Shareholder has signed a Letter of Intent making such
Shareholder eligible for a reduced
sales load, the terms of such Letter of Intent will carry over
and apply to such Shareholder as a shareholder of the National
Fund. The National Fund also
offers the same Right of Accumulation with respect to purchases
of National Fund Class A Shares as that offered to Series
Shareholders.
DISTRIBUTION PLAN _ National Fund Class A Shares are not subject
to a Rule 12b-1 Plan. National Fund Class B Shares are subject
to an identical Rule 12b-1 Plan as Series Class B shares. If the
Exchange is consummated, Series
Class B shares will continue to be subject to the same Rule
12b-1 Plan. See "Distribution Plan and Shareholder Services
Plan_Distribution Plan" in the
relevant Prospectus for a complete discussion of the Rule 12b-1
Plan.
SHAREHOLDER SERVICES PLAN _ National Fund Shares are subject to
a Shareholder Services Plan which is identical to that adopted
by the Trust for each Series' Class A and Class B shares. See
"Distribution Plan and Shareholder Services Plan_Shareholder
Services Plan" in the relevant Prospect
us for a complete discussion of the Shareholder Services Plan.
PRIMARY PORTFOLIO MANAGERS _ The primary portfolio managers are
different for the National Fund and the Series. The primary
portfolio manager for each
of the Series is Stephen C. Kris, who has held that position
with respect to the Arizona Series
since September 1992 and with respect to the Colorado Series and
the Oregon Series since January 1994. Mr. Kris has been employed
by Dreyfus since
February 1988. The primary portfolio manager for the National
Fund is Samuel J. Weinstock, who has held that position since
August 1987.
Mr. Weinstock has been employed by Dreyfus since March 1987. Mr.
Kris, together with the Series' other portfolio managers,
however, are portfolio managers of the National Fund.
CAPITALIZATION _ The following table sets forth as of September
1, 1995 (1) the capitalization of each Series, (2) the
capitalization of the National
Fund, with respect to Class A and Class B, and (3) the pro forma
capitalization of the National Fund, with respect to Class A and
Class B, as adjusted showing the effect of the Exchange had it
occurred on such date.
<TABLE>
<CAPTION>
NATIONAL FUND ARIZONA SERIES COLORADO SERIES OREGON SERIES
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B A B A B A B
___________-------- ___________-------- ___________------ --------___________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total net assets $497,299,173 $100,487,246 $9,816,857 $8,801,088 $1,206,605 $3,431,747 $2,950,921 $2,012,610
Net asset value
per share... $14.24 $14.24 $13.11 $13.13 $12.91 $12.92 $13.17 $13.17
Shares outstanding 34,923,629 7,055,305 748,672 670,535 93,482 265,716 224,081 152,773
</TABLE>
PRO FORMA
FOR NATIONAL FUND
AFTER EXCHANGE
CLASS A CLASS B
_____________ ----------
Total net assets $511,273,556 $114,732,691
Net asset value
per share... $14.24 $14.24
Shares outstanding 35,904,042 8,057,071
PURCHASE PROCEDURES _ The purchase procedures of the Series and
National Fund are identical. See "How to Buy Fund Shares" in
the
relevant Prospectus for a complete discussion of purchase
procedures.
REDEMPTION PROCEDURES _ The redemption procedures of the Series
and National Fund are identical. See "How to Redeem Fund Shares"
in the relevant Prospectus for a complete discussion of
redemption procedures.
DISTRIBUTIONS _ The dividend and distributions policies of the
Series and National Fund are identical. See "Dividends,
Distributions and Taxes" in the
relevant Prospectus for a complete discussion of such policies.
SHAREHOLDER SERVICES _ The shareholder services offered by the
Series and National Fund are identical. See "Shareholder
Services" in the relevant
Prospectus for a complete description of shareholder services.
RISK FACTORS _ The investment risks of each Series and the
National Fund are substantially similar, except for those
incurred by each Series as a result
of its purchase primarily of one 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 a Series invests. 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' portfolio and the interest
income to the Series 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. Securities in which each Series or the
National 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.
In addition, each Series and the National 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 the Series' or the National 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 the Series or the National Fund to sell certain
securities or could result in lower prices than those used in
calculating the Series' or the National Fund's net asset value.
Certain municipal lease/purchase obligations in which each
Series or the National 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_Risk Factors"
in the relevant Prospectus for a more complete description of
investment risks.
REASONS FOR THE EXCHANGE
The Board of Trustees of the Trust and National 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 of the Series has
been unable to attract sufficient assets to operate efficiently
without significant expense subsidization as separate series of
the Trust. As of September 1, 1995, the
Arizona Series, Colorado Series and Oregon Series had assets
under management of just $18,617,945, $4,638,352 and $4,963,531,
respectively. Larger aggregate net assets should enable the
combined Fund to obtain the benefits
of some economies of scale, which may result in a lower overall
expense ratio for the combined Fund (as compared to the expense
ratios of each Series and the National Fund alone) through the
spreading of fixed costs of fund
operations over a somewhat larger asset base.
In determining whether to recommend approval of the
Exchange, each Board considered the following factors, among
others: (1) the compatibility of the Series' and National
Fund's investment objective, management policies
and investment restrictions, as well as shareholder services
offered by the Series and National Fund; (2) the comparative
investment performance of the National Fund and the Series; (3)
the terms and conditions of the Exchange
and whether the Exchange would result in dilution of shareholder
interests;
(4) expense ratios and published information regarding the fees
and expenses of the National Fund and Series, as well as the
expense ratios of similar funds and the estimated expense ratio
of the combined Fund; (5) the tax
consequences of the Exchange; and (6) the estimated costs
incurred by the National Fund and the Series 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 EXCHANGE
PLAN OF EXCHANGE. The following summary of the Plan is
qualified in its entirety by reference to the Plan attached
hereto as Exhibit A. The Plan provides that the National Fund
will acquire all or substantially all of the
assets of each Series, attributable to the Series' Class A and
Class B shares, in exchange for National Fund Class A Shares and
National Fund Class
B Shares, respectively, and the assumption by the National Fund
of each Series' stated liabilities on December 1, 1995 or such
later date as may be agreed upon by the parties (the "Closing
Date"). The number of National 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 National 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 National
Fund will be valued in accordance with the valuation practices
of
the National Fund, which are described under the caption "How to
Buy Fund Shares" in the National Fund Prospectus and under the
caption "Determination of Net
Asset Value" in the National Fund's Statement of Additional
Information dated July 12, 1995.
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' 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) and all of its 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 and
Class B Shareholders of record as of the close of business on
the
Closing Date the National Fund Class A Shares and National Fund
Class B Shares, respectively,
received by it in the Exchange. Such liquidation and
distribution
will be accomplished by establishing accounts on the share
records of the National Fund in the name of each Series
Shareholder, each account representing the
respective pro rata number of National 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 National Fund Shares distributed to the record
holders of the Series. Upon presentation to the transfer agent
of
the National Fund, Series Share certificates will be exchanged
for National Fund Share certificates, at the
applicable exchange rate. Certificates for National Fund Shares
will be issued only upon the investor's written request.
The Plan may be amended at any time prior to the Exchange.
The Trust will provide Series Shareholders with information
describing any material
amendment to the Plan prior to Shareholder consideration. The
Series' and National Fund's obligations under the Plan 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 National Fund being confirmed
by the respective parties.
The total expenses of the Exchange are expected to be
approximately $1,500 for the Arizona Series, $300 for the
Colorado Series and $350 for the
Oregon Series. Each Series will bear its own expenses, except
for
the expenses of preparing, printing and mailing this Combined
Proxy Statement/Prospectus, 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 National Fund. 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 Series
assets for National Fund Shares is intended to qualify for
Federal income tax purposes
as a tax-free reorganization under Section 368(a) of the
Internal
Revenue Code of 1986, as amended (the "Code"). As a condition to
the closing of the Exchange, the National Fund and Series will
receive the opinion of Stroock &
Stroock & Lavan, counsel to the National Fund and each 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 National
Fund Shares and the assumption by the National Fund of Series'
liabilities will constitute a "reorganization" within the
meaning
of Section 368(a)(1)(C) of the Code; (2) no gain or loss will be
recognized by the National Fund upon
the receipt of Series assets solely in exchange for National
Fund
Shares and the assumption by the National 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 National Fund in exchange for National Fund Shares
and the assumption by the
National Fund of the Series' liabilities or upon the
distribution
(whether actual or constructive) of National 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 National
Fund
Shares; (5) the aggregate tax basis for National 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 National 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 National 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 National
Fund will include the period during which
those assets were held by the Series.
NONE OF THE SERIES OR THE NATIONAL FUND 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 Exchange in light of their
individual circumstances.
Since the foregoing discussion relates only to the Federal
income
tax consequences of the Exchange, Series Shareholders also
should consult their tax advisers as to state and local tax
consequences, if any, of the Exchange.
REQUIRED VOTE AND BOARDS' 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 each Series'
charter documents, an affirmative vote of a majority of the
Series' Share is required to approve the Plan and the Exchange.
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 NATIONAL FUND AND SERIES
Information about the National Fund is incorporated by
reference into this Combined Proxy Statement/Prospectus from the
National Fund Prospectus forming a part of the Registration
Statement on Form N-1A (File No. 33-7496). Information about the
Series is incorporated by reference into
this Combined Proxy Statement/Prospectus from the Trust
Prospectus forming a part of the Registration Statement on Form
N-1A (File No. 33-10238).
The Series and the National Fund are subject to the
requirements of the Act, and file reports, proxy statements and
other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy
statements and other information filed by the Series or National
Fund 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 can also 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 the 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 o
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 thirty percent
(30%) of the outstanding Series Shares entitled to vote at the
Meeting.
The votes of the National Fund's shareholders are not being
solicited since their approval or consent is not necessary for
the Exchange.
As of September 1, 1995, 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:
<TABLE>
<CAPTION>
ARIZONA SERIES PERCENTAGE OF SHARES
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING CLASS A
<S> <C> <C>
Merrill Lynch Pierce 50,083.000 6.63%
Fenner & Smith, Inc.
4800 Deer Lake Dr. E. FL 3
Jacksonville, FL
CLASS B
Merrill Lynch/FDS 66,181.000 9.88%
4800 Deer Lake Dr. E. FL3
Jacksonville, FL
COLORADO SERIES
PERCENTAGE OF SHARES
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING CLASS A
Major Trading Corporation 30,650.154 32.78%
200 Park Avenue
New York, NY
Merrill Lynch Pierce 5,799.000 6.20%
Fenner & Smith, Inc.
4800 Deer Lake Dr. E. FL 3
Jacksonville, FL
Phillip S. Fox 9,248.195 9.89%
2055 Anglo Dr. Ste. 200
Colorado Springs, CO
Smith Barney, Inc. 12,067.458 12.90%
388 Greenwich Street
New York, NY
COLORADO SERIES (CONTINUED)
PERCENTAGE OF SHARES
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING
CLASS B
Major Trading Corporation 30,865.288 11.46%
200 Park Avenue
New York, NY
Smith Barney, Inc. 16,865.288 6.34%
388 Greenwich Street
New York, NY
OREGON SERIES
PERCENTAGE OF SHARES
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING
CLASS A
W. Drager, Sr. TTEE 11,789.341 5.26%
William G. Drager Sr. Living Trust
DTD 6/15/89
4797 Becker Cir SE
Albany, OR
Paine Webber FBO 11,688.000 5.21%
Sharon W. Barauskas
921 Midland Way
Brookings, OR
Major Trading Corporation 104,883.344 46.80%
200 Park Avenue
New York, NY
CLASS B
Major Trading Corporation 78,988.851 51.70%
200 Park Avenue
New York, NY
Prudential Securities FBO 19,643.326 12.85%
Elwood Mead &
Erma V. Mead, JT TEN
32200 SW French Prairies Dr.
Unit B-205
Wilsonville, OR
Smith Barney, Inc. 8,135.541 5.32%
388 Greenwich Street
New York, NY
</TABLE>
A shareholder who beneficially owns, directly or
indirectly, more than 25% of a Series' voting securities may be
deemed a "control person" (as defined in the 1940 Act) of the
Series.
As of September 1, 1995, Merrill Lynch/FDS, 4800 Deer Lake
Drive E. Jacksonville, FL owned 497.249.000 shares and 7.04% of
the National Fund's Class B shares outstanding. As of such date,
no other shareholder was known
by the National Fund to own of record 5% or more of its
outstanding voting shares.
As of September 1, 1995, Trustees and officers of the
National Fund, as a group, owned less than 1% of the National
Fund's outstanding shares. As of September 1, 1995, Trustees and
officers of the 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 April 30, 1995, which are included in the
Trust's Statement of Additional Information, and the audited
financial statements of the National
Fund for the fiscal year ended April 30, 1995, which are
included
in the National Fund's Statement of Additional Information, have
each been audited by Ernst & Young LLP, independent auditors,
whose respective reports thereon
are included therein. 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 The Shareholder
Services Group, Inc., a subsidiary of First Data Corporation,
Attention: Premier State Municipal Bond Fund, P.O. Box 9119,
Quincy, Massachusetts 02269-9947, 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
Combined Proxy Statement/Prospectus 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 THE MEETING
IN PERSON ARE URGED TO COMPLETE, DATE, SIGN AND RETURN EACH
PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
Dated: September 22, 1995
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated July 19, 1995
(the "Agreement"), between PREMIER STATE MUNICIPAL BOND FUND, a
Massachusetts business trust (the "Trust"), on behalf of its
__*__ (the "Series") and PREMIER MUNICIPAL BOND FUND, a
Massachusetts business trust (the "Acquiring
Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section
368(a)(1)(C) 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 and Class B shares, in exchange solely for Class A
shares
("Acquiring Fund Class A Shares") and Class B shares ("Acquiring
Fund Class B Shares" and, together with Acquiring Fund Class A
Shares, the "Acquiring Fund
Shares"), respectively, of beneficial interest, par value $.001
per share, of the Acquiring Fund and the assumption by the
Acquiring Fund of certain
liabilities of the Series and the distribution, after the
Closing
Date hereinafter referred to, of the Acquiring 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 Acquiring Fund is
a registered, diversified, open-end management investment
company, and the Series owns
securities which are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, both the Acquiring Fund and the Series are
authorized to issue their shares of beneficial interest;
WHEREAS, the Board of the Acquiring Fund 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 and Class B
shares, for Acquiring Fund Class A Shares and Acquiring Fund
Class B Shares, respectively, and the assumption of such
liabilities is in the best interests
of the Acquiring Fund's shareholders and that the interests of
the Acquiring Fund's existing shareholders would not be diluted
as a result of this transaction; and
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 and Class B shares, for Acquiring
Fund Class A Shares and Acquiring Fund Class B 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
ACQUIRING 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
Acquiring Fund all of the assets of the Series, including all
securities and cash (subject to liabilities), attributable to
the Series' Class A and Class B shares, and the
Acquiring Fund agrees in exchange therefor (i) to deliver to the
Series the number of Acquiring Fund Shares, including fractional
Acquiring 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 Acquiring Fund Shares, the
Acquiring Fund shall credit
the Acquiring Fund Shares to the Series' account on the books of
the Acquiring 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
Acquiring 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 Acquiring 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.
- ------------------
* Insert ARIZONA SERIES, COLORADO SERIES or OREGON SERIES, as
appropriate.
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
Acquiring Fund's custodian (the "Custodian"), for the account of
the Acquiring 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 Acquiring 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 Acquiring Fund.
1.4. The Series will pay or cause to be paid to the
Acquiring Fund any interest received on or after the Closing
Date
with respect to assets transferred to the Acquiring Fund
hereunder. The Series will transfer to the Acquiring 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 Acquiring 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 and Class B
shareholders of record, determined as of the close of business
on the Closing Date (the "Series Shareholders"), Acquiring Fund
Class A Shares and Acquiring Fund Class B
Shares, respectively, received by the Series pursuant to
paragraph 1.1. Such liquidation and distribution will be
accomplished by the transfer of the applicable Acquiring Fund
Shares then credited to the account
of the Series on the books of the Acquiring Fund to open
accounts
on the share records of the Acquiring Fund in the names of the
Series Shareholders and representing the respective pro rata
number of the applicable Acquiring
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 Acquiring Fund Shares will be shown on
the books of the Acquiring Fund's transfer agent. Shares of the
Acquiring Fund will be issued in the manner described in the
Acquiring Fund's current prospectus and statement of additional
information.
1.7. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder
of the Acquired 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 Acquiring 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
Acquiring 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 Acquiring Fund's Amended and Restated Agreement and
Declaration of Trust dated as of September 18, 1992 (the "Trust
Agreement") and then-current
prospectus or statement of additional information.
2.2. The net asset value of an Acquiring Fund Share
shall be the net asset value per share computed as of the
Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's Trust Agreement and
then-current prospectus or statement of additional information.
2.3. The number of Acquiring Fund Class A Shares and
Acquiring Fund Class B 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 Acquiring Fund Class
A Share or Acquiring Fund Class B
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 Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1. The Closing Date shall be December 1, 1995 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 9:30 a.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 Acquiring
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 Acquiring 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 Acquiring 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
and
Class B shareholders and the number and percentage ownership of
outstanding Class A and Class B shares, respectively, owned by
each such shareholder immediately
prior to the Closing. The Acquiring Fund shall issue and deliver
a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of the Series, or
provide evidence satisfactory to the Series that such Acquiring
Fund Shares have been credited to the
Series' account on the books of the Acquiring 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.
4. REPRESENTATIONS AND WARRANTIES.
4.1. The Series represents and warrants to the Acquiring
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 September
19, 1986, 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__*__fiscal year(s) ended April 30, 1995 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 Acquiring
Fund) fairly reflect the financial condition of the Series as of
such date, and there are no known contingent liabilities of the
Series as of such date not disclosed therein.
- ----------------------------
* Insert three, with respect to the Arizona Series only.
(g) Since April 30, 1995, 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 Series' 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 Acquiring 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 Acquiring Fund represents and warrants to the
Series as follows:
(a) The Acquiring Fund is 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 Acquiring Fund is registered under the 1940 Act as
an open-end, diversified, 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 Acquiring Fund 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 Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material
violation of its Trust Agreement or its Bylaws or of any
agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquiring 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
Acquiring 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 Acquiring 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
Acquiring
Fund for the five fiscal years ended April 30, 1995, 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 Acquiring Fund as of such
dates.
(g) Since April 30, 1995 there has not been any material
adverse change in the Acquiring Fund's financial condition,
assets, liabilities or
business other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring 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 Acquiring 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.
(i) For each fiscal year of its operation, the Acquiring 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 Acquiring Fund
are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable by the Acquiring
Fund.
The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for
or purchase any of the Acquiring Fund Shares, nor is there
outstanding any security convertible into any Acquiring 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
Acquiring Fund's 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 Acquiring Fund and
is based on information furnished by the Acquiring 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 ACQUIRING FUND AND THE SERIES.
5.1. The Acquiring 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 Series 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
Acquiring 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
Acquiring Fund, in such form as is reasonably satisfactory to
the Acquiring Fund, a statement of
the earnings and profits of the Series for Federal income tax
purposes which will be carried over to the Acquiring 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 Series will provide the Acquiring 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 Acquiring Fund (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 Acquiring 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 ACQUIRING
FUND.
The obligations of the Acquiring 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 Series
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 Acquiring 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 Series shall have delivered to the Acquiring 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 Acquiring Fund, to the effect that the
representations and warranties of the Series 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 Acquiring 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
Acquiring 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 Acquiring
Fund 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 Acquiring Fund 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
Acquiring Fund 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 Acquiring Fund shall
reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING 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
Acquiring 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 Acquiring 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 Acquiring 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
ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid)
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 Acquiring Fund Shares and the
assumption by the Acquiring 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
Acquiring
Fund upon the receipt of the assets of the Series solely in
exchange for the Acquiring Fund Shares and the assumption by the
Acquiring 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
Acquiring Fund in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring
Fund of certain identified liabilities of the Series or upon the
distribution (whether actual or constructive) of the Acquiring
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 Acquiring Fund Shares; (e) The aggregate
tax basis for the Acquiring 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 Acquiring 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
Acquiring 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 Acquiring 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 the Acquiring Fund, 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 trustees, officers or
shareholders of the Acquiring Fund 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 Acquiring Fund
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 Acquiring 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
Acquiring 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 "Premier Municipal Bond Fund" and
"Trustees of Premier Municipal Bond Fund" refer respectively to
the Acquiring Fund and its Trustees, as trustees but not
individually or personally, acting
from time to time under the Acquiring Fund's 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
Acquiring Fund. The obligations of the Acquiring Fund 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 Acquiring Fund
personally, but bind only the Acquiring Fund's property, and all
persons dealing with any
class of shares of the Acquiring Fund must look
solely to the Acquiring Fund's property belonging to such class
for the enforcement of any claims against the Acquiring Fund.
(b) The names "Premier State Municipal Bond Fund" and
"Trustees of Premier State 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.
IN WITNESS WHEREOF, the Acquiring Fund and the Trust
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.
PREMIER MUNICIPAL BOND FUND
By:______________________________
Marie E. Connolly,
President
ATTEST:____________________
John E. Pelletier,
Secretary
PREMIER STATE MUNICIPAL BOND FUND, on behalf of its
_______*______SERIES
By:______________________________
Marie E. Connolly,
President
ATTEST:____________________
John E. Pelletier,
Secretary
* Insert ARIZONA, COLORADO or OREGON, as appropriate.
<PAGE>
Preliminary Copy
PREMIER STATE MUNICIPAL BOND FUND
(ARIZONA SERIES)
The undersigned shareholder of the Arizona Series
(the "Series") of Premier State Municipal Bond Fund (the
"Trust") hereby appoints Robert R. Mullery and Steven F. Newman,
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
September 15, 1995, 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 11:00 a.m. on
Wednesday, November 15, 1995, 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 Joint Proxy Statement/Prospectus 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 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 and Class B 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, administra-
tor, trustee or guardian, please give full
title.
Dated: _______________, 1995
___________________________
Signature(s)
___________________________
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
Preliminary Copy
PREMIER STATE MUNICIPAL BOND FUND
(COLORADO SERIES)
The undersigned shareholder of the Colorado Series
(the "Series") of Premier State Municipal Bond Fund (the
"Trust") hereby appoints Robert R. Mullery and Steven F. Newman,
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
September 15, 1995, 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 11:00 a.m. on
Wednesday, November 15, 1995, 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 Joint Proxy Statement/Prospectus 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 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 and Class B 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, administra-
tor, trustee or guardian, please give full
title.
Dated: _______________, 1995
_____________________________
Signature(s)
_____________________________
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
Preliminary Copy
PREMIER STATE MUNICIPAL BOND FUND
(OREGON SERIES)
The undersigned shareholder of the Oregon Series (the
"Series") of Premier State Municipal Bond Fund (the "Trust")
hereby appoints Robert R. Mullery and Steven F. Newman,
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
September 15, 1995, 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 11:00 a.m. on
Wednesday, November 15, 1995, 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 Joint Proxy Statement/Prospectus 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 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 and Class B 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, administra-
tor, trustee or guardian, please give full
title.
Dated: _______________, 1995
_______________________________
Signature(s)
_______________________________
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
<PAGE>
PREMIER MUNICIPAL BOND FUND
PROSPECTUS JULY 12, 1995
Premier Municipal Bond Fund (the "Fund") is an open-end,
diversified, management investment company, known as a mutual
fund. Its goal is to maximize current income exempt from Federal
income tax to the extent consistent with the preservation of
capital.
By this Prospectus, Class A, Class B and Class C shares of
the Fund are being offered. 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 on
redemptions made within five years of purchase; and Class C
shares are subject to a contingent deferred sales charge imposed
on redemptions made within one year of purchase. Other
differences among the three Classes include the services offered
to and the expenses borne by each Class and certain voting
rights, as described herein. The Fund offers these alternatives
so an investor may choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares and other
circumstances.
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 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 July 12,
1995, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters
which may be of interest to some investors. It has been filed
with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, write to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
1-800-554-4611. 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............................. 17
How to Buy Fund Shares............................. 18
Shareholder Services............................... 22
How to Redeem Fund Shares.......................... 25
Distribution Plan and Shareholder Services Plan.... 30
Dividends, Distributions and Taxes................. 30
Performance Information............................ 33
General Information................................ 34
<TABLE>
FEE TABLE
<CAPTION>
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* 3.00% 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.............................. .37% .39% .37%
Total Fund Operating Expenses............... .92% 1.44% 1.67%
</TABLE>
<TABLE>
<CAPTION>
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
<S> <C> <C> <C>
1 Year........................... $ 54 $45/$15** $27/$17**
3 Years.......................... $ 73 $66/$46** $ 53
5 Years.......................... $ 94 $89/$79** $ 91
10 Years........................... $ 153 $145*** $ 198
* 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.
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%.
</TABLE>
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will
bear, directly or indirectly, the payment of which will reduce
investors' return on an annual basis. Other Expenses for Class C
are based on amounts for Class A for the Fund's last 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 Fund Shares" and "Distribution Plan and Shareholder
Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been
audited by Ernst & Young LLP, the Fund's independent auditors,
whose report thereon appears in the Statement of Additional
Information. Further financial data and related notes for Class
A and Class B are included in the Statement of Additional
Information, available upon request. No financial information
is available for Class C shares, which had not been offered as
of the date of this Prospectus.
FINANCIAL HIGHLIGHTS
Contained below is per share operating
performance data for Class A and Class B shares 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 Class B Shares
---------------------------------------------------------------------------- ---------------------
Year Ended April 30, Year Ended April 30,
---------------------------------------------------------------------------- ---------------------
1987(1) 1988 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ----- ----- ----- ---- ---- ---- ---- ---- ------- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:
Net asset value, beginning
of year $14.00 $12.83 $12.30 $12.97 $12.77 $13.28 $13.75 $14.45 $13.81 $14.02 $14.45 $13.81
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Investment income-net .43 .97 1.01 .99 .98 .94 .92 .89 .84 .24 .80 .77
Net realized and unrealized
gain (loss) on investments (1.17) (.53) .67 (.20) .51 .49 .91 (.59) .05 .43 (.59) .05
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations (.74) .44 1.68 .79 1.49 1.43 1.83 .30 .89 .67 .21 .82
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions:
Dividends from investment
income-net (.43) (.97) (1.01) (.99) (.98) (.94) (.92) (.89) (.84) (.24) (.80) (.77)
Dividends from net
realized gain on investments -- -- -- -- -- (.02) (.21) (.05) -- -- (.05) --
Dividends in excess of net
realized gain on investments -- -- -- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (.43) (.97) (1.01) (.99) (.98) (.96) (1.13) (.94) (.84) (.24) (.85) (.77)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year $12.83 $12.30 $12.97 $12.77 $13.28 $13.75 $14.45 $13.81 $13.86 $14.45 $13.81 $13.86
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN(3) (12.87%)(4) 3.64% 14.13% 6.25% 12.13% 11.08% 13.76% 1.84% 6.72% 16.80%(4) 1.26% 6.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets -- -- -- -- .22% .54% .74% .85% .92% 1.15%(4) 1.40% 1.44%
Ratio of net investment
income to average net assets 6.53%(4) 7.81% 7.72% 7.51% 7.43% 6.90% 6.43% 6.01% 6.16% 5.13%(4) 5.33% 5.62%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation 1.50%(4) 1.50% 1.50% 1.15% .82% .40% .20% .06% -- .10%(4) .05% --
Portfolio Turnover Rate 36.62%(5) 33.25% 143.20% 63.53% 41.30% 50.72% 30.99% 22.15% 38.60% 30.99% 22.15% 38.60%
Net Assets, end of year
(000's omitted) $1,290 $5,650 $26,342 $100,784 $247,195 $388,793 $526,606 $546,036 $495,616 $19,855 $95,643 $99,411
(1) From November 26, 1986 (commencement of operations) to April 30, 1987.
(2) From January 15, 1993 (commencement of initial offering)to April 30, 1993.
(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
Fund 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 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 Fund Shares--Class B Shares" and "How to Redeem
Fund 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 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 their purchase.
See "How to Buy Fund Shares -- Class C Shares" and "How to
Redeem Fund 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
INVESTMENT OBJECTIVE
The Fund's goal is to maximize current income exempt from
Federal income tax to the extent consistent with the
preservation of capital. To accomplish this goal, the Fund
invests primarily in Municipal Obligations (described below)
rated at least Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Corporation ("S&P") or
Fitch Investors Service, Inc. ("Fitch"). 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) of
the Fund's outstanding voting shares. There can be no assurance
that the Fund's investment objective will be achieved.
MUNICIPAL OBLIGATIONS
Municipal Obligations are debt securities issued by states,
territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies
and instrumentalities, or multistate agencies or authorities,
the interest from which is, in the opinion of bond counsel to
the issuer, exempt from Federal income tax. Municipal
Obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial
development bonds issued by or on behalf of public authorities.
Municipal Obligations are classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Revenue bonds
are payable from the revenue derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from
the general taxing power. Tax exempt industrial development
bonds, in most cases, are revenue bonds that do not carry the
pledge of the credit of the issuing municipality, but generally
are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations
of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of
other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by
municipalities. Municipal Obligations bear fixed, floating or
variable rates of interest which are determined in some
instances by formulas under which the Municipal Obligation's
interest rate will change directly or inversely to changes in
interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. Certain Municipal Obligations
are subject to redemption at a date earlier than their stated
maturity pursuant to call options, which may be separated from
the related Municipal Obligation and purchased and sold
separately.
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. Generally, 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 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 or BBB by S&P or 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" in the Statement of Additional
Information. Municipal Obligations rated BBB by S&P or Fitch or
Baa by Moody's are considered investment grade obligations;
those rated BBB by S&P and Fitch are regarded as having an
adequate capacity to pay principal and interest, while those
rated Baa by Moody's are considered medium grade obligations
which lack outstanding investment characteristics and have
speculative characteristics. Investments rated Ba or lower by
Moody's and BB or lower by S&P and Fitch ordinarily provide
higher yields but involve greater risk because of their
speculative characteristics. The Fund may invest in Municipal
Obligations rated C by Moody's or D by S&P or Fitch, which is
such rating organizations' lowest rating and indicates that the
Municipal Obligation is in default and interest and/or repayment
of principal is in arrears. See "Risk Factors--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 below. Under normal market conditions, the
weighted average maturity of the Fund's portfolio is expected to
exceed ten years.
In addition to usual investment practices, the Fund may use
speculative investment techniques such as short-selling and
lending its portfolio securities. The Fund also may purchase,
hold or deal in futures contracts and options on futures
contracts for non-speculative purposes. Futures and options on
futures transactions involve so-called "derivative securities."
See "Investment Techniques" below.
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, or securities
whose issuers are located in the same state. As a result, the
Fund may be subject to greater risk as compared to a fund that
does not follow this practice.
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 "Risk
Factors and Other Investment Considerations."
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. As mutually agreed, the Fund may increase or
decrease the amounts under these obligations or the borrower may
repay the amount borrowed without penalty. 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. The Dreyfus Corporation, on
behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuers of the floating and variable
rate demand obligations in the Fund's portfolio.
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
Board of Trustees has determined meets the prescribed quality
standards for banks set forth below, or the payment obligation
otherwise will be collateralized by U.S. Government securities.
For certain participation interests, the Fund will have the
right to demand payment, on not more than seven days' notice,
for all or any part of the Fund's participation interest in the
Municipal Obligation, plus accrued interest. As to these
instruments, the Fund intends to exercise its right to demand
payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions,
or to maintain or improve the quality of its investment
portfolio.
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. The Fund
will not invest more than 15% of the value of its net assets in
securities that are illiquid, which could include tender option
bonds as to which it cannot exercise the tender feature on not
more than seven days' notice if there is no secondary market
available for these obligations.
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. 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.
The Fund may purchase custodial receipts representing the
right to receive certain future principal and interest payments
on Municipal Obligations which underlie the custodial receipts.
A number of different arrangements are possible. In a typical
custodial receipt arrangement, an issuer or a third party owner
of Municipal Obligations deposits such obligations with a
custodian in exchange for two classes of custodial receipts. The
two classes have different characteristics, but, in each case,
payments on the two classes are based on payments received
on the underlying Municipal Obligations. One class has the
characteristics of a typical auction rate security, where at
specified intervals its interest rate is adjusted, and ownership
changes, based on an auction mechanism. This class's interest
rate generally is expected to be below the coupon rate of the
underlying Municipal Obligations and generally is at a level
comparable to that of a Municipal Obligation of similar quality
and having a maturity equal to the period between interest rate
adjustments. The second class bears interest at a rate that
exceeds the interest rate typically borne by a security of
comparable quality and maturity; this rate also is adjusted, but
in this case inversely to changes in the rate of interest of the
first class. If the interest rate on the first class exceeds the
coupon rate of the underlying Municipal Obligations, its
interest rate will exceed the rate paid on the second class. In
no event will the aggregate interest paid with respect to the
two classes exceed the interest paid by the underlying Municipal
Obligations. The value of the second class and similar
securities should be expected to fluctuate more than the value
of a Municipal Obligation of comparable quality and maturity and
their purchase by the Fund should increase the volatility of its
net asset value and, thus, its price per share. These custodial
receipts are sold in private placements. The Fund also may
purchase directly from issuers, and not in a private placement,
Municipal Obligations having characteristics similar to
custodial receipts. These securities may be issued as part of a
multi-class offering and the interest rate on certain classes
may be subject to a cap or floor.
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.
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. The Fund may invest up to 5% of its assets in zero
coupon bonds which are rated below investment grade. See "Risk
Factors--Lower Rated Bonds" and "Other Investment
Considerations" below, and "Investment Objective and Management
Policies--Risk Factors--Lower Rated Bonds" and "Dividends,
Distributions and Taxes" in the Statement of Additional
Information.
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-l by Moody's, A-l by S&P or F-l 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. Under
normal market conditions, the Fund anticipates that not more
than 5% 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.
INVESTMENT TECHNIQUES
The Fund may employ, among others, the investment techniques
described below. Use of certain of these techniques may give
rise to taxable income.
WHEN-ISSUED SECURITIES -- New issues of Municipal Obligations
usually are offered on a when-issued basis, which means that
delivery and payment for such Municipal Obligations ordinarily
take place within 45 days after the date of the commitment to
purchase. The payment obligation and the interest rate that will
be received on the Municipal Obligations are fixed at the time
the Fund enters into the commitment. The Fund will make
commitments to purchase such Municipal Obligations 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, although any gain realized on such sale would be
taxable. The Fund will not accrue income in respect of a
when-issued security prior to its stated delivery date. No
additional when-issued commitments will be made if more than 20%
of the value of the Fund's net assets would be so committed.
Municipal Obligations purchased on a when-issued basis and
the securities held in the Fund's portfolio are subject to
changes in value (both 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. Municipal Obligations purchased
on a when-issued basis may expose the Fund to risk because they
may experience such fluctuations prior to their actual delivery.
Purchasing Municipal Obligations 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. 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 when-issued commitments
will be established and maintained at the Fund's custodian bank.
Purchasing Municipal Obligations on a 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.
FUTURES TRANSACTIONS -- IN GENERAL -- The Fund is not a
commodity pool. However, as a substitute for a comparable market
position in the underlying securities or for hedging purposes,
the Fund may engage in futures and options on futures
transactions, as described below.
The Fund's commodities transactions must constitute bona
fide hedging or other permissible transactions pursuant to
regulations promulgated by the Commodity Futures Trading
Commission. In addition, the Fund may not engage in such
transactions if the sum of the amount of initial margin deposits
and premiums paid for unexpired commodity options, other than
for bona fide hedging transactions, would exceed 5% of the
liquidation value of the Fund's assets, after taking into
account unrealized profits and unrealized losses on such
contracts it has entered into; 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%.
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.
To the extent the Fund engages in the use of futures and options
on futures for other than bona fide hedging purposes, the Fund
may be subject to additional risk.
Initially, when purchasing or selling futures contracts the
Fund will be required to deposit with its custodian in the
broker's name an amount of cash or cash equivalents up to
approximately 10% of the contract amount. This amount is subject
to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of
trade may impose their own higher requirements. This amount is
known as "initial margin" and is in the nature of a performance
bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the broker
will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and
short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the
expiration of a futures contract, the Fund may elect to close
the position by taking an opposite position at the
then-prevailing price, which will operate to terminate the
Fund's existing position in the contract.
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 the
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. If it is
not possible or the Fund determines not to close a futures
position in anticipation of adverse price movements, the Fund
will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the
portion of the Fund's portfolio being hedged, if any, may offset
partially or completely losses on the futures contract. However,
no assurance can be given that the price of the securities being
hedged will correlate with the price movements in a futures
contract and thus provide an offset to losses on the futures
contract.
To the extent the Fund is engaging in a futures transaction
as a hedging device, because of the risk of an imperfect
correlation between securities in the Fund's portfolio that are
the subject of a hedging transaction and the futures contract
used as a hedging device, it is possible that the hedge will not
be fully effective if, for example, losses on the portfolio
securities exceed gains on the futures contract or losses on the
futures contract exceed gains on the portfolio securities. For
futures contracts based on indices, the risk of imperfect
correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort
to compensate for the imperfect correlation of movements in the
price of the securities being hedged and movements in the price
of futures contracts, the Fund may buy or sell futures contracts
in a greater or lesser dollar amount than the dollar amount of
the securities being hedged if the historical volatility
of the futures contract has been less or greater than that of
the securities. Such "over hedging" or "under hedging" may
adversely affect the Fund's net investment results if the market
does not move as anticipated when the hedge is established.
Successful use of futures by the Fund also is subject to
The Dreyfus Corporation's ability to correctly predict
movements in the direction of the market or interest rates. For
example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting the value of the
securities held in its portfolio and prices increase instead,
the Fund will lose part or all of the benefit of the increased
value of the 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.
An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise
price at any time during the option exercise period. The writer
of the option is required upon exercise to assume an offsetting
futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the
option, the assumption of offsetting futures positions by the
writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin
account which represents the amount by which the market price
of the futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price
of the option on the futures contract.
Call options sold by the Fund with respect to futures
contracts will be covered by, among other things, entering into
a long position in the same contract at a price no higher than
the strike price of the call option, or by ownership of the
instruments underlying, or instruments the prices of which are
expected to move relatively consistently with the instruments
underlying, the futures contract. Put options sold by the Fund
with respect to futures contracts will be covered when, among
other things, cash or liquid securities are placed in a
segregated account to fulfill the obligation undertaken.
The Fund may utilize municipal bond index futures to
protect against changes in the market value of the Municipal
Obligations in its portfolio or which it intends to acquire.
Municipal bond index futures contracts are based on an index of
long-term Municipal Obligations. The index assigns relative
values to the Municipal Obligations included in the index, and
fluctuates with changes in the market value of such Municipal
Obligations. The contract is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash
based upon the difference between the value of the index at the
close of the last trading day of the contract and the price at
which the index contract was originally written. The acquisition
or sale of a municipal bond index futures contract enables the
Fund to protect its assets from fluctuations in rates on tax
exempt securities without actually buying or selling such
securities.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST
RATE FUTURES CONTRACTS -- The Fund may purchase and sell
interest rate futures contracts and options on interest rate
futures contracts as a substitute for a comparable market
position or to hedge against adverse movements in interest
rates.
To the extent the Fund has invested in interest rate
futures contracts or options on interest rate futures contracts
as a substitute for a comparable market position, the Fund will
be subject to the investment risks of having purchased the
securities underlying the contract.
The Fund may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may
purchase put options on interest rate futures contracts to hedge
its portfolio securities against the risk of rising interest
rates.
The Fund may sell call options on interest rate futures
contracts to partially hedge against declining prices of its
portfolio securities. If the futures price at expiration of the
option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's
portfolio holdings. The Fund may sell put options on interest
rate futures contracts to hedge against increasing prices of
the securities which are deliverable upon exercise of the
futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain
the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the
Fund intends to purchase. If a put or call option sold by the
Fund is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on
the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its
futures positions, the Fund's losses from existing options on
futures may, to some extent, be reduced or increased
by changes in the value of its portfolio securities.
The Fund also may sell options on interest rate futures
contracts as part of closing purchase transactions to terminate
its options positions. No assurance can be given that such
closing transactions can be effected or that there will be a
correlation between price movements in the options on interest
rate futures and price movements in the Fund's portfolio
securities which are the subject of the hedge. In addition, the
Fund's purchase of such options will be based upon predictions
as to anticipated interest rate trends, which could prove to be
inaccurate.
SHORT-SELLING -- The Fund may make short sales of
securities, which are transactions in which the Fund sells a
security it does not own in anticipation of a decline in the
market value of that security. To complete such a transaction,
the Fund must borrow the security to make delivery to the buyer.
The Fund then is obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement.
The Fund will incur a loss as a result of the short sale if the
price of the security increases between the date of the short
sale and the date on which the Fund replaces the borrowed
security. The Fund will realize a gain if the security declines
in price between those dates.
No securities will 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 sell short the securities of any class of an
issuer to the extent, at the time of the transaction, of more
than 5% of the outstanding securities of that class.
In addition to the short sales discussed above, the Fund
may make short sales "against the box," a transaction in which
the Fund enters into a short sale of a security which the Fund
owns. 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.
FUTURE DEVELOPMENTS -- The Fund may take advantage of
opportunities in the area of options and futures contracts and
options on futures contracts and any other derivative
investments 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.
LENDING PORTFOLIO SECURITIES -- From time to time, the Fund
may lend securities from its portfolio to brokers, dealers and
other financial institutions needing to borrow securities to
complete certain transactions. Such loans may not exceed
33-1/3% of the value of the Fund's total assets. In connection
with such loans, 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. The Fund can increase its income through the
investment of such collateral. However, such income generally
would not be tax exempt. The Fund continues to be entitled to
payments in amounts equal to the interest or other distributions
payable on the loaned security and receives interest on the
amount of the loan. Such loans will be 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.
BORROWING MONEY -- As a fundamental policy, the Fund is
permitted to borrow to the extent permitted under the Investment
Company Act of 1940. However, 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 was made. While
borrowings exceed 5% of the Fund's total assets, the Fund will
not make any additional investments.
CERTAIN FUNDAMENTAL POLICIES
The Fund may (i) borrow money to the extent permitted under
the Investment Company Act of 1940, which currently limits
borrowing to no more than 33-1/3% of the value of the Fund's
total assets; and (ii) invest up to 25% of its assets in the
securities of issuers in any industry, provided that there is no
such limitation on investments in Municipal Obligations and, for
temporary defensive purposes, obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. This
paragraph describes fundamental policies that cannot be changed
without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the Fund's outstanding
voting shares. See "Investment Objective and Management
Policies--Investment Restrictions" in the Statement of
Additional Information.
RISK FACTORS
LOWER RATED BONDS -- You should carefully consider the
relative risks of investing in the higher yielding (and,
therefore, higher risk) debt securities in which the Fund may
invest up to 30% of the value of its net assets. These are
bonds 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. 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" 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 fund that invested
in higher rated 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.
The market price and yield of bonds rated Ba or lower by
Moody's and BB or lower by S&P are more volatile than those of
higher rated bonds. Factors adversely affecting the market
price and yield of these securities will adversely affect the
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 the Fund to sell certain securities or could result
in lower prices than those used in calculating the Fund's net
asset value.
The Fund may invest up to 5% of the value of its net assets
in zero coupon securities and pay-in-kind bonds (bonds which pay
interest through the issuance of additional bonds) rated Ba or
lower by Moody's and BB or lower by S&P and Fitch. These
securities may be subject to greater fluctuations in value due
to changes in interest rates than interest-bearing securities
and thus may be considered more speculative than comparably
rated interest-bearing securities. See "Other Investment
Considerations" below, and "Investment Objective and Management
Policies--Risk Factors--Lower Rated Bonds" and "Dividends,
Distributions and Taxes" in the Statement of Additional
Information.
OTHER INVESTMENT CONSIDERATIONS -- Even though
interest-bearing securities are investments which promise a
stable stream of income, the prices of such securities are
inversely affected by changes in interest rates and, therefore,
are subject to the risk of market price fluctuations. Certain
securities that may be purchased by the Fund, such
as those with interest rates that fluctuate directly or
indirectly based on multiples of a stated index, are designed to
be highly sensitive to changes in interest rates and can subject
the holders thereof to extreme reductions of yield and possibly
loss of principal. The value of fixed-income securities also
may be affected by changes in the credit rating or financial
condition of the issuing entities. 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.
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 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.
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
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.
Investment decisions for the Fund are made independently
from those of other investment companies advised by The Dreyfus
Corporation. However, if such other investment companies are
prepared to invest in, or desire to dispose of, Municipal
Obligations or Taxable Investments at the same time 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
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 May 31, 1995, The Dreyfus Corporation managed or
administered approximately $76 billion in assets for more than
1.8 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the
overall management of the Fund's affairs under a Management
Agreement with the Fund, subject to the overall authority of the
Fund's Board of Trustees in accordance with Massachusetts law.
The Fund's primary portfolio manager is Samuel J. Weinstock. He
has held that position since August 1987 and has been employed
by The Dreyfus Corporation since March 1987. The Fund's other
portfolio managers are identified in the Fund's Statement of
Additional Information. The Dreyfus Corporation also provides
research services for the Fund as well as for other funds
advised by The Dreyfus Corporation through a professional staff
of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under
the Federal Bank Holding Company Act of 1956, as amended. Mellon
provides a comprehensive range of financial products and
services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the
United States based on total assets. Mellon's principal
wholly-owned subsidiaries are Mellon Bank, N.A., Mellon Bank
(DE) National Association, Mellon Bank (MD), The Boston Company,
Inc., AFCOCredit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its
subsidiaries, including The Dreyfus Corporation, Mellon managed
approximately $200 billion in assets as of March 31, 1995,
including approximately $72 billion in proprietary mutual fund
assets. As of March 31, 1995, Mellon, through various
subsidiaries, provided non-investment services, such as
custodial or administration services, for approximately $680
billion in assets including approximately $67 billion in mutual
fund assets.
For the fiscal year ended April 30, 1995, the Fund paid The
Dreyfus Corporation a 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 at the time
such amounts are waived or assumed, as the case may be. 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.
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.
The Fund's distributor is Premier Mutual Fund Services,
Inc. (the "Distributor"), located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor 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 Shareholder Services Group, Inc., a subsidiary of First
Data Corporation, P.O. Box 9671, Providence, Rhode Island
02940-9671, is the Fund's Transfer and Dividend Disbursing Agent
(the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY FUND 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. 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. Each Service Agent
has agreed to transmit to its clients a schedule of such fees.
You should consult your Service Agent in this regard.
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.
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment must
be accompanied by the Fund's Account Application.
You may purchase Fund shares by check or wire, or through
the TELETRANSFER Privilege described below. Checks should be
made payable to "Premier Municipal Bond Fund." Payments to open
new accounts which are mailed should be sent to Premier
Municipal Bond Fund, P.O. Box 9387, Providence, Rhode Island
02940-9387, 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
Municipal Bond Fund, P.O. Box 105, Newark, New Jersey
07101-0105. 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,
DDA#8900119292/Premier Municipal Bond Fund-Class A shares,
DDA#8900115017/Premier Municipal Bond Fund-Class B shares, or
DDA#8900252030/Premier Municipal Bond Fund-Class C shares, as
the case may be, for purchase of Fund shares in your name.
The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be
included instead), account registration and dealer number, if
applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to
obtain your Fund account number. Please include your Fund
account number on the Fund's Account Application and
promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is
received. You may obtain further information about remitting
funds in this manner from your 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.
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 Board of Trustees 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
Board of Trustees. For further information regarding the methods
employed in valuing Fund investments, see "Determination of Net
Asset Value" in the Fund's Statement of Additional Information.
Federal regulations require that you provide a certified
TIN upon opening or reopening an account. See "Dividends,
Distributions and Taxes" and the Fund's Account Application for
further information concerning this requirement. Failure to
furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
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.
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 1.00% 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 two years after purchase. The terms contained in
the section of the Fund's Prospectus entitled "How to Redeem
Fund 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 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.
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, these incentives may be offered only to
certain dealers who have sold or may sell significant amounts of
such shares. For the period from May 1, 1994 through August 23,
1994, Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation and distributor of the Fund's shares
until August 24, 1994, retained $17,249 from sales loads on
Class A 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 Fund Shares." The Distributor
compensates certain Service Agents for selling Class B 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. For the period May 1, 1994
through August 23, 1994, $63,511 was retained by Dreyfus Service
Corporation, as former distributor, from the CDSC on Class B
Shares.
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
Fund 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 of certain other funds 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 a
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 Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one
of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is
an Automated Clearing House member may be so designated. The
Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306.
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 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 Fund 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. If you desire 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, you or 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, also available by
calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-221-4060 or, if you are calling
from overseas, call 1-401-455-3306. See "How to Redeem Fund
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 of the
fund from which you are exchanging were: (a) purchased with a
sales load, (b) acquired by a previous exchange from shares
purchased with a sales load, or (c) acquired through
reinvestment of dividends or distributions paid with respect to
the foregoing categories of shares. To qualify, at the time of
your exchange 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 the 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.
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.
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 currently an
investor. The amount you designate, which can be expressed
either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or
fifteenth 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 charge.
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 writing to Premier
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. 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. 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.
AUTOMATIC ASSET BUILDER (Registration Mark)
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 an 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 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 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. There is a service charge
of .50 cents for each withdrawal check. The Automatic Withdrawal
Plan may be ended at any time by you, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
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, available from
the Distributor, 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 FUND 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 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
on 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 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 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 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:
CDSC
Year Since 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 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 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 3% (the applicable rate in the second year after
purchase) for a total CDSC of $7.20.
CLASS C SHARES -- A CDSC of 1.00% 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, and (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. If the Fund's Trustees determine 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, the
Check Redemption Privilege with respect to Class A shares only,
the TELETRANSFER Privilege or, if you are a client of a Selected
Dealer, 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.
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 Fund's 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 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 Municipal Bond Fund, P.O. Box 6527, Providence, Rhode
Island 02940-6527. 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 -- If you hold
Class A shares, you may request on the Account Application,
Shareholder Services Form or by later written request that the
Fund provide Redemption Checks drawn on the Fund's 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. Class A shares for which certificates
have been issued may not be redeemed by Redemption Check. This
Privilege may be modified or terminated at any time by the Fund
or the Transfer Agent upon notice to holders of Class A shares.
TELETRANSFER PRIVILEGE -- You may redeem Fund shares
(minimum $500 per day) without charge by telephone if you have
checked the appropriate box and supplied the necessary
information on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between your Fund account and the bank
account designated in one of these documents. Only such an
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.
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 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 redemption of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. Shares issued in certificate form are not
eligible for this Privilege.
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 the dealer 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 -- 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 A, Class B and Class C shares are subject to a
Shareholder Services Plan and Class B and Class C shares only
are subject to a Distribution Plan.
DISTRIBUTION PLAN -- Under the Distribution Plan, adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940,
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. Under the
Shareholder Services Plan, the Distributor may make payments to
Service Agents in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. Each
Service Agent is required to disclose to its clients any
compensation payable to it by the Fund pursuant to the
Shareholder Services Plan and any other compensation payable by
their clients in connection with the investment of their assets
in Class A, Class B or Class C shares.
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. 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 Investment Company Act of 1940. The Fund will
not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have
expired. You may choose whether to receive distributions in cash
or to reinvest in additional shares of 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 that 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. No dividend paid by
the Fund will qualify for the dividends received deduction
allowable to certain U.S. corporations. 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 or not reinvested.
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. Dividends and distributions attributable to
income or gain derived from securities transactions and from the
use of certain of the investment techniques described under
"Description of the Fund--Investment Techniques," will be
subject to Federal income tax. The Code provides that the net
capital gain of an individual generally will not be subject to
Federal income tax at a rate in excess of 28%. Under the Code,
interest on indebtedness incurred or continued to purchase or
carry Fund shares which is deemed to relate to exempt-interest
dividends is not deductible. Dividends and distributions
may be subject to state and local 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 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.
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.
Taxable dividends derived from net investment income,
together with distributions from 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 to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of
30%, unless the foreign investor claims the benefit
of a lower rate specified in a tax treaty. Distributions from
net realized long-term securities gains paid by the Fund to a
foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to
which gain or loss may be realized, generally will not be
subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described
below, unless the foreign investor certifies his non-U.S.
residency status.
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 April 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 taxes to the extent its earnings
are distributed in accordance with applicable provisions of the
Code. In addition, 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.
You should consult your tax adviser regarding specific
questions as to Federal, state or local 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.
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 or 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 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 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 Class A,
Class B and Class C for one, five and ten year periods, or for
shorter periods depending upon the length of time during which
the Fund has operated. Computations of average annual
total return for periods of less than one year represent an
annualization of the Class's actual total return for the
applicable period.
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 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 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 may also 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 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 June 4, 1986, and commenced operations on November 26,
1986. On July 2, 1990, the Fund's name was changed from Premier
Tax Exempt Bond Fund to Premier Municipal 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 Board of Trustees.
However, 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 Trustees intend to conduct the
operations of the Fund 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IN THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFER OF THE FUND'S SHARES, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
<PAGE>
September 27, 1995
Premier State Municipal Bond Fund
(Arizona Series)
(Colorado Series)
(Oregon Series)
Supplement to Prospectus Dated August 14, 1995
A Special Meeting of Shareholders of the Arizona
Series, the Colorado Series and the Oregon Series of Premier
State Municipal Bond Fund (the "Series") will be held on
November 15, 1995 to consider an Agreement and Plan of
Reorganization ("Reorganization"). The Reorganization would
provide for the transfer of all or substantially all of each
Series' assets, subject to liabilities, attributable to its
Class A and Class B shares, to Premier Municipal Bond Fund in a
tax free exchange (the "Exchange") for corresponding Class A and
Class B shares of Premier Municipal Bond Fund, and the
assumption by Premier Municipal Bond Fund of stated liabilities.
In accordance with the terms set forth herein,
shareholders of the Series who purchased Class A shares on or
after January 1, 1995 and who choose to redeem such shares
rather than participate in the Exchange will be reimbursed upon
redemption prior to the Exchange the sales load applicable to
such Class A share purchases, in accordance with the sales load
schedule set forth on page 43 in Premier State Municipal Bond
Fund's current prospectus dated August 14, 1995 (the "Sales Load
Reimbursement"). Class B shares held by shareholders of the
Series who choose to redeem such shares rather than participate
in the Exchange will not be subject to any contingent deferred
sales charge upon redemption prior to the Exchange (the "CDSC
Waiver").
The Sales Load Reimbursement/CDSC Waiver will be
available to Class A and Class B shareholders of the Series who
redeem their shares at any time during the period from September
29, 1995 to the later of December 1, 1995 or the consummation of
the Exchange.
If you have any questions pertaining to the Exchange
or the Sales Load Reimbursement/CDSC Waiver, please contact your
Service Agent.
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND
PROSPECTUS AUGUST 14, 1995
Premier State Municipal Bond Fund (the "Fund") is an
open-end, non-diversified, management investment company, known
as a mutual fund. Its goal 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 fifteen
separate portfolios (each, a "Series"): the Arizona Series, the
Colorado 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 Oregon 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, Class A, Class B and Class C shares
of each Series are being offered. 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 on
redemptions made within five years of purchase; and Class C
shares are subject to a contingent deferred sales
charge imposed on redemptions made within one year of purchase.
Other differences among the three Classes include the services
offered to and the expenses borne by each Class and certain
voting rights, as described herein. The Fund offers these
alternatives to permit an investor to choose the method
of purchasing shares that is most beneficial given the amount of
the purchase, the length of time the investor expects to hold
the shares and other circumstances.
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 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 August 14,
1995, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters
which may be of interest to some investors. It has been filed
with the Securities and Exchange Commission and is incorporated
herein by reference. For a free copy, write to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call 1-800-554-4611. 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.................... 8
ALTERNATIVE PURCHASE METHODS....................... 22
DESCRIPTION OF THE FUND............................ 23
MANAGEMENT OF THE FUND............................. 38
HOW TO BUY FUND SHARES............................. 40
SHAREHOLDER SERVICES............................... 44
HOW TO REDEEM FUND SHARES.......................... 48
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN.... 52
DIVIDENDS, DISTRIBUTIONS AND TAXES................. 52
PERFORMANCE INFORMATION............................ 60
GENERAL INFORMATION................................ 61
APPENDIX........................................... 63
<TABLE>
<CAPTION>
FEE TABLE
ARIZONA SERIES COLORADO 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..................... .52% .55% .52% 1.44% 1.42% 1.44%
Total Fund Operating Expenses...... 1.07% 1.60% 1.82% 1.99% 2.47% 2.74%
</TABLE>
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:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR........................... $ 55 $46/16** $28/$18** $ 65 $55/25** $38/$28**
3 YEARS.......................... $ 78 $70/50** $57 $105 $97/77** $85
5 YEARS.......................... $ 101 $97/87** $99 $147 $142/132** $145
10 YEARS......................... $ 170 $163*** $214 $266 $258*** $307
</TABLE>
<TABLE>
<CAPTION>
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..................... .35% .37% .35% .36% .37% .36%
Total Fund Operating Expenses...... .90% 1.42% 1.65% .91% 1.42% 1.66%
</TABLE>
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:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR........................... $ 54 $44/$14** $27/$17** $ 54 $44/$14** $27/$17**
3 YEARS.......................... $ 72 $65/$45** $52 $ 73 $65/$45** $52
5 YEARS.......................... $ 93 $88/$78** $90 $ 93 $88/$78** $90
10 YEARS......................... $ 151 $143*** $195 $ 152 $144*** $197
*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>
<TABLE>
<CAPTION>
FEE TABLE
GEORGIA SERIES MARYLAND 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................. .48% .50% .48% .36% .40% .36%
Total Fund Operating Expenses.. 1.03% 1.55% 1.78% .91% 1.45% 1.66%
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........................ $ 55 $46/$16** $28/$18** $ 54 $45/$15** $27/$17**
3 YEARS....................... $ 76 $69/$49** $56 $ 73 $64/$46** $52
5 YEARS....................... $ 99 $94/$84** $96 $ 93 $89/$79** $90
10 YEARS...................... $ 165 $158*** $209 $152 $145*** $197
</TABLE>
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES MICHIGAN 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 (as a percentage of the amount None* 3.00% 1.00% None* 3.00% 1.00%
Redemptions subject to charge)
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% .41% .40% .38% .40% .38%
Total Fund Operating Expenses.. .95% 1.46% 1.70% .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 CLASS A CLASS B CLASS C
------- ------- ------ ------- ------- -------
1 YEAR........................ $ 54 $45/$15** $27/$17** $ 54 $45/$15** $27/$17**
3 YEARS....................... $ 74 $66/$46** $54 $ 73 $66/$46** $53
5 YEARS....................... $ 95 $90/$80** $92 $ 94 $89/$79** $91
10 YEARS...................... $156 $148*** $201 $ 154 $147*** $199
*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>
<TABLE>
<CAPTION>
FEE TABLE
MINNESOTA SERIES NORTH CAROLINA 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 None* 3.00% 1.00% None* 3.00% 1.00%
amount subject to charge)
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................. .36% .40% .36% .40% .44% .40%
Total Fund Operating Expenses.. .91% 1.45% 1.66% .95% 1.49% 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 $66/$46** $52 $ 74 $67/$47** $54
5 Years....................... $ 93 $89/$79** $90 $ 95 $91/$81** $92
10 Years...................... $ 152 $145*** $197 $ 156 $150*** $201
</TABLE>
<TABLE>
<CAPTION>
OHIO SERIES OREGON 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.................. .38% .40% .38% 1.05% 1.08% 1.05%
Total Fund Operating Expenses... .93% 1.43% 1.68% 1.60% 2.13% 2.35%
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** $ 61 $52/$22** $34/$24**
3 Years....................... $ 73 $66/$46** $53 $ 93 $87/$67** $73
5 Years....................... $ 94 $89/$79** $91 $ 128 $124/$114** $126
10 Years...................... $ 154 $147*** $199 $ 226 $220*** $269
*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>
<TABLE>
<CAPTION>
FEE TABLE
PENNSYLVANIA SERIES TEXAS 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................. .38% .40% .38% .37% .39% .37%
Total Fund Operating Expenses.. .93% 1.45% 1.68% .92% 1.44% 1.67%
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 $66/$46** $53 $ 73 $66/$46** $53
5 Years....................... $ 94 $89/$79** $91 $ 94 $89/$79** $91
10 Years...................... $ 154 $147*** $199 $ 153 $145*** $198
*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>
<TABLE>
<CAPTION>
FEE TABLE
VIRGINIA SERIES
-------------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
------- ------- -------
<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 None* 3.00% 1.00%
amount subject to charge)
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% .40% .39%
Total Fund Operating Expenses..... .94% 1.45% 1.69%
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 $45/$15 $27/$17**
3 Years.......................... $74 $66/$46 $53
5 Years.......................... $95 $89/$79 $92
10 Years......................... $155 $147*** $200
*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 various costs and expenses that investors will
bear, directly or indirectly, the payment of which will reduce
investors' return on an annual basis. Other Expenses for Class C
are based on amounts for Class A for the Fund's last 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
Fund Shares" and "Distribution Plan and Shareholder Services
Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited
by Ernst & Young LLP, the Fund's independent auditors, whose
report thereon appears in the Statement of Additional
Information. Further financial data and related notes for Class
A and Class B are included in the Statement of Additional
Information, available upon request. No financial information is
available for Class C shares, which had not been offered as of
the date of this Prospectus.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data
for Class A and Class B shares 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>
ARIZONA SERIES
------------------------------------------------
CLASS A SHARES CLASS B SHARES
----------------------- -----------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------- -----------------------
PER SHARE DATA: 1993(1) 1994 1995 1993(2) 1994 1995
------ ---- ---- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.50 $13.12 $12.60 $12.65 $13.12 $12.61
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net........... .51 .75 .75 .21 .68 .69
Net realized and unrealized gain (loss)
on investments.................. .62 (.51) .14 .47 (.50) .14
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.13 .24 .89 .68 .18 .83
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net (.51) (.75) (.75) (.21) (.68) (.69)
Dividends from net realized gain on
investments - (.01) - - (.01) -
------ ------- ------ ------ ------ ------
TOTAL DISTRIBUTIONS............. (.51) (.76) (.75) (.21) (.69) (.69)
------ ------- ------ ------ ------ ------
Net asset value, end of year.... $13.12 $12.60 $12.74 $13.12 $12.61 $12.75
------ ------- ------ ------ ------ ------
------ ------- ------ ------ ------ ------
TOTAL INVESTMENT RETURN(3)........ 14.01%(4) 1.61% 7.41% 18.49%(4) 1.16% 6.88%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - - - .50%(4) .50% .50%
Ratio of net investment income to
average net assets 5.71%(4) 5.51% 6.04% 4.61%(4) 4.95% 5.54%
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation 1.87%(4) 1.26% 1.07% 1.68%(4) 1.27% 1.10%
Portfolio Turnover Rate......... 5.94%(5) 3.65% 21.96% 5.94%(5) 3.65% 21.96%
Net Assets, end of year (000's omitted) $5,671 $12,506 $12,972 $1,745 $6,569 $8,256
(1) From September 3, 1992 (commencement of operations) to
April 30, 1993.
(2) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
COLORADO SERIES
-------------------------------
CLASS A SHARES CLASS B SHARES
--------------- ---------------
YEAR ENDED APRIL 30, 1995(1)
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................... $12.50 $12.50
------ ------
INVESTMENT OPERATIONS:
Investment income-net...................................... .76 .69
Net realized and unrealized (loss) on investments.......... (.07) (.07)
------- -------
TOTAL FROM INVESTMENT OPERATIONS........................... .69 .62
------- -------
DISTRIBUTIONS;
Dividends from investment income-net....................... (.76) (.69)
------- -------
Net asset value, end of period............................. $12.43 $12.43
------- -------
------- -------
TOTAL INVESTMENT RETURN(2)................................... 5.83%(3) 5.26%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................... -- .50%(3)
Ratio of net investment income to average net assets....... 6.20%(3) 5.58%(3)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation.................... 1.99%(3) 1.97%(3)
Portfolio Turnover Rate.................................... 21.81%(4) 21.81%(4)
Net Assets, end of period (000's omitted).................. $1,003 $3,199
(1) From May 6, 1994 (commencement of operations) to
April 30, 1995.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
CONNECTICUT SERIES
---------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
---------------------------------------------------------------------- ---------------------
1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year $11.00 $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.89 $12.26 $11.80
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net..... .76 .81 .80 .77 .72 .71 .68 .67 .18 .61 .61
Net realized and unrealized
gain (loss) on investments... (.28) .38 (.15) .40 .17 .81 (.42) (.05) .37 (.43) (.04)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS................... .48 1.19 .65 1.17 .89 1.52 .26 .62 .55 .18 .57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net................. (.76) (.81) (.80) (.77) (.72) (.71) (.68) (.67) (.18) (.61) (.61)
Dividends from net realized
gain on investments - (.05) (.02) - - - (.03) - - (.03) -
Dividends in excess of net
realized gain on investments - - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS.......... (.76) (.86) (.82) (.77) (.72) (.71) (.71) (.67) (.18) (.64) (.61)
Net asset value, end of year..$10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.76 $12.26 $11.80 $11.76
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN(3)..... 5.00%(4) 11.54% 5.93% 11.10% 8.14% 13.62% 1.92% 5.47% 16.08%(4) 1.26% 4.99%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets - - - .21% .52% .69% .80% .89% 1.12%(4) 1.36% 1.41%
Ratio of net investment income
to average net assets 7.31%(4) 7.24% 7.05% 6.81% 6.30% 5.93% 5.44% 5.77% 4.57%(4) 4.78% 5.21%
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%(4) 1.42% 1.10% .75% .41% .21% .09% .01% .12%(4) .08% .01%
Portfolio Turnover Rate.... 91.09%(5) 72.52% 12.62% 6.30% 8.53% 24.22% 10.83% 10.48% 24.22% 10.83% 10.48%
Net Assets, end of year
(000's omitted)............ $11,641 $31,056 $83,206 $183,788 $280,305 $360,020 $364,182 $335,964 $9,492 $32,246 $35,425
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
FLORIDA SERIES
-----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------------------------------------- ---------------------
1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year....$12.00 $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.59 $15.01 $14.42
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net................. .92 1.02 1.02 .99 .95 .92 .85 .81 .24 .77 .73
Net realized and unrealized gain (loss)
on investments .85 .63 (.11) .61 .41 .86 (.51) .12 .42 (.51) .13
------ ------ ----- ----- ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS...... 1.77 1.65 .91 1.60 1.36 1.78 .34 .93 .66 .26 .86
------ ------ ----- ----- ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net.. (.92) (1.02) (1.02) (.99) (.95) (.92) (.85) (.81) (.24) (.77) (.73)
Dividends from net realized gain on
investments - - (.03) (.02) (.01) (.17) (.04) (.04) - (.04) (.04)
Dividends in excess of net realized
gain on investments - - - - - - (.04) - - (.04) -
------ ------ ------ ------ ----- ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS................... (.92) (1.02) (1.05) (1.01) (.96) (1.09) (.93) (.85) (.24) (.85) (.77)
------ ------ ------ ------ ----- ------ ------ ------ ----- ------ ------
Net asset value, end of year..........$12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.51 $15.01 $14.42 $14.51
TOTAL INVESTMENT RETURN(3).............. 16.24%(4) 13.32% 6.83% 12.40% 10.09% 12.84% 2.14% 6.71% 15.60%(4)1.54% 6.21%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - - - .21% .52% .69% .80% .90% 1.12%(4)1.34% 1.41%
Ratio of net investment income to
average net assets 7.76%(4) 7.26% 7.24% 7.11% 6.65% 6.21% 5.61% 5.67% 4.87%(4) 4.91% 5.13%
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%(4) 1.50% 1.08% .74% .41% .21% .10% .01% .12%(4) .09% .01%
Portfolio Turnover Rate............... 31.25%(5) 17.16% 27.69% .28% 20.99% 33.18% 20.84% 50.62% 33.18% 20.84% 50.62%
Net Assets, end of year (000's
omitted) $1,493 $15,061 $67,416 $177,927$245,474 $299,775$289,791 $252,406 $5,916 $22,476 $25,282
(1) From May 28, 1987 (commencement of operations) to April
30, 1988.
(2) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
GEORGIA SERIES
----------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
------------------------- ------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------- ------------------------
PER SHARE DATA: 1993(1) 1994 1995 1993(2) 1994 1995
------ ---- ---- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.50 $13.27 $12.69 $12.71 $13.27 $12.69
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net........... .51 .73 .73 .20 .67 .66
Net realized and unrealized gain
(loss) on investments .77 (.58) .11 .56 (.58) .11
------ ------ ------ ----- ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.28 .15 .84 .76 .09 .77
------ ------ ------ ----- ------ ------
DISTRIBUTIONS;
Dividends from investment income-net (.51) (.73) (.73) (.20) (.67) (.66)
------ ------ ------ ----- ------ ------
Net asset value, end of year.... $13.27 $12.69 $12.80 $13.27 $12.69 $12.80
------ ------ ------ ----- ------ ------
TOTAL INVESTMENT RETURN(3)........ 15.91%(4) .97% 6.87% 20.66%(4) .46% 6.33%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets - .07% .25% .50%(4) .58% .75%
Ratio of net investment income to average
net assets 5.55%(4) 5.41% 5.80% 4.60%(4) 4.85% 5.27%
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation 1.46%(4) 1.02% .78% 1.37%(4) 1.02% .80%
Portfolio Turnover Rate......... 37.79%(5) 6.76% 34.04% 37.79%(5) 6.76% 34.04%
Net Assets, end of year (000's omitted) $7,304 $10,058 $8,985 $6,319 $16,243 $19,429
(1) From September 3, 1992 (commencement of operations) to April 30, 1993.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
MARYLAND SERIES
----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------------------------------ ---------------------
1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year..$12.50 $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.64 $13.02 $12.46
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net............... .80 .87 .86 .85 .79 .76 .73 .70 .20 .65 .63
Net realized and unrealized gain
(loss) on investments (1.12) .34 (.09) .53 .35 .68 (.53) .08 .38 (.53) .08
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.... (.32) 1.21 .77 1.38 1.14 1.44 .20 .78 .58 .12 .71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net (.80) (.87) (.86) (.85) (.79) (.76) (.73) (.70) (.20) (.65) (.63)
Dividends from net realized gain on
investments - - (.02) (.01) (.05) (.09) (.03) - - (.03) -
Dividends in excess of net realized
gain on investments - - - - - - - - - - -
------ ------ ------ ------ ------ ------- ------- ------ ------ ----- ------
TOTAL DISTRIBUTIONS................. (.80) (.87) (.88) (.86) (.84) (.85) (.76) (.70) (.20) (.68) (.63)
------ ------ ----- ------ ------ ------ ------- ------ ------ ------ ------
Net asset value, end of year........ $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.54 $13.02 $12.46 $12.54
------ ------ ------ ------ ------- ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN(3).......... (2.50%)(4) 11.05% 6.69% 12.24% 9.68% 11.93% 1.33% 6.52% 15.74%(4) .75% 5.94%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets........................... - - - .21% .53% .69% .80% .90% 1.09%(4) 1.37% 1.44%
Ratio of net investment income to
average net assets................. 7.44%(4) 7.26% 7.12% 6.98% 6.40% 5.93% 5.51% 5.69% 4.55%(4) 4.82% 5.13%
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%(4) 1.50% 1.11% .75% .41% .22% 10% .01% .12%(4) .08% .01%
Portfolio Turnover Rate.............75.21%(5) 8.67% 30.03% 1.45% 16.21% 17.92% 10.27% 35.39% 17.92% 10.27% 35.39%
Net Assets, end of year
(000's omitted).................. $4,353 $24,383 $85,794 $179,959 $254,240 $337,307 $335,518 $301,834 $5,931 $30,527 $35,090
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES
-----------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------------------------------------- ---------------------
1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year....$11.50 $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.79 $12.13 $12.13
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net................ .76 .83 .82 .79 .75 .73 .71 .69 .19 .64 .63
Net realized and unrealized gain
(loss) on investments............... (.96) .38 (.23) .37 .36 .73 (.44) (.06) .34 (.45) (.06)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS...... (.20) 1.21 .59 1.16 1.11 1.46 .27 .63 .53 .19 .57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net.. (.76) (.83) (.82) (.79) (.75) (.73) (.71) (.69) (.19) (.64) (.63)
Dividends from net realized gain on
investments - - - (.01) - (.01) (.05) - - (.05) -
Dividends in excess of net realized
gain on investments - - - - - - - (.05) - - (.05)
------ ------ ------ ------ ------ ------- ------- ------ ------ ------ ------
TOTAL DISTRIBUTIONS................... (.76) (.83) (.82) (.80) (.75) (.74) (.76) (.74) (.19) (.69) (.68)
------ ------ ----- ------ ------ ------ ------- ------ ------ ------ ------
Net asset value, end of year.......... $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.53 $12.13 $11.63 $11.52
------ ------ ------ ------ ------- ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN(3)............ (1.67%)(4) 11.91% 5.49% 11.23% 10.32% 13.14% 2.08% 5.72% 15.56%(4) 1.44% 5.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................. - - - .19% .55% .69% .82% .94% 1.15%(4) 1.36% 1.45%
Ratio of net investment income to
average net assets................... 7.63%(4) 7.58% 7.40% 7.21% 6.65% 6.16% 5.80% 6.04% 4.92%(4) 5.18% 5.47%
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%(4) 1.48% 1.11% .78% .41% .24% .11% .01% .13%(4) .10% .01%
Portfolio Turnover Rate...............36.11%(5) 17.76% 28.44% 47.07% 24.75% 11.36% 12.04% 13.62% 11.36% 12.04% 13.62%
Net Assets, end of year
(000's omitted).................... $5,174 $21,578 $43,375 $57,328 $66,873 $79,701 $76,865 $72,731 $1,066 $3,702 $4,220
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
MICHIGAN SERIES
--------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------------------------------ ---------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <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 $15.20 $15.64 $15.27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net.......... 1.00 1.07 1.05 1.01 .95 .92 .89 .85 .24 .80 .77
Net realized and unrealized gain
(loss) on investments......... .45 .65 (.27) .54 .46 .98 (.30) .11 .44 (.29) .10
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
TOTAL FROM INVESTMENT OPERATION 1.45 1.72 .78 1.55 1.41 1.90 .59 .96 .68 .51 .87
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
DISTRIBUTIONS:
Dividends from investment
income-net................... (1.00) (1.07) (1.05) (1.01) (.95) (.92) (.89) (.85) (.24) (.80) (.77)
Dividends from net realized gain
on investments............... - - (.03) - - (.13) (.08) (.24) - (.08) (.24)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
TOTAL DISTRIBUTIONS......... (1.00) (1.07) (1.08) (1.01) (.95) (1.05) (.97) (1.09) (.24) (.88) (1.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
Net asset value, end of year... $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.14 $15.64 $15.27 $15.13
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
TOTAL INVESTMENT RETURN(3)....... 12.32%(4) 13.25% 5.59% 11.61% 10.12% 13.25% 3.65% 6.65% 15.50%(4) 3.11% 6.01%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets........................ - - - .20% .53% .69% .81% .92% 1.18%(4) 1.38% 1.44%
Ratio of net investment income to
average net assets............ 7.97%(4) 7.49% 7.23% 7.07% 6.47% 6.01% 5.56% 5.66% 4.85%(4) 4.88% 5.10%
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%(4) 1.50% 1.16% .79% .42% .25% .11% .01% .14%(4) .09% .01%
Portfolio Turnover Rate....... 48.80%(5) 32.72% 20.23% 27.31% 21.42% 14.99% 19.96% 48.30% 14.99% 19.96% 48.30%
Net Assets, end of year
(000's omitted)............. $1,671 $8,548 $56,699 $111,696 $145,159 $184,138 $187,405 $176,604 $3,581 $13,861 $16,471
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA SERIES
------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------------------------------ ---------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <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 $14.86 $15.32 $14.74
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
INVESTMENT OPERATIONS:
Investment income-net............. .97 1.07 1.04 1.02 .96 .92 .87 .83 .24 .78 .75
Net realized and unrealized gain
(loss) on investments............ (.13) .55 (.13) .56 .36 .77 (.53) .18 .46 (.52) .18
------ ----- ------ ------ ------ ------ ------ ------ ------ ------- -----
TOTAL FROM INVESTMENT OPERATIONS.. .84 1.62 .91 1.58 1.32 1.69 .34 1.01 .70 .26 .93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
DISTRIBUTIONS:
Dividends from investment income-net (.97) (1.07) (1.04) (1.02) (.96) (.92) (.87) (.83) (.24) (.78) (.75)
Dividends from net realized gain on
investments..................... - - (.05) (.02) (.01) (.09) (.06) - - (.06) -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
Total Distributions............... (.97) (1.07) (1.09) (1.04) (.97) (1.01) (.93) (.83) (.24) (.84) (.75)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -----
Net asset value, end of year...... $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $14.90 $15.32 $14.74 $14.92
====== ====== ====== ====== ====== ====== ====== ====== ====== ======= =====
TOTAL INVESTMENT RETURN(3).......... 7.01%(4) 12.57% 6.67% 11.89% 9.45% 11.96% 2.08% 7.14% 16.32%(4) 1.55% 6.57%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets........................... - - - .20% .53% .69% .80% .90% 1.16%(4) 1.38% 1.44%
Ratio of net investment income to
average net assets............... 7.79%(4) 7.66% 7.25% 7.19% 6.53% 6.13% 5.61% 5.68% 4.83%(4) 4.91% 5.13%
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%(4) 1.50% 1.16% .79% .41% .24% .11% .01% .14%(4) .09% .01%
Portfolio Turnover Rate.......... 70.26%(5) 31.64% 23.48% 14.04% 12.32% 23.42% 12.21% 51.95% 23.42% 12.21% 51.95%
Net Assets, end of year
(000's omitted)................. $4,331 $13,019 $46,428 $85,066 $122,782 $148,765 $155,657 $145,444 $4,633 $21,004 $23,217
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
NORTH CAROLINA SERIES
------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
-------------------------------- --------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- --------------------------
PER SHARE DATA: 1992(1) 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year..... $12.00 $12.39 $13.40 $12.73 $12.90 $13.39 $12.72
------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net.................. .62 .78 .74 .70 .20 .66 .64
Net realized and unrealized gain (loss)
on investments....................... .39 1.02 (.67) (.01) .49 (.67) (.01)
------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS..... 1.01 1.80 .07 .69 .69 (.01) .63
------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net... (.62) (.78) (.74) (.70) (.20) (.66) (.64)
Dividends from net realized gain
on investments....................... - (.01) - - - - -
------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS.................. (.62) (.79) (.74) (.70) (.20) (.66) (.64)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year........... $12.39 $13.40 $12.73 $12.72 $13.39 $12.72 $12.71
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN(3)............... 11.36%(4) 14.97% .29% 5.70% 18.53%(4) (.27%) 5.12%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets................................ - .29% .44% .64% .79%(4) 1.00% 1.19%
Ratio of net investment income to
average net assets.................... 6.35%(4) 5.94% 5.38% 5.63% 4.47%(4) 4.78% 5.08%
Decrease reflected in above expense
ratios due to undertakings by The
Dreyfus Corporation................... 1.14%(4) .76% .50% .31% .56%(4) .48% .30%
Portfolio Turnover Rate................ 15.01%(5) 5.76% 11.62% 12.02% 5.76% 11.62% 12.02%
Net Assets, end of year
(000's omitted)....................... $26,387 $56,284 $68,074 $50,205 $13,145 $38,968 $42,310
(1) From August 1, 1991 (commencement of operations) to April 30, 1992.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
OHIO SERIES
------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------------------------- ---------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $14.50 $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.69 $13.09 $12.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net................. .80 .89 .88 .86 .80 .77 .74 .73 .20 .66 .66
Net realized and unrealized gain
(loss) on investments............... (3.32) .48 (.08) .46 .36 .81 (.36) (.05) .40 (.35) (.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS...... (2.52) 1.37 .80 1.32 1.16 1.58 .38 .68 .60 .31 .61
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net.. (.80) (.89) (.88) (.86) (.80) (.77) (.74) (.73) (.20) (.66) (.66)
Dividends from net realized gain on
investments.......................... - - (.04) - (.01) (.07) (.03) (03) - (.03) (.03)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS................... (.80) (.89) (.92) (.86) (.81) (.84) (.77) (.76) (.20) (.69) (.69)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.......... $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.62 $13.09 $12.71 $12.63
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)..............(18.49%)(4) 12.72% 6.95% 11.84% 9.97% 13.24% 2.78% 5.63% 16.36%(4) 2.24% 5.06%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................... - - - .21% .52% .70% .81% .92% 1.17%(4) 1.38% 1.44%
Ratio of net investment income to
average net assets................... 7.79%(4) 7.57% 7.30% 7.20% 6.53% 6.03% 5.57% 5.84% 4.62%(4) 4.89% 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%(4) 1.50% 1.12% .78% .41% .23% .12% .01% .13%(4) .10% .01%
Portfolio Turnover Rate...............11.10%(5) 14.49% 14.58% 3.00% 13.68% 6.08% 7.73% 39.53% 6.08% 7.73% 39.53%
Net Assets, end of year (000's
omitted).............................$8,043 $31,420 $92,864 $176,223 $243,074 $295,564 $293,706 $273,225 $8,482 $27,657 $32,797
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
OREGON SERIES
--------------------------------------
CLASS A SHARES CLASS B SHARES
----------------- -----------------
YEAR ENDED APRIL 30, 1995(1)
PER SHARE DATA:
<S> <C> <C>
Net asset value, beginning of period............ $12.50 $12.50
------- -------
INVESTMENT OPERATIONS:
Investment income-net........................... .76 .69
Net unrealized gain on investments.............. .45 .45
------- -------
TOTAL FROM INVESTMENT OPERATIONS................ 1.21 1.14
------- -------
DISTRIBUTIONS;
Dividends from investment income-net............ (.76) (.69)
------- -------
Net asset value, end of period.................. $12.95 $12.95
------- -------
------- -------
TOTAL INVESTMENT RETURN(2)........................ 10.12%(3) 9.57%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......... .01% .51%(3)
Ratio of net investment income to average
net assets.................................... 5.95%(3) 5.47%(3)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation......... 1.59%(3) 1.62%(3)
Portfolio Turnover Rate......................... -- --
Net Assets, end of period (000's omitted)....... $2,852 $1,483
(1) From May 6, 1994 (commencement of operations) to April 30, 1995.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA SERIES
------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------------------------- ---------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <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 $16.10 $16.60 $16.01
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
INVESTMENT OPERATIONS:
Investment income-net................. .85 1.13 1.13 1.12 1.06 1.02 .95 .91 .26 .85 .83
Net realized and unrealized gain
(loss) on investments............... (.77) .55 (.08) .55 .56 .99 (.57) .11 .50 (.56) .10
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL FROM INVESTMENT OPERATIONS...... .08 1.68 1.05 1.67 1.62 2.01 .38 1.02 .76 .29 .93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
DISTRIBUTIONS:
Dividends from investment income-net.. (.85) (1.13) (1.13) (1.12) (1.06) (1.02) (.95) (.91) (.26) (.85) (.83)
Dividends from net realized gain on
investments.......................... - - (.02) (.02) (.04) (.11) (.03) - - (.03) -
Dividends in excess of net realized
gain on investments.................. - - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL DISTRIBUTIONS................... (.85) (1.13) (1.15) (1.14) (1.10) (1.13) (.98) (.91) (.26) (.88) (.83)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of year.......... $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.12 $16.60 $16.01 $16.11
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL INVESTMENT RETURN(3).............. .87%(4) 12.21% 7.20% 11.74% 10.97% 13.19% 2.17% 6.65% 16.39%(4) 1.65% 6.02%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................... - - - .22% .56% .69% .81% .92% 1.14%(4) 1.38% 1.44%
Ratio of net investment income to
average net assets................... 7.08%(4) 7.46% 7.38% 7.32% 6.75% 6.24% 5.61% 5.77% 4.90%(4) 4.95% 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%(4) 1.50% 1.24% .79% .41% .25% .12% .01% .15%(4) .10% .01%
Portfolio Turnover Rate...............67.48%(5) 25.10% 59.15% 25.74% 38.97% 8.64% 7.21% 55.19% 8.64% 7.21% 55.19%
Net Assets, end of year (000's
omitted).............................$2,870 $12,083 $51,418 $113,439 $158,437 $220,920 $235,619 $219,949 $14,631 $59,057 $70,062
(1) From July 30, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
TEXAS SERIES
------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------------------------- ---------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ---- ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $15.50 $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.52 $21.23 $20.41
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
INVESTMENT OPERATIONS:
Investment income-net................. 1.33 1.45 1.44 1.40 1.36 1.29 1.25 1.22 .33 1.13 1.10
Net realized and unrealized gain
(loss) on investments................ 2.39 .75 (.05) .67 .69 1.37 (.66) .28 .71 (.66) .28
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL FROM INVESTMENT OPERATIONS...... 3.72 2.20 1.39 2.07 2.05 2.66 .59 1.50 1.04 .47 1.38
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
DISTRIBUTIONS:
Dividends from investment income-net.. (1.33) (1.45) (1.44) (1.40) (1.36) (1.29) (1.25) (1.22) (.33) (1.13) (1.10)
Dividends from net realized gain on
investments.......................... - - (.01) - (.05) (.03) (.13) - - (.13) -
Dividends in excess of net realized
gain on investments................. - - - - - - (.03) - - (.03) -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL DISTRIBUTIONS................... (1.33) (1.45) (1.45) (1.40) (1.41) (1.32) (1.41) (1.22) (.33) (1.29) (1.10)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of year.......... $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.69 $21.23 $20.41 $20.69
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL INVESTMENT RETURN(3).............. 26.23%(4) 12.79% 7.55% 11.54% 10.97% 13.80% 2.62% 7.63% 17.60%(4) 2.05% 7.05%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets............................... - - - - .15% .36% .39% .37% .82%(4) .94% .89%
Ratio of net investment income to
average net assets................... 7.94%(4) 7.90% 7.50% 7.29% 6.78% 6.18% 5.78% 6.01% 4.81%(4) 5.15% 5.46%
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%(4) 1.50% 1.50% 1.27% .88% .62% .55% .55% .49%(4) .54% .55%
Portfolio Turnover Rate...............47.85%(5) 6.84% 2.62% 1.95% 7.49% 14.94% 9.68% 38.68% 14.94% 9.68% 38.68%
Net Assets, end of year (000's
omitted).............................$1,553 $2,902 $5,642 $15,139 $37,208 $72,037 $76,277 $68,103 $6,373 $15,878 $16,818
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION> VIRGINIA SERIES
------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES
-------------------------------- --------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- --------------------------
PER SHARE DATA: 1992(1) 1993 1994 1995 1993(2) 1994 1995
------ ---- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $15.00 $15.50 $16.80 $16.02 $16.25 $16.80 $16.02
------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net..................... .78 1.00 .97 .94 .26 .88 .85
Net realized and unrealized gain (loss)
on investments........................... .50 1.31 (.75) .04 .55 (.75) .04
------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.......... 1.28 2.31 .22 .98 .81 .13 .89
------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net...... (.78) (1.00) (.97) (.94) (.26) (.88) (.85)
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) (.26) (.91) (.88)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.............. $15.50 $16.80 $16.02 $16.03 $16.80 $16.02 $16.03
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN(3).................. 11.54%(4) 15.32% 1.10% 6.39% 17.22%(4) .54% 5.83%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets... - .27% .46% .39% .83%(4) 1.01% .90%
Ratio of net investment income to
average net assets....................... 6.42%(4) 6.02% 5.64% 5.93% 4.62%(4) 5.02% 5.40%
Decrease reflected in above expense
ratios due to undertakings by The
Dreyfus Corporation...................... 1.22%(4) .76% .55% .55% .54%(4) .54% .55%
Portfolio Turnover Rate................... 5.96%(5) 9.32% 30.69% 21.60% 9.32% 30.69% 21.60%
Net Assets, end of year (000's omitted)... $23,096 $55,627 $65,279 $62,428 $8,402 $25,254 $28,813
(1) From August 1, 1991 (commencement of operations) to April 30, 1992.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not 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
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 Fund 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 Fund Shares -- Class B Shares" and
"How
to Redeem Fund 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 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 Fund Shares -- Class C Shares"
and "How to Redeem Fund 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 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 goal is to maximize current income exempt from
Federal income tax and, where applicable, from State income
taxes for residents of the States of Arizona, Colorado,
Connecticut, Florida, Georgia, Maryland, Massachusetts,
Michigan,
Minnesota, North Carolina, Ohio, Oregon, Pennsylvania, Texas and
Virginia, without undue risk. To accomplish this goal, 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, "Arizona
Municipal Obligations," "Colorado Municipal Obligations,"
"Connecticut Municipal Obligations," "Florida 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 Investment Company Act
of 1940) 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 facilitie
s
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 "Risk
Factors -- 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 Corporation ("S&P") or Fitch Investors Service, Inc.
("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 BBB by S&P or Fitch or
Baa by Moody's are considered investment grade obligations;
those
rated BBB by S&P or Fitch are regarded as having an adequate
capacity to pay principal and interest, while those rated Baa by
Moody's are considered medium grade obligations which lack
outstanding investment characteristics and have speculative
characteristics. Investments rated Ba or lower by Moody's and
BB or lower by S&P and Fitch ordinarily provide higher yields
but involve greater risk because of their speculative
characteristics. Each Series may invest in Municipal Obligations
rated C by Moody's or D by S&P or Fitch, which is such rating
organizations' lowest rating and indicates that the Municipal
Obligation is in default and interest and/or repayment of
principal is in arrears. See "Risk Factors -- 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 below. Under normal market conditions, the weighted
average maturity of each Series' portfolio is expected to exceed
ten years.
In addition to usual investment practices, each Series may
use speculative investment techniques such as short-selling and
lending its portfolio securities. Each Series also may purchase,
hold or deal in futures contracts and options on futures
contracts, as permitted by applicable law. Futures and options
on futures transactions involve so-called "derivative
securities." See "Investment Techniques" below, and "Dividends,
Distributions and Taxes."
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.
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
"Risk Factors -- Other Investment Considerations."
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 such Series,
as lender, and the borrower. These obligations permit daily
changes in the amount borrowed. As mutually agreed, the Fund may
increase or decrease the amounts under these obligations or the
borrower may repay the amount borrowed without penalty. 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. The Dreyfus Corporation, on behalf of the
Fund, will consider on an ongoing basis the creditworthiness of
the issuers of the floating and variable rate demand obligations
in each Series' portfolio.
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
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
Board of Trustees 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.
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 Obligation, of any
custodian and of the third party provider of the tender
option. In certain instances and for certain tender option
bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal
Obligation and for other reasons. No Series will invest more
than
15% of the value of its net assets in illiquid securities, which
could include tender option bonds as to which it cannot exercise
the tender feature on not more than seven days' notice if there
is no secondary market available for these obligations.
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. 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. 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 such Series.
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.
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 such 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.
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
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. Each
Series may invest up to 5% of its assets in zero coupon bonds
which are rated below investment grade. See "Risk Factors --
Lower
Rated Bonds" and "Other Investment Considerations" below, and
"Investment Objective and Management Policies -- Risk Factors --
Lower Rated Bonds" and "Dividends, Distributions and Taxes" in
the Statement of Additional Information.
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 such Series' net assets may be invested in securities
that are not exempt from Federal and, where applicable, from
State 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. 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.
INVESTMENT TECHNIQUES
Each Series may employ, among others, the investment
techniques described below to the extent permitted by applicable
law. Use of certain of these techniques may give rise to
taxable income.
WHEN-ISSUED SECURITIES -- New issues of Municipal Obligations
usually are offered on a when-issued basis, which means that
delivery and payment for such Municipal Obligations ordinarily
take place within 45 days after the date of the commitment to
purchase. The payment obligation and the interest rate that will
be received on the Municipal Obligations are fixed at the time
the Fund enters into the commitment. The Fund will make
commitments to purchase such Municipal Obligations 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, although any gain realized on such sale would
be taxable. No Series will accrue income in respect of a
when-issued security prior to its stated delivery date. No
additional when-issued commitments will be made for a Series if
more than 20% of the value of such Series' net assets would be
so committed.
Municipal Obligations purchased on a when-issued basis and
the securities held in a Series' portfolio are subject to
changes
in value (both 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. Municipal Obligations purchased
on a when-issued basis may expose a Series to risk because they
may experience such fluctuations prior to their actual delivery.
Purchasing Municipal Obligations 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. 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 when-issued commitments
will be established and maintained at the Fund's custodian bank.
Purchasing Municipal Obligations on a 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.
FUTURES TRANSACTIONS -- IN GENERAL -- Neither the Fund nor any
Series is a commodity pool. However, as a substitute for a
comparable market position in the underlying securities or for
hedging purposes, each Series may engage, to the extent
permitted
by applicable regulations, in futures and options on futures
transactions, as described below.
A Series' commodities transactions must constitute bona
fide hedging or other permissible transactions pursuant to
regulations promulgated by the Commodity Futures Trading
Commission. In
addition, the Series may not engage in such transactions if the
sum of the amount of initial margin deposits and premiums paid
for unexpired commodity options, other than for bona fide
hedging
transactions, would exceed 5% of the liquidation value of the
Series' assets after taking into account unrealized profits and
unrealized losses on such contracts it has entered into;
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%. Pursuant to regulations
and/or
published positions of the Securities and Exchange Commission, a
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. To the extent a Series engages in the use
of futures and options on futures for other than bona fide
hedging purposes, the Series may be subject to additional risk.
Initially, when purchasing or selling futures contracts the
Series will be required to deposit with the Fund's custodian in
the broker's name an amount of cash or cash equivalents up to
approximately 10% of the contract amount. This amount is subject
to change by the exchange or board of trade on which the
contract
is traded and members of such exchange or board of trade may
impose their own higher requirements. This amount is known as
"initial margin" and is in the nature of a performance bond or
good faith deposit on the contract which is returned to the
Series upon termination of the futures position assuming all
contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the broker
will be made daily as the price of the index or security
underlying the futures contract fluctuates, making the long and
short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the
expiration of a futures contract, the Series may elect to close
the position by taking an opposite position at the then
prevailing price, which will operate to terminate the Series'
existing position in the contract.
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 the 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. If it
is
not possible or the Series determines not to close a futures
position in anticipation of adverse price movements, the Series
will be required to make daily cash payments of variation
margin.
In such circumstances, an increase in the value of the portion
of
the portfolio being hedged, if any, may offset partially or
completely losses on the futures contract. However, no
assurance
can be given that the price of the securities being hedged will
correlate with the price movements in a futures contract and
thus provide an offset to losses on the futures contract.
To the extent a Series is engaging in a futures transaction
as a hedging device, because of the risk of an imperfect
correlation between securities in a Series' portfolio that are
the subject of a hedging transaction and the futures contract
used as a hedging device, it is possible that the hedge will not
be fully effective if, for example, losses on the portfolio
securities exceed gains on the futures contract or losses on the
futures contract exceed gains on the portfolio securities. For
futures contracts based on indices, the risk of imperfect
correlation increases as the composition of a Series' portfolio
varies from the composition of the index. In an effort to
compensate for the imperfect correlation of movements in the
price of the securities being hedged and movements in the price
of futures contracts, a Series may buy or sell futures contracts
in a greater or lesser dollar amount than the dollar amount of
the securities being hedged if the historical volatility of the
futures contract has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely
affect a Series' net investment results if the market does not
move as anticipated when the hedge is established.
Successful use of futures by a Series also is subject to
The
Dreyfus Corporation's ability to correctly predict movements in
the direction of the market or interest rates. For example, if
the Series has hedged against the possibility of a decline in
the
market adversely affecting the value of the securities held in
its portfolio and prices increase instead, the Series will lose
part or all of the benefit of the increased value of the
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.
An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position
in a futures contract (a long position if the option is a call
and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period.
The
writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a
call and a long position if the option is a put). Upon exercise
of the option, the assumption of offsetting futures positions by
the writer and holder of the option will be accompanied by
delivery of the accumulated cash balance in the writer's futures
margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case
of a call, or is less than, in the case of a put, the exercise
price of the option on the futures contract.
Call options sold by a Series with respect to futures
contracts will be covered by, among other things, entering
into a long position in the same contract at a price no higher
than the strike price of the call option, or by ownership of the
instruments underlying, or instruments the prices of which are
expected to move relatively consistently with the instruments
underlying, the futures contract. Put options sold by a Series
with respect to futures contracts will be covered when, among
other things, cash or liquid securities are placed in a
segregated account to fulfill the obligation undertaken.
Each Series may utilize municipal bond index futures to
protect against changes in the market value of the Municipal
Obligations in the Series' portfolio or which the Series intends
to acquire. Municipal bond index futures contracts are based on
an index of long-term Municipal Obligations. The index assigns
relative values to the Municipal Obligations included in the
index and fluctuates with changes in the market value of such
Municipal Obligations. The contract is an agreement pursuant to
which two parties agree to take or make delivery of an amount of
cash based upon the difference between the value of the index at
the close of the last trading day of the contract and the price
at which the index contract was originally written. The
acquisition or sale of a municipal bond index futures contract
enables the Fund to protect a Series' assets from fluctuations
in rates on tax exempt securities without actually buying or
selling such securities.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST
RATE FUTURES CONTRACT -- Each Series may purchase and sell
interest rate futures contracts and options on interest rate
futures contracts as a substitute for a comparable market
position or to hedge against adverse movements in interest
rates.
To the extent the Series has invested in interest rate
futures contracts or options on interest rate futures contracts
as a substitute for a comparable market position, such Series
will be subject to the investment risks of having purchased the
securities underlying the contract.
Each Series may purchase call options on interest rate
futures contracts to hedge against a decline in interest rates
and may purchase put options on interest rate futures contracts
to hedge such Series' portfolio securities against the risk of
rising interest rates.
Each Series may sell call options on interest rate futures
contracts to partially hedge against declining prices of such
Series' portfolio securities. If the futures price at expiration
of the option is below the exercise price, the Series will
retain
the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in such Series'
portfolio holdings. Each Series may sell put options on interest
rate futures contracts to hedge against increasing prices of the
securities which are deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is
higher than the exercise price, the Series will retain the full
amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Series
intends to purchase. If a put or call option sold for such
Series
is exercised, such Series will incur a loss which will be
reduced
by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of a Series'
portfolio securities and changes in the value of its futures
positions, such Series' losses from existing options on futures
may, to some extent, be reduced or increased by changes in the
value of its portfolio securities.
Each Series also may sell options on interest rate futures
contracts as part of closing purchase transactions to terminate
such Series' options positions. No assurance can be given that
such closing transactions can be effected or that there will be
a
correlation between price movements in the options on interest
rate futures and price movements in the Series' portfolio
securities which are the subject of the hedge. In addition, the
Series' purchase of such options will be based upon predictions
as to anticipated interest rate trends, which could prove to be
inaccurate.
SHORT-SELLING -- Each Series may make short sales of securities,
which are transactions in which the Series sells a security it
does not own in anticipation of a decline in the market value of
that security. To complete such a transaction, the Series must
borrow the security to make delivery to the buyer. The Series
then 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. A Series will incur a loss as a
result of the short sale if the price of the security increases
between the date of the short sale and the date on which the
Series replaces the borrowed security. A Series will realize a
gain if the security declines in price between those dates.
No securities will 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.
No Series may 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. No Series may
sell short the securities of any class of an issuer to the
extent, at the time of the transaction, of more than 5% of the
outstanding securities of that class.
In addition to the short sales discussed above, the Series
may make short sales "against the box," a transaction in which a
Series enters into a short sale of a security which such Series
owns. 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.
FUTURE DEVELOPMENTS -- Each Series may take advantage of
opportunities in the area of options and futures contracts
and options on futures contracts and any other derivative
investments 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, appropriate disclosure will be provided in the
Fund's prospectus or statement of addtional information.
LENDING PORTFOLIO SECURITIES -- From time to time, each Series
may lend securities from its portfolio to brokers, dealers and
other financial institutions needing to borrow securities to
complete certain transactions. As to each Series, such loans may
not exceed 33-1/3% of the value of the Series' total assets. In
connection with such loans, 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. A Series can increase its income through the
investment of such collateral. However, such income generally
would not be tax exempt. The Series continues to be entitled to
payments in amounts equal to the interest or other distributions
payable on the loaned security and receives interest on the
amount of the loan. Such loans will be 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 such Series.
BORROWING MONEY -- As a fundamental policy, each Series is
permitted to borrow to the extent permitted under the Investment
Company Act of 1940. 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 a Series' total assets, such Series will not make
any additional investments.
CERTAIN FUNDAMENTAL POLICIES
Each Series may (i) borrow money to the extent permitted
under the Investment Company Act of 1940, which currently limits
borrowing to no more than 33-1/3% of the value of the Series'
total assets; and (ii) invest up to 25% of its assets in the
securities of issuers in any industry, provided that there is no
such limitation on investments in Municipal Obligations and, for
temporary defensive purposes, obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities. This
paragraph describes fundamental policies that cannot be changed
as to a Series without approval by the holders of a majority (as
defined in the Investment Company Act of 1940) of such Series'
outstanding voting shares. See "Investment Objective and
Management Policies -- Investment Restrictions" in the Statement
of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each Series may (i) pledge, hypothecate, mortgage or
otherwise encumber its assets, but only to secure permitted
borrowings; an d (ii) invest up to 15% of the value of its net
assets in repurchase agreements providing for settlement in more
than seven days after notice and in other illiquid securities
(which securities could include participation interests
(including municipal lease/purchase agreements) that are not
subject to the demand feature described above, and floating and
variable rate demand obligations as to which the Fund cannot
exercise the related demand feature described above and as to
which there is no secondary market). See "Investment Objective
and Management Policies -- Investment Restrictions" in the
Statement of Additional Information.
RISK FACTORS
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.
ARIZONA SERIES -- The Arizona legislature and Arizona local
governmental entities are subject to certain limitations on
their ability to raise and assess taxes and levies which could
affect their ability to meet their respective financial
obligations. Arizona's economy was adversely affected by
problems
in the real estate sector during the past decade, and current
and proposed reductions in Federal military expenditures are
expected to cause additional difficulties with Arizona's
economy.
COLORADO SERIES -- During the mid-to-late 1980s, Colorado's
economy was adversely affected primarily by three factors: a
contraction in the energy sector, a decline caused by
over-expansion in the high technology sector and a general
decline in the construction industry. Since 1990, the economy
has rebounded and has generally out-performed the national
economy. However, economic growth is expected to slow during
1995 through 1997, due in part to decreased defense spending and
the recent completion of several significant public works
projects in the State.
On November 3, 1992, voters in Colorado passed the Bruce
Amendment, otherwise known as the "Taxpayers' Bill of Rights."
The Amendment restricts growth of government spending to the
rate of inflation plus the change in demand for government
services (as measured by population, school enrollment, or
construction); limits the issuance of debt to that which is
voter
approved; and requires voter approval of all tax increases.
Though the Bruce Amendment is not expected to have an immediate
effect on the credit quality of State and local governments, it
will likely reduce the financial flexibility of all levels of
government in Colorado over time. In addition, younger or
rapidly growing municipalities with large infrastructure
requirements may have difficulty finding the revenues needed to
finance their growth.
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
and 1993, 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. The Comptroller
reported that the State ended the 1994 fiscal year with a
General Fund operating surplus of $19.7 million. The
Comptroller,
however, estimated the cumulative projected deficit under GAAP
for the fiscal year ended June 30, 1994 to have been
approximately $465.8 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 1993-94 total General
Revenue and Working Capital Funds available are estimated to
have
been $14.453 billion, which resulted in estimated unencumbered
reserves of $351.8 million at the end of fiscal 1993-94. The
General Revenue and Working Capital Funds ended the 1992-93
fiscal year with unencumbered reserves of $544 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. In
1989 and 1990, however, the State's economy began to slow and
lower than projected growth in income and sales taxes and
increasing expenditure levels resulted in a reduction in the
general fund reserve. During fiscal years 1990, 1991 and 1992,
state expenditures exceeded revenues, effectively eliminating
the
State's general fund reserve. In fiscal 1993 and 1994, however,
revenues slightly exceeded appropriations which increased the
State's revenue shortfall reserve at the end of fiscal 1994 to
approximately $267 million. Revenues and expenditures for
fiscal
1995 are estimated to be equal, and 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 1995 budget was
enacted, it was estimated that the General Fund surplus on a
budgetary basis at June 30, 1995, would be approximately $9.7
million. As of March 8, 1995, it was estimated that the General
Fund surplus on a budgetary basis at June 30, 1993, will be
$76.9
million. When the 1996 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, 1995 would be
approximately $176.8 thousand, including $60 million
appropriated to the Revenue Stabilization Account
of the State Reserve Fund.
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 1994 and expects to end fiscal 1995 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 5.9% in
1994.
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 and 1993-94 with
surpluses of approximately $308 million and $460 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 officio 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% 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 1995 fiscal year, the
Ohio Office of Budget and Management projects positive $681.5
million and $446.7 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.
OREGON SERIES -- The Oregon economy generally has outperformed
the national economy in recent years. There is no assurance,
however, that this will continue to be the case. The State
forecasts modest growth of the economy through 1995 with jobs
increasing at 3.6% per year, and personal income growing at an
annual rate of 4.6%. The State's population has been growing,
and
the growth is expected to continue. Forest products, housing,
agriculture, trade and tourism are mainstays of the economy.
Oregon's economy is expected to slow over the next year. The
major factors slowing the economy are a softening of the State's
housing markets, reductions in timber output and employment, and
weaker national demand for Oregon's manufactured products.
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
1994-95 General Fund budget provided for no new taxes. As of
April 30, 1995, the General Fund had a surplus of $442.9 million
or 3.4% above the official estimate.
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 and 1994, Texas' General Revenue
Fund ended with cash surpluses of $1.005 billion, $615 million,
$1.630 billion and $2.225 billion, respectively.
VIRGINIA SERIES -- Due to Virginia's proximity to Washington,
D.C. and the concentration of military installations in Northern
Virginia and the Tidewater, federal government spending is an
important factor in Virginia's economy. The federal government
has a greater impact on Virginia relative to its size than any
other state except Alaska and Hawaii. While federal employment
in
1992 accounted for 10.0% of Virginia's personal income (compared
with a national average of 3.3% in that year), it ranked behind
services (19.7%), wholesale and retail trade (10.6%) and
manufacturing (10.5%).
The Commonwealth experienced a decrease in its General Fund
balances from fiscal 1989 to fiscal 1990 and again from fiscal
1991, reflecting the effects of a nationwide recession and
increasing expenditures. General Fund balances have increased
since fiscal 1991. In fiscal 1994, revenues increased 6.0% from
the previous year, while total expenditures increased 4.5%.
Revenues exceeded expenditures by $731.2 million, an increase of
20.0% over fiscal 1993.
LOWER RATED BONDS -- You should carefully consider the relative
risks of investing in the higher yielding (and, therefore,
higher
risk) debt securities (commonly known as junk bonds) in which
each Series may invest up to 30% of the value of its net assets.
These are bonds 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. 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 fund that invested in
higher rated 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.
The market price and yield of bonds rated Ba or lower by
Moody's and BB or lower by S&P and Fitch are more volatile than
those of higher rated bonds. Factors adversely affecting the
market price and yield of these securities will adversely affect
the Series' 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 the Fund to sell certain securities or could result
in lower prices than those used in calculating the Series' net
asset value.
Each Series may invest up to 5% of the value of its net
assets in zero coupon securities and pay-in-kind bonds (bonds
which pay interest through the issuance of additional bonds)
rated Ba or lower by Moody's and BB or lower by S&P and Fitch.
These securities may be subject to greater fluctuations in value
due to changes in interest rates than interest-bearing
securities
and thus may be considered more speculative than comparably
rated
interest-bearing securities. See "Other Investment
Considerations" below, and "Investment Objective and Management
Policies - Risk Factors - Lower Rated Bonds" and "Dividends,
Distributions and Taxes" in the Statement of Additional
Information.
OTHER INVESTMENT CONSIDERATIONS -- 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 value of
fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities.
Each Series' net asset value generally will not be stable and
should fluctuate based upon changes in the value of such Series'
portfolio securities. Securities in which a 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.
Federal income tax law requires the holder of a zero coupon
security or of certain pay-in-kind bonds to take into account
annually a portion of the discount (or deemed discount) at which
such securities were issued, prior to the receipt of cash
payments. To maintain its qualification as a regulated
investment
company, a Series may be required to distribute such portion of
the discount and may have to dispose of portfolio securities
under disadvantageous circumstances in order to generate cash to
satisfy these distribution requirements.
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.
The Fund's classification 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 Investment Company Act of 1940. A "diversified"
investment
company is required by the Investment Company Act of 1940
generally to invest, with respect to 75% of its total assets,
not more than 5% of such assets in the securities of a single
issuer.
However, each Series intends to conduct its operations so as to
qualify as a "regulated investment company" for purposes of the
Code, which requires that, at the end of each quarter of its
taxable year, (i) at least 50% of the market value of each
Series' total assets be invested in cash, U.S. Government
securities, the securities of other regulated investment
companies and other securities, with such other securities of
any
one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of each Series' total
assets, and (ii) not more than 25% of the value of each Series'
total assets be invested in the securities of any one issuer
(other than U.S. Government securities or the securities of
other
regulated investment companies). 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
securities may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities
of a diversified investment company.
Investment decisions for the Fund are made independently
from those of other investment companies advised by The Dreyfus
Corporation. However, if such other investment companies are
prepared to invest in, or desire to dispose of, Municipal
Obligations or Taxable Investments at the same time 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
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 May 31,
1995, The Dreyfus Corporation managed or administered
approximately $76 billion in assets for more than 1.8 million
investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the
overall management of the Fund's affairs under a Management
Agreement with the Fund, subject to the overall authority of the
Fund's Board of Trustees in accordance with Massachusetts law.
The primary portfolio manager for each of the Arizona Series,
the
Colorado Series, the Georgia Series and the Oregon Series is
Stephen C. Kris, who has held that position with respect
to the Arizona Series and the Georgia Series since September
1992 and with respect to the Colorado Series and the Oregon
Series since January 1994, 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 Florida Series, the Maryland Series, the
Pennsylvania
Series and the Texas Series is A. Paul Disdier, who has held
that
position since April 1988 and has been employed by The Dreyfus
Corporation since February 1988. 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 Fund's Statement of Additional
Information. The Dreyfus Corporation also provides research
services for the Fund as well as for other funds advised by The
Dreyfus Corporation through a professional staff of portfolio
managers and securities analysts.
Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered
under the 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.,
AFCOCredit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its
subsidiaries,
including The Dreyfus Corporation, Mellon managed approximately
$200 billion in assets as of March 31, 1995, including
approximately $72 billion in mutual fund assets. As of March 31,
1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration
services, for approximately $680 billion in assets including
approximately $67 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
overall expense ratio of that Series and increasing yield to
investors at the time such amounts are waived or assumed, as the
case may be. 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, 1995, 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
- --------------------
- ------------------------------
Arizona 0
Colorado 0
Connecticut .54 of 1%
Florida .54 of 1%
Georgia 0
Maryland .54 of 1%
Massachusetts .54 of 1%
Michigan .54 of 1%
Minnesota .54 of 1%
North Carolina .24 of 1%
Ohio .54 of 1%
Oregon 0
Pennsylvania .54 of 1%
Texas 0
Virginia 0
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.
The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor 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 Shareholder Services Group, Inc., a subsidiary of First
Data Corporation, P.O. Box 9671, Providence, Rhode Island
02940-9671, is the Fund's Transfer and Dividend Disbursing Agent
(the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY FUND 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.
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 a direct fee
which would be in addition to any amounts which might be
received
under the Shareholder Services Plan. Each Service Agent has
agreed to transmit to its clients a schedule of such fees. You
should consult your Service Agent in this regard.
When purchasing Fund shares, you must specify which Class of
shares 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.
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment
must be accompanied by the Fund's Account Application.
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 9387, Providence, Rhode Island
02940-9387, 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 105, Newark, New
Jersey 07101-0105. 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 together
with the applicable Series' DDA# as shown below, for purchase of
Fund shares in your name:
For Class A shares:
DDA #8900117052/Premier State Municipal Bond Fund/Arizona Series
- - Class A shares
DDA #8900088281/Premier State Municipal Bond Fund/Colorado
Series - Class A shares
DDA #8900119489/Premier State Municipal Bond Fund/Connecticut
Series - Class A shares
DDA #8900119381/Premier State Municipal Bond Fund/Florida Series
- - Class A shares
DDA #8900117087/Premier State Municipal Bond Fund/Georgia Series
- - Class A shares
DDA #8900119403/Premier State Municipal Bond Fund/Maryland
Series - Class A shares
DDA #8900119470/Premier State Municipal Bond Fund/Massachusetts
Series - Class A shares
DDA #8900119411/Premier State Municipal Bond Fund/Michigan
Series - Class A shares
DDA #8900119438/Premier State Municipal Bond Fund/Minnesota
Series - Class A shares
DDA #8900208635/Premier State Municipal Bond Fund/North
Carolina Series - Class A shares
DDA #8900119446/Premier State Municipal Bond Fund/Ohio Series
- - Class A shares
DDA #8900088265/Premier State Municipal Bond Fund/Oregon Series
- - Class A shares
DDA #8900119454/Premier State Municipal Bond Fund/Pennsylvania
Series - Class A shares
DDA #8900119462/Premier State Municipal Bond Fund/Texas Series -
Class A shares
DDA #8900208678/Premier State Municipal Bond Fund/Virginia
Series - Class A shares
For Class B shares:
DDA #8900115238/Premier State Municipal Bond Fund/Arizona Series
- - Class B shares
DDA #8900115432/Premier State Municipal Bond Fund/Colorado
Series - Class B shares
DDA #8900115130/Premier State Municipal Bond Fund/Connecticut
Series - Class B shares
DDA #8900115041/Premier State Municipal Bond Fund/Florida Series
- - Class B shares
DDA #8900115246/Premier State Municipal Bond Fund/Georgia Series
- - Class B shares
DDA #8900115068/Premier State Municipal Bond Fund/Maryland
Series - Class B shares
DDA #8900115122/Premier State Municipal Bond Fund/Massachusetts
Series - Class B shares
DDA #8900115076/Premier State Municipal Bond Fund/Michigan
Series - Class B shares
DDA #8900115084/Premier State Municipal Bond Fund/Minnesota
Series - Class B shares
DDA #8900115149/Premier State Municipal Bond Fund/North Carolina
Series - Class B shares
DDA #8900115092/Premier State Municipal Bond Fund/Ohio Series
- - Class B shares
DDA #8900115424/Premier State Municipal Bond Fund/Oregon Series
- - Class B shares
DDA #8900115106/Premier State Municipal Bond Fund/Pennsylvania
Series - Class B shares
DDA #8900115114/Premier State Municipal Bond Fund/Texas Series -
Class B shares
DDA #8900115157/Premier State Municipal Bond Fund/Virginia
Series - Class B shares
For Class C shares:
DDA #8900252049/Premier State Municipal Bond Fund/Arizona Series
- - Class C shares
DDA #8900252057/Premier State Municipal Bond Fund/Colorado
Series - Class C shares
DDA #8900252065/Premier State Municipal Bond Fund/Connecticut
Series - Class C shares
DDA #8900252073/Premier State Municipal Bond Fund/Florida Series
- - Class C shares
DDA #8900252081/Premier State Municipal Bond Fund/Georgia Series
- - Class C shares
DDA #8900252103/Premier State Municipal Bond Fund/Maryland
Series - Class C shares
DDA #8900252111/Premier State Municipal Bond Fund/Massachusetts
Series - Class C shares
DDA #8900252138/Premier State Municipal Bond Fund/Michigan
Series - Class C shares
DDA #8900252146/Premier State Municipal Bond Fund/Minnesota
Series - Class C shares
DDA #8900252154/Premier State Municipal Bond Fund/North Carolina
Series - Class C shares
DDA #8900252162/Premier State Municipal Bond Fund/Ohio Series -
Class C shares
DDA #8900252170/Premier State Municipal Bond Fund/Oregon Series
- - Class C shares
DDA #8900252189/Premier State Municipal Bond Fund/Pennsylvania
Series - Class C shares
DDA #8900252200/Premier State Municipal Bond Fund/Texas Series -
Class C shares
DDA #8900252197/Premier State Municipal Bond Fund/Virginia
Series - Class C shares
The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should
be included instead), account registration and dealer number, if
applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to
obtain your Fund account number. Please include your Fund
account
number on the Fund's Account Application and promptly mail the
Account Application to the Fund, as no redemptions will be
permitted until the Account Application is received. You may
obtain further information about remitting funds in this
manner from your 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.
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 each business day by an
independent pricing service approved by the Board of Trustees
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 Board of Trustees. For further information
regarding the methods employed in valuing the Series'
investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
Federal regulations require that you provide a certified
TIN upon opening or reopening an account. See "Dividends,
Distributions and Taxes" and the Fund's Account Application for
further information concerning this requirement. Failure to
furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
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 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 dealers' responsibility to transmit orders so that they will
be received by the Distributor or its designee before the
close of its business day.
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 two
years after purchase. The terms contained in the section of the
Fund's Prospectus entitled "How to Redeem Fund 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 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 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,
country 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 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, these incentives may be offered only to
certain dealers who have sold or may sell significant amounts of
such shares. For the period from May 1, 1994 through August 23,
1994, Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation and distributor of the Fund's shares
until August 24, 1994, retained $ 80,071 from sales loads on
Class A 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 Fund Shares." The Distributor
compensates certain Service Agents for selling Class B 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. For the period May 1, 1994
through August 23, 1994, $188,875 was retained by Dreyfus
Service
Corporation, as former distributor, from the CDSC on Class B
shares.
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, however, is
imposed on redemptions of Class C shares made within the first
year of purchase. See "Class B Shares" above and "How to Redeem
Fund Shares."
RIGHT OF ACCUMULATION -- CLASS A SHARES -- Reduced sales
loads apply to any purchase of Class A shares, shares of other
funds in the Family of Premier Funds, shares of certain other
funds purchased through an exchange from any funds in the Family
of Premier Funds and 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 shares purchased with a sales
load (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 a
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 Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained
in a domestic financial institution which is an Automated
Clearing House member may be so designated. The Fund may modify
or terminate this Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306.
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 a Series, shares
of the same Class in 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 Fund 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. If you desire 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, or by a separate signed
Shareholder Services Form, also available by calling
1-800-645-6561. If you have established the Telephone
Exchange Privilege, you may telephone exchange instructions by
calling 1-800-221-4060 or, if you are calling from overseas,
call
1-401-455-3306. See "How to Redeem Fund 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. 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 of the fund
from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased
with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of your
exchange 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.
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.
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 funds in the Premier Family of Funds or certain
other funds in the Dreyfus Family of Funds of which you are
currently an investor. The amount you designate, which can be
expressed either in terms of a specific dollar or share amount
($100 minimum), will be exchanged automatically on the first
and/or fifteenth 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 charge.
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 writing 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.
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. 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.
AUTOMATIC ASSET BUILDERRegistration Mark
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 an 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 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 ACHpermits you to transfer
electronically on the payment date 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. There is a service charge of
50cents for each withdrawal check. The Automatic Withdrawal Plan
may be ended at any time by you, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
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, available from the
Distributor, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased
in a 13-month period. 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 FUND 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 a
nominal fee
for effecting redemption 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 on 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 AUTOMATIC ASSET BUILDER 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 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
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 1.00% 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 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 Trustees determine 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, the Check
Redemption Privilege with respect to Class A shares, the
TELETRANSFER Privilege or, if you are a client of a Selected
Dealer, 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.
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 Fund's 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 TELETRANSFER redemption or an 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
TELETRANSFER 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. 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.
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 -- If you hold
Class A shares, you may request on the Account Application,
Shareholder Services Form or by later written request that the
Fund provide Redemption Checks drawn on the Fund's 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. Class A shares for
which certificates have been issued may not be redeemed by
Redemption Check. This Privilege may be modified or terminated
at any time by the Fund or the Transfer Agent upon notice to
holders of Class A shares.
TELETRANSFER PRIVILEGE -- You may redeem shares (minimum $500
per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between your
Fund account and the bank account designated in one of these
documents. Only such an 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. 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 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 redemption of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. Shares issued in certificate form are not
eligible for this Privilege.
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 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 A, Class B and Class C shares are subject to a
Shareholder Services Plan and Class B and Class C shares only
are subject to a Distribution Plan.
DISTRIBUTION PLAN -- Under the Distribution Plan, adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940,
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. Under the Shareholder
Services Plan the Distributor may make payments to Service
Agents in respect of these services. The Distributor determines
the amounts to be paid to Service Agents. Each Service Agent is
required to disclose to its clients any compensation payable to
it by the Fund pursuant to the Shareholder Services Plan and any
other compensation payable by their clients in connection with
the investment of their assets in Class A, Class B or Class C
shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS -- 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. 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 Investment Company Act of
1940. 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
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 Class A, Class B
or Class C will be borne exclusively by that Class. Class B and
Class C 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 of the Fund
is treated as a separate corporation 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 or
not reinvested. 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 gains derived from securities transactions and
from the use of certain of the investment techniques described
under "Description of the Fund -- 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.
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
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.
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.
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, 1995 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. Qualification as a
regulated investment company 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.
ARIZONA SERIES -- Dividends paid by the Series are not subject
to Arizona individual and corporate income taxes to the extent
that such dividends are derived from income received by the
Series as
interest from Arizona Municipal Obligations, or from direct
obligations of the United States, certain Federal agency
obligations, or obligations issued by the governments of Puerto
Rico, Virgin Islands or Guam. Dividends derived from other
sources including distributions that qualify as capital gain
dividends for Federal income tax purposes may be taxable by
Arizona. In addition, any gain realized on the redemption, sale
or exchange of Series shares is subject to Arizona income tax.
Arizona does not impose an alternative minimum tax.
Shares of the Arizona Series are not subject to property
taxation by the State of Arizona or its political subdivisions.
COLORADO SERIES -- Dividends paid by the Series to a Colorado
resident individual, trust or estate, or corporation doing
business in Colorado, will be exempt from Colorado income tax to
the extent that such dividends qualify as exempt-interest
dividends of a regulated investment company under Section
852(b)(5) of the Code that are derived from interest received by
the Series from (a) obligations of Colorado or its political
subdivisions issued on or after May 1, 1980, or if issued before
May 1, 1980, to the extent such interest is specifically exempt
from income taxation under the laws of the State of Colorado
authorizing the issuance of such obligations, (b) obligations of
the United States or its possessions to the extent included in
Federal taxable income, and (c) obligations of territories and
possessions of the United States to the extent Federal law
exempts interest on such obligations from taxation by the
states.
To the extent that Series, dividends and distributions are
attributable to sources not described in the preceding sentence,
such as short or long-term capital gains from investments sold
or disposed of by the Series, such dividends and distributions
will
not be exempt from Colorado income tax.
The shares of the Colorado Series are not subject to
property taxation by Colorado or its political subdivisions.
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.
There is no specific statutory or regulatory exception that
would exempt shares of a regulated investment company, including
regulated investment companies that only hold Municipal
Obligations or other direct obligations of the United States and
its territories and possessions, from the Georgia intangibles
tax. The Georgia Department of Revenue has taken the position
that the fair market value of a regulated investment company's
shares are subject to Georgia's intangibles tax regardless of
the
tax exempt character of the obligations in which the Series
invests or the tax exempt income generated by such investments.
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 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.
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 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,
but only if the dividends so attributable represent 95% or more
of the exempt-interest dividends that are paid by the Series.
However, 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 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.
OREGON SERIES -- Dividends paid by the Series to an Oregon
resident individual, trust or estate are exempt from Oregon
personal income tax to the extent that such dividends qualify as
exempt-interest dividends for federal income tax purposes and
such dividends are attributable to interest on tax-exempt
obligations of the State of Oregon and its political as
subdivisions and authorities or on obligations issued by the
governments of Puerto Rico, the U.S. Virgin Islands, Guam
and the Northern Mariana Islands. To the extent that the Series'
dividends and distributions are attributable to sources not
described in the preceding sentence, such as short- or long-term
capital gains from investments sold or disposed of by the
Series,
such dividends and distributions will not be exempt from Oregon
personal income tax. In addition, dividends and distributions
paid by the Oregon Series are expected to be fully includable in
income in determining the Oregon excise tax on corporations.
The shares of the Oregon Series are not subject to property
taxation by Oregon or its political subdivisions.
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 not 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 l, 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: (l)
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 -- Dividends paid by the Series to a Virginia
resident or a corporation doing business in Virginia are
exempt from Virginia income tax to the extent that the dividends
are attributable to (a) Virginia Municipal Obligations, (b)
obligations of the United States or any authority, commission or
instrumentality of the United States in the exercise of the
borrowing power of the United States and backed by the full
faith
and credit of the United States, or (c) obligations issued by
particular Federal or Virginia agencies or political
subdivisions
whose enabling statute exempts from state taxation interest or
dividends paid on securities of such entity; provided, that the
exempt portion of dividends can be determined with reasonable
certainty and substantiated if taxable income is commingled with
exempt income. Other dividends and distributions, including
distributions of capital gains attributable to the
aforementioned
obligations, are subject to Virginia income tax unless
specifically exempted by statutory provisions creating the
agency or political subdivisions.
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 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 Class A, Class B and Class C for one, five and
ten year periods, or for shorter periods depending upon the
length of time during which each Series has operated.
Computations of average total return for periods of less than
one
year represent an annualization of the Class's actual total
return for the applicable period.
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 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 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 may also 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 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. On July 2, 1990, the Fund's name was
changed from Premier State Tax Exempt Bond Fund to Premier State
Municipal 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 Board of Trustees. However, 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.
On August 3, 1994, the shareholders of each Series of the
Fund approved a proposal to change, among other things, certain
of the Fund's fundamental policies and investment restrictions
to
(i) increase the amount the Series may borrow; and (ii) increase
the amount of assets the Series may pledge to secure such
borrowing and make such policy non-fundamental.
To date, the Trustees have authorized the creation of
fifteen 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.
Rule 18f-2 under the Investment Company Act of 1940
provides
that any matter required to be submitted under the provisions of
the Investment Company Act of 1940 or applicable state law or
otherwise, to the holders of the outstanding voting securities
of
an investment company such as the Fund will not be deemed to
have
been effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each Series affected by
such matter. Rule 18f-2 further provides that a Series shall be
deemed to be affected by a matter unless it is clear that the
interests of each Series in the matter are identical or that the
matter does not affect any interest of such Series. However,
the Rule exempts the selection of independent accountants and
the
election of trustees from the separate voting requirements of
the
Rule.
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 Trustees intend to conduct the
operations
of the Fund 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 by writing to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
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.
APPENDIX
The average distribution of investments (at value) in
Municipal Obligations by ratings for the fiscal year ended
April 30, 1995, computed on a monthly basis, for each Series
indicated was as follows:
<TABLE>
<CAPTION>
FITCH MOODY'S STANDARD & OHIO PENNSYLVANIA
INVESTORS INVESTORS POOR'S SERIES SERIES
SERVICE, INC. OR SERVICE, INC. OR CORPORATION
- ------------- ------------- -------------- -------------- --------
<S> <C> <C> <C> <C>
AAA Aaa AAA 27.7% 29.6%
AA Aa AA 7.4 14.7
A A A 27.1 16.5
BBB Baa BBB 24.7 22.2
BB Ba BB 5.4 1.7
F-1 MIG1/P-1 SP-1/A-1 1.1 2.2
Not Rated Not Rated Not Rated 6.7(1) 13.1(2)
-------- --------
100.0% 100.0%
======== ========
(1) Included under the Not Rated category are securities
comprising 6.7% 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 (3.8%), Baa/BBB (2.7%), B (.2%).
(2) Included under the Not Rated category are securities
comprising 13.1% 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 (3.7%), A/A (1.7%), Baa/BBB (3.9%), Ba/BB
(3.0%) and B (.8%).
The actual distribution of the Series' investments in
Municipal Obligations 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.
</TABLE>
<PAGE>
PREMIER MUNICIPAL BOND FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
_____________ __, 1995
Acquisition of the Assets of
PREMIER STATE MUNICIPAL BOND FUND
ARIZONA SERIES
COLORADO SERIES
OREGON SERIES
144 Glenn Curtiss Boulevard
Uniondale, New York 11556-0144
1-800-554-4611
By and in Exchange for Class A Shares and Class B Shares of
PREMIER 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 Combined Proxy Statement/Prospectus dated ___________
__, 1995, relating specifically to the proposed transfer of all
or substantially all of the assets and liabilities of the
Arizona Series, the Colorado Series and the Oregon Series of
Premier State Municipal Bond Fund in exchange for Class A
shares and Class B shares of Premier Municipal Bond Fund. Each
such transfer is to occur pursuant to an Agreement and Plan of
Reorganization. This Statement of Additional Information
consists of this cover page and the following described
documents, each of which is attached hereto and incorporated
herein by reference:
1. The Statement of Additional Information of
Premier Municipal Bond Fund dated July 12, 1995.
2. The Statement of Additional Information of
Premier State Municipal Bond Fund dated August 14,
1995.
3. Annual Report of Premier Municipal Bond Fund for
the fiscal year ended April 30, 1995.
4. Annual Report of each of the Arizona Series, the
Colorado Series and the Oregon Series of Premier State
Municipal Bond Fund for the fiscal year ended April 30,
1995.
The Combined Proxy Statement/Prospectus dated
___________ __, 1995 may be obtained by writing to Premier
Municipal Bond Fund, c/o The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166.
<PAGE>
PREMIER MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS C SHARES
(STATEMENT OF ADDITIONAL INFORMATION)
This Statement of Additional Information, which is not a
prospectus, supplements and
should be read in conjunction with the current Prospectus of
Premier Municipal Bond Fund
(the "Fund"), dated July 12, 1995, as it may be revised from
time
to time. To obtain a copy
of the Fund's Prospectus, please write to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144.
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-10
Management Agreement. . . . . . . . . . . . . . . . . . . B-14
Purchase of Fund Shares . . . . . . . . . . . . . . . . . B-16
Distribution Plan and Shareholder Services Plan . . . . . B-17
Redemption of Fund Shares . . . . . . . . . . . . . . . . B-19
Shareholder Services. . . . . . . . . . . . . . . . . . . B-20
Determination of Net Asset Value. . . . . . . . . . . . . B-23
Dividends, Distributions and Taxes. . . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . B-26
Information About the Fund. . . . . . . . . . . . . . . . B-28
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . B-28
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . B-29
Financial Statements. . . . . . . . . . . . . . . . . . . B-38
Report of Independent Auditors. . . . . . . . . . . . . . B-52
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
The average distribution of investments (at value) in
Municipal Obligations by ratings for the fiscal year ended
April 30, 1995, computed on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Fitch Moody's Standard
Investors Investors & Poor's
Service, Inc. Service, Inc. Corporation Percentage
("Fitch") or ("Moody's") or ("S&P") of Value
- ------------- ------------- ----------- ----------
<S> <C> <C> <C>
AAA Aaa AAA 17.0%
AA Aa AA 7.5
A A A 16.2
BBB Baa BBB 32.2
BB Ba BB 4.1
F-1 VMIG 1, MIG 1, P-1 SP-1, A-1 5.2
F-2 VMIG 2 SP-2 .1
Not Rated Not Rated Not Rated 17.7
100.0%
</TABLE>
Municipal Obligations. The term "Municipal Obligations"
generally includes debt obligations issued to obtain funds for
various public purposes, including the construction of a
wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. Other public purposes for
which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating
expenses and lending such funds to other public institutions and
facilities. In addition, certain types of industrial
development
bonds are issued by or on behalf of public authorities to obtain
funds to provide for the construction, equipment, repair
or improvement of privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass
transit, industrial, port or parking facilities, air or water
pollution control facilities and certain local facilities for
water supply, gas, electricity or sewage or solid waste
disposal;
the interest paid on such obligations may be exempt from
Federal income tax, although current tax laws place substantial
limitations on the size of such issues. Such obligations are
considered to be Municipal Obligations if the interest paid
thereon qualifies as exempt from Federal income tax in the
opinion
of bond counsel to the issuer. There are, of course, variations
in the security of Municipal Obligations both within
a particular classification and between classifications.
Floating and variable rate demand obligations are tax
exempt
obligations ordinarily having stated maturities in excess of one
year, but which permit the holder to demand
payment of principal at any time, or at specified intervals.
The issuer of such obligations
ordinarily has a corresponding right, after a given period, to
prepay in its discretion the
outstanding principal amount of the 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.
For the purpose of diversification under the Investment
Company Act of 1940, as
amended (the "Act"), the identification of the issuer of
Municipal
Obligations depends on the
terms and conditions of the security. When the assets and
revenues of an agency, authority,
instrumentality or other political subdivision are separate from
those of the government
creating the subdivision and the security is backed only by the
assets and revenues of the
subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only
by
the assets and revenues of
the non-governmental user, then such non-governmental user would
be deemed to be the sole
issuer. If, however, in either case, the creating government or
some other entity guarantees
a security, such a guaranty would be considered a separate
security and will be treated as an
issue of such government or other entity.
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 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
(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. See "Investment Restriction
No.
12" below.
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 its 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.
Futures Contracts and Options on Futures Contracts. Upon
exercise of an option on a
futures contract, the writer of the option delivers to the
holder
of the option the futures
position and the accumulated balance in the writer's futures
margin account, which represents
the amount by which the market price of the futures contract
exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the
option on the futures contract.
The potential loss related to the purchase of options on futures
contracts is limited to the
premium paid for the option (plus transaction costs). Because
the
value of the option is fixed
at the time of sale, there are no daily cash payments to reflect
changes in the value of the
underlying contract; however, the value of the option does
change
daily and that change
would be reflected in the net asset value of the Fund.
Lending Portfolio Securities. To a limited extent, the
Fund
may lend its portfolio
securities to brokers, dealers and other financial institutions,
provided it receives cash
collateral which at all times is maintained in an amount equal
to
at least 100% of the current
market value of the securities loaned. By lending its portfolio
securities, the Fund can
increase its income through the investment of the cash
collateral.
For purposes of this policy, the Fund considers collateral
consisting of U.S. Government securities or irrevocable
letters of credit issued by banks whose securities meet the
standards for investment by the
Fund to be the equivalent of cash. Such loans may not exceed
33-1/3% of the value of the
Fund's total assets. From time to time, 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. These
conditions may be subject to
future modification.
Taxable Investments. Securities issued or guaranteed by
the
U.S. Government or its
agencies or instrumentalities include U.S. Treasury securities,
which differ in their interest
rates, maturities and times of issuance. Some obligations
issued
or guaranteed by U.S.
Government agencies and instrumentalities, for example,
Government
National Mortgage
Association pass-through certificates, are supported by the full
faith and credit of the U.S.
Treasury; others, such as those of the Federal Home Loan Banks,
by
the right of the issuer
to borrow from the U.S. Treasury; others, such as those issued
by
the Federal National
Mortgage Association, by discretionary authority of the U.S.
Government to purchase certain
obligations of the agency or instrumentality; and others, such
as
those issued by the Student
Loan Marketing Association, only by the credit of the agency or
instrumentality. These
securities bear fixed, floating or variable rates of interest.
Principal and interest may
fluctuate based on generally recognized reference rates or the
relationship of rates. While
the U.S. Government provides financial support to such U.S.
Government sponsored
agencies or instrumentalities, no assurance can be given that it
will always do so, since it is
not so obligated by law. The Fund will invest in such
securities only when it is satisfied that
the credit risk with respect to the issuer is minimal.
Commercial paper consists of short-term, unsecured
promissory
notes issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates
representing the obligation of a bank
to repay funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a
banking institution for a
specified period of time 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.
Repurchase agreements involve the acquisition by the Fund
of
an underlying debt
instrument, subject to an obligation of the seller to
repurchase,
and the Fund to resell, the
instrument at a fixed price, usually not more than one week
after
its purchase. The Fund's
custodian or sub-custodian will have custody of, and will hold
in
a segregated account,
securities acquired by the Fund under a repurchase agreement.
Repurchase agreements are
considered by the staff of the Securities and Exchange
Commission to be loans by the Fund.
In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, the Fund will
enter into repurchase agreements only with domestic banks with
total assets in excess of one
billion dollars or primary government securities dealers
reporting
to the Federal Reserve
Bank of New York, with respect to securities of the type in
which
the Fund may invest, and
will require that additional securities be deposited with it if
the value of the securities
purchased should decrease below resale price. The Manager will
monitor on an ongoing
basis the value of the collateral to assure that it always
equals
or exceeds the repurchase
price. Certain costs may be incurred by the Fund in connection
with the sale of the
securities if the seller does not repurchase them in accordance
with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced
with respect to the seller
of the securities, realization on the securities by the Fund may
be delayed or limited. The
Fund will consider on an ongoing basis the creditworthiness of
the
institutions with which it
enters into repurchase agreements.
Short-Selling. The Fund may engage in short-selling.
Until
the Fund replaces a
borrowed security in connection with a short sale, the Fund will
(a) maintain daily a
segregated account, containing cash or U.S. Government
securities, at such a level that
(i) the amount deposited in the account plus the amount
deposited
with the broker as
collateral will equal the current value of the securities sold
short and (ii) the amount
deposited in the segregated account plus the amount deposited
with
the broker as collateral
will not be less than the market value of the security at the
time
it was sold short; or (b)
otherwise cover its short position.
Illiquid Securities. If a substantial market of qualified
institutional buyers develops
pursuant to Rule 144A under the Securities Act of 1933, as
amended, for certain restricted
securities held by the Fund, the Fund intends to treat such
securities as liquid securities in
accordance with procedures approved by the Fund's Board of
Trustees. Because it is not
possible to predict with assurance how the market for restricted
securities pursuant to Rule
144A will develop, the Fund's Board of Trustees has directed the
Manager to monitor
carefully the Fund's investments in such securities with
particular regard to trading activity,
availability of reliable price information and other relevant
information. To the extent that,
for a period of time, qualified institutional buyers cease
purchasing restricted securities
pursuant to Rule 144A, the Fund's investing in such securities
may
have the effect of
increasing the level of illiquidity in its portfolio during
such period.
Risk Factors--Lower Rated Bonds. The Fund is permitted to
invest in securities rated
below Baa by Moody's and below BBB by S&P and Fitch. Such
bonds,
though higher yielding, are characterized by risk. See
"Description of the Fund--Risk Factors--Lower
Rated Bonds" in the Prospectus for a discussion of certain risks
and "Appendix" 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. In this
evaluation, the Manager will take into consideration, among
other
things, the issuer's
financial resources, its sensitivity to economic conditions and
trends, the quality of the
issuer's management and regulatory matters. It also is possible
that a rating agency might
not timely change the rating on a particular issue to reflect
subsequent events. As stated
above, once the rating of a bond in the Fund's portfolio has
been
changed, the Manager will
consider all circumstances deemed relevant in determining
whether
the Fund should continue
to hold the bond.
Investors should be aware that the market values of many of
these bonds tend to be
more sensitive to economic conditions than are higher rated
securities. These bonds
generally are considered by Moody's, S&P and Fitch to be
predominantly speculative with
respect to capacity to pay interest and repay principal in
accordance with the terms of the
obligation and generally will involve more credit risk than
securities in the higher rating
categories.
Because there is no established retail secondary market for
many of these securities,
the Fund anticipates that such securities could be sold only to
a
limited number of dealers or
institutional investors. To the extent a secondary trading
market
for these bonds does exist,
it generally is not as liquid as the secondary market for higher
rated securities. The lack of a
liquid secondary market may have an adverse impact on market
price
and yield and the
Fund's ability to dispose of particular issues when necessary to
meet the Fund's liquidity
needs or in response to a specific economic event such as a
deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary
market for certain securities
also may make it more difficult for the Fund to obtain accurate
market quotations for
purposes of valuing the Fund's portfolio and calculating its net
asset value. Adverse
publicity and investor perceptions, whether or not based on
fundamental analysis, may
decrease the values and liquidity of these securities. In such
cases, judgment may play a
greater role in valuation because less reliable objective data
may
be available.
These bonds may be particularly susceptible to economic
downturns. It is likely that
any economic recession could disrupt severely the market for
such
securities and may have
an adverse impact on the value of such securities. In addition,
it is likely that any such
economic downturn could adversely affect the ability of the
issuers of such securities to repay
principal and pay interest thereon and increase the incidence of
default for such securities.
The Fund may acquire these bonds during an initial
offering.
Such securities may
involve special risks because they are new issues. The Fund has
no arrangement with any
persons concerning the acquisition of such securities, and the
Manager will review carefully
the credit and other characteristics pertinent to such new
issues.
Lower rated zero coupon securities and pay-in-kind bonds,
in
which the Fund may
invest up to 5% of its net assets, involve special
considerations.
The credit risk factors
pertaining to lower rated securities also apply to lower rated
zero coupon bonds and
pay-in-kind bonds. Such zero coupon, pay-in-kind or delayed
interest bonds carry an
additional risk in that, unlike bonds which pay interest
throughout the period to maturity, the
Fund will realize no cash until the cash payment date unless a
portion of such securities are
sold and, if the issuer defaults, the Fund may obtain no return
at
all on its investment. See
"Dividends, Distributions and Taxes."
Investment Restrictions. The Fund has adopted investment
restrictions numbered 1 through 10 as fundamental policies.
Fundamental policies cannot be changed without
approval by the holders of a majority (as defined in the 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 Trustees at any time. The
Fund may not:
1. Purchase securities other than Municipal Obligations
and
Taxable Investments as those terms are defined above and in the
Prospectus and those arising out of transactions
in futures and options.
2. Borrow money, except to the extent permitted under the
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, 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 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
Trustees and officers of the Fund, together with
information
as to their principal business occupations during at least the
last five years, are shown below. Each Trustee who is deemed to
be an "interested person" of the Fund (as defined in the Act) is
indicated by an asterisk.
Trustees of the Fund
CLIFFORD L. ALEXANDER, JR., Trustee. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to
1981, Mr. Alexander served as Secretary of the Army and Chairman
of the Board of the Panama Canal Company, and from 1975 to 1977,
he was a member of the Washington, D.C. law firm of Verner,
Liipfert, Bernhard, McPherson and Alexander. He is a
director of American Home Products Corporation, The Dun &
Bradstreet Corporation, MCI Communications Corporation, Mutual
of
America Life Insurance Company and Equitable Resources, Inc., a
producer and distributor of natural gas and crude petroleum.
Mr. Alexander is also a Board member of 17 other funds in the
Dreyfus Family of Funds. He is 61 years old and his address is
400 C Street, N.E., Washington, D.C. 20002.
PEGGY C. DAVIS, Trustee. Shad Professor of Law, New York
University School of Law. Professor Davis has been a member of
the
New York University law faculty since 1983. Prior to that time,
she served for three years as a judge in the courts of New
York State; was engaged for eight years in the practice of
law, working in both corporate and non-profit sectors; and
served
for two years as a criminal justice administrator in the
government of the City of New York. She writes and teaches in
the fields of evidence, constitutional theory, family law,
social sciences and the law, legal process and professional
methodology and training. Professor Davis is also a Board
member of 15 other funds in the Dreyfus Family of Funds. She is
52 years old and her address is c/o New York University School
of
Law, 249 Sullivan Street, New York, New York 10011.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January
1995,
Chairman of the Board of various funds in the Dreyfus Family of
Funds. For more than five years prior thereto, he was
President,
a director and, until August 1994, Chief Operating Officer of
the
Manager and Executive Vice President and a director of Dreyfus
Service Corporation, a wholly-owned subsidiary of the
Manager, and, until August 24, 1994, the Fund's distributor.
From
August 1994 to December 31, 1994, he was a director of Mellon
Bank
Corporation. He is Chairman of the Board of Noel Group,
Inc., a venture capital company; a trustee of Bucknell
University; and a director of the Muscular Dystrophy
Association,
HealthPlan Services Corporation, Belding Heminway, Inc., a
manufacturer and marketer of industrial threads, specialty
yarns,
home furnishings and fabrics, Curtis Industries, Inc., a
national distributor of security products, chemicals and
automotive and other hardware, Simmons Outdoor Corporation and
Staffing Resources, Inc. Mr. DiMartino is also a Board member
of
93 other funds in the Dreyfus Family of Funds. He is 51
years old and his address is 200 Park Avenue, New York, New York
10166.
ERNEST KAFKA, Trustee. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents.
Since 1981, he has served as an Instructor at the New York
Psychoanalytic Institute and, prior thereto, held other teaching
positions. He is Associate Clinical Professor of Psychiatry
at Cornell Medical School. For more than the past five years,
Dr.
Kafka has held numerous administrative positions, including
President of The New York Psychoanalytic Society, and has
published many articles on subjects in the field of
psychoanalysis.
Dr. Kafka is also a Board member of 15 other funds in the
Dreyfus Family of Funds. He is 62 years old and his address is
23
East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, Trustee. Chairman and Chief Executive Officer
of
SBK Associates, which provides research and consulting services
to
financial institutions. Dr. Klaman was President of the
National
Association of Mutual Savings Banks until November 1983,
President
of the National Council of Savings Institutions until June 1985,
Vice Chairman of Golembe Associates and BEI Golembe, Inc. until
1989 and Chairman Emeritus of BEI Golembe, Inc. until November,
1992. He also served as an Economist to the Board of Governors
of
the Federal Reserve System and on several Presidential
Commissions and has held numerous consulting and advisory
positions in the fields of economics and housing finance.
Dr. Klaman is also a Board member of 15 other funds in the
Dreyfus Family of Funds. He is 75 years old and his address
is 431-B Dedham Street, The Gables, Newton Center,
Massachusetts 02159.
NATHAN LEVENTHAL, Trustee. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for
Operations of New York City from September 1979 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.
Mr. Leventhal is also a Board member of 15 other funds in the
Dreyfus Family of Funds. He is 52 years old and his address is
70
Lincoln Center Plaza, New York, New York 10023-6583.
For so long as the Fund's plans described in the section
captioned "Distribution Plan
and Shareholder Services Plan" remain in effect, the Trustees of
the Fund who are not
"interested persons" of the Fund, as defined in the Act, will be
selected and nominated by
the Trustees who are not "interested persons" of the Fund.
Each Trustee, except for Mr. DiMartino, was elected at a
meeting of shareholders
held on August 3, 1994. There ordinarily will be no further
meetings of shareholders for the
purpose of electing Trustees unless and until such time as less
than a majority of the Trustees
holding office have been elected by shareholders, at which time
the Trustees then in office
will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of
record of not less than two-thirds of the outstanding shares of
the Fund may remove a
Trustee through a declaration in writing or by vote cast in
person
or by proxy at a meeting
called for that purpose. The Trustees are required to call a
meeting of shareholders for the
purpose of voting upon the question of removal of any such
Trustee
when requested in
writing to do so by the shareholders of record of not less than
10% of the Fund's outstanding
shares.
The Fund typically pays its Trustees an annual retainer and
a per meeting fee and
reimburses them for their expenses. The Chairman of the Board
receives an additional 25%
of such compensation. The aggregate amount of compensation
paid
to each Trustee by the
Fund for the fiscal year ended April 30, 1995, and by all other
funds in the Dreyfus Family
of Funds for which such person is a Board member for the year
ended December 31, 1994,
were as follows:
<TABLE>
<CAPTION>
(5)
(3) Total
(2) Pension or (4) Compensation from
(1) Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation Accrued as Part of Benefits Upon Complex Paid to
Member from Fund* Fund's Expenses Retirement Board Member
- ------------- ------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
Clifford L. Alexander, Jr. $3,750 none none $73,210
Peggy C. Davis $3,750 none none $61,751
Joseph S. DiMartino $4,375** none none $445,000***
Ernest Kafka $3,750 none none $61,001
Saul B. Klaman $3,750 none none $61,751
Nathan Leventhal $3,750 none none $61,751
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $175 for all Trustees as a group.
** Estimated amount for the current fiscal year ending April 30, 1996.
***Estimated amount for the year ending December 31, 1995.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief
Operating Officer of the Distributor and an officer of other
investment companies advised or administered by the Manager.
From
December 1991 to July 1994, she was President and Chief
Compliance Officer of Funds Distributor, Inc., the ultimate
parent company of which is Boston Institutional Group, Inc.
Prior
to December 1991, she served as Vice President and Controller,
and
later as Senior Vice President, of The Boston Company Advisors.
She is 37 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice
President and General Counsel of the Distributor and an officer
of
other investment companies advised or administered by the
Manager.
From February 1992 to July 1994, he served as Counsel for The
Boston Company Advisors, Inc. From August 1990 to February
1992,
he was employed as an Associate at Ropes & Gray, and prior to
August 1990, he was employed as an Associate at Sidley & Austin.
He is 30 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer.
Senior
Vice President of the Distributor and an officer of other
investment companies advised or administered by the Manager.
From 1988 to August 1994, he was Manager of the High Performance
Fabric Division of Springs Industries Inc. He is 33 years
old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary.
Associate General Counsel of the Distributor and an officer of
other investment companies advised or administered by the
Manager.
From September 1992 to August 1994, he was an attorney with the
Board of Governors of the Federal Reserve System. He is 30
years
old.
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 32 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 59 years old.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President
of
the Distributor and an officer of other investment companies
advised or administered by the Manager. From January 1992 to
July
1994, he was a Senior Legal Product Manager, and, from
January 1990 to January 1992, a mutual fund accountant, for
The Boston Company Advisors, Inc. He is 28 years old.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President
of
the Distributor and an officer of other investment companies
advised or administered by the Manager. From March 1992 to July
1994, she was a Compliance Officer for The Managers Funds, a
registered investment company. From March 1990 until
September 1991, she was Development Director of The Rockland
Center for the Arts. She is 50 years old.
The address of each officer of the Fund is 200 Park Avenue,
New York, New York 10166.
Trustees and officers of the Fund, as a group, owned less
than 1% of the Fund's shares of beneficial interest outstanding
on
June 19, 1995.
The following entity held of record or beneficially 5% or
more of the Fund's Class B shares outstanding as of June 19,
1995:
Merrill Lynch/FDS, 4800 Deer Lake Drive East, Jacksonville,
Florida 32246-6484.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the
section in the Fund's Prospectus entitled "Management of the
Fund."
The Manager provides management services pursuant to the
Management Agreement
(the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval
by (i) the Fund's Board of Trustees or (ii) vote of a majority
(as
defined in the Act) of the
outstanding voting securities of the Fund, provided that in
either
event the continuance also is
approved by a majority of Trustees who are not "interested
persons" (as defined in the Act)
of the Fund or the Manager, by vote cast in person at a meeting
called for the purpose of
voting on such approval. The Agreement was approved by
shareholders on August 3, 1994
and was last approved by the Fund's Board of Trustees, including
a majority of the Trustees
who are not "interested persons" of any party to the Agreement,
at
a meeting held on July
20, 1994. The Agreement is terminable without penalty, on 60
days' notice, by the Board of
Trustees or by vote of the holders of a majority of the Fund's
shares, or, on not less than 90
days' notice, by the Manager. The Agreement will terminate
automatically in the event of
its assignment (as defined in the Act).
The following persons are officers and/or directors of the
Manager: Howard Stein,
Chairman of the Board and Chief Executive Officer; W. Keith
Smith,
Vice Chairman of the
Board; Robert E. Riley, 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; Paul H. Snyder, Vice President-Finance and Chief
Financial Officer; Daniel
C. Maclean, Vice President and General Counsel; Barbara E.
Casey,
Vice President-Dreyfus
Retirement Services; Diane M. Coffey, Vice President-Corporate
Communications; Elie M.
Genadry, Vice President-Institutional Sales; Henry D. Gottmann,
Vice President-Retail Sales
and Service; William F. Glavin, Jr., Vice President-Product
Management; Andrew S.
Wasser, Vice President-Information Services; Mark N. Jacobs,
Vice
President-Legal and
Secretary; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Katherine C.
Wickham, Vice President-Human Resources; Maurice Bendrihem,
Controller; Elvira
Oslapas, Assistant Secretary; and Mandell L. Berman, Frank V.
Cahouet, Alvin E.
Friedman, Lawrence M. Greene, Julian M. Smerling and David B.
Truman, directors.
The Manager manages the Fund's portfolio of investments in
accordance with the
stated policies of the Fund, subject to the approval of the
Fund's
Board of Trustees. The
Manager is responsible for investment decisions, and provides
the
Fund with portfolio
managers who are authorized by the Board of Trustees to execute
purchases and sales of
securities. The Fund's portfolio managers are Joseph P. Darcy,
A.
Paul Disdier, Karen M.
Hand, Stephen C. Kris, Richard J. Moynihan, Jill C. Shaffro, L.
Lawrence Troutman,
Samuel J. Weinstock and Monica S. Wieboldt. The Manager also
maintains a research
department with a professional staff of portfolio managers and
securities analysts who
provide research services for the Fund as well as for other
funds
advised by the Manager.
All purchases and sales are reported for the Board of Trustees'
review at the meeting
subsequent to such transactions.
All expenses incurred in the operation of the Fund are
borne
by the Fund, except to
the extent specifically assumed by the Manager. The expenses
borne by the Fund include,
without limitation, 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, 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 shareholders'
reports
and meetings, and any
extraordinary expenses. Class A, Class B and Class C shares are
subject to an annual
service fee for ongoing personal services relating to
shareholder
accounts and services related
to the maintenance of shareholder accounts. In addition, each
of
Class B and Class C shares
are subject to an annual distribution fee for distributing the
relevant Class of shares pursuant
to a distribution plan adopted in accordance with Rule 12b-1
under
the Act. See
"Distribution Plan and Shareholder Services Plan."
The Manager maintains office facilities on behalf of the
Fund, and furnishes statistical
and research data, clerical help, accounting, data processing,
bookkeeping and internal
auditing and certain other required services to the Fund. The
Manager also may make such
advertising and promotional expenditures, using its own
resources,
as it from time to time
deems appropriate.
As compensation for the Manager's services 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. The management fees payable
for
the fiscal years ended
April 30, 1993, 1994 and 1995 amounted to $2,525,162, $3,526,429
and $3,361,698,
respectively, which fees were reduced by $904,536, $399,146 and
$
0, respectively, pursuant
to undertakings in effect, resulting in net fees paid to the
Manager of $1,620,626 in fiscal
1993, $3,127,283 in fiscal 1994 and $3,361,698 in fiscal 1995.
The Manager has agreed that if in any fiscal year the
aggregate expenses of the Fund,
exclusive of taxes, brokerage, interest on borrowings and (with
the prior written consent of
the necessary state securities commissions) extraordinary
expenses, but including the
management fee, exceed 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 FUND SHARES
The following information supplements and should be read in
conjunction with the
section in the Fund's Prospectus entitled "How to Buy Fund
Shares."
The Distributor. The Distributor serves as the Fund's
distributor pursuant to an
agreement dated August 24, 1994. The Distributor also acts as
distributor for the other
funds in the Premier Family of Funds, for the funds in the
Dreyfus
Family of Funds and for
certain other investment companies.
Using Federal Funds. The Shareholder Services Group, Inc.,
the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund
may
attempt to notify the
investor upon receipt of checks drawn on banks that are not
members of the Federal Reserve
System as to the possible delay in conversion into Federal Funds
and may attempt to arrange
for a better means of transmitting the money. If the investor
is
a customer of a securities
dealer ("Selected Dealer") and his order to purchase Fund shares
is paid for other than in
Federal Funds, the Selected Dealer, acting on behalf of its
customer, will complete the
conversion into, or itself advance, Federal Funds generally on
the
business day following
receipt of the customer'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.
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.
Offering Prices. Based upon the Fund's net asset value at
the close of business on
April 30, 1995, the maximum offering price of the Fund's Class A
and Class B shares would
have been as follows. Class C shares were not offered as of
April
30, 1995.
Class A Shares:
NET ASSET VALUE per share. . . . . . . . . $13.86
Sales load for individual sales
of shares aggregating less
than $50,000 - 4.5 percent of
offering price (approximately
4.7 percent of net asset value per share) $ .65
Offering Price to Public . . . . . . . . . $14.51
Class B Shares:
NET ASSET VALUE, redemption price and offering
price to public* . . . . . . . . . . . $13.86
______________________________
* Class B shares are subject to a contingent deferred sales
charge on certain redemptions,
see "How to Redeem Fund Shares" in the Fund's Prospectus.
TeleTransfer Privilege. TeleTransfer purchase orders may
be
made between the
hours of 8:00 A.M. and 4:00 P.M., New York time, on any business
day that the Transfer
Agent and the New York Stock Exchange are open. Such purchases
will be credited to the
shareholder's Fund account on the next bank business day. To
qualify to use the
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 Fund
Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account
with
a minimum
investment of $100 without filing a new Account Application
during
the calendar year the
account is closed or during the following calendar year,
provided
the information on the old
Account Application is still applicable.
DISTRIBUTION PLAN 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 A, Class B and Class C shares are subject to a
Shareholder Services Plan and
Class B and Class C shares only are subject to a Distribution
Plan.
Distribution Plan. Rule 12b-1 (the "Rule"), adopted by the
Securities and Exchange
Commission under the Act, provides, among other things, that an
investment company may
bear expenses of distributing its shares only pursuant to a plan
adopted in accordance with
the Rule. The Fund's Board of Trustees has adopted such a plan
(the "Distribution Plan")
with respect to Class B and Class C shares of the Fund pursuant
to
which the Fund pays the
Distributor for distributing the relevant Class of shares. The
Fund's Board of Trustees
believes that there is a reasonable likelihood that the
Distribution Plan will benefit the Fund
and holders of the relevant Class of shares. In some states,
certain institutions effecting
transactions in Fund shares may be required to register as
dealers
pursuant to state law.
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 Trustees for their
review. In addition, the Distribution Plan provides that it may
not be amended to increase
materially the costs which holders of the relevant Class of
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
Board
of Trustees, and by the
Trustees who are not "interested persons" (as defined in the
Act)
of the Fund or the Manager
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 Trustees cast in person at
a meeting called for the purpose of voting on the Distribution
Plan. The Distribution Plan
was so approved on April 12, 1995. As to the relevant Class of
shares, the Distribution Plan
may be terminated at any time by vote of a majority of the
Trustees who are not "interested
persons" and have no direct or indirect financial interest in
the
operation of the Distribution
Plan or by vote of the holders of a majority of such Class.
For the period from May 1, 1994 through August 23, 1994,
the
Fund paid Dreyfus
Service Corporation, as former distributor, $155,187 with
respect
to Class B under the
Distribution Plan. For the period from August 24, 1994 through
April 30, 1995, the Fund
paid the Distributor $334,342 with respect to Class B under the
Distribution Plan. There
were no payments made under the Distribution Plan with respect
to
Class C shares during the
fiscal year ended April 30, 1995, as Class C shares had not yet
been offered.
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. Under the
Shareholder Services Plan, the
Distributor may make payments to certain securities dealers,
financial institutions 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 Trustees for
their review. In addition, the Shareholder Services Plan
provides
that it may not be amended
without approval of the Board of Trustees, and by the Trustees
who
are not "interested
persons" (as defined in the Act) of the Fund and have no direct
or
indirect financial interest
in the operation of the Shareholder Services Plan, 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 cast in person at a meeting
called
for the purpose of voting
on the Shareholder Services Plan. The Shareholder Services Plan
was so approved on
April 12, 1995. As to each Class of shares, the Shareholder
Services Plan is terminable at
any time by vote of a majority of the Trustees 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 period from May 1, 1994 through August 23, 1994,
the
Fund paid Dreyfus
Service Corporation, as former distributor, $425,801 with
respect
to Class A, and $77,593
with respect to Class B, under the Shareholder Services Plan.
For
the period from August
24, 1994 through April 30, 1995, the Fund paid the Distributor
$857,479 with respect to
Class A, and $167,171 with respect to Class B, under the
Shareholder Services Plan. There
were no payments made under the Shareholder Services Plan with
respect to Class C shares
during the fiscal year ended April 30, 1995, as Class C shares
had
not yet been offered.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the
section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Check Redemption Privilege - 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 Fund's account.
Checks
will be sent only to
the registered owner(s) of the account and only to the address
of
record. The Account
Application, 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 transacti
on will be effected through the Automated Clearing House ("ACH")
system unless more prompt transmittal specifically
is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business
days after receipt of the redemption request. See
"Purchase of Fund Shares--TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates
representing Fund shares to be
redeemed must be submitted with the redemption request. Written
redemption requests must
be signed by each shareholder, including each 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 Board of Trustees reserves the right to make
payments
in whole or in part in
readily 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 Redemption. 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."
Exchange Privilege. 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 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 contingent deferred
sales charge ("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 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 Exchange 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. There is a service charge of $.50
for
each withdrawal check.
Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the
Transfer Agent. Shares for which certificates have been issued
may not be redeemed
through the Automatic Withdrawal Plan. 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
on
the payment date
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 Fund Shares."
Valuation of Portfolio Securities. The Fund's investments
are valued each business
day by an independent pricing service (the "Service") approved
by
the Board of Trustees.
When, in the judgment of the Service, quoted bid prices for
investments are readily available
and are representative of the bid side of the market, these
investments are valued at the mean
between the quoted bid prices (as obtained by the Service from
dealers in such securities) and
asked prices (as calculated by the Service based upon its
evaluation of the market for such
securities). Other investments (which constitute a majority of
the portfolio securities) are
carried at fair value as determined by the Service, based on
methods which include
consideration of: yields or prices of municipal bonds of
comparable quality, coupon,
maturity and type; indications as to values from dealers; and
general market conditions. The
Service may employ electronic data processing techniques and/or
a
matrix system to
determine valuations. The Service's procedures are reviewed by
the Fund's officers under
the general supervision of the Board of Trustees. 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 the 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 April 30, 1995 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.
Accordingly, the Fund may be
restricted in the selling of securities held for less than three
months, and in the utilization of
certain of the investment techniques described in the Prospectus
under "Description of the
Fund--Investment Techniques." The Code, however, allows the
Fund
to net certain
offsetting positions making it easier for the Fund to satisfy
the
30% test. 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 "Dividends, Distributions and Taxes" 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.
Exempt-interest dividends received with respect to Fund shares
may
be partially exempt from
certain state or local taxes for the residents of such state or
locality.
Ordinarily, gains and losses realized from portfolio
transactions will be treated as
capital gain or loss. However, all or a portion of any gains
realized from the sale or other
disposition of certain market discount bonds will be treated as
ordinary income under Section
1276 of the Code. In addition, all or a portion of the gain
realized from engaging in
"conversion transactions" may be treated as ordinary income
under
Section 1258 of the
Code. "Conversion transactions" are defined to include certain
forward, futures, option and
"straddle" transactions 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, 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
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
April 30, 1994 and 1995
was 22.15% and 38.60%, 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."
Class C shares had not been offered as of the date of the
financials and, therefore, no
performance data is provided for Class C.
Current yield for the 30-day period ended April 30, 1995
for
Class A was 5.61% and
for Class B was 5.36%. 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) 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 1995 Federal tax rate of 39.6%, the tax
equivalent yield for the 30-day
period ended April 30, 1995 for Class A was 9.29% and for Class
B
was 8.87%. 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 that is not tax exempt.
The tax equivalent yield noted above represents the
application of the highest Federal
marginal personal income tax rate presently in effect. 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) taxes, including applicable
surcharges. In addition, there may be
pending legislation which could affect such stated tax rate 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 8.427 year
periods ended April 30,
1995 for Class A was 1.92%, 8.02% and 6.84%, respectively. The
average annual total
return for the 1 and 2.290 year periods ended April 30, 1995 for
Class B was 3.15% and
4.53%, respectively. 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 the period November 26, 1986 through
April 30, 1995 for Class
A was 74.67%. Based on net asset value per share, the total
return for Class A was 82.91%
for this period. The total return for the period January 15,
1993
(commencement of initial
offering of Class B shares) through April 30, 1995 for Class B
was
10.68%. Without giving
effect to the applicable CDSC, the total return for Class B was
12.65% 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 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.
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.
On August 3, 1994, the Fund's shareholders approved a
proposal to change, among
other things, certain of the Fund's fundamental policies and
investment restrictions to
(i) increase the amount the Fund may borrow; and (ii) increase
the
amount of the Fund's
assets it may pledge to secure such borrowing and make such
policy
non-fundamental.
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.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New
York 10286, is the
Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671,
is the Fund's transfer
and dividend disbursing agent. Neither The Bank of New York nor
The Shareholder
Services Group, Inc. has any part in determining the investment
policies of the Fund or
which securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New
York 10004-2696,
as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due
authorization and valid issuance of the shares of beneficial
interest being sold pursuant to the
Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019,
independent auditors, has been selected as auditors of the Fund.
<PAGE>
APPENDIX
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 an 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
payment 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 rating 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 (+) 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.
B
Issues rated B are regarded as having only an adequate
capacity for timely payment;
such capacity may be damaged by changing conditions or
short-term adversities.
C
This rating is assigned to short-term debt obligations with
a doubtful capacity for payment.
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 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 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 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.
Demand Bond or Notes Ratings
Certain demand securities empower the holder at his option
to
require the issuer,
usually through a remarketing agent, to repurchase the security
upon notice at par with
accrued interest. This is also referred to as a put option.
The
ratings of the demand provision
may be changed or withdrawn at any time if, in Fitch's judgment,
changing circumstances
warrant such action.
Fitch demand provision ratings carry the same symbols and
related definitions as its
short-term ratings.
<PAGE>
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.7% AMOUNT VALUE
------------- --------------
<S> <C> <C>
ALABAMA-1.0%
Courtland Industrial Development Board, SWDR
(Champion International Corp. Project) 6.375%, 3/1/2029................. $ 6,000,000 $ 5,739,540
ARIZONA-.5%
Tucson Airport Authority, Special Facility Revenue
(Lockheed Aermod Center, Inc.) 8.70%, 9/1/2019.......................... 2,500,000 2,815,000
COLORADO-9.8%
Dawson Ridge, Metropolitan District Number 1, Refunding:
Zero Coupon, 10/1/2017.................................................. 9,930,000 2,145,674
Zero Coupon, 10/1/2022.................................................. 47,535,000 7,298,999
Denver City and County, Airport Revenue:
7.75%, 11/15/2021....................................................... 8,000,000 8,370,160
7.25%, 11/15/2023....................................................... 10,000,000 10,026,700
7.50%, 11/15/2023....................................................... 11,775,000 12,113,178
7%, 11/15/2025.......................................................... 18,225,000 17,820,041
CONNECTICUT-2.0%
Connecticut Development Authority, First Mortgage Gross Revenue
(Elim Park Baptist Home, Inc. Project) 9%, 12/1/2020.................... 3,000,000 3,157,410
Connecticut Housing Finance Authority (Housing Mortgage Finance Program)
6.70%, 11/15/2022....................................................... 8,500,000 8,710,120
FLORIDA-2.3%
Palm Beach County, Solid Waste IDR:
(Okeelanta Power LP Project) 6.85%, 2/15/2021........................... 6,750,000 6,420,802
(Osceola Power LP) 6.95%, 1/1/2022...................................... 7,500,000 7,192,425
GEORGIA-2.1%
Atlanta, Airport Facilities Revenue, Refunding 7.25%, 1/1/2017.............. 5,000,000 5,345,300
Georgia Municipal Electric Authority, Power Revenue, Refunding
5.50%, 1/1/2020 (Insured; FGIC) (a)..................................... 4,250,000 3,936,648
Hogansville, Combined Public Utility System Revenue, Refunding
(Asset Guaranty) 6%, 10/1/2023.......................................... 3,475,000 3,255,102
ILLINOIS-12.4%
Chicago, Skyway Toll Bridge Revenue, Refunding 6.75%, 1/1/2017.............. 5,425,000 5,387,676
Chicago O'Hare International Airport, Special Facility Revenue:
(American Airlines, Inc. Project) 7.875%, 11/1/2025..................... 6,000,000 6,258,120
(United Airlines, Inc.):
8.20%, 5/1/2018....................................................... 2,165,000 2,316,290
8.50%, 5/1/2018....................................................... 3,500,000 3,751,300
East Chicago, PCR, Refunding (Inland Steel Co. Project Number 10) 6.80%, 6/1/2013 9,000,000 8,682,210
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facility)
8.75%, 3/1/2010....................................................... 6,990,000 7,362,008
8.50%, 9/1/2010....................................................... 4,535,000 4,737,352
8.25%, 8/1/2012....................................................... 4,280,000 4,373,389
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
ILLINOIS (CONTINUED)
Illinois Health Facilities Authority, Revenue:
(Beverly Farm Foundation) 9.125%, 12/15/2015............................ $ 2,000,000 $ 2,144,300
(Delnor Community Hospital Project) 8%, 5/15/2019 (Prerefunded 5/15/1999) (b) 5,500,000 6,209,280
Robbins, RRR (Robbins Resource Recovery Partners):
9.25%, 10/15/2014....................................................... 10,000,000 10,801,100
9.25%, 10/15/2016....................................................... 10,000,000 10,801,100
INDIANA-1.3%
Indianapolis Airport Authority, Special Facilities Revenue
(Federal Express Corp. Project) 7.10%, 1/15/2017........................ 7,500,000 7,679,325
KENTUCKY-.6%
Perry County, SWDR (TJ International Project) 7%, 6/1/2024.................. 3,500,000 3,435,740
LOUISIANA-4.4%
Lake Charles Non-Profit Housing Development Corp., First Mortgage Revenue,
Refunding (Chateau Project) 7.875%, 2/15/2025 (Insured; FHA)............ 1,000,000 1,004,280
Louisiana Housing Finance Agency, MFHR, Refunding
(LaBelle Projects-A) 9.75%, 10/1/2020 (c)............................... 4,300,000 4,291,314
Louisiana Public Facilities Authority, Revenue (Student Loan) 7%, 9/1/2006.. 3,000,000 3,111,930
Parish of West Feliciana, PCR:
(Gulf States Utilities - II) 7.70%, 12/1/2014........................... 10,000,000 10,390,100
(Gulf States Utilities - III) 7.70%, 12/1/2014.......................... 6,500,000 6,753,565
MARYLAND-.4%
Maryland Community Development Administration, Department of Housing and
Community Development (Single Family Program) 7.70%, 4/1/2015........... 2,075,000 2,198,732
MASSACHUSETTS-1.1%
Massachusetts Housing Finance Agency, SFHR 7.95%, 6/1/2023.................. 2,000,000 2,125,860
New England Education Loan Marketing Corp., Student Loan Revenue
6.90%, 11/1/2009........................................................ 4,000,000 4,118,440
MICHIGAN-2.7%
Greater Detroit Resources Recovery Authority, Revenue:
9.25%, Series A, 12/13/2008............................................. 8,440,000 8,876,686
9.25%, Series D, 12/13/2008............................................. 250,000 262,935
9.25%, Series E, 12/13/2008............................................. 1,000,000 1,051,740
9.25%, Series H, 12/13/2008............................................. 2,045,000 2,150,808
Wayne County Building Authority 8%, 3/1/2017 (Prerefunded 3/1/2002) (b)..... 1,500,000 1,759,200
Western Townships Utilities Authority, Sewer Disposal System
(Limited Tax) 8.20%, 1/1/2018........................................... 1,500,000 1,673,445
NEBRASKA-.8%
Nebraska Higher Education Loan Program, Revenue 6.40%, 6/1/2013............. 5,000,000 4,910,400
NEVADA-2.3%
Clark County, IDR (Southwest Gas Corp.) 7.50%, 9/1/2032..................... 13,000,000 13,286,520
NEW HAMPSHIRE-.6%
New Hampshire Housing Finance Authority, Single Family Residential Mortgage
7.70%, 7/1/2029......................................................... 3,620,000 3,760,528
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
NEW JERSEY-7.2%
Camden County Pollution Control Financing Authority, Solid Waste RRR
7.50%, 12/1/2010........................................................ $ 2,000,000 $ 1,940,940
New Jersey Economic Development Authority, First Mortgage Gross Revenue
(The Evergreens) 9.25%, 10/1/2022....................................... 15,000,000 15,717,600
New Jersey Sports and Exposition Authority, Revenue, Refunding
(Monmouth Park) 8%, 1/1/2025............................................ 4,000,000 4,245,920
New Jersey Turnpike Authority, Turnpike Revenue 6.50%, 1/1/2016............. 10,000,000 10,550,100
Union County Utilities Authority, Solid Waste Revenue 7.20%, 6/15/2014...... 9,500,000 9,612,670
NEW MEXICO-.3%
New Mexico Educational Assistance Foundation, Student Loan Revenue
6.85%, 12/1/2005........................................................ 1,730,000 1,766,382
NEW YORK-17.9%
Metropolitan Transportation Authority, Service Contract, Commuter Facilities
7.50%, 7/1/2016 (Prerefunded 7/1/2000) (b).............................. 3,000,000 3,397,650
New York City:
8%, 6/1/2000............................................................ 2,200,000 2,411,574
7.50%, 2/1/2001......................................................... 5,000,000 5,373,650
6%, 5/15/2008........................................................... 8,970,000 8,579,087
7.50%, 8/15/2008........................................................ 2,000,000 2,103,340
7.10%, 2/1/2009......................................................... 5,000,000 5,126,800
7%, 2/1/2020............................................................ 10,000,000 10,194,900
6.625%, 2/15/2025....................................................... 7,000,000 6,878,550
New York City Industrial Development Agency, Special Facilities Revenue
(American Airlines, Inc. Project) 8%, 7/1/2020.......................... 3,250,000 3,414,450
New York City Municipal Water Finance Authority, Water and Sewer Systems
Revenue:
7%, 6/15/2001........................................................... 1,735,000 1,942,592
7.375%, 6/15/2009 (Prerefunded 6/15/1999) (b)........................... 4,000,000 4,430,760
7%, 6/15/2015 (Prerefunded 6/15/2001) (b)............................... 755,000 840,247
New York State Dormitory Authority, Revenue:
City University System:
5.75%, 7/1/2018....................................................... 2,000,000 1,830,340
7.625%, 7/1/2020 (Prerefunded 7/1/2000) (b)........................... 4,000,000 4,558,720
State University Educational Facilities 7%, 5/15/2018 (Prerefunded 5/15/2000) (b) 3,295,000 3,651,025
New York State Energy Research and Development Authority,
Electric Facilities Revenue:
(Consolidated Edison Co. of New York, Inc.):
7.50%, 7/1/2025................................................... 3,000,000 3,187,080
7.50%, 1/1/2026................................................... 2,000,000 2,135,640
(Long Island Lighting Co.):
7.15%, 9/1/2019................................................... 3,650,000 3,535,208
7.15%, 6/1/2020................................................... 4,000,000 3,873,000
7.15%, 2/1/2022................................................... 7,500,000 7,256,250
New York State Housing Finance Agency, Revenue:
(Refunding - Health Facilities - New York City) 8%, 11/1/2008........... 5,000,000 5,537,850
Service Contract Obligation 7.30%, 3/15/2021 (Prerefunded 9/15/2001) (b) 5,000,000 5,706,000
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
NEW YORK (CONTINUED)
New York State Local Government Assistance Corp.
7%, 4/1/2016 (Prerefunded 4/1/2001) (b)................................. $ 5,500,000 $ 6,136,845
New York State Medical Care Facilities Finance Agency, Revenue
(Mental Health Service Facilities Improvement):
7.875%, 8/15/2020..................................................... 1,295,000 1,412,068
Refunding 7.875%, 8/15/2000........................................... 1,150,000 1,323,846
NORTH CAROLINA-.4%
Martin County Industrial Facilities and Pollution Control Financing
Authority,
SWDR (Weyerhaeuser Co.) 6.80%, 5/1/5024................................. 2,000,000 2,059,300
OHIO-.6%
Gateway Economic Development Corp., Greater Cleveland Excise Tax Revenue
7.50%, 9/1/2005......................................................... 3,500,000 3,762,430
OKLAHOMA-.8%
Tulsa Municipal Airport Trust, Revenue (American Airlines, Inc.) 7.375%, 12/1/2020 4,300,000 4,373,100
PENNSYLVANIA-7.1%
Blair County Hospital Authority, Revenue (Altoona Hospital) 7.247%, 7/1/2013 (a,d) 5,000,000 5,176,900
Lancaster County Hospital Authority, Revenue (Health Center - United Church
Homes Project) 9.125%, 10/1/2014 (Prerefunded 10/1/1999) (b)............ 1,465,000 1,725,052
Lehigh County General Purpose Authority, Revenue (Wiley House):
8.75%, 11/1/2014........................................................ 2,000,000 1,988,880
9.50%, 11/1/2016........................................................ 3,000,000 3,110,280
Montgomery County Higher Education and Health Authority, Revenue
(AHF/Montgomery, Inc. Project) 10.50%, 9/1/2020......................... 3,500,000 3,749,655
Pennsylvania Convention Center Authority, Revenue, Refunding 6.70%, 9/1/2014 8,125,000 8,168,875
Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue
(Philadelphia Funding Program) 6.80%, 6/15/2022 (Prerefunded 6/15/2002) (b) 5,500,000 6,052,640
Philadelphia, Water and Sewer Revenue 7.35%, 9/1/2004....................... 4,970,000 5,700,689
Philadelphia Hospital and Higher Education Facility Authority, HR
(Graduate Health Systems) 7.25%, 7/1/2018............................... 6,100,000 6,139,589
RHODE ISLAND-.4%
Rhode Island Depositors Economic Protection Corp.,
6.95%, 8/1/2022 (Prerefunded 8/1/2002) (b).............................. 2,000,000 2,253,560
SOUTH CAROLINA-.5%
Richland-Lexington Airport District, Airport Revenue
(Colombia Metropolitan Airport) 6.125%, 1/1/2025 (Insured; AMBAC)....... 3,000,000 2,910,000
TENNESSEE-1.6%
Maury County Industrial Development Board, PCR, Refunding
(Saturn Corp. Project) 6.50%, 9/1/2024.................................. 5,500,000 5,372,675
McMinn County Industrial Development Board, PCR
(Calhoun Newsprint Co. Project) 7.625%, 3/1/2016........................ 3,000,000 3,129,600
Tennessee Housing Development Agency, Mortgage Finance 6.90%, 7/1/2025...... 1,000,000 1,019,360
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
TEXAS-9.9%
Alliance Airport Authority, Special Facilities Revenue
(American Airlines, Inc. Project):
7%, 12/1/2011......................................................... $ 10,700,000 $ 10,678,172
7.50%, 12/1/2029...................................................... 6,000,000 6,129,540
Brazos River Authority, PCR (Texas Utilities Electric Co. Project)
7.875%, 3/1/2021........................................................ 490,000 532,483
Dallas - Fort Worth International Airport Facility Improvement Corp.,
Revenue:
(American Airlines, Inc.) 7.50%, 11/1/2025.............................. 13,000,000 13,279,500
(Delta Airlines, Inc.) 7.125%, 11/1/2026................................ 4,200,000 4,181,646
Gulf Coast Waste Disposal Authority, Revenue
(Champion International Corp.) 7.45%, 5/1/2026.......................... 7,000,000 7,369,880
Port Corpus Christi Authority, PCR, Refunding
(Hoechst Celanese Co. Project) 7.50%, 8/1/2012.......................... 4,000,000 4,311,160
Texas Housing Agency, SFMR 7.875%, 9/1/2012................................. 835,000 861,687
Texas Public Property Finance Corp., Revenue (Mental Health and Retardation
Center)
8.20%, 10/1/2012 (Prerefunded 10/1/2002) (b)............................ 8,840,000 10,450,118
UTAH-4.0%
Carbon County, SWDR, Refunding:
(East Carbon Development Corp.) 9%, 7/1/2012............................ 4,000,000 4,157,200
(Laidlaw Inc./ECDC Project) 7.50, 2/1/2010.............................. 3,300,000 3,369,201
(Sunnyside Cogeneration) 9.25%, 7/1/2018................................ 15,000,000 16,166,250
VIRGINIA-.5%
Virginia Housing Development Authority, Commonwealth Mortgage
6.20%, 7/1/2021......................................................... 3,255,000 3,077,928
WASHINGTON-.5%
Pilchuck Development Public Corp., Industrial Revenue, Refunding (Little Neck
Properties Project) 6.25%, 8/1/2010 (LOC; US Bank of Washington) (e).... 3,090,000 3,103,442
WEST VIRGINIA-2.7%
West Virginia Parkways Economic Development and Tourism Authority
5.831%, 5/16/2019 (Insured; FGIC)....................................... 8,000,000 7,671,920
West Virginia Water Development Authority, Water Development Revenue
(Loan Program II) 7.50%, 11/1/2029 (Prerefunded 11/1/1999) (b).......... 1,900,000 2,129,843
Winchester Industrial Development Authority, HR
.91%, 1/1/1996 (d)...................................................... 3,100,000 3,021,043
1.52%, 1/1/1997 (d)..................................................... 3,300,000 3,107,841
WYOMING-.5%
Sweetwater County, SWDR (FMC Corp. Project) 7%, 6/1/2024.................... 1,575,000 1,588,136
Wyoming Community Development Authority, Single Family Mortgage 8%, 6/1/2021 1,355,000 1,412,032
U.S. RELATED-.5%
Puerto Rico Commonwealth 6.25%, 7/1/2013 (Insured; MBIA) (c)................ 3,000,000 3,163,980
--------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $561,324,789)................... $585,139,443
==============
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENT-.3% AMOUNT VALUE
-------------- --------------
CONNECTICUT;
Connecticut Development Authority, Health Care Revenue, VRDN
(Corp. Independent Living Project) 4.65% (LOC; Credit Commercial De
France) (e,f)
(cost $1,600,000)..................................................... $ 1,600,000 $ 1,600,000
===============
TOTAL INVESTMENTS-100.0%
(cost $562,924,789)..................................................... $586,739,443
===============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company PCR Pollution Control Revenue
FHA Federal Housing Administration RRR Resource Recovery Revenue
HR Hospital Revenue SFHR Single Family Housing Revenue
IDR Industrial Development Revenue SFMR Single Family Mortage Revenue
LOC Letter of Credit SWDR Solid Waste Disposal Revenue
MBIA Municipal Bond Investors Assurance VRDN Variable Rate Demand Notes
Insurance Corporation
</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 14.7%
AA Aa AA 5.4
A A A 16.0
BBB Baa BBB 36.8
BB Ba BB 6.1
F-1+, F-1 MIGI, VMIG1 & P1 SP1 & A1 .3
Not Rated (h) Not Rated (h) Not Rated (h) 20.7
--------
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly 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) Purchased on delayed delivery basis.
(d) Inverse floater security - the interest rate is subject
to change periodically.
(e) Secured by letter of credit.
(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) 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 Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $562,924,789)-see statement..................................... $586,739,443
Cash.................................................................... 3,714,719
Interest receivable..................................................... 12,777,511
Receivable for shares of Beneficial Interest subscribed................. 411,409
Prepaid expenses........................................................ 43,237
--------------
603,686,319
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 271,255
Due to Distributor...................................................... 164,327
Payable for investment securities purchased............................. 7,575,713
Payable for shares of Beneficial Interest redeemed...................... 459,008
Accrued expenses........................................................ 189,066 8,659,369
------------ --------------
NET ASSETS ................................................................ $595,026,950
==============
REPRESENTED BY:
Paid-in capital......................................................... $589,802,839
Accumulated net realized capital losses and distributions in excess of
net realized gain on investments...................................... (18,590,543)
Accumulated net unrealized appreciation on investments-Note 3(b)........ 23,814,654
--------------
NET ASSETS at value......................................................... $595,026,950
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 35,756,494
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 7,170,392
===============
NET ASSET VALUE per share:
Class A Shares
($495,615,827 / 35,756,494 shares).................................... $13.86
=======
Class B Shares
($99,411,123 / 7,170,392 shares)...................................... $13.86
=======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 43,228,502
EXPENSES:
Management fee-Note 2(a).............................................. $ 3,361,698
Shareholder servicing costs-Note 2(c)................................. 1,974,564
Distribution fees (Class B shares)-Note 2(b).......................... 489,529
Custodian fees........................................................ 58,925
Professional fees..................................................... 56,881
Registration fees..................................................... 52,938
Prospectus and shareholders' reports.................................. 52,285
Trustees' fees and expenses-Note 2(d)................................. 26,203
Miscellaneous......................................................... 45,341
--------------
TOTAL EXPENSES.................................................... 6,118,364
--------------
INVESTMENT INCOME-NET............................................. 37,110,138
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments (including options transactions)-Note 3(a) $(15,841,048)
Net realized gain on financial futures-Note 3(a)........................ (1,236,099)
--------------
NET REALIZED (LOSS)................................................... (17,077,147)
Net unrealized appreciation on investments.............................. 17,971,750
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 894,603
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 38,004,741
==============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
--------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 38,105,215 $ 37,110,138
Net realized (loss) on investments...................................... (1,468,275) (17,077,147)
Net unrealized appreciation (depreciation) on investments for the year.. (29,828,947) 17,971,750
--------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 6,807,993 38,004,741
-------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (34,640,947) (31,608,832)
Class B shares........................................................ (3,464,268) (5,501,306)
From net realized gain on investments:
Class A shares........................................................ (1,935,559) ---
Class B shares........................................................ (249,175) ---
In excess of net realized gain on investments:
Class A shares........................................................ (39,975) ---
Class B shares........................................................ (5,146) ---
-------------- --------------
TOTAL DIVIDENDS................................................... (40,335,070) (37,110,138)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 104,748,904 30,432,598
Class B shares........................................................ 83,821,633 14,763,131
Dividends reinvested:
Class A shares........................................................ 22,085,600 18,464,043
Class B shares........................................................ 2,282,208 3,214,657
Cost of shares redeemed:
Class A shares........................................................ (80,102,730) (99,967,298)
Class B shares........................................................ (4,090,771) (14,454,418)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 128,744,844 (47,547,287)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 95,217,767 (46,652,684)
NET ASSETS:
Beginning of year....................................................... 546,461,867 641,679,634
-------------- --------------
End of year............................................................. $641,679,634 $595,026,950
=============== =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------- --------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- --------------------------------
1994 1995 1994 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 7,100,350 2,241,162 5,676,601 1,080,646
Shares issued for dividends reinvested. 1,502,278 1,354,808 155,727 235,883
Shares redeemed........................ (5,500,645) (7,383,625) (281,527) (1,070,587)
----------- ---------- -------------- ------------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING.... 3,101,983 (3,787,655) 5,550,801 245,942
=========== ========== ============== ============
</TABLE>
See notes to financial statements.
PREMIER 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.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
------------------------------------------------ ---------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------------ ---------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.77 $13.28 $13.75 $14.45 $13.81 $14.02 $14.45 $13.81
------- ------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............ .98 .94 .92 .89 .84 .24 .80 .77
Net realized and unrealized gain (loss)
on investments................. .51 .49 .91 (.59) 05 .43 (.59) .05
------- ------- ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.49 1.43 1.83 .30 .89 .67 .21 .82
------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.98) (.94) (.92) (.89) (.84) (.24) (.80) (.77)
Dividends from net realized gain
on investments................. -- (.02) (.21) (.05) -- -- (.05) --
Dividends in excess of net realized gain
on investments................. -- -- -- -- -- -- -- --
------- ------ ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS............ (.98) (.96) (1.13) (.94) (.84) (.24) (.85) (.77)
------- ------ ------- ------- ------- ------- ------- -------
Net asset value, end of year..... $13.28 $13.75 $14.45 $13.81 $13.86 $14.45 $13.81 $13.86
======= ====== ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(2)........... 12.13% 11.08% 13.76% 1.84% 6.72% 16.80%(3) 1.26% 6.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .22% .54% .74% . 85% .92% 1.15%(3) 1.40% 1.44%
Ratio of net investment income to
average net assets............. 7.43% 6.90% 6.43% 6.01% 6.16% 5.13%(3) 5.33% 5.62%
Decrease reflected in above expense ratios
due to undertakings by the Manager .82% .40% .20% 06% -- .10%(3) .05% --
Portfolio Turnover Rate.......... 41.30% 50.72% 30.99% 22.15% 38.60% 30.99% 22.15% 38.60%
Net Assets, end of year (000's Omitted $247,195 $388,793 $526,606 $546,036 $495,616 $19,855 $95,643 $99,411
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
See notes to financial statements.
PREMIER 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 diversified, open-end management investment
company. Dreyfus Service Corporation, until August 24, 1994,
acted as the distributor of the Fund's shares. Dreyfus Service
Corporation is a wholly-owned subsidiary of The Dreyfus
Corporation ("Manager"). Effective August 24, 1994, the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
The Fund offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the
two 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: Securitie
s
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.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund
to declare dividends daily from investment income-net. Such
dividends are paid monthly. Dividends from net realized capital
gain, if any, are normally declared and paid annually, but the
Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code.
To the extent that net realized capital gain can be offset by
capital loss carryovers, it is the policy of the Fund not to
distribute such gain.
PREMIER 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 applicabl
e
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 $7,557,000 available for Federal income tax
purposes to be applied against future net securities profits, if
any, realized subsequent to April 30, 1995. The carryover does
not include net realized securities losses from November 1,
1994 through April 30, 1995 which are treated, for Federal
income
tax purposes, as arising in fiscal 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 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 (exclusive of distribution
expenses and certain expenses as described above) exceed 2-1/2%
of
the first $30 million, 2% of the next $70 million and 1-1/2% of
the excess over $100 million of the average value of the Fund's
net assets in accordance with California "blue sky" regulations.
There was no expense reimbursement for the year ended April 30,
1995.
Dreyfus Service Corporation retained $17,249 during the year
ended April 30, 1995 from commissions earned on sales of the
Fund's Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $63,511 from contingent deferred sales charges imposed
upon redemptions of the Fund's Class B shares.
(B) On August 3, 1994, the Fund's shareholders approved a
revised Distribution Plan with respect to Class B shares (the
"Class B Distribution Plan") pursuant to Rule 12b-1 under the
Act. Pursuant to the Class B Distribution Plan, effective August
24, 1994, the Fund pays the Distributor for distributing the
Fund's Class B shares at an annual rate of .50 of 1% of
the value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Fund pay Dreyfus Service
Corporation at an annual rate of .50 of 1% of the value of the
Fund's Class B shares average daily net assets, for costs and
expenses in connection with advertising, marketing and
distributing the Fund's Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Fund's Class B shares owned by clients of the
Service Agent.
PREMIER MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the year ended April 30, 1995, $334,342 was charged
to
the Fund pursuant to the Class B Distribution Plan and $155,187
was charged to the Fund pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. The services provided may
include
personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing
reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make
payments to Service Agents in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $425,801 and $77,593
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $857,479 and $167,171 were charged to the Class
A
and Class B shares, respectively, by the Distributor pursuant to
the Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives 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:
(A) The aggregate amount of purchases and sales of investmen
t
securities, excluding option transactions, amounted to
$400,684,880 and $436,203,780, respectively, for the year ended
April 30, 1995, and consisted entirely of long-term and
short-term municipal investments.
In addition, the following table summarizes the Fund's
call/put options written transactions for the year ended April
30, 1995.
<TABLE>
<CAPTION>
OPTIONS TERMINATED
--------------------------------
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED COST GAIN
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
OPTIONS WRITTEN:
Contracts outstanding April 30, 1994.... 400 $ 296,552
Contracts written....................... 20,900 9,035,735
-------------- --------------
21,300 9,332,287
-------------- --------------
Contracts terminated:
Closed................................ 5,250 2,541,539 $1,851,372 $ 690,167
Exercised............................. 3,195 2,999,705 --- ---
Expired............................... 12,855 3,791,043 --- 3,791,043
-------------- -------------- -------------- --------------
Total contracts terminated........ 21,300 9,332,287 $1,851,372 $4,481,210
============== ============== ============== ==============
Contracts outstanding April 30, 1995.... --- ---
============== ==============
</TABLE>
As a writer of call options, the Fund receives a premium at
the outset and then bears the market risk of unfavorable changes
in the price of the financial instrument underlying the option.
Generally, the Fund would incur a gain, to the extent of the
premiums, if the price of the underlying financial instrument
decreases between the date the option is written and the date on
which the option is terminated. Generally, the Fund would
realize
a loss, if the price of the financial instrument increases
between those dates.
PREMIER MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As a writer of put options, the Fund receives a premium at
the outset and then bears the market risk of unfavorable changes
in the price of the financial instrument underlying the option.
Generally, the Fund would incur a gain, to the extent of the
premiums, if the price of the underlying financial instrument
increases between the date the option is written and the date on
which the option is terminated. Generally, the Fund would
realize
a loss, if the price of the financial instrument decreases
between those dates.
The Fund is engaged in trading financial futures contracts.
The Fund is exposed to market risk as a result of changes in the
value of the underlying financial instruments. Investments in
financial futures require the Fund to "mark to market" on a
daily
basis, which reflects the change in the market value of the
contract at the close of each day's trading. Accordingly,
variation margin payments are made or received to reflect daily
unrealized gains or losses. When the contracts are closed, the
Fund recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consist
of cash or cash equivalents, up to approximately 10% of the
contract amount. The amount of these deposits is determined by
the exchange or Board of Trade on which the contract is traded
and is subject to change. At April 30, 1995, there were no
financial futures contracts outstanding.
(B) At April 30, 1995, accumulated net unrealized
appreciation on investments was $23,814,654, consisting of
$28,183,278 gross unrealized appreciation and $4,368,624 gross
unrealized depreciation.
At April 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 MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and
liabilities of Premier Municipal Bond Fund, including the
statement of investments, as of April 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 April 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 Municipal Bond Fund
at April 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
June 1, 1995
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND
CLASS A AND CLASS B AND CLASS C SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 14, 1995
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 August 14, 1995, as it may be revised from
time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
The Dreyfus Corporation (the "Manager") serves as the
Fund's investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is
the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
- ------
Investment Objective and Management Policies. . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . B-11
Management Agreement. . . . . . . . . . . . . . . . . . . . B-15
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-18
Distribution Plan and Shareholder Services Plan . . . . . . B-21
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-24
Shareholder Services. . . . . . . . . . . . . . . . . . . . B-26
Determination of Net Asset Value. . . . . . . . . . . . . . B-28
Dividends, Distributions and Taxes. . . . . . . . . . . . . B-29
Portfolio Transactions. . . . . . . . . . . . . . . . . . . B-31
Performance Information . . . . . . . . . . . . . . . . . . B-31
Information About the Fund. . . . . . . . . . . . . . . . . B-37
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . B-37
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . B-38
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . .
B-114
Financial Statements. . . . . . . . . . . . . . . . . . . .
B-122
Report of Independent Auditors. . . . . . . . . . . . . . .
B-287
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read
in conjunction with the section in the Fund's Prospectus
entitled "Description of the Fund."
The average distribution of investments (at value) in
Municipal Obligations by ratings for the fiscal year ended
April 30, 1995, computed on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Fitch Moody's Standard &
Investors Investors Poor's
Service, Inc. Service, Inc. Corporation Arizona Colorado Connecticut Florida
("Fitch") or ("Moody's")or ("S&P") Series Series Series Series
- ------------ ------------ ---------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
AAA Aaa AAA 43.5% 37.7% 30.8% 36.4%
AA Aa AA 22.3 29.3 34.3 13.5
A A A 18.8 3.6 15.5 12.4
BBB Baa BBB 7.9 24.6 12.4 20.9
BB Ba BB 4.5 - - .9
F-1 MIG 1/P-1 SP-1/A-1 3.0 4.8 .1 3.8
Not Rated Not Rated Not Rated - - 6.9<F1> 12.1<F2>
100.0% 100.0% 100.0% 100.0%
===== ===== ====== =====
Georgia Maryland Massachusetts Michigan
Fitch or Moody's or S&P Series Series Series Series
- --------- -------- ---- ------- -------- --------- ---------
AAA Aaa AAA 39.3% 31.1% 42.9% 32.9%
AA Aa AA 42.8 35.5 10.2 25.4
A A A 11.4 19.6 33.0 17.5
BBB Baa BBB 4.9 5.3 5.9 13.7
BB Ba BB .9 - - -
F-1 MIG 1/P-1 SP-1/A-1 .7 1.3 - 2.7
Not Rated Not Rated Not Rated - 7.23<F3> 8.04<F4> 7.8<F5>
100.0% 100.0% 100.0% 100.0%
===== ===== ====== =====
- ----------------
<FN>1 Included in the Not Rated category are securities comprising 6.9% 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%) and Baa/BBB (6.6%).
<FN>2 Included in the Not Rated category are securities comprising 12.1% 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 (.5%), Baa/BBB (10.3%), Ba/BB
(.8%) and B/B (.5%).
<FN>3 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: Baa/BBB (6.7%) and B (.5%).
<FN>4 Included in the Not Rated category are securities comprising 8.0% 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 (.4%), A/A (1.1%) and Baa/BBB
(6.5%).
<FN>5 Included in the Not Rated category are securities comprising 7.8% 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 (2.9%), A/A (.9%) and Baa/BBB
(4.0%).
<PAGE>
North
Minnesota Carolina Ohio Oregon
Fitch or Moody's or S&P Series Series Series Series
- ----- ------- -------- --------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
AAA Aaa AAA 38.3% 27.6% 27.7% 48.6%
AA Aa AA 25.8 18.8 7.4 32.4
A A A 19.7 37.4 27.1 16.8
BBB Baa BBB 10.1 12.3 24.7 -
BB Ba BB - - 5.4 -
F-1 MIG 1/P-1 SP-1/A-1 1.3 2.0 1.0 2.2
Not Rated Not Rated Not Rated 4.8<F6> 1.9<F7> 6.7<F8> -
----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Pennsylvania Texas Virginia
Fitch or Moody's or S&P Series Series Series
- ----- ------- --- ----------- ------ --------
<S> <C> <C> <C> <C> <C>
AAA Aaa AAA 29.6% 37.7% 31.7%
AA Aa AA 14.7 32.8 28.0
A A A 16.5 7.9 25.3
BBB Baa BBB 22.2 13.8 11.7
BB Ba BB 1.7 - -
F-1 MIG 1/P-1 SP-1/A-1 2.2 1.6 1.6
Not Rated Not Rated Not Rated 13.1<F9> 6.2<F10> 1.7<F11>
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
- ----------------
<FN>6 Included in the Not Rated category are securities comprising 4.8% 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 (1.4%) and Baa/BBB (3.4%).
<FN>7 Included in the Not Rated category are securities comprising 1.9% 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%) and Baa/BBB (1.6%).
<FN> 8 Included under the Not Rated category are securities comprising 6.7%
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 (3.8%), Baa/BBB (2.7%)
and B (.2%).
<FN> 9 Included under the Not Rated category are securities comprising 13.1%
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 (3.7%), A/A (1.7%),
Baa/BBB (3.9%), Ba/BB (3.0%) and B (.8%).
<FN>10 Included under the Not Rated category are securities comprising 6.2%
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 (.8%) and Baa/BBB
(5.4%).
<FN>11 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%).
</TABLE>
<PAGE>
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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Upon
exercise of an option on a futures contract, the writer of the
option delivers to the holder of the option the futures
position and the accumulated balance in the writer's futures
margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a
call, or is less than, in the case of a put, the exercise
price of the option on the futures contract. The potential
loss related to the purchase of options on futures contracts
is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed
at the time of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract;
however, the value of the option does change daily and that
change would be reflected in the net asset value of the
relevant Series.
LENDING PORTFOLIO SECURITIES. To a limited extent, each
Series may lend its portfolio securities to brokers, dealers
and other financial institutions, provided it receives cash
collateral which at all times is maintained in an amount equal
to at least 100% of the current market value of the securities
loaned. By lending its portfolio securities, a Series can
increase its income through the investment of the cash
collateral. For purposes of this policy, the Fund considers
collateral consisting of U.S. Government securities or
irrevocable letters of credit issued by banks whose securities
meet the standards for investment by the Series to be the
equivalent of cash. From time to time, the Series may return
to the borrower or a third party which is unaffiliated with
the Series, 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. These conditions may be subject to future
modification.
TAXABLE INVESTMENTS. Securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities
include U.S. Treasury securities, which differ in their
interest rates, maturities and times of issuance. Some
obligations issued or guaranteed by U.S. Government agencies
and instrumentalities, for example, Government National
Mortgage Association pass-through certificates, are supported
by the full faith and credit of the U.S. Treasury; others,
such as those of the Federal Home Loan Banks, by the right of
the issuer to borrow from the U.S. Treasury; others such as
those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and
others, such as those issued by the Student Loan Marketing
Association, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may
fluctuate based on generally recognized reference rates or the
relationship of rates. While the U.S. Government provides
financial support to such U.S. Government-sponsored agencies
or instrumentalities, no assurance can be given that it will
always do so, since it is not so obligated by law. The Fund
will invest in such securities only when it is satisfied that
the credit risk with respect to the issuer is minimal.
Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates
representing the obligation of a bank to repay funds deposited
with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time 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.
Repurchase agreements involve the acquisition by the
Series of an underlying debt instrument, subject to an
obligation of the seller to repurchase, and the Series to
resell, the instrument at a fixed price, usually not more than
one week after its purchase. 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 which entered into them. 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 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 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. The Manager will monitor on an ongoing basis
the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred
by the Series in connection with the sale of the securities if
the seller does not repurchase them in accordance with the
repurchase agreement. In addition, if bankruptcy proceedings
are commenced with respect to the seller of the securities,
realization on the securities by the Series may be delayed or
limited. The Fund will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into
repurchase agreements.
SHORT-SELLING. The Fund may engage in short-selling.
Until the Fund replaces a borrowed security in connection with
a short sale, the Fund will (a) maintain daily a segregated
account, containing cash or U.S. Government securities, at
such a level that (i) the amount deposited in the account plus
the amount deposited with the broker as collateral will equal
the current value of the securities sold short and (ii) the
amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than
the market value of the security at the time it was sold
short; or (b) otherwise cover its short position.
ILLIQUID SECURITIES. If a substantial market of
qualified institutional buyers develops pursuant to Rule 144A
under the Securities Act of 1933, as amended, for certain
restricted securities held by the Fund, the Fund intends to
treat such securities as liquid securities in accordance with
procedures approved by the Fund's Board of Trustees. Because
it is not possible to predict with assurance how the market
for restricted securities pursuant to Rule 144A will develop,
the Fund's Board of Trustees has directed the Manager to
monitor carefully the Fund's investments in such securities
with particular regard to trading activity, availability of
reliable price information and other relevant information. To
the extent that, for a period of time, qualified institutional
buyers cease purchasing restricted securities pursuant to Rule
144A, the Fund's investing in such securities may have the
effect of increasing the level of illiquidity in its portfolio
during such period.
RISK FACTORS
LOWER RATED BONDS. Each Series is permitted to invest in
securities rated below Baa by Moody's and below BBB by S&P and
Fitch. Such bonds, though higher yielding, are characterized
by risk. See "Description of the Fund--Risk Factors--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. In this evaluation, the Manager will take into
consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends,
the quality of the issuer's management and regulatory matters.
It also is possible that a rating agency might not timely
change the rating on a particular issue to reflect subsequent
events. As stated above, once the rating of a bond in a
Series' portfolio has been changed, the Manager will consider
all circumstances deemed relevant in determining whether such
Series should continue to hold the bond.
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.
Lower rated zero coupon securities and pay-in-kind bonds,
in which each Series may invest up to 5% of its net assets,
involve special considerations. The credit risk factors
pertaining to lower rated securities also apply to lower rated
zero coupon bonds and pay-in-kind bonds. Such zero coupon,
pay-in-kind or delayed interest bonds carry an additional risk
in that, unlike bonds which pay interest throughout the period
to maturity, the 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 "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 Trustees 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 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 Trustees.
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
Trustees and officers of the Fund, together with
information as to their principal business occupations during
at least the last five years, are shown below. Each Trustee
who is deemed to be an "interested person" of the Fund (as
defined in the Act) is indicated by an asterisk.
TRUSTEES OF THE FUND
CLIFFORD L. ALEXANDER, JR., TRUSTEE. President of Alexander &
Associates, Inc., a management consulting firm. From
1977 to 1981, Mr. Alexander served as Secretary of the
Army and Chairman of the Board of the Panama Canal
Company, and from 1975 to 1977, he was a member of the
Washington, D.C. law firm of Verner, Liipfert, Bernhard,
McPherson and Alexander. He is a director of American
Home Products Corporation, The Dun & Bradstreet
Corporation, MCI Communications Corporation, Mutual of
America Life Insurance Company and Equitable Resources,
Inc., a producer and distributor of natural gas and crude
petroleum. Mr. Alexander is also a Board member of 17
other funds in the Dreyfus Family of Funds. He is 61
years old and his address is 400 C Street, N.E.,
Washington, D.C. 20002.
PEGGY C. DAVIS, TRUSTEE. Shad Professor of Law, New York
University School of Law. Professor Davis has been a
member of the New York University law faculty since 1983.
Prior to that time, she served for three years as a judge
in the courts of New York State; was engaged for eight
years in the practice of law, working in both corporate
and non-profit sectors; and served for two years as a
criminal justice administrator in the government of the
City of New York. She writes and teaches in the fields
of evidence, constitutional theory, family law, social
sciences and the law, legal process and professional
methodology and training. Professor Davis is also a
Board member of 15 other funds in the Dreyfus Family of
Funds. She is 52 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. 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 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 Hemingway, 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, Simmons Outdoor
Corporation and Staffing Resources, Inc. Mr. DiMartino
is also a Board member of 93 other funds in the Dreyfus
Family of Funds. He is 51 years old and his address is
200 Park Avenue, New York, New York 10166.
ERNEST KAFKA, TRUSTEE. A physician engaged in private
practice specializing in the psychoanalysis of adults and
adolescents. Since 1981, he has served as an Instructor
at the New York Psychoanalytic Institute and, prior
thereto, held other teaching positions. 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. Dr. Kafka is
also a Board member of 15 other funds in the Dreyfus
Family of Funds. He is 62 years old and his address is
23 East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, TRUSTEE. Chairman and Chief Executive Officer
of SBK Associates, which provides research and consulting
services to financial institutions. Dr. Klaman was
President of the National Association of Mutual Savings
Banks until November 1983, President of the National
Council of Savings Institutions until June 1985, Vice
Chairman of Golembe Associates and BEI Golembe, Inc.
until 1989 and Chairman Emeritus of BEI Golembe, Inc.
until November 1992. He also served as an Economist to
the Board of Governors of the Federal Reserve System and
on several Presidential Commissions, and has held
numerous consulting and advisory positions in the fields
of economics and housing finance. Dr. Klaman is also a
Board member of 15 other funds in the Dreyfus Family of
Funds. He is 75 years old and his address is 431-B
Dedham Street, The Gables, Newton Center, Massachusetts
02159.
NATHAN LEVENTHAL, TRUSTEE. President of Lincoln Center for
the Performing Arts, Inc. Mr. Leventhal was Deputy Mayor
for Operations of New York City from September 1979 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 government. Mr. Leventhal is also a Board
member of 15 other funds in the Dreyfus Family of Funds.
He is 52 years old and his address is 70 Lincoln Center
Plaza, New York, New York 10023-6583.
For so long as the Fund's plans described in the section
captioned "Distribution Plan and Shareholder Services Plan"
remain in effect, the Trustees of the Fund who are not
"interested persons" of the Fund, as defined in the Act, will
be selected and nominated by the Trustees who are not
"interested persons" of the Fund.
Ordinarily meetings of shareholders for the purpose of
electing Trustees will not be held unless and until such time
as less than a majority of the Trustees holding office have
been elected by shareholders at which time the Trustees then
in office will call a shareholders' meeting for the election
of Trustees. Under the Act, shareholders of record of not
less than two-thirds of the outstanding shares of the Fund may
remove a Trustee through a declaration in writing or by vote
cast in person or by proxy at a meeting called for that
purpose. The Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of
removal of any such Trustee when requested in writing to do so
by the shareholders of record of not less than 10% of the
Fund's outstanding shares.
The Fund typically pays its Trustees an annual retainer
and a per meeting fee and reimburses them for their expenses.
The Chairman of the Board receives an additional 25% of such
compensation. The aggregate amount paid to each Trustee by
the Fund, for the fiscal year ended April 30, 1995, and, by
all funds in the Dreyfus Family of Funds for which such person
is a Board member for the year ended December 31, 1994, were
as follows:
<TABLE>
<CAPTION>
(5)
(3) TOTAL
(2) PENSION OR (4) COMPENSATION FROM
(1) AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL 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 $4,000 none none $ 73,210
Peggy C. Davis $4,250 none none $ 61,751
Joseph S. DiMartino $4,375** none none $445,000***
Ernest Kafka $3,750 none none $ 61,001
Saul B. Klaman $4,250 none none $ 61,751
Nathan Leventhal $4,250 none none $ 61,751
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $266 for all Trustees as a group.
** Estimated amount for the current fiscal year ending April 30, 1996.
*** Estimated amount for the year ending December 31, 1995.
</TABLE>
OFFICERS OF THE FUND
MARIE E. CONNOLLY, PRESIDENT AND TREASURER. President and Chief
Operating Officer of the Distributor and an officer of other
investment companies advised or administered by the Manager.
From December 1991 to July 1994, she was President and Chief
Compliance Officer of Funds Distributor, Inc., a wholly-owned
subsidiary of The Boston Company, 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 37 years old.
JOHN E. PELLETIER, VICE PRESIDENT AND SECRETARY. Senior Vice
President and General Counsel of the Distributor and an
officer of other investment companies advised or administered
by the Manager. From February 1992 to July 1994, he served
as
Counsel for The Boston Company Advisors, Inc. From August
1990 to February 1992, he was employed as an Associate at
Ropes & Gray, and prior to August 1990, he was employed as an
Associate at Sidley & Austin. He is 30 years old.
FREDERICK C. DEY, VICE PRESIDENT AND ASSISTANT TREASURER.
Senior
Vice President of the Distributor and an officer of other
investment companies advised or administered by the Manager.
From 1988 to August 1994, he was Manager of the High
Performance Fabric Division of Springs Industries Inc. He is
33 years old.
ERIC B. FISCHMAN, VICE PRESIDENT AND ASSISTANT SECRETARY.
Associate General Counsel of the Distributor and an officer
of
other investment companies advised or administered by the
Manager. From September 1992 to August 1994, he was an
attorney with the Board of Governors of the Federal Reserve
System. He is 30 years old.
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 32 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 59 years old.
PAUL FURCINITO, ASSISTANT SECRETARY. Assistant Vice President
of
the Distributor and an officer of other investment companies
advised or administered by the Manager. From January 1992 to
July 1994, he was a Senior Legal Product Manager, and from
January 1990 to January 1992, a mutual fund accountant, for
The Boston Company Advisors, Inc. He is 28 years old.
RUTH D. LEIBERT, ASSISTANT SECRETARY. Assistant Vice President
of the Distributor and an officer of other investment
companies advised or administered by the Manager. From March
1992 to July 1994, she was a Compliance Officer for The
Managers Funds, a registered investment company. From March
1990 until September 1991, she was Development Director of
The
Rockland Center for the Arts. She is 50 years old.
The address of all officers of the Fund is 200 Park Avenue,
New York, New York 10166.
Trustees and officers of the Fund, as a group, owned less
than
1% of the Fund's shares of beneficial interest outstanding on
July 13, 1995.
As of July 17, 1995, the following persons owned 5% or more
of
the outstanding shares of beneficial interest of the Fund;
Arizona Series Class A: Merrill Lynch Pierce Fenner & Smith,
Inc., Jacksonville, FL - 6.8%; Arizona Series Class B: Merrill
Lynch/FDS, Jacksonville, FL - 10.43%; Colorado Series Class A:
Major Trading Corporation, New York, NY - 36.69%; Colorado
Series Class B: Major Trading
Corporation, New York, NY - 11.66%; Smith Barney Inc., New York,
NY - 6.20%; Connecticut Series Class A: Merrill Lynch Pierce
Fenner & Smith, Inc., Jacksonville, FL - 8.13%; Connecticut
Series Class B: Merrill Lynch Pierce Fenner & Smith, Inc.,
Jacksonville, FL - 6.38%; Florida Series Class A: Merrill Lynch
Pierce Fenner & Smith, Inc., Jacksonville FL - 5.07%; Florida
Series Class B: Merrill Lynch/FDS, Jacksonville, FL - 7.14%;
Georgia
Series Class B: Merrill Lynch Pierce Fenner & Smith, Inc.,
Jacksonville, FL - 15.70%; Maryland Series Class A: Stephens
Inc., Little Rock, AR - 6.00%; Maryland Series Class B: Merrill
Lynch/FDS, Jacksonville, FL - 5.29%; Massachusetts Series Class
B: Edwin J. Buczak, Worchester, MA - 5.33%;
Michigan Series
Class A: Merrill Lynch Pierce Fenner & Smith, Inc.,
Jacksonville,
FL - 6.92%; Michigan Series Class B: Merrill Lynch/FDS,
Jacksonville, FL - 9.02%; North Carolina Series
Class A: Merrill Lynch Pierce Fenner & Smith, Inc.,
Jacksonville,
FL - 7.12%; Ohio Series Class A: BHC Securities, Philadelphia,
PA - 5.42%; Oregon Series Class A: Major
Trading Corporation, New York, NY - 43.04%; and Oregon Series
Class B: Major Trading Corporation, New York, NY - 51.26%,
Prudential Securities FBO Elwood Mead & Erma V. Mead, JT TEN,
Wilsonville, OR - 12.74%, Smith Barney, Inc., New York, NY
5.32%. 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 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 of Trustees or
(ii) vote of a majority (as defined in the Act) of the
outstanding voting securities of such Series, provided
that in either event the continuance also is approved by
a majority of the Trustees who are not "interested persons"
(as defined in the Act) of the Fund or the Manager,
by vote cast in person at a meeting called for
the purpose of voting on such approval. The Agreement was last
approved by the Fund's Board of Trustees, including a majority
of
the Trustees who are not "interested persons" of any party to
the
Agreement, at a meeting held on July 20, 1994. 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 of Trustees 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; Robert E.
Riley, 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; Paul H. Snyder, Vice President-Finance and
Chief
Financial Officer; Daniel C. Maclean, Vice President and General
Counsel; Barbara E. Casey, Vice President-Dreyfus Retirement
Services; Diane M. Coffey, Vice President-Corporate
Communications; Elie M. Genadry, Vice President-Institutional
Sales; Henry D. Gottmann, Vice President-Retail Sales and
Service; William F. Glavin, Jr., Vice President-Product
Management; Mark N. Jacobs, Vice President-Legal and Secretary;
Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Katherine C. Wickham, Vice President-Human Resources; Andrew S.
Wasser, Vice President-Information Services; Elvira Oslapas,
Assistant Secretary; Maurice Bendrihem, Controller; and Mandell
L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M.
Greene, Julian M. Smerling and David B. Truman, 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 of Trustees. The Manager is
responsible for investment decisions, and provides the Fund with
portfolio managers who are authorized by the Board of Trustees
to
execute purchases and sales of securities. The Fund's portfolio
managers are Joseph P. Darcy, A. Paul Disdier, Karen M. Hand,
Stephen C. Kris, Richard J. Moynihan, Jill C. Shaffro, L.
Lawrence Troutman, Samuel J. Weinstock and Monica S. Wieboldt.
The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts
who provide research services for the Fund as well as for other
funds advised by the Manager. All purchases and sales are
reported for the Board of Trustees' review at the meeting
subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne
by the Fund, except to the extent specifically assumed by the
Manager. The expenses borne by the Fund include, without
limitation, the following: taxes, interest, loan commitment
fees, interest and distributions on securities sold short,
brokerage fees and commissions, if any, fees of Trustees who are
not officers, directors, employees or holders of 5% or more of
the outstanding voting securities of the Manager, Securities and
Exchange Commission fees 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. Class A, Class B and
Class C shares are subject to an annual service fee for ongoing
personal services relating to shareholder accounts and services
related to the maintenance of shareholder accounts. In
addition,
Class B and Class C shares are subject to an annual distribution
fee for distributing the relevant Class of shares pursuant to a
distribution plan adopted in accordance with Rule 12b-1 under
the
Act. 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
of Trustees, including, but not limited to, proportionately in
relation to the net assets of each Series.
The Manager maintains office facilities on behalf of the Fund
and furnishes statistical and research data, clerical help,
accounting, data processing, bookkeeping and internal auditing
and certain other required services to the Fund. The Manager
also may make such advertising and promotional expenditures,
using its own resources, as it from time to time deems
appropriate.
As compensation for the Manager's services 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 each Series'
average
daily net assets. For the fiscal years ended April 30, 1993,
1994 and 1995, the management fee payable, the reduction in such
fee and the net management fee paid for each Series was as set
forth below:
<TABLE>
<CAPTION>
SERIES MANAGEMENT FEE PAYABLE REDUCTION IN FEE
- ------- ------------------------------------- ---------------------------------
1993 1994 1995 1993 1994 1995
----------- --------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Arizona $ 12,227<F1>$ 77,253 $ 106,761 $ 12,227 $ 77,253 $106,761
Colorado - - 16,404<F2> - - 16,404<F2>
Connecticut 1,780,354 2,222,426 2,082,924 694,635 378,489 35,533
Florida 1,496,430 1,811,102 1,599,553 589,747 328,323 27,718
Georgia 20,072<F1> 120,183 149,119 20,072 120,183 149,119
Maryland 1,634,121 2,079,227 1,901,194 663,156 375,233 32,614
Massachusetts 406,583 466,331 426,673 179,550 95,389 7,190
Michigan 910,442 1,124,896 1,074,186 411,882 219,841 18,112
Minnesota 745,093 952,683 943,548 328,657 184,360 15,888
North Carolina 228,381 533,032 535,236 228,381 475,442 297,996
Ohio 1,489,944 1,811,687 1,707,720 629,804 386,259 28,783
Oregon - - 15,174<F2> - - 15,174<F2>
Pennsylvania 1,406,107 1,544,000 1,589,232 472,202 317,330 26,631
Texas 301,425 503,485 485,593 301,425 503,485 485,593
Virginia 227,861 464,237 496,788 227,861 464,237 496,788
______________
<FN>1 For the period from September 3, 1992 (commencement of operations) through April 30, 1993.
<FN>2 For the period from May 6, 1994 (commencement of operations) through April 30, 1995.
</TABLE>
SERIES NET FEE PAID
- ------ -----------------------------------
1993 1994 1995
--------- -------- ---------
Arizona $ -0-<F1> $ -0- $ -0-
Colorado - - -0-<F2>
Connecticut 1,085,719 1,843,937 2,047,391
Florida 906,683 1,482,779 1,571,835
Georgia -0- -0- -0-
Maryland 970,965 1,703,994 1,868,580
Massachusetts 227,033 370,942 419,483
Michigan 498,560 905,055 1,056,074
Minnesota 416,346 768,323 927,660
North Carolina -0- 57,590 237,240
SERIES NET FEE PAID
- ------ ----------------------------
1993 1994 1995
------ --------- ---------
Ohio 860,140 1,425,428 1,678,937
Oregon - - -0-<F2>
Pennsylvania 933,905 1,226,670 1,562,601
Texas -0- -0- -0-
Virginia -0- -0- -0-
______________
[FN]1 For the period from September 3, 1992 (commencement of
operations) through April 30, 1993.
[FN]2 For the period from May 6, 1994 (commencement of operation
s)
through April 30, 1995.
<PAGE>
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 FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ
IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"HOW TO BUY FUND SHARES."
THE DISTRIBUTOR. The Distributor serves as the Fund's
distributor pursuant to an agreement 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.
USING FEDERAL FUNDS. The Shareholder Services Group,
Inc.,
the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), or the Fund may attempt to notify the investor upon
receipt of checks drawn on banks that are not members of the
Federal Reserve System as to the possible delay in conversion
into Federal Funds and may attempt to arrange for a better means
of transmitting the money. If the investor is a customer of a
securities dealer ("Selected Dealer") and his order to purchase
Fund shares is paid for other than in Federal Funds, the
Selected
Dealer, acting on behalf of its customer, will complete the
conversion into, or itself advance, Federal Funds generally on
the business day following receipt of the customer order. The
order is effective only when so converted and received by the
Transfer Agent. An order for the purchase of Fund shares placed
by an investor with sufficient Federal Funds or a cash balance
in
his brokerage account with a Selected Dealer will become
effective on the day that the order, including Federal Funds, is
received by the Transfer Agent.
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.
TELETRANSFER PRIVILEGE. TELETRANSFER purchase orders may
be
made between the hours of 8:00 a.m. and 4:00 p.m., New York
time,
on any business day that the Transfer Agent and the New York
Stock Exchange are open. Such purchases will be credited to the
shareholder's Fund account on the next bank business day. To
qualify to use the 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 Fund's Account Application or Shareholder Services Form on
file. If the proceeds of a particular redemption are to be
wired
to an account at any other bank, the request must be in writing
and signature-guaranteed. See "Redemption of Fund
Shares--TELETRANSFER Privilege."
OFFERING PRICE. Based upon each Series' net asset value
at
the close of business on April 30, 1995, the maximum offering
price of the Fund's Class A and Class B shares would have been
as
follows (Class C shares were not offered as of April 30, 1995):
<TABLE>
<CAPTION>
ARIZONA COLORADO CONNECTICUT FLORIDA
SERIES SERIES SERIES SERIES
------- -------- ----------- -------
<S> <C> <C> <C> <C>
Class A Shares:
NET ASSET VALUE, per share $12.74 $12.43 $11.76 $14.51
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). . . . . . . . .60 .58 .55 .68
Offering price to public. . . . . $13.34 $13.01 $12.31 $15.19
Class B Shares:
NET ASSET VALUE, redemption price and
offering price to public* $12.75 $12.43 $11.76 $14.51
GEORGIA MARYLAND MASSACHUSETTS MICHIGAN
SERIES SERIES SERIES SERIES
------- -------- ------------- -------
Class A Shares:
NET ASSET VALUE, per share $12.80 $12.54 $11.53 $15.14
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). . . . . . . . .60 .59 .54 .71
Offering price to public. . . . . $13.40 $13.13 $12.07 $15.85
Class B Shares:
NET ASSET VALUE, redemption price and
offering price to public* $12.80 $12.54 $11.52 $15.13
NORTH
MINNESOTA CAROLINA OHIO OREGON
SERIES SERIES SERIES SERIES
------ ------ ------ ------
Class A Shares:
NET ASSET VALUE, per share $14.90 $12.72 $12.62 $12.95
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). . . . . . . . .70 .60 .59 .61
Offering price to public. . . . . $15.60 $13.32 $13.21 $13.56
Class B Shares:
NET ASSET VALUE, redemption price and
offering price to public* $14.92 $12.71 $12.63 $12.95
PENNSYLVANIA TEXAS VIRGINIA
SERIES SERIES SERIES
<S> <C> <C> <C>
Class A Shares:
NET ASSET VALUE, per share $16.12 $20.69 $16.03
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). . . . . . . . .76 .97 .75
Offering price to public. . . . . $16.88 $21.66 $16.78
Class B Shares:
NET ASSET VALUE, redemption price and
offering price to public* $16.11 $20.69 $16.03
*Class B shares are subject to a contingent deferred sales charge
on certain redemptions. See "How to Redeem Fund Shares" in the
Fund's Prospectus.
</TABLE>
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 A, Class B and Class C shares are subject to a
Shareholder Services Plan and Class B and Class C shares only
are
subject to a Distribution Plan.
DISTRIBUTION PLAN. Rule 12b-1 (the "Rule") adopted by the
Securities and Exchange Commission under the Act provides, among
other things, that an investment company may bear expenses of
distributing its shares only pursuant to a plan adopted in
accordance with the Rule. The Fund's Board of Trustees has
adopted such a plan (the "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 of Trustees 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.
In some states, certain institutions effecting transactions in
Fund shares may be required to register as dealers pursuant to
state law.
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 Trustees for their review.
In
addition, the Distribution Plan provides that it may not be
amended to increase materially the costs which holders of the
relevant Class of 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 Board of Trustees, and by the Trustees who are
not "interested persons" (as defined in the Act) of the Fund and
have no direct or indirect financial interest in the operation
of
the 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 Trustees cast in person at a meeting called for the
purpose of voting on the Distribution Plan. The Distribution
Plan was last approved by the Fund's Board of Trustees,
including
a majority of the Trustees who are not "interested persons" at a
meeting held on April 12, 1995 and by the Fund's shareholders on
August 3, 1994. As to the relevant Class of shares, the
Distribution Plan may be terminated at any time by vote of a
majority of the Trustees who are not "interested persons" and
have no direct or indirect financial interest in the operation
of
the Distribution Plan, or by vote of the holders of a majority
of
the outstanding shares of such Class.
For the period from May 1, 1994 through August 23, 1994,
each Series paid Dreyfus Service Corporation, as former
distributor, the following amounts with respect to Class B under
the Distribution Plan:
AMOUNT CHARGED
SERIES CLASS B
------- --------------
Arizona $ 11,124
Colorado 1,410<F1>
Connecticut 53,190
Florida 36,592
Georgia $27,219
Maryland 49,777
Massachusetts 6,115
Michigan 23,763
Minnesota 34,128
North Carolina 63,468
Ohio 45,293
Oregon 735<F1>
Pennsylvania 98,376
Texas 26,110
Virginia 40,954
__________________________
[FN]1 From May 6, 1994 (commencement of operations) to August
23,
1994.
<PAGE>
For the period from August 24, 1994 through April 30,
1995,
each Series paid the Distributor the following amounts with
respect to Class B shares under the Distribution Plan:
AMOUNT CHARGED
SERIES CLASS B
------- --------------
Arizona $26,079
Colorado 9,770
Connecticut 117,044
Florida 82,256
Georgia 61,066
Maryland 112,582
Massachusetts 13,418
Michigan 52,967
Minnesota 75,643
North Carolina 136,431
Ohio 104,049
Oregon 4,598
Pennsylvania 226,769
Texas 56,193
Virginia 93,928
There were no payments made under the Distribution Plan
with
respect to Class C shares during the fiscal year ended April 30,
1995, as Class C shares had not yet been offered.
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. Under the Shareholder
Services Plan, the Distributor may make payments to certain
securities dealers, financial institutions 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 Trustees for
their review. In addition, the Shareholder Services Plan
provides that it may not be amended without approval of the
Board
of Trustees, and by the Trustees who are not "interested
persons"
(as defined in the Act) of the Fund and have no direct or
indirect financial interest in the operation of the Shareholder
Services Plan or in any agreements entered into in connection
with 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 cast in person at a meeting called for the purpose of
voting on the Shareholder Services Plan. The Shareholder
Services Plan was so approved on April 12, 1995. As to each
Series, the Shareholder Services Plan is terminable at any time
by vote of a majority of the Trustees who are not "interested
persons" and who have no direct or indirect financial interest
in
the operation of the Shareholder Services Plan.
For the period from May 1, 1994 through August 23, 1994,
each Series paid Dreyfus Service Corporation, as former
distributor, the following amounts with respect to Class A and
Class B, under the Shareholder Services Plan:
SERIES CLASS A CLASS B
Arizona $ 9,574 $ 5,562
Colorado 368<F1> 937<F1>
Connecticut 284,876 26,594
Florida 224,083 18,296
Georgia 7,959 13,610
Maryland 260,906 24,888
Massachusetts 60,131 3,058
Michigan 147,668 11,774
Minnesota 122,540 17,064
North Carolina 52,956 31,456
Ohio 229,922 22,647
Oregon 527<F1> 368<F1>
Pennsylvania 184,959 49,188
Texas 60,108 13,056
Virginia 51,924 20,477
___________________________________
[FN]1 From May 6, 1994 (commencement of operations) to
August 23, 1994.
<PAGE>
For the period from August 24, 1994 through April 30,
1995,
each Series paid the Distributor the following amounts with
respect to Class A and Class B under the Shareholder Services
Plan:
SERIES CLASS A CLASS B
- ------ ------- -------
Arizona $ 20,352 $13,040
Colorado 1,498 4,653
Connecticut 576,791 58,523
Florida 443,562 41,128
Georgia 15,680 30,533
Maryland 522,094 56,291
Massachusetts $124,045 $ 6,708
Michigan 302,233 26,591
Minnesota 251,460 37,821
North Carolina 90,383 68,494
Ohio 471,643 52,024
Oregon 3,703 2,299
Pennsylvania 347,846 113,385
Texas 119,464 28,096
Virginia 106,447 46,965
There were no payments made under the Shareholder Services
Plan with respect to Class C during the fiscal year ended April
30, 1995, as Class C shares had not been offered.
REDEMPTION OF FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ
IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"HOW TO REDEEM FUND SHARES."
CHECK REDEMPTION PRIVILEGE - CLASS A SHARES. An investor
may indicate on the Account Application, Shareholder Services
Form or by later written request that the Fund provide Redemptio
n
Checks ("Checks") with respect to Class A shares, drawn on the
Fund's account. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The
Account Application, 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 Fund Shares--TELETRANSFER Privilege."
SHARE CERTIFICATES; SIGNATURES. Any certificates
representing Fund shares to be redeemed must be submitted with
the redemption request. Written redemption requests must be
signed by each shareholder, including each 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
Board of Trustees reserves the right to make payments in whole
or
in part in securities or other assets in case of an emergency or
any time a cash distribution would impair the liquidity of the
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 would be incurred. In connection
with a redemption request where the Fund delivers in-kind
securities instead of cash to an investor, the in-kind securitie
s
will be readily marketable securities.
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
Bcertain 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 contingent
deferred sales charge ("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. There is a service charge of $.50
for each withdrawal check. Automatic Withdrawal may be
terminated at any time by the investor, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not
be redeemed through the Automatic Withdrawal Plan. 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
on the payment date 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 FUND SHARES."
VALUATION OF PORTFOLIO SECURITIES. Each Series'
investments are valued each business day by an independent
pricing service (the "Service") approved by the Board of
Trustees. When, in the judgment of the Service, quoted bid
prices for investments are readily available and are
representative of the bid side of the market, these investments
are valued at the mean between the quoted bid prices (as
obtained by the Service from dealers in such securities) and
asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio
securities) are carried at fair value as determined by the
Service, based on methods which include consideration of:
yields or prices of municipal bonds of comparable quality,
coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may employ
electronic data processing techniques and/or a matrix system to
determine valuations. The Service's procedures are reviewed by
the Fund's officers under the general supervision of the Board
of Trustees. 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, 1995, 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.
Accordingly, a Series may be restricted in the selling of
securities held for less than three months, and in the
utilization of certain of the investment techniques described in
the Prospectus under "Description of the Fund--Investment
Techniques." The Code, however, allows a Series to net certain
offsetting positions making it easier for the Series to satisfy
the 30% test. The terms "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 "Dividends,
Distributions and Taxes" 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 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 a Series
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, such futures and 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 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. 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 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" and the conversion transaction 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.
The amount of transactions during the last fiscal year in
newly issued debt instruments in fixed price public offerings
directed to an underwriter or underwriters in consideration of,
among other things, research services for the Florida Series was
$1,550,384.
PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ
IN CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS
ENTITLED "PERFORMANCE INFORMATION."
Class C shares had not been offered as of the date of the
financials and, therefore, no performance data is provided for
Class C.
The current yield for the 30-day period ended April 30,
1995, for Class A and Class B of each Series was as follows:
CURRENT NET OF ABSORBED
SERIES YIELD EXPENSES<F1>
- ------- ------- ----------
CLASS A:
Arizona 5.64 4.68
Colorado 5.86 4.34
Connecticut 5.08 -
Florida 5.31 -
Georgia 5.46 4.73
Maryland 4.94 -
Massachusetts 4.87 -
Michigan 4.96 -
Minnesota 4.80 -
North Carolina 5.26 5.01
Ohio 5.13 -
Oregon 5.57 4.31
Pennsylvania 5.27 -
Texas 5.57 5.04
Virginia 5.47 4.94
CURRENT NET OF ABSORBED
SERIES YIELD EXPENSES<F1>
- ------ ----- ------------
CLASS B:
Arizona 5.40 4.38
Colorado 5.62 4.03
Connecticut 4.78 -
Florida 4.92 -
Georgia 5.21 4.45
Maryland 4.64 -
Massachusetts 4.57 -
Michigan 4.67 -
Minnesota 4.49 -
North Carolina 4.99 4.73
Ohio 4.83 -
Oregon 5.31 3.97
Pennsylvania 5.00 -
Texas 5.30 4.75
Virginia 5.21 4.66
____________________________
[FN]1 This column sets forth current yield had expenses not
been absorbed.
<PAGE>
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 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 1995 combined (except where noted) Federal
and applicable State tax rate specified below, the tax
equivalent yield for the 30-day period ended April 30, 1995, for
Class A and Class B of each Series was as follows:
TAX EQUIVALENT NET OF ABSORBED
SERIES TAX RATE YIELD EXPENSES<F1>
- ------ -------- ------------- ------------
CLASS A:
Arizona 43.77 10.03 8.32
Colorado 42.62 10.21 7.56
Connecticut 42.32 8.81 -
Florida<F2> 39.60 8.79 -
Georgia 43.22 9.62 8.33
Maryland 42.62 8.61 -
Massachusetts 46.85 9.16 -
Michigan 42.26 8.59 -
Minnesota 44.73 8.68 -
North Carolina 44.28 9.44 8.99
Ohio 44.13 9.18 -
Oregon 45.04 10.13 7.84
Pennsylvania 41.29 8.98 -
Texas<F2> 39.60 9.22 8.34
Virginia 43.07 9.61 8.68
CLASS B:
Arizona 43.77 9.60 7.79
Colorado 42.62 9.79 7.02
Connecticut 42.32 8.29 -
Florida<F2> 39.60 8.15 -
Georgia 43.22 9.18 7.84
Maryland 42.62 8.09 -
Massachusetts 46.85 8.60 -
Michigan 42.26 8.09 -
Minnesota 44.73 8.12 -
North Carolina 44.28 8.96 8.49
Ohio 44.13 8.65 -
Oregon 45.04 9.66 7.22
Pennsylvania 41.29 8.52 -
Texas<F2> 39.60 8.77 7.86
Virginia 43.07 9.15 8.19
____________________________
[FN]1 This column sets forth tax equivalent yield
had expenses not been absorbed.
[FN]2 Federal tax rate only. No state personal
income tax imposed during 1995.
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.
The average annual total return for the periods indicated
for Class A of each Series was as follows:
<TABLE>
<CAPTION>
1-YEAR PERIOD 5-YEAR PERIOD 7.926-YEAR PERIOD
SERIES ENDED APRIL 30, 1995 ENDED APRIL 30, 1995 ENDED APRIL 30, 1995
- ------ -------------------- -------------------- --------------------
<S> <C> <C> <C>
Arizona 2.61 4.99<F1> -
Colorado 0.99<F2> - -
Connecticut 0.70 6.99 7.18
Florida 1.91 7.76 9.30
Georgia 2.05 4.99<F1> -
Maryland 1.70 7.27 6.47
Massachusetts 0.95 7.43 6.63
Michigan 1.85 8.00 8.85
Minnesota 2.35 7.44 7.93
North Carolina 0.94 6.42<F3> -
Ohio 0.86 7.63 4.73
Oregon 5.08<F2> - -
Pennsylvania 1.88 7.87 7.63<F4>
Texas 2.79 8.24 10.72
Virginia 1.63 6.96<F3> -
____________________________
<FN> 1 For the 2.658 year period ended April 30, 1995.
<FN> 2 For the 0.989 year period ended April 30, 1995.
<FN> 3 For the 3.748 year period ended April 30, 1995.
<FN> 4 For the 7.753 year period ended April 30, 1995.
</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 2.290-YEAR PERIOD
SERIES ENDED APRIL 30, 1995 ENDED APRIL 30, 1995
- ------ -------------------- --------------------
Arizona 3.88 5.04
Colorado 2.23<F1> -
Connecticut 2.00 3.96
Florida 3.21 4.56
Georgia 3.33 4.75
Maryland 2.94 4.09
1-YEAR PERIOD 2.290-YEAR PERIOD
SERIES ENDED APRIL 30, 1995 ENDED APRIL 30, 1995
- ------ -------------------- --------------------
Massachusetts 2.18 4.06
Michigan 3.04 5.17
Minnesota 3.57 4.80
North Carolina 2.12 3.63
Ohio 2.08 4.47
Oregon 6.51<F1> -
Pennsylvania 3.02 4.62
Texas 4.05 5.41
Virginia 2.83 4.14
_________________________
[FN] 1 For the 0.989 year period ended April 30, 1995.
<PAGE>
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, 1995 (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
- ------ --------------- ---------------
Arizona<F1> 13.82 19.20
Colorado<F2> 0.98 5.75
Connecticut 73.25 81.44
Florida 102.40 112.01
Georgia<F1> 13.82 19.19
Maryland 64.35 72.11
Massachusetts 66.30 74.12
Michigan 95.84 105.02
Minnesota 83.11 91.80
North Carolina<F3> 26.25 32.25
Ohio 44.22 50.97
Oregon<F2> 5.02 9.98
Pennsylvania<F4> 76.79 85.15
Texas 124.10 134.64
Virginia<F3> 28.69 34.77
____________________________
[FN] 1 For the period from September 3, 1992 (commencement of
operations) through April 30, 1995.
[FN] 2 For the period from May 6, 1994 (commencement of
operations) through April 30, 1995.
[FN] 3 For the period from August 1, 1991 through
(commencement of operations) April 30, 1995.
[FN] 4 For the period from July 30, 1987 through (commencement
of operations) April 30, 1995.
<PAGE>
The total return for the period January 15, 1993 to April
30, 1995 (except where indicated) for Class B of each Series was
as follows:
SERIES BASED ON NET ASSET BASED ON
CLASS B: VALUE PER SHARE MAXIMUM CDSC
- ------- --------------- ------------
Arizona 13.91 11.91
Colorado<F1> 5.19 2.21
Connecticut 11.27 9.29
Florida 12.74 10.75
Georgia 13.22 11.22
Maryland 11.61 9.62
Massachusetts 11.48 9.53
Michigan 14.23 12.24
Minnesota 13.34 11.34
North Carolina 10.48 8.51
Ohio 12.52 10.53
Oregon<F1> 9.44 6.44
Pennsylvania 12.89 10.89
Texas 14.82 12.82
Virginia 11.71 9.74
____________________________
[FN] 1 For the period from May 6, 1994 (commencement of
operations) through April 30, 1995.
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 are 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.
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.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New
York 10286, is the Fund's custodian. The Shareholder Services
Group, Inc., a subsidiary of First Data Corporation, P.O. Box
9671, Providence, Rhode Island 02940-9617, is the Fund's
transfer and dividend disbursing agent. Neither The Bank of New
York nor The Shareholder Services Group, Inc. has any part in
determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York,
New York 10004-2696, as counsel for the Fund, has rendered its
opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares of beneficial
interest being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, independent auditors, have been selected as auditors of
the Fund.
<PAGE>
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.
Arizona Series . . . . . . . . . . . . . . . . . . B-38
Colorado Series. . . . . . . . . . . . . . . . . . B-42
Connecticut Series . . . . . . . . . . . . . . . . B-47
Florida Series . . . . . . . . . . . . . . . . . . B-50
Georgia Series . . . . . . . . . . . . . . . . . . B-55
Maryland Series. . . . . . . . . . . . . . . . . . B-60
Massachusetts Series . . . . . . . . . . . . . . . B-62
Michigan Series. . . . . . . . . . . . . . . . . . B-65
Minnesota Series . . . . . . . . . . . . . . . . . B-70
North Carolina Series. . . . . . . . . . . . . . . B-74
Ohio Series. . . . . . . . . . . . . . . . . . . . B-80
Oregon Series. . . . . . . . . . . . . . . . . . . B-86
Pennsylvania Series. . . . . . . . . . . . . . . . B-91
Texas Series . . . . . . . . . . . . . . . . . . . B-99
Virginia Series. . . . . . . . . . . . . . . . . . B-105
ARIZONA SERIES
Arizona's population increased by approximately 35%
during the 10-year period from 1980 to 1990, ranking Arizona
as the third fastest growing State in the country for the
period. Over the past several decades, the State has outpaced
most other regions of the country in other major categories of
growth, including personal income, gross State product and job
creation. While the rate of growth has increased in recent
years, growth slowed during the late 1980s and early 1990s.
The State's principal economic sectors include services,
trade, government, manufacturing, tourism, travel, mining,
agriculture and the military. About 65% of total non-
agricultural employment comes from manufacturing, services and
trade. While mining and agricultural employment have
diminished over the last twenty-five years, significant job
growth has occurred in aerospace and high technology,
construction, finance, insurance and real estate. Arizona's
economy, however, has been adversely affected by problems in
the real estate industry, including an excessive supply of
commercial, residential and retail buildings and severe
problems with Arizona-based savings and loan associations,
many of which have been or are in the process of being
liquidated by the Resolution Trust Corporation. In addition,
current and proposed reductions in Federal military
expenditures are expected to cause difficulties with the
State's economy. Defense-related business plays an important
role in Arizona's economy, particularly in the manufacturing
sector, and reductions in the defense budget could adversely
affect these businesses. These factors are expected to
negatively impact Arizona's economy for the foreseeable
future. In addition, while Arizona's political climate has
stabilized with the passage in 1992 of a paid State holiday
honoring Dr. Martin Luther King, Jr., Arizona earlier
experienced a number of political difficulties, including the
impeachment and removal from office of the State's governor,
and the conviction of several State legislators in connection
with alleged payments for votes to approve legalized gambling.
Arizona's unemployment rate, as of April 1995, was 5.1%,
a decrease of close to 2.0% from 1994. Per capita income
levels are less than the United States average (85% of the
United States average in 1991) and Arizona's average annual
growth rate of per capita income has been less than the United
States average for several years. Arizona's per capita income
growth rate in 1994 and 1995, however, has exceeded that of
the United States. The former trend of lower personal income
growth likely resulted from the fact that Arizona has a higher
percentage of its employment in the service sector and a lower
percentage of its employment in the manufacturing sector than
the United States average. In recent years, however, Arizona
has seen an increased in manufacturing employment. This slow
growth in per capita income, if it recurs, could adversely
affect both State and local budgets in the near future.
Arizona is required by law to maintain a balanced budget.
To achieve this objective, the State, in the past, has used a
combination of spending reductions and tax increases. For the
1990-91 budget, the Arizona Legislature increased taxes by
over $250 million, which led to a citizen's referendum
designed to stop the tax increase until the voters could
consider it at the general election. A court determined that
the referendum could not be used to stop this tax increase, so
that tax increase went into effect. Since then, legislators
have been reluctant to increase taxes, despite heightened
demands for services due to the State's growing population and
the general recession. Moreover, in 1992, Arizona voters
adopted an initiative, Proposition 108, which requires a two-
thirds vote by the Legislature for any future tax or fee
increase. This makes any future tax increase more difficult
to achieve.
Arizona's budget picture has stabilized in recent years.
The 1991-92 budget contained no tax increase, but the
Legislature was called into special session twice to adjust
aspects of that budget due to projected deficits. The 1992-93
budget, the 1993-94 budget, the 1994-95 budget and the 1995-96
budget all provided tax decreases, and relied solely on
spending cuts to balance the budget. After eight years of
contrary experience, there was no need for a mid-year
correction to balance the 1992-93, 1993-94 and 1994-95
budgets. The largest part of the spending cuts for these
budget years came from cuts in State aid to education and in
Arizona's Medicaid program. Substantial revenue increases
permitted a balanced 1994-95 budget without any such spending
cuts, and with a $100 million personal income tax cut.
Similarly, the 1994-95 budget made few spending cuts, and
included a $200 million personal income tax cut beginning in
1995 and a $200 million property tax cut beginning in 1996.
The largest impact of the tax cuts adopted in 1992
through 1995 will take place in future years, which could have
the effect -- especially in light of Proposition 108 -- of
making it difficult to meet the increased demands for services
for Arizona's growing population even if the Arizona economy
improves. Although revenue growth has been healthy in recent
years, revenue may decline if the economy slows. Projections
by the Joint Legislative Budget Committee ("JLBC") staff in
1993 suggest that there will be a need for either further
spending cuts or tax increases to balance the budget in future
fiscal years. These projections show continued growth in
school populations, Medicaid participants and prison beds that
could increase at a rate faster than revenue growth. The most
likely budget cut will be the refusal of the Legislature to
fund an otherwise required $100 million contribution to a
Budget Stabilization Fund, which is a "rainy day" fund
designed to accumulate revenues for use in recessionary years.
In the 1993-94 budget, for example, only $42 million was put
into this fund, while $78 million was required by statute. In
1995, the Legislature capped the fund at five percent of
revenue, which will mean that no new contributions are likely
to be made after the 1996 fiscal year.
Arizona law also requires municipalities to maintain
balanced budgets. The slower economy has strained their
budgets. For example, the 1992-93 annual budget for the City
of Phoenix, for the first time in the city's history, was less
than the prior year's budget. Moreover, the State tax cuts in
1992 through 1995 will have the effect of worsening the budget
picture in future years because municipalities in Arizona rely
heavily on State-shared revenues. It is likely that
municipalities in Arizona will need to either increase taxes
or reduce spending to compensate for this lost State-shared
revenue. The budget picture could get worse, depending on how
the legislature treats State-shared revenue programs when
setting the future State budgets.
The State general fund is funded primarily by sales and
income taxes, with only a small contribution by property
taxes. In fiscal year 1995, the total general fund revenues
were estimated at $4,278,400,000. Of this amount, 44.6% will
be raised by sales taxes, 37.0% will be raised by income
taxes, and 4.4% will be raised by property taxes. Other
revenue sources, such as luxury taxes, the lottery and
insurance premium taxes, will constitute 14.0% of this
revenue. These revenue components change little from year to
year. Over half of the general fund is appropriated for
K-12 and university education (54% in fiscal year 1995).
Other major budget items include Medicare (11%), social
welfare programs (9%) and corrections (8%). As is the case
with other States, Medicare expenditures have been the fastest
growing part of the State budget.
Municipalities also rely on a variety of revenue sources.
While municipalities cannot collect an income tax, they do
impose sales and property taxes. Municipalities also rely on
State-shared revenues. In fiscal year 1992, the total State-
shared sales tax revenue to countries and cities was $430.7
million. Additionally, cities received $176.1 million in
State-shared income tax revenues. School districts are funded
by a combination of local property taxes and State assistance.
In fiscal year 1995, State assistance of $1.461 billion was
appropriated to school districts.
Arizona's Constitution limits the amount of debt that may
be contracted by the State to $350,000. This, as a practical
matter, precludes the use of general revenue bonds for State
projects. In recent years, however, the State has used lease-
purchase financing to finance several university, court and
prison building projects. The legislature has not treated
these lease-purchase financing projects as subject to the
constitutional debt limit, and there has been no legal
challenge to the use of lease-purchase financing as a means of
financing State capital projects. Additionally, certain other
issuers have the power to issue obligations which affect the
whole or large portions of the State. The debts are not
considered debts of the State because they are secured solely
by separate revenue sources. For example, the Transportation
Board of the State of Arizona Department of Transportation may
issue debt for highways that is payable from revenues
generated from State gasoline taxes, motor vehicle
registration fees, and other automobile taxes and fees. The
three Arizona universities may issue debt for university
building projects payable from tuition and other fees. Salt
River Project Agricultural & Improvement District, an
agricultural improvement district that operates the Salt River
Project (a Federal reclamation project and an electric system
which generates, purchases and distributes electric power to
residential, commercial, industrial and agricultural power
users in a 2,900 square-mile service area around Phoenix), may
issue debt payable from a number of sources.
Arizona's Constitution also restricts the debt of certain
of the State's political subdivisions. No county, city, town,
school district or other municipal corporation of the State
may for any purpose become indebted in any manner in an amount
exceeding six percent of the taxable property in such county,
city, town, school district or other municipal corporation
without the assent of a majority of the qualified electors
thereof voting at an election provided by law to be held for
that purpose; provided, however, that (i) under no
circumstances may any county or school district of the State
become indebted in an amount exceeding fifteen percent (or
thirty percent in the case of a unified school district) of
such taxable property and (ii) any incorporated city or town
of the State with such assent may be allowed to become
indebted in up to a twenty percent additional amount for (a)
supplying such city or town with water, artificial light or
sewers, when the works for supplying such water, light or
sewers are or will be owned and controlled by the municipality
and (b) acquiring and developing land or interests therein for
open space preserves, parks, playgrounds and recreational
facilities. Irrigation, power, electrical, agricultural
improvement, drainage, flood control and tax levying public
improvement districts, however, are exempt from such
restrictions of the constitution.
Annual property tax levies for the payment of general
obligation bonded indebtedness of political subdivisions are
unlimited as to rate or amount. Other obligations may be
issued by such entities, sometimes without an election, which
are payable from, among other sources, project revenues,
special assessments and excise taxes.
Arizona's local government entities are subject to
certain other limitations on their ability to assess taxes and
levies which could affect their ability to meet their
financial obligations. Subject to certain exceptions, the
maximum amount of property taxes levied by any Arizona county,
city, town or community college district for their operations
and maintenance expenditures cannot exceed the amount levied
in a preceding year by more than two percent. Certain taxes
are specifically exempt from this limit, including taxes
levied for debt service payments.
COLORADO SERIES
The Colorado economy continued to grow at a rate in
excess of the national economy during 1994. With the
exception of the construction industry, most indicators of
economic activity were stronger in 1994 than in 1993.
Overall, 1993 and 1994 combined to provide Colorado with its
strongest two-year period of economic growth during the past
15 years. The State's population growth and the continuation
of significant public works projects contributed to strong job
creation, housing starts and personal income growth. With the
exception of the mining sector, which now employs less than 1%
of the State's work force, each of Colorado's major industries
experienced job growth during 1994.
Throughout the 1970s and early 1980s, the Colorado
economy expanded at rates faster than the national economy.
However, during the mid-to-late 1980s, Colorado experienced a
significant economic recession, attributable in part to a
dramatic decline in oil prices. During this time, employment
in the State grew at rates lower than in the national economy.
A total of just 269,000 jobs were created in the 1980-1990
decade, representing just 65% of the jobs created in the prior
decade.
Since 1990, the Colorado economy has rebounded and has
expanded at a rate in excess of the national economy. The
State's unemployment rate has been lower than the nation in
each year since 1990, and personal income has grown at a rate
in excess of the nation. A number of conditions have
supported Colorado's recent growth above rates of the national
economy. First, the State has a more service-oriented economy.
The reduced reliance on heavy manufacturing industries, such
as automobiles, has insulated the Colorado economy during
periods of national recession. Thus, problems in the
manufacturing sector nationwide have not affected Colorado to
the same extent. In addition, Coloradans have had
significantly lower debt levels compared to the rest of the
nation. Finally, a number of major infrastructure projects
have been undertaken in Colorado. Major projects have
included the $4.2 billion Denver International Airport,
highway improvements, a $215 million baseball stadium, a $140
million expansion of the Colorado Springs airport, a $95
million amusement park, a new $65 million Denver library, and
federal and State prisons.
Beginning in 1995 and continuing through 1997, growth in
the Colorado economy is expected to slow. Completion of each
of the infrastructure projects described above in 1994 or
early 1995 will contribute to the slower rate of growth
predicted for 1995 through 1997. As one of the States most
reliant on defense contracts and military payroll, Colorado
also remains vulnerable to reductions in the U.S. defense
budget. In addition to the September 1994 closure of Lowry
Air Force Base, Fort Carson Air Force Base and Fitzsimons Army
Medical Center are military facilities which have been
identified for downsizing and closure, respectively. The
Rocky Flats nuclear weapons plant also reduced its work force
by 1,300 positions in 1994 and is expected to eliminate an
additional 1,700 jobs by October 1995.
EMPLOYMENT. Nonagriculture job growth in Colorado was
4.7% and 4.6% during 1994 and 1993, respectively. Reflecting
the strong job market, the State's unemployment rate fell to
4.2 during 1994, its lowest level since 1974. For the second
consecutive year, construction was the strongest industry in
the State, with employment up 12.6% in 1994 following a 15.1%
increase in 1993. Although construction accounts for only
5.5% of Colorado's jobs, it accounted for 14% of the State's
1994 job growth.
Colorado's services industry also experienced strong
growth during 1994, as jobs increased at a 7.0% rate. The
services industry is the largest industry in the State,
accounting for 28.7% of all jobs. All segments of the
services industry registered job growth in 1994, led by a
12.9% increase in business services and an 11.0% increase in
data processing services. The wholesale and retail trade
industry and the finance, insurance and real estate industry
also showed healthy job growth during 1994, expanding by 5.6%
and 4.1%, respectively.
Colorado's manufacturing and government industries
experienced nominal job growth in 1994, while the mining
industry continued to lose jobs. The manufacturing industry
had job growth of 1.4% in 1994 and 1.2% in 1993 after
experiencing significant job losses in prior years.
Government job growth was just 1.0% in 1994. Growth in
federal and State government jobs was flat or declining, due
in part to military lay-offs. Local government job growth was
relatively strong due to the increased hiring of teachers in
public schools. The Colorado mining industry was the only
industry to lose jobs during 1994. The mining industry has
lost jobs in each year since 1981, and it now accounts for
just .9% of the State's jobs.
The Colorado Legislative Council expects that the rate of
job growth will decline beginning in 1995. Job growth rates
of 2.0%, 1.8% and 1.4% are forecasted for 1995, 1996 and 1997,
respectively. Factors contributing to the reduced growth rate
are expected to include layoffs at military bases and defense
contractors located in the State; the recent completion of
Denver International Airport and other major infrastructure
projects; and the downsizing of major utilities, including US
WEST and Public Service Company of Colorado.
INCOME GROWTH. Through the third quarter of 1994,
personal income in the State grew at an annual rate of 7.5%.
The Colorado Legislative Council expects that the rate of
growth in personal income will decline to 6.8% in 1995,
reflecting the anticipated slower job growth. On an
inflation-adjusted basis, personal income growth in 1995 is
expected to be at its weakest level since 1987. Personal
income growth in Colorado is projected to rebound slightly
after 1995 to 7.2% in each of 1996 and 1997.
RETAIL SALES. Growth in the State's retail sales have
exceeded the national growth rate since 1989. The State
enjoyed retail sales growth of 8.2%, 9.6% and 12.1% in 1992,
1993 and 1994, respectively. As the Colorado economy settles
into a more moderate growth rate, the growth in retail sales
is projected to decline, with 6.3%, 6.2% and 6.6% growth
projected for 1995, 1996 and 1997, respectively.
REAL ESTATE. The housing sector has been a bright spot
in the Colorado economy since 1990. During 1991, 1992 and
1993, the number of total housing permits grew at rates of
18.3%, 66.9% and 27.4%, respectively. The growth rate
experienced in 1994 is currently estimated at 20%. However,
the number of housing permits is expected to decline
significantly during the three years thereafter, as
in-migration slows and housing supply meets demand. The
number of total housing permits is expected to decline in
1995, 1996 and 1997 by 10.1%, 9.2% and 6.8%.
Nonresidential construction declined by 4.3% during 1994
due in large part to the completion of significant public
infrastructure projects. However, most segments of private
nonresidential construction posted strong growth during 1994.
For example, retail construction increased by 9.3% following a
41.9% increase in 1993; office building construction increased
by 49.7% following a 4.3% increase in 1993; and industrial
building construction increased by 33.6% following a 53.5%
increase in 1993. Overall, nonresidential construction is
expected to decline by 2.4% in 1995, followed by slight gains
in 1996 and 1997.
POPULATION. Colorado's population grew 2.6% in 1994, one
of the strongest growth rates among the States. This compares
to the State's population growth of 2.9% in 1993. Slower job
growth during 1995, combined with an improved national economy
which is expected to enhance job opportunities throughout the
country, is expected to slow population growth. Colorado's
population is expected to grow by 2.0% in 1995 and 1.8% in
1996.
Because of limitations contained in the State
Constitution, the State of Colorado issues no general
obligation bonds secured by the full faith and credit of the
State. Consequently, there are no outstanding general
obligation bond ratings for Colorado. Several agencies and
instrumentalities of State government are authorized by
statute to issue bonds secured by revenues from specific
projects and activities. Additionally, the State is
authorized to issue short-term tax and revenue anticipation
notes. To the extent the Portfolio holds debt of local units
of government whose revenues may rely in part on distributions
from the State, the fiscal health of the State will have an
indirect effect on the Portfolio.
As of the fiscal year ended June 30, 1994, Colorado had a
General Fund balance of approximately $405 million, up
considerably from the $327 million balance at June 30, 1993.
The June 30, 1994 balance was 12.1% of expenditures, well in
excess of the statutorily required reserve of 4% of
expenditures. The State's General Fund balance as of June 30,
1995 is projected to be approximately $410 million after
required transfers. As of June 30, 1996, the State's General
Fund balance is expected to be approximately $501 million
after required transfers. The foregoing General Fund balances
include funds restricted to comply with the emergency reserve
requirement contained in the State Constitution. The General
Fund balance at June 30, 1994 included $39 million in funds
restricted for such purpose.
Leading the revenue growth in fiscal 1994 were strong
increases in excise taxes (which include sales and use taxes),
corporate income taxes and personal income taxes. Growth in
the General Fund balance is also due to excess Medicaid
revenues received by the State. Pursuant to the federal
government's disproportionate share program, Colorado has
received Medicaid revenues which have been in excess of its
corresponding expenses. For example, from fiscal year 1992
through fiscal year 1996, Colorado expects to have received a
net General Fund benefit of approximately $238 million
attributable to the Medicaid disproportionate share program.
General Fund gross revenues were $3.725 billion in fiscal
year 1994. The major revenue sources of the State are the
individual income tax, excise taxes, and the corporate income
tax. These taxes represented approximately 52%, 32% and 4.0%,
respectively, of General Fund gross revenues for fiscal 1994.
Individual income tax, excise taxes and corporate income tax
are expected to represent 53.2%, 33.8% and 4.8%, respectively,
of the $3.912 billion in gross revenues which are projected
for fiscal year 1995.
There are approximately 2,000 units of local government
in Colorado, including counties, statutory cities and towns,
home rule cities and counties, charter cities, school
districts and a variety of water, irrigation and other special
improvement districts, all with various constitutional and
statutory authority to levy taxes and incur indebtedness. The
major source of revenue for funding such indebtedness is the
AD VALOREM property tax, which presently is imposed and
collected solely at the local level (although the State is
also authorized to levy the tax), and revenue from special
projects. Residential real property is presently assessed at
10.5% of its actual value. All other property is assessed at
29% of its actual value except producing mines and oil and gas
properties. Agricultural land is assessed at 29% of its value
based on its ability to produce agricultural crops, and oil
and gas properties are assessed based on certain factors,
including the means of recovery and the production of the
property.
Colorado's tax system is closely linked to the federal
tax system in that it uses federal taxable income as the basis
for determining Colorado income taxes. As a result, any
change in the federal tax laws which reduces the federal
taxable income base would also reduce Colorado individual and
corporate income taxes.
On November 3, 1992, voters in Colorado passed the Bruce
Amendment, otherwise known as the "Taxpayers Bill of Rights."
The Amendment restricts the growth of government spending and
cash reserve increases based upon the rate of inflation and
the change in demand for government services (as measured by
population, school enrollment, or construction); the effect of
this restriction is that if the increase in spending and cash
reserves exceeds that permitted by inflation and the demand
for government services, the excess revenues must be refunded
to taxpayers. The Amendment also limits the issuance of debt
to that which is voter approved and requires voter approval of
all tax increases. To date, the Amendment has not affected
State revenues and programs, as the increase in the State's
spending and cash reserves has been less than the allowable
limit. However, given projected revenue growth and estimates
of limitations to be imposed by the Amendment, spending and
cash reserves may begin to approach the allowable limit in the
year ending June 30, 1998. Over time, the Amendment will
likely reduce the financial flexibility of all levels of
government in Colorado. In addition, younger or rapidly
growing municipalities with large infrastructure requirements
may have ongoing difficulty generating the revenues needed to
finance their growth.
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 1993 manufacturing
employment declined 33.5%, while non-manufacturing employment
increased 63.3%, particularly in the service, trade and
finance categories, resulting in an increase of 27.6% 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. From 1984 to 1993,
Connecticut ranked from sixth to twelfth among all States in
total defense contract awards, receiving 2.5% of all such
contracts in 1993. 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 1992 was $89.0
billion, a 5.2% increase over the previous year. Total
personal income in the State increased 29.6% from 1987 to 1992
and 11.1% from 1989 to 1992, compared with national increases
of 35.4% and 17.5%, respectively. According to U.S.
Department of Commerce projections, the State is expected to
continue to rank among the highest in State per capita income.
As of January 1994, the estimated rate of unemployment (on a
seasonably adjusted basis) in the State was 6.2%.
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 March 1, 1995, $455,610,000 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 unappropriated surplus in the General
Fund is deemed to be appropriated for debt service for the
fiscal year ending June 30, 1995.
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. The Comptroller's monthly report for the
period ended January 31, 1995 estimated that on a GAAP basis
the cumulative deficit is $511 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 1994-95, the
adopted budget anticipates General Fund expenditures of $8.116
billion and General Fund revenues of $8.117 billion.
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. For fiscal 1994-95, permitted growth in
capped expenditures is 4.49%. The adoption Budget for fiscal
1994-95 is approximately $24 million below the spending cap.
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.
The General Assembly has empowered, pursuant to bonds
acts in effect, the State Bond Commission to authorize general
obligation bonds in the amount of $10,194,811,925. As of
March 1, 1995, the State Bond Commission has authorized
$8,673,257,266 in such bonds and the balance of $1,521,554,659
was available for authorization. From such total
authorizations of $8,673,257,266, bonds in the aggregate of
$7,334,468,663.09 have been issued and the balance of
$1,338,788,602.91 remained authorized but unissued as of March
1, 1995.
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 1992-93 and 1993-94 with
General Revenue plus Working Capital Funds unencumbered
reserves of approximately $543.5 million and $351.8 million,
respectively. Estimated fiscal year 1994-95 General Revenue
plus Working Capital Funds available total $14.453 billion.
Total effective appropriations for the 1994-95 fiscal year are
estimated at $14.281 billion, resulting in estimated
unencumbered reserves of $171.0 million at the end of the
fiscal year. The massive effort to rebuild and replace
destroyed or damaged property in the wake of Hurricane Andrew
is responsible for the substantial positive revenue growth
shown. Most of the impact is in the sales tax.
In fiscal year 1993-94, the State derived approximately
63% 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 68.4%, .6% and
4.0%, 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,
1994, receipts from this source were $1.009 billion, an
increase of 19.0% from fiscal year 1992-93.
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
$777 million during fiscal year 1993-94, posting a 22%
increase 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 1993-94, gross receipts utilities tax
collections totalled $488.2 million, an increase of 8.9% 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 1993-94 total intangible personal property
tax collections were $816.5 million, a 4% 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 $54.8 million during
fiscal year 1993-94, down 15.0% 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 1993-94 produced ticket sales of $2.2 billion
of which education received approximately $948.8 million.
GEORGIA SERIES
Georgia's economy grew rapidly in the 1980s resulting in
a general fund reserve. In fiscal 1989 and 1990, however, the
State's economy began to slow and lower than projected growth
in income and sales taxes and increasing expenditure levels
resulted in a reduction of the general fund's reserve.
During fiscal years 1990, 1991, and 1992, State
expenditures exceeded revenue, effectively eliminating the
State's general fund reserve.
In fiscal 1993 and 1994, however, revenues exceeded
appropriations, which increased the State's revenue shortfall
reserve at the end of Fiscal 1994 to approximately $267
million. Revenues and expenditures for Fiscal 1995 are
estimated to be equal, and revenues are estimated to slightly
exceed expenditures for Fiscal 1996. Fiscal 1995 estimates
indicate that revenues also will slightly exceed expenditures.
Georgia's unemployment rate was 5.6% for 1994 (January-
November annualized rate), which is an increase of 0.1% over
the State's 1993 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 (92.6% 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 1994 from fiscal year 1993, and
that these revenue sources generated the following percentages
of total Georgia State revenue in fiscal year 1994:
Sales Tax 34.6%
Income Tax 43.9%
Motor Fuels Tax 5.2%
Lottery 3.8%
Other Taxes 12.5%
----------- ------
TOTAL 100.0%
State expenditures are classified by major policy
category for budgetary purposes. In the fiscal year 1995
operating budget, Georgia expenditures for educational
development, human resources, protection of persons and
property, and transportation amounted to 51%, 26%, 9.1%, and
4.6%, respectively, of total budgeted expenditures. Debt
service for issued obligations accounts for 4.1% of total
budgeted expenditures for fiscal year 1995, and is projected
to account for 4.0% of total budgeted expenditures in fiscal
year 1996.
For fiscal years ended June 30, 1975 through June 30,
1995, the aggregate general obligation debt and guaranteed
revenue debt authorized by the State General Assembly are $6.9
billion and $195 million, respectively. The aggregate amount
of general obligation debt and guaranteed revenue debt
actually issued by the State, as of March 1, 1995, is $7.1
billion. The total outstanding principal amount of
indebtedness of the State as of March 1, 1995 is $4.3 billion.
Of this outstanding debt, 32% is due and payable on or before
January 1, 2000 and 57% is due and payable on or before
January 1, 2005.
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.
REICH V. COLLINS. On December 6, 1994, the U.S. Supreme
Court reversed the Georgia Supreme Court's decision in REICH
V. COLLINS, 263 Ga. 602 (1993), which had determined that the
plaintiff federal retiree was not entitled to a refund of
taxes paid on federal retirement pension benefits for tax
years before 1989. The plaintiff had sought refunds under the
U.S. Supreme Court's decision in DAVIS V. MICHIGAN DEPARTMENT
OF TREASURY, 489 U.S. 803(1989). The U.S. Supreme Court in
Reich remanded the case to the Georgia Supreme Court for "the
provision of meaningful backward-looking relief consistent
with due process and the McKesson line of cases." On February
1, 1995, the Governor signed H.B. 90 into law, which provides
for the payment of refunds to federal retirees who timely
filed claims for any of the tax years 1985 through 1988,
inclusive. The total amount payable is estimated at
approximately $110 million, to be paid in four roughly equal
annual installments beginning on or before October 15, 1995.
Based on this legislation, it is anticipated that Reich will
shortly be dismissed.
JAMES B. BEAM DISTILLING CO. V. STATE. Three suits have
been filed against the State of Georgia seeking refunds of
liquor taxes under O.C.G.A. Section 48-2-35, in light of BACCHUS
IMPORTS. LTD. V. DIAS, 468 U.S. 263(1984) under Georgia's
pre-Bacchus statute. In the BEAM case, the Supreme Court
indicated that BACCHUS was retroactive, but only within the
bounds of State statutes of limitations and procedural bars,
and left State courts to determine any remedy in light of
reliance interests, equitable considerations, and other
defenses. Georgia's statute of limitations in O.C.G.A.
Section 48-2-35 has run on all pre-BACCHUS claims for refund
except five pending claims seeking 31.7 million dollars in tax
plus interest. On remand, the Fulton County Superior Court
ruled
that procedural bars and other defenses bar any recovery by
taxpayers on Beam's claims for refund. The Georgia Supreme
Court has affirmed, Beam petitioned the United States Supreme
Court for a writ of certiorari, and said petition was denied.
Beam filed a petition for rehearing which was denied on
February 22, 1995.
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. The two Age refund cases are still pending in
the 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, and
plaintiffs have filed a petition for rehearing which is
pending.
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,
have 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 submitted to
the Court for approval. The proposed settlement calls for the
State to pay the amount awarded to the plaintiff and to offer
an option regarding a future funding methodology for pupil
transportation.
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.
MARYLAND SERIES
The State's total expenditures for the fiscal years
ending June 30, 1992, 1993 and 1994 were $11.585 billion,
$11.786 billion and $12.351 billion, respectively. As of
March 8, 1995, it was estimated that total expenditures for
fiscal year 1995 would be $13.834 billion. The State's
General Fund, representing approximately 54% - 60% of each
year's total budget, had a surplus on a budgetary basis of $55
thousand in fiscal year 1991, a deficit of $56 million in
fiscal year 1992 and a surplus of $11 million in fiscal year
1993. 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 1994, the General Assembly approved the $13.343
billion 1995 fiscal year budget. The Budget includes $2.6
billion in aid to local governments (reflecting a $102.4
million increase in funding over 1994 that provides for
substantial increase in education, health and police aid), and
104.8 million in general fund deficiency appropriations for
fiscal year 1994, of which $60.5 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 1995
Budget does not include any proposed expenditures dependent on
additional revenue from new or broad-based taxes. When the
1995 Budget was enacted, it was estimated that the general
fund surplus on a budgetary basis at June 30, 1995, would be
approximately $9.7 million. As of March 8, 1995, it is
estimated that the general fund surplus on a budgetary basis
at June 30, 1995, will be $76.9 million.
In January 1995, the Governor submitted his proposed 1996
Fiscal Year Budget to the General Assembly. The Budget
includes $2.8 billion in aid to local governments (reflecting
a $161.0 million increase over 1995 that provides substantial
increases in education, health and police aid), and $142.1
million in general fund deficiency appropriations for fiscal
year 1995, of which $60.0 million is an appropriation to the
Revenue Stabilization Account of the State Reserve Fund. As
of March 8, 1995, it is estimated that the general fund
surplus on a budgetary basis at June 30, 1996 will be $176.8
thousand.
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 May 1995, the State's general obligation bonds were
rated "Aaa" by Moody's and "AAA" by S&P 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 May 1995, these bonds were rated "Aa" by
Moody's and "AA" by S&P 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 May 1995.
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 "AA+" 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 May 1995. 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
At the present time, the Commonwealth of Massachusetts'
economy is experiencing a modest recovery following a slow
down that began in mid-1988. Massachusetts has nonetheless
undergone serious financial difficulties in recent years that
have adversely affected the Commonwealth's credit standing.
While Massachusetts had benefitted from an annual job growth
rate of approximately 2% since the early 1980s, by 1989
employment started to decline. Between 1988 and 1992, total
employment in Massachusetts declined 10.7 percent. In 1993
and 1994, however, total employment increased by 1.6 percent
and 2.2 percent, 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, although unemployment rates in
Massachusetts since 1993 have declined faster than the
national average. As a result, the average monthly
unemployment rate in Massachusetts for 1993 was only slightly
higher than the national average (6.9 percent compared to 6.8
percent) and the unemployment rate in Massachusetts in 1994
was slightly below the national average (6.0 percent compared
to 6.1 percent).
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 to
1994 and expects to end fiscal 1995 with a positive closing
fund balance in its budgeted operating funds.
Massachusetts expenditures for State government programs
and services in each of the fiscal years 1987 through 1991,
inclusive, exceeded each fiscal year's current revenues. In
fiscal years 1987 and 1988, largely by drawing on fund
balances from prior years, Massachusetts ended each fiscal
year with budgetary surpluses. However, fiscal years 1989 and
1990 ended with operating deficits of $672.5 million and $1.25
billion, respectively.
In fiscal 1991, total revenues and other sources of the
budgeted operating funds increased by 13.8% over the prior
year, to $13.913 billion. This increase was due chiefly to
State tax rate increases enacted in 1990 and to a substantial
federal reimbursement under the Medicaid program for
uncompensated patient care payments, as well as other factors.
The Commonwealth ended fiscal 1991 with an operating loss of
$21.2 million, but with positive closing fund balances of
$237.1 million.
Budgeted revenues and other sources for fiscal 1992 were
$13.728 billion, including tax revenues of $9.484 billion.
Budgeted revenues and other sources increased by approximately
0.7% from fiscal 1991 to fiscal 1992, while tax revenues
increased by 5.4% for the same period.
Commonwealth expenditures and other uses were
approximately $13.420 billion for fiscal 1992, which is $238.7
million or 1.7% lower than fiscal 1991 budgeted expenditures
and other uses. Final fiscal 1992 budgeted expenditures were
approximately $300 million higher than the initial July 1991
estimates of budgetary expenditures. A large portion of the
increase in spending resulted from increases in certain human
services programs, including an increase of $268.7 million for
the Medicaid program and $50.0 million for mental retardation
consent decree requirements. Fiscal 1992 expenditures for
Medicaid were $2.818 billion, or 1.9% higher than fiscal 1991.
This increase compares favorably with the 19.25% average
annual growth rate of Medicaid expenditures for fiscal years
1988 through 1991. Overall, the budgeted operating funds
ended fiscal 1992 with an excess of revenues and other sources
over expenditures and other uses of $312.3 million.
The budgeted operating funds of the Commonwealth ended
fiscal 1993 with a surplus of revenues and other sources over
expenditures and other uses of $13.1 million. Budgeted
revenues and other sources for fiscal 1993 totaled
approximately $14.710 billion, including tax revenues of $9.40
billion. Total revenues and other sources increased by
approximately 6.9% from fiscal 1992 to fiscal 1993, while tax
revenues increased by 4.7% for the same period.
Budgeted operating funds of the Commonwealth ended fiscal
1994 with a surplus of revenues and other sources over
expenditures and other uses of $26.8 million and the aggregate
ending fund balance in the budgeted operating funds of the
Commonwealth was approximately $589.3 million. Budgeted
revenues and other sources for fiscal 1994 totaled
approximately $15.55 billion, including tax revenues of
$10.607 billion. Budgeted expenditures and other uses in
fiscal 1994 totaled $15.52 billion, approximately 5.6% higher
than budgeted expenditures and other uses in fiscal 1993.
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. 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.
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 7.1% from $659.7 million in fiscal 1989 to $868.2
million in fiscal 1993. Pension costs (inclusive of current
benefits and pension reserves) for fiscal 1994 were $908.9
million, an increase of 4.7% over fiscal 1993 expenditures.
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 $1.15
billion in fiscal 1994. 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 either 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 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 voter 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. 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 1994,
approximately 17.59% of Massachusetts' budget was allocated to
Local Aid. Direct Local Aid has dropped from a high of $2.961
billion in fiscal 1989 to $2.727 billion in fiscal 1994.
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 1994, approximately 77% of wage
and salary employment was in the State's non-manufacturing
sectors. In 1994, total employment was 4,473,000 with
manufacturing wage and salary employment totaling 949,400.
Manufacturing employment remains below the peak employment
level of 1,179,600 attained in 1978. Employment in the
durable goods manufacturing industries was 706,700 and non-
durable goods employment was 242,800 in the State in 1994.
The motor vehicle industry, which is still an important
component in the State's economy, employed 278,200 in 1994.
The State's average unemployment rate for calendar year 1994
was 5.9%.
The State's general obligation bonds are rated A1 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.
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. The State has
prepared a preliminary calculation to reclassify these
expenditures and does not foresee any material financial
impact from the reclassification.
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 January 1995
forecast is summarized below.
The State's economic forecast for calendar year 1995
projects modest growth. Real GDP is projected to grow 2.9% in
1995, on a calendar year basis. Car and light truck sales are
expected to total 15.7 million units in 1995.
The forecast assumes moderate inflation, accompanied by
steady interest rates. Ninety-day T-Bill rates are expected
to average 6.0 percent for 1995. The United States'
unemployment rate is projected to decline to an average of 5.6
percent for 1995.
The State's forecast for the Michigan economy reflects
the above national outlook. Total wage and salary employment
is projected to grow 2.9% in 1995. This slight growth
reflects the ongoing diversification of the Michigan economy.
The unemployment rate is projected to average 5.4% in 1995,
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 1994-1995
was submitted to the Legislature in December 1993. The fiscal
year 1994-1995 general fund/general purpose Executive Budget
recommendation totalled $7,865.8 million. The 1994-95 budget
was passed by the Legislature in July 1994.
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.
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. 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. The unreserved ending accrued balance of
the BSF on September 30, 1990 was $385.1 million, on September
30, 1991 was $182.2 million, on September 30, 1992 was $20.1
million and on September 30, 1993 was $303.4 million. The
ending unreserved fiscal year 1993-94 General Fund balance of
$460.2 million was transferred to the Budget Stabilization
Fund.
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.
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 of
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, 1994, the outstanding principal
amount of all State general obligation bonds was $382 million.
The State anticipates issuing additional general obligation
environmental bonds in 1995. On March 16, 1995, the State
issued $500 million in short-term general obligation notes in
order to meet cash flow requirements. These notes will mature
on September 29, 1995. On April 6, 1995, the State issued
$85.0 million in short-term general obligation school loan
notes. These notes are due on August 15, 1995.
As of December 31, 1994, approximately $4.1 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
CONSTITUTIONAL AND STATUTORY PROVISIONS RELATING TO STATE
AND LOCAL FUNDING. State revenues in Minnesota are generated
primarily from individual and corporate income taxes, sales
and use taxes, inheritance and gift taxes, motor fuel taxes
and excise taxes on liquor and tobacco. 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 State
revenues is allocated from State government to other
governmental units within the State 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 State
government with other units of government subjects all levels
of government, in varying degrees, to fluctuations in the
State's overall economy.
The State's constitutionally prescribed fiscal period is
a biennium, and Minnesota operates on a biennial budget basis
with revenues credited 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 State
government shall not in any biennium appropriate funds in
excess of projected tax revenues from all sources. The State
is authorized to levy additional taxes to resolve any
inadvertent shortfalls.
Legislative appropriations for each biennium are prepared
and adopted during the final legislative session of the
immediately preceding biennium. A revenue forecast is
normally 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.
The State'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 increase
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 the State's overall
economy may restrict future aid or appropriations from State
government to other units of government.
For fiscal year 1994, ending June 30, 1994, revenues
received were $9.040 billion. Expenditures and transfers were
$8.075 billion and, after deducting a cash flow account
appropriations carry forward of $500 million, a budgetary
balance of $216 million remained.
For fiscal year 1995, ending June 30, 1995, revenues are
estimated to be $9.610 billion. Expenditures and transfers
are estimated at $8.610 billion and, after deducting a cash
flow account appropriations carry forward of $500 million, it
is estimated that a budgetary balance of $421 million will
remain.
For fiscal years 1996 and 1997, revenues are estimated at
$9.756 billion and $9.862 billion, respectively. Expenditures
and transfers are estimated at $8.827 billion and $9.223
billion, respectively. A cash flow account is maintained in
the amount of $350 million for each such fiscal year and
projections show a budgetary balance of $290 million at the
end of fiscal year 1996 and a budgetary balance of zero at the
end of the 1997 fiscal year.
In 1992, the Minnesota Legislature adopted
"MinnesotaCare" which was designed to provide universal health
care coverage for Minnesota citizens while controlling the
escalation of health care costs. The program has been funded
primarily from a 2% provider tax which is the subject of
ongoing litigation in Minnesota. Similar tax provisions have
been enacted in other states and are also subject to
litigation. Litigation will probably continue until the U.S.
Supreme Court issues a definitive ruling on the powers of the
state to tax employee benefit plans. In 1995, the Minnesota
legislature delayed mandates for universal coverage and other
provisions of the MinnesotaCare law thus reducing the exposure
for deficits in the health care program.
When the Minnesota legislature convened in early 1994,
the Governor announce a "no new taxes" position. In 1995,
legislators from both political parties joined the Governor in
the "no new tax" pledge and, as a result, the legislature
adopted few changes in the tax laws of the State. The
Minnesota legislature completed its tax and appropriations
process in June 1995. However, given the relationship between
state and federal expenditures and the anticipated reduction
in federal aid to the states, it is anticipated that the
Minnesota legislature will meet in special session to make
budget adjustments shortly after the level of federal
expenditures for the next biennium is determined.
State and local governments in Minnesota have been well
served by the creation of a "rainy day fund" or "cash flow
account" which can be drawn upon at a time of economic
downturn. However, the amount budgeted for the account was
reduced from $500 million in fiscal year '94/'95 to $350
million for fiscal year '96/'97.
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 Aa by
Moody's and AA+ by S&P and Fitch.
STATEWIDE 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 the labor market.
When viewed in 1995 at a highly aggregate level of
detail, the structure of the State's economy parallels the
structure of the United States' 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 State employment was within two
percentage points of the share of national employment.
The State's employment in the durable goods industries
continues to be highly concentrated in industries specializing
in the manufacturing of industrial machinery, fabricated
metals and instruments. This emphasis is partially explained
by the location in the State of IBM, Cray Research and other
computer equipment manufacturers. Further, manufacturers of
food products, wood products, and printed and published
materials joined the high technology manufacturing group which
has led to significant business expansion in Minnesota in this
decade.
The importance of the State's rich natural resource base
for overall employment is apparent in the employment mix in
non-durable goods industries. in 1989, approximately 29.9% of
the State's non-durable goods employment was concentrated in
food and kindred industries, and approximately 19.9% in paper
and allied industries. This compares to approximately 21.4%
and 8.8%, respectively, for comparable sectors in the national
economy. Both of these industries rely heavily on renewable
resources in the State. Over half of the State's acreage is
devoted to agricultural purposes and nearly one-third to
forestry. Printing and publishing are also relatively more
important in the State than in the United States.
Mining is currently a less significant factor in the
State economy than it once was. Mining employment primarily
in the iron or taconite industry dropped from 17.3 per
thousand people in 1979 to 7.9 per thousand. 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 like Alliant Tech and United Defense FMC/BMY
(formerly FMC) will face challenges in maintaining employment
and sales. More importantly, Minnesota firms producing
electronic components, communication equipment, electrical
equipment, chemicals, plastics, computers and software will
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%,
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.
EMPLOYMENT AND INCOME GROWTH IN THE STATE. During the
1980 to 1990 period, total employment in Minnesota increased
17.8% as compared to 20.5% 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.
The most recent recession which began in July 1990 was less
severe in Minnesota than it was nationally. Since 1988, non-
farm employment in Minnesota grew at a more rapid rate than it
did at the national level.
The Minnesota work force will remain stable with slow
growth expected between now and 1996. The large size of the
baby boom generation will lend stability. Not much change is
expected in composition. Female labor force participation
rates will continue to increase slowly. Employment growth is
projected to be most rapid for professional, para-professional
and technical occupations. Minnesota has a well educated work
force as compared to the nation as a whole, and occupations
projected to grow most rapidly are those requiring the most
education and training.
Since 1980, State per capital personal income has been
within three percentage points of national per capital
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 spite of the early 1980's recessions and some difficult
years in agriculture. In 1991, Minnesota per capita personal
income was 100.2% and in 1992, 101% of its U.S. counterpart.
Another measure of the vitality of the State's economy is
its unemployment rate. For 1991, the State's unemployment
rate was 5.1% as compared to a national average of 6.7%. In
1992, the State's unemployment rate was again 5.1% with a
national average of 7.4%. In April 1995, the State rate was
3.7% and the national rate 5.6%.
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 3,244,600 jobs in 1993, of which
approximately 845,900 were in manufacturing. According to the
North Carolina Employment Security Commission, in May 1994,
the State ranked tenth 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 June 1994
seasonally adjusted unemployment rate to be 3.7%, as compared
with a national unemployment rate of 6.0%.
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 3,556,000 in 1993, an increase of 24.5%.
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
134,908 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. 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 to 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 has 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, which was denied. An appeal from the decision is
pending. 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. SWANSON CASE -- STATE TAX REFUNDS-FEDERAL RETIREES.
In DAVIS V. MICHIGAN (1989), the United States Supreme Court
ruled that a Michigan income tax statute which taxed federal
retirement benefits while exempting those paid by State and
local governments violated the constitutional doctrine of
intergovernmental tax immunity. At the time of the DAVIS
decision, North Carolina law contained similar exemptions in
favor of State and local retirees. Those exemptions were
repealed prospectively, beginning with the 1989 tax year. All
public pension and retirement benefits are now entitled to a
$4,000 annual exclusion.
Following DAVIS, federal retirees filed a class action
suit in federal court in 1989 seeking damages equal to the
North Carolina income tax paid on federal retirement income by
the class members. A companion suit was filed in State court
in 1990. The complaints alleged that the amount in
controversy exceeded $140 million. The North Carolina
Department of Revenue estimate of refunds and interest
liability is $280.89 million as of June 30, 1994. In 1991,
the North Carolina Supreme Court ruled in favor of the State
in the State court action, concluding that DAVIS could only be
applied prospectively and that the taxes collected from the
federal retirees were thus not improperly collected. In 1993,
the United States Supreme Court vacated that decision and
remanded the case back to the North Carolina Supreme Court.
The North Carolina Supreme Court then ruled in favor of the
State on the grounds that the federal retirees had failed to
comply with State procedures for challenging unconstitutional
taxes. Plaintiffs petitioned the United States Supreme Court
for review of that decision and the Supreme Court denied that
petition. The United States District Court has ruled in favor
of the defendants in the companion federal case, and a
petition for reconsideration was denied. Plaintiffs have
appealed to the United States Court of Appeals. Oral
arguments have been held, but no decision has been made. The
North Carolina Attorney General's Office believes that sound
legal arguments support the State's position.
4. 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. The case has been
tried in Superior Court, but a decision has not yet been made
by the trial judge. The North Carolina Attorney General's
Office believes that sound legal arguments support the State's
position.
5. FAULKENBURY V. TEACHER'S 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
Woodward, 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 Woodward, 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 are scheduled to
be heard in the Superior Court of Wake County in late May,
1995. 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.
6. 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, has been
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 seeks 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 effect of this ruling was to increase collections by
rendering all stock taxable on 100% of its value. The North
Carolina Supreme Court reversed the Court of Appeals and held
that the tax is valid and constitutional. The plaintiff's
petition or review by the United States Supreme Court was
granted. Oral argument is expected in Fall, 1995 and a
decision expected by mid-1996. Net collections from the tax
for the fiscal year ended on June 30, 1993 amounted to $120.6
million. The North Carolina Attorney General's Office
believes that sound legal arguments support the State's
position.
OHIO SERIES
STATE ECONOMY AND BUDGET. Non-manufacturing industries
now employ approximately 78.6% 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") projects
positive $681.5 million and $446.7 million ending fund and
cash balances, respectively, for the GRF for fiscal year 1995.
In addition, as of March 31, 1995 the Budget Stabilization
Fund ("BSF") had a cash balance of $288.7 million.
The GFR appropriations bill for the biennium ending June
30, 1995 was passed on June 30, 1993 and promptly signed, with
selective vetoes, by the Governor. The act provides for total
GRF biennial expenditures of approximately $30.7 billion, an
increase over those for the 1992-93 fiscal biennium.
Authorized expenditures in fiscal year 1995 are 6.6% higher
than in fiscal year 1994. Any unobligated and unreserved fund
balances in the GRF, in excess of $70.0 million by the end of
fiscal year 1995, must be transferred to the BSF.
Accordingly, the OBM reports that a transfer of approximately
$611.5 million will be made from the GRF to the BSF.
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 March 31, 1995 was
$3.434 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 six months of fiscal year
1994, the highest being $500.6 million in December 1993. In
the first eight months of fiscal year 1995, a GRF cash flow
deficiency occurred in four months with the highest being
$338.0 million in November 1994. In addition, GRF cash flow
deficiencies have occurred in five months of fiscal year 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 from 1921, the voters of Ohio, by
thirteen specific constitutional amendments, have authorized
the incurrence of up to $4.864 billion in State debt to which
taxes or excises were pledged for payment. As of April 17,
1995, excluding Highway Obligations Bonds discussed below,
$3.375 billion had been issued, of which $2.584 billion had
been retired and approximately $790.1 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.
The total voted authorization of State debt includes
authorization for $500 million in Highway Obligations to be
outstanding at any one time, with no more than $100 million to
be issued in any one calendar year. As Highway Obligations
are retired, additional Highway Obligations may be issued so
long as the principal amount outstanding does not exceed $500
million. As of April 17, 1995, approximately $1.545 billion
in Highway Obligations had been issued and $446.3 million were
outstanding.
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 an additional $35 million of Coal Development Bonds. As of
April 17, 1995, $80 million of Coal Development Bonds were
issued, of which $34.7 million were outstanding.
A 1987 State constitutional amendment authorizes 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. As of
April 17, 1995, approximately $840.0 million of such
obligations were issued, of which $728.3 million were
outstanding.
A constitutional amendment adopted in November 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
November 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.
In addition, a constitutional amendment adding express
exclusions from sales or other excise taxes upon food was
approved at the November 1994 election. The estimate of
resulting reduced annual State-level revenues approximates
$30.0 million for the current fiscal year. However, in OBM's
judgment, the amendment has not had and will not have a
materially negative effect on State finances and appropriates
for the remainder of the current biennium.
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.
Resolutions have been introduced in both houses of the
General Assembly that would submit at the November 1995
election a constitutional amendment relating to the State
debt. The amendment would authorize, among other things, the
issuance of general obligation debt for a variety of purposes
and without additional vote of the people to the extent that
debt service on all State general obligation debt and GRF-
supported obligations would not 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 not
secured by a pledge of taxes or excises 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 April 17,
1995 the OPFC had issued $3.531 billion for higher education
facilities, approximately $2.164 billion of which were
outstanding, $957.5 million for mental health facilities,
approximately $473.1 million of which were outstanding and
$165.0 million for parks and recreation facilities,
approximately $103.1 million of which were outstanding.
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 was authorized to issue obligations in
addition to those previously authorized by the General
Assembly, in the amounts of $70.0 million for the Department
of Education and $240.0 million ($120 million for calendar
year 1995 and $120 million for calendar year 1996) for the
Public Works Commission. The Commissioners of the Sinking
Fund presently have General Assembly authorization to issue
$70.0 million of Coal Development Bonds, $118.17 million of
Highway Obligation Bonds, and $80.0 million of parks and
natural resources bonds.
A State law, originally enacted in 1986 and recently
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 1994 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 (or the predecessor
Authority), 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
receipts) of the State after provision for the payment of
certain other State obligations.
Notwithstanding the constitutional provisions prohibiting
the incurrence of certain debt without popular vote, the State
and State agencies have issued revenue bonds that are payable
from net revenues of revenue-producing facilities or
categories of facilities, which revenue bonds are not "debt"
within the meaning of such constitutional provisions.
Investment in such bonds carries the risk that the issuing
agency or the specific revenue source may not provide
sufficient funds to service the debt incurred. Certain of
these bonds consist of those issued by the Ohio Turnpike
Commission.
The State is a party to various legal proceedings seeking
damages or injunctive relief and generally incidental to its
operations. In particular, two actions contesting the Ohio
system of school funding are pending.
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
$5.032 billion, $88.5 million and $840.2 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 nine cities and nine villages
have been resolved and their commissions terminated. Only the
Cities of East Cleveland and Nelsonville and three of the
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.
OREGON SERIES
STATE TAX REVENUES. Oregon does not have a sales tax. As
a result, State tax revenues are particularly sensitive to
economic recessions. The principal sources of State tax
revenues are personal income and corporate income taxes. For
the 1993-95 biennium, approximately 96.3% of the State's
revenues will come from combined income taxes, insurance
taxes, gift and inheritance taxes, and cigarette and tobacco
taxes. Since 1983 State revenues have improved substantially,
and in recent years the State has granted tax credits because
of budget surpluses, as required by statute. The State's
economic and revenue forecast dated May 15, 1995 issued by The
Office of Economic Analysis predicts that State General Fund
revenues for the 1993-1995 biennium will exceed the
legislatively approved budget forecast by approximately $314.0
million (or 5.1 percent).
The most significant feature of the budgeting process in
Oregon is the constitutional requirement that the budget be in
balance at the end of each biennium. Actual General Fund
revenues have exceeded budget estimates in every biennium
since 1983 and the State predicts an ending 1993-95 biennium
General Fund balance of $546.4 million.
EMPLOYMENT. Oregon's economy has outperformed the
nation's economy in recent years. Oregon employment increased
15.4% between 1987 and 1992; national employment during the
same period increased only 6.1%. According to a report issued
by the State of Oregon, non-agricultural employment in Oregon
increased 4.3% from 1993 to 1994 while national employment
increased only 2.6%. Non-agricultural employment in Oregon is
predicted to continue increasing at a faster rate than the
national average through the year 2000. During the same
period personal income for wage earners in Oregon is expected
to rise 55% before adjustment for inflation, compared to 48.9%
for the nation. Despite favorable income and job growth
projections Oregon's per capita income is expected to slip
behind the rest of the nation because of expanding labor
supply due to in-migration and downsizing of the timber
industry and government.
As the economy has grown, it has diversified, becoming
less dependent on the forest products industry and expanding
the number of high technology industries. Compared to 1980,
15,500 fewer people worked in lumber and products
manufacturing in 1992, while 7,700 more people worked in high
technology sectors. Timber industry employment in Western
Oregon is projected to fall to 56,000 jobs over the next
decade, a 23% decrease relative to 1990 employment.
Most of the recent job gains have come from
non-manufacturing sectors. Since 1985, non-manufacturing
employment has increased by 27%, led by trade (up 23%),
services (up 41%) and construction (up 53%).
Non-manufacturing sectors now provide more that 83% of total
Oregon employment.
Despite recent developments in employment, however,
Oregon per capital personal income remains at about 93.6% of
the national average.
STATE FORECAST. In May 1995, the State of Oregon
forecast that modest growth of the economy which began in the
second half of 1992 would continue through 1994 and into 1995,
with an expected rate of growth in non-agricultural wage and
salary employment increasing 3.6% in 1995. Personal income is
expected to increase 4.6% in 1995, after a 4.3% gain in 1994.
The rate of growth is expected to slow as a result of
softening of Oregon's housing markets, reductions in timber
output and employment and weaker national demand for Oregon's
manufactured products.
The State forecast for the economy through the year 2000
anticipates gradually improving national conditions, continued
strong net in-migration to Oregon, accelerating construction
activity, and continued strength in the State's electronics
and office equipment manufacturing industries. In the 1990's,
the State's economy is expected to exceed the rate achieved in
Oregon in the 1980's, based on forecast competitive cost
advantages compared to national averages, in-migration, growth
in Oregon's high technology sector and expanding exports, but
to fall well below the rates of growth in the 1960's and
1970's.
POPULATION. Oregon's population as of July 1, 1992 was
estimated to be 2,979,000. Since 1960 the State's population
has increased almost 61%; between 1980 and 1990, Oregon's
population increased approximately 7.7%. The rate of
population growth through the 1990's is expected to be more
than twice the rate of growth in the 1980's. Oregon's
population is expected to grow by 63,000 in 1994 with two
thirds of the growth from net in-migration. Growth is
expected to slow to 50,000 per year in 1995 as the California
economy rebounds.
There are four major population areas in Oregon. The
City of Portland, located at the northern end of the
Willamette Valley, is the largest city in the State, and its
primary metropolitan statistical area was estimated to have a
population of 1,285,100 in 1991, or 44% of the total State
population. The City of Eugene, located at the southern end
of the Willamette Valley, is the second largest city, with a
metropolitan statistical area population of 290,900 in 1991,
or 10% of the State's total population. Salem, located in the
middle of the Willamette Valley, is the third largest city,
had a metropolitan statistical area population of 287,900 in
1991, or 10% of the State's total population. The fourth
largest city, Medford, is located in southwestern Oregon
outside the Willamette Valley, and had a metropolitan
statistical area of 151,400 in 1991. Approximately 70% of the
State's population resides in the Willamette Valley.
Western Oregon consists largely of small coastal
communities which focus on tourism, fishing, agriculture and
dairy operations. Central Oregon, west of the Cascade
Mountains, has the Willamette Valley, Oregon's four largest
cities, and the highly economically diversified Portland
metropolitan area. East of the Cascade Mountains communities
tend to be smaller, and economic activity centers on
agriculture, forestry and ranching. A number of small, timber
dependent communities throughout the State have been
particularly adversely affected by the recent reductions in
timber and forestry products employment. Local economies in
Oregon vary substantially, and respond to different factors;
statistical data on the economic activity in the State as a
whole may mask significant differences in local economies.
HOUSING, AGRICULTURE, TRADE AND FOREST PRODUCTS. Much of
the recent and forecast growth in the Oregon non-manufacturing
sectors can be traced to population growth. Oregon's quality
of life and low housing costs have always encouraged
in-migration. The State's rapid job growth since 1987 pushed
Oregon's population growth above the nation's. The growth
caused Oregon housing starts to increase in 1987, 1988, 1989
and 1990, even though national housing starts declined. In
1990, Oregon housing starts (including single and multiple
family dwellings) increased by two percent, compared to a
national decline of 12.9%. In 1991, housing starts declined,
but increased again in 1992 and 1993 primarily due to single
family dwelling increases.
Oregon has a highly diversified agricultural base, with
gross farm sales of over $2.8 billion in 1993, over 84
commodities with sales of $1,000,000 or more, and over 37
commodities with gross sales of $10,000,000 or more.
Agriculture in Oregon follows the national trend of increasing
capital intensity, with employment decreasing as constant
dollar output has increased. Recent agricultural expansion is
attributed to use of more efficient methods and increased use
of irrigation. Although every county in the State is involved
in agricultural production, activity is concentrated in
Willamette Valley.
Oregon's forest products industry consists of several
components: lumber and wood products, paper and allied
products, and a small number of workers in reforestation and
other services. In 1992, farm forest products were,
collectively, the third largest agricultural commodity for the
State, with gross sales of $258 million. Employment for paper
and allied products has remained relatively constant at about
9,000. Reforestation currently employed about 4,000, and has
been growing steadily. Lumber and wood products, once
Oregon's manufacturing mainstay, has experienced massive, and
probably permanent, reductions in employment, with jobs
declining from about 65,000 to about 50,000 during the period
from 1988 to 1992.
Oregon is located on the western coast of the United
States, where the Columbia River flows into the Pacific Ocean.
International trade and exports are an important part of the
Oregon economy, with much of the trade occurring through
Oregon's 23 port districts. The Port of Portland is most
active, having developed an efficient system for dealing with
large numbers of vessels, including modern grain elevators,
cranes, break-bulk and containerized cargo facilities, and
ship repair and dry dock facilities. Substantial activity
also occurs throughout the Columbia-Snake River basin and
through the ports of Newport and Coos Bay, on the Oregon
coast. Chief export items include grains, logs, lumber and
other forest products, paper and paper products, vegetables,
metal products and chemical/petroleum products. Items
imported in amounts in excess of $100 million in 1991 include
cars, chemical/petroleum products, metals/metal products, food
and headware/flat goods, computing equipment, electronic
components, electrical machinery, general purpose machinery
and rubber/plastic. Imports through the Oregon Columbia-Snake
River, Newport and Coos Bay Customs Districts increased
approximately 14% over the five year period beginning in 1987.
In 1992, the Columbia-Snake River ports, together with the
ports of Newport and Coos Bay, reported exports of over $5.3
billion (representing a 20.1% increase from 1991) and imports
of over $1.8 billion (representing a 4.0% decrease from 1991).
RECENT DEVELOPMENTS AFFECTING THE OREGON ECONOMY AND
CREDITWORTHINESS OF OREGON ISSUERS. Article XI, section 11b
of the Oregon Constitution, adopted by Oregon's voters in
November 1990 (the "Ballot Measure 5") imposes an aggregate
limit on the rate of property taxes, including ad valorem
taxes, that may be levied against any real or personal
property. The limit is being phased in over a 5-year period
that will be complete in the 1995 tax year. Beginning with
the 1995 tax year, not more that $15.00 per $1,000 of real
market value may be assessed against any real or personal
property, of which amount not more than $10.00 may be levied
for combined general governmental purposes and not more than
$5 may be levied for educational purposes.
The Ballot Measure 5 limits do not apply to taxes imposed
to pay the principal of and interest bonds issued by the State
of Oregon under a specific provisions of the State
Constitution. Therefore, the ability of the State to levy
taxes to service its general obligations bonds is not subject
to the limit. In addition, because the State currently
receives its revenues from sources other than property taxes,
the Ballot Measure 5 has not directly affected State revenues.
The Ballot Measure 5 does affect the financial condition
of the State, however, since it (1) requires the State to
replace losses to school funds until fiscal year 1996-97 and
(2) restricts the ability of Oregon local governments to raise
revenues through the imposition of property tax increases.
The Legislative Revenue Office of the State has projected that
the State's obligation to replace school revenues will be
$1,535.2 million during the 1993-95 biennium and $1,364.1
million during the 1995-96 fiscal year. The State's
obligation to replace school revenues terminates after fiscal
year 1995-96.
All local governments which use property taxes as a
source of revenues will be affected. The Ballot Measure 5
does not apply to specially levied ad valorem taxes to pay the
principal and interest on general obligation bonds for capital
construction or improvements if the bonds were either: (1)
issued on or prior to November 6, 1990 or (2) approved by the
electors of the issuing governmental unit, so local general
obligation bonds will be unaffected. To date, only a few
local governments have experienced restrictions on their
ability to levy taxes as a result of the Ballot Measure 5.
User fees, licenses, excise or income taxes and incurred
charges for local improvements are also exempted from the
Ballot Measure 5. As a result, local governments have begun
to rely more heavily on such fees and taxes to finance
services and improvements.
Pending litigation and environmental proceedings relating
to the logging of old growth forest and the protection of the
Northern Spotted Owl make it difficult to predict future
timber supplies in Oregon. Competitive pressures,
productivity improvements and fluctuations in demand for wood
products may result in additional losses. In 1991 and 1992,
in response to concerns over diminishing salmon runs, three
populations of Snake River salmon were placed on the
Endangered Species list. More recently, the National Marine
Fisheries Service and the U.S. Fish and Wildlife Service have
commenced status reviews of hundreds of additional salmon and
trout populations in the Columbia Basin and throughout Western
Oregon. The Snake River salmon listings have already had
substantial economic impacts, primarily through increased
electricity rates and related impacts on rate-sensitive
industries such as the aluminum industry. Efforts to protect
salmon and steelhead populations may eventually affect a wide
variety of industrial, recreational and land use activities,
with corresponding impacts on long-term economic growth.
There is a relatively small active market for municipal
bonds of Oregon issuers other than the general obligations of
the State itself, and the market price of such other bonds may
therefore be volatile. If the Oregon Series were forced to
sell a large volume of Oregon Obligations owned by it for any
reason, such as to meet redemption requests for a large number
of its shares, there is a risk that the large sale itself
would adversely affect the value of the Fund's portfolio.
PENNSYLVANIA SERIES
GENERAL. Pennsylvania has historically 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 of 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 1984
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 7.1 percent in 1993. Seasonally adjusted data for October
1994 shows an unemployment rate of 6.0% compared to an
unemployment rate of 5.8% 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 (33.7% of General
Fund revenues in fiscal 1994), the 2.8% personal income tax
(32.0% of General Fund revenues in fiscal 1994) and the 10.99%
corporate net income tax (10.2% of General Fund revenues in
fiscal 1994). 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, the oil company franchise tax, aviation
taxes and revenues from fees levied on heavy trucks. These
revenues are restricted to the repair and construction of
highway bridges and aviation programs. 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 ($6.2 billion of fiscal 1993 expenditures, $6.4
billion of the fiscal 1994 budget and $6.7 billion of the
fiscal 1995 budget) and public health and human services
($11.1 billion of fiscal 1993 expenditures, $11.7 billion of
the fiscal 1994 budget and $12.6 billion of the fiscal 1995
billion budget).
GOVERNMENTAL FUND TYPES: FINANCIAL CONDITION/RESULTS OF
OPERATIONS (GAAP BASIS). Reduced revenue growth and increased
expenses contributed to negative unreserved-undesignated fund
balances of the Governmental Fund Types at the end of the 1990
and 1991 fiscal years, largely due to operating deficits in
the General Fund and State Lottery Fund during those years.
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. Financial
performance continued to improve during fiscal 1993 resulting
in a positive unreserved-undesignated balance for combined
Governmental Fund Types at June 30, 1993, as a result of a
$420.4 million in the balance. These gains were produced by
continued efforts to control expenditure growth. At the end
of fiscal 1993, the total fund balance and other credits for
the total governmental Fund types was $1,959.9 million, a
$732.1 million increase from the balance at June 30, 1992.
During fiscal 1993, total assets increased by $1,296.7 million
to $7,096.4 million, while liabilities increased $564.6
million to $5,136.5 million.
General Fund: Financial Condition/Results of Operations.
FIVE YEAR OVERVIEW (GAAP BASIS). The five year period
from fiscal 1989 through fiscal 1993 was marked by public
health and welfare costs growing at a rate double the growth
rate for all the State expenditures. Rising caseloads,
increased utilization of services and rising prices joined to
produce the rapid rise of public health and welfare costs at a
time when a national recession caused tax revenues to stagnate
and even decline. During the period from fiscal 1989 through
fiscal 1993, public health and welfare costs rose by an
average annual rate of 10.9% while tax revenues were growing
at an average annual rate of 5.5%. Consequently, spending on
other budget programs was restrained to a growth rate below
5.0% and sources of revenues other than taxes became larger
components of fund revenues. Among those sources are transfers
from other funds and hospital and nursing home pooling of
contributions to use as federal matching funds.
Tax revenues declined in fiscal 1991 as a result of the
recession in the economy. A $2.7 billion tax increase enacted
for fiscal 1992 brought financial stability to the General
Fund. That tax increase included several taxes with
retroactive effective dates which generated some one-time
revenues during fiscal 1992. The absence of those revenues in
fiscal 1993 contributed to the decline in tax revenues for
fiscal 1993.
During fiscal 1992 enactment of over $2.7 billion in
General Fund tax increases and implementation of expenditure
control initiatives helped the General Fund balance return to
a surplus at June 30, 1992, of $87.5 million. The actions
taken to increase revenues and restrain expenditure growth
were necessary to offset the effects on General Fund finances
of a period of slow economic growth including a national
economic recession. The recession caused tax revenues during
fiscal 1991 to be below the amount received during fiscal 1990
while spending, particularly for public health and welfare
programs to support needy individuals, increased.
FISCAL 1993 FINANCIAL RESULTS (GAAP BASIS). The fund
balance of the General Fund increased by $611.4 million during
the fiscal year, led by an increase in the unreserved balance
of $576.8 million over the prior fiscal year balance. At June
30, 1993, the fund balance totaled $698.9 million and the
unreserved-undesignated balance totaled $64.4 million. A
continuing recovery of the Commonwealth's financial condition
from the effects of the national economic recession of 1990
and 1991 is demonstrated by this increase in the balance and a
return to a positive unreserved-undesignated balance. The
previous positive unreserved-undesignated balance was recorded
in fiscal 1987. For the second consecutive fiscal year the
increase in the unreserved-undesignated balance exceeded the
increase recorded in the budgetary basis unappropriated
surplus during the fiscal year.
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. Expenditures, excluding pooled financing
expenditures, increased by 7.2% over fiscal 1993 expenditures.
Medical assistance and corrections spending contributed to the
rate of spending growth for the fiscal year. The Commonwealth
maintained an operating balance on a budgetary basis for
fiscal 1994 producing a fiscal year ending unappropriated
surplus of $335.8 million. By State statute, ten percent
($33.6 million) of that surplus transferred to the Tax
Stabilization Reserve Fund and the remaining balance was
carried over into the 1995 fiscal year. The balance in the
Tax Stabilization Reserve Fund as of October 31, 1994, was
$63.9 million.
FISCAL 1995 BUDGET. The fiscal 1994-95 budget was
approved by the Governor in June 1994 and provided for
$15,652.9 million of appropriations from commonwealth funds,
an increase of 3.9% over appropriations, including
supplemental appropriations, for fiscal 1994. Medical
assistance expenditures represent the largest single increase
in the budget ($221 million) representing a 9% increase over
the prior fiscal year. Education subsidies to local school
districts were increased by $132.2 million to continue the
increased funding for the poorest school districts in the
State.
The budget also includes tax reductions totaling an
estimated $166.4 million. A reduction to the corporate net
income tax rate from 12.25% to 9.99% to be phased in over a
period of four years was enacted. Several other tax changes
to the sales tax, the inheritance tax and the capital stock
and franchise tax were also enacted.
The fiscal 1994-95 budget projects a $4 million fiscal
year-end unappropriated surplus based on estimates for fiscal
1994 and the adopted budget. As of April 30, 1995, the
General Fund had a surplus of $442.9 million, or 3.4% above
the official estimate. The fiscal 1995-96 budget is currently
the subject of discussion and negotiations between the
Governor and the General Assembly.
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 $5,075.8 million at June
30, 1994. Over the 10-year period ended June 30, 1994, total
outstanding general obligation debt increased at an annual
rate of 1.3% and for the five years ended June 30, 1994, at an
annual rate of 1.5%. 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 $600.0
million of tax anticipation notes for the account of the
General Fund in fiscal 1995, all of which will mature on June
30, 1995, and will be paid from fiscal 1995 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 June
30, 1994: Delaware River Joint Toll Bridge Commission ($57.4
million), Delaware River Port Authority ($233.8 million),
Pennsylvania Economic Development Financing Authority ($380.8
million), Pennsylvania Energy Development Authority ($163.7
million), Pennsylvania Higher Education Assistance Agency
($1,158.8 million), Pennsylvania Higher Educational Facilities
Authority ($1,933.7 million), Pennsylvania Industrial
Development Authority ($357.3 million), Pennsylvania
Infrastructure Investment Authority ($107.5 million),
Pennsylvania Turnpike Commission ($1,268.3 million),
Philadelphia Regional Port Authority ($53.1 million) and the
State Public School Building Authority ($280.9 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 ($1,972.0 million of revenue bonds and $13.0
million of notes outstanding as of June 30, 1994), 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 ($1.64 million of the loan principal was
outstanding as of June 30, 1994.)
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 1995); (b) The ACLU filed suit in April 1990 in federal
court demanding additional funding for child welfare services
(no available estimates of potential liability), 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, and the parties have stipulated to a
judgment against the plaintiffs in order for plaintiffs to
appeal the denial of class certification to the Third
Circuit; (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 judgment 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. Although no damages are
sought, if injunctive relief is granted, the cost to the
Commonwealth in capital and personnel expenses may be
substantial. The parties have reached a tentative settlement;
(e) In 1991, a consortium of public interest law firms filed a
class action suit alleging that the Commonwealth had failed to
comply with the 1989 federal mandate with respect to certain
services for Medicaid-eligible children under the age of 21.
The parties have reached a tentative settlement; (f) 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, and the State case is in the
pre-trial discovery stage. The trial has not yet been
scheduled, and there is no available estimate of potential
liability; and (g) The Pennsylvania Medical Society has
challenged the State's reimbursement rates for outpatient
services provided to needy citizens under the Medical
Assistance Program. The favorable District Court decision
received by the Commonwealth was reversed by the U.S. Third
Circuit Court and an appeal is under consideration. Estimated
potential costs to the Commonwealth approximate $50 million
per year.
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 6, 1992. The most recent amended
five year plan was approved in May 1994.
As of November 1, 1994, PICA had issued $1,296,660,000 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, 1993, showed a
surplus of approximately $3 million. The unaudited
preliminary General Fund balance as of June 30, 1994,
estimates a surplus of approximately $15.4 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 or $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
and 1994 with surpluses in the General Revenue Fund of $295
million, $768 million, $1,006.4 billion, $615.3 million,
$1,630 billion and $2.239 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.
The Texas economy bottomed out at the end of 1986 and
moved into recovery. Based upon information gathered by the
U.S. Bureau of Labor, the State has more than doubled the jobs
that it lost during the 1986-87 recession. 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 appears to have been
merely temporary since by September 1994, the unemployment
rate had again declined to just over 6.5%.
Manufacturing employment has added a cumulative total of
about 35,000 jobs from 1992-1994, but forecasts are for a
levelling off of growth in that employment sector over the
next few years. In the overall race for new job growth,
however, Texas has been the national leader for most of the
1990's. Total employment in Texas has been steadily improving
since 1991. Over the 12 month period ending in December 1994,
Texas gained 249,600 jobs, an increase of 3.3%. Most of the
new jobs have been in the service sector, which added an
estimated 231,900 jobs from 1993 to 1994.
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 Sate 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 $10.03
billion. Bond income during the State's fiscal year ending
August 31, 1994 continued a trend toward increased issuance of
nonself-supporting Texas bonds. On August 31, 1994, Texas had
$3.1 billion in bonds outstanding which must be paid back from
the State's general revenue fund. This 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 28.7% of total revenue during
fiscal year 1994. Sales taxes are the State's second largest
source of revenues (and by far the largest source of tax
revenue), accounting for approximately 26.7% of the State's
total revenues during fiscal year 1994. Licenses, fees and
permits, motor fuels taxes and interest and investment income,
accounted for approximately 8.6%, 5.9% and 4.6%, respectively,
of the State's total revenue in fiscal year 1994. 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 3.4% of total revenues in
fiscal 1994. 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
1989, 1990, 1991, 1992, 1993 and 1994 amounted to
approximately $21.657 billion, $23.622 billion, $26.190
billion, $29.647 billion, $33.795 billion and $36.707 billion,
respectively, while tax collections for the same period
amounted to $12.905 billion, $14.922 billion, $15.849 billion,
$17.011 billion and $18.106 billion, respectively.
The 73rd State Legislative Session convened in January
1993 and before adjourning passed a budget for the 1994-95
biennium. The 1994-95 budget provides for appropriations
totalling $38.8 billion from general revenue related funds and
$70.1 billion from all fund sources. The 1994-95 biennium
budget increases general revenue funding by 10.6%, which
funding from all funds increased by 11.4%. Funding for
education has been increased to $1.4 billion, or 5.8%, while
health and human services increased $4.3 billion, or 22.5%.
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.
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 estimate 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. 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
158,000, down 7,500 from 1993 and 30,000 since early 1991.
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,
particu-larly 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, individ-ual 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 dif-ficulties 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.
Some signs of recovery are now appearing. Texas bank
profits in 1991, 1992 and 1993 were $1.1 billion, $1.9 billion
and $2.4 billion, respectively. Total loans, total equity
capital, and total assets also rose in 1993 and 1994. Most
loan growth was in consumer real estate, and even business
lending rose for the first time since 1985. Texas banks had a
9 percent growth in loans during the first three quarters in
1994 following a nearly 11 percent increase in dollars lent in
1993.
Many Texas banks and banking organizations have con-
solidated. Texas had 991 banks at the end of 1994 down from
1,125 banks as of the end of 1991. 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 1992 and 1993 was 1.08% and 1.07%, respectively.
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 62 in 1993. However, in terms
of profits, after a nearly flat year in 1991, the State's
thrifts posted a record $705 million profit for 1992, the
second highest in the nation. Texas' savings and loans also
led the nation in profits for most of 1993. 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 1993 total value of taxable property in Texas School
Districts amounted to approximately $628 billion in 1993,
according to records compiled by the Property Tax Division of
the Office of the Comptroller (derived from school districts
in the State). This $628 billion valuation total included
approximately $270.2 billion of single-family residences, an
increase of 4.2%. The value of utility property rose 3.5
percent from 1992 to 1993, while multi-family residential
property values increased 1.6 percent during the same period.
By way of contrast, the valuation of oil, gas and mineral
properties dropped 6.4% during 1993. The values of vacant
lots and rural real estate also declined 8.1 percent and 1.9
percent, respectively, during the year.
LITIGATION. In 1986, a group of school districts in the
State with relatively low ad valorem tax bases filed suit
challenging the constitutionality of Texas' system of
financing public education. In June 1987, a final judgment was
entered by the District Court in EDGEWOOD V. KIRBY, holding
that the Texas School Financing System (implemented in
conjunction with local school district boundaries that contain
unequal taxable property wealth for the financing of public
education) is "unconstitutional and unenforceable" under the
Texas Constitution. On October 2, 1989, the Texas Supreme
Court ruled that the State's school financing system violates
the State constitutional requirement that the State
Legislature "establish and make suitable provisions for the
support and maintenance of an efficient system of public free
schools." The Texas Supreme Court did not instruct the
Legislature as to the specifics of the legislation it should
enact or order the Legislature to raise taxes.
After four special sessions, the Legislature passed a
comprehensive school reform bill (Senate Bill 1) in June 1990.
In September 1990 a State District judge ruled that the school
finance section of Senate Bill 1 was unconstitutional because
it contained inequities in the system and ordered the State to
devise a new system by September 1, 1991. The State appealed
the ruling and the Texas Supreme Court ruled in January 1991
to enforce the injunction against State funding disbursements
until April 1, 1991.
On April 15, 1991, a new school finance reform bill
(Senate Bill 351) was enacted. Under Senate Bill 351, local
districts are entitled to a minimum local property tax rate
plus a guaranteed basic State allotment per pupil. The
funding mechanism is predicated upon tax base consolidation
and created 188 new taxing units known as County Education
Districts (CEDs), drawn largely along county lines. Within
each taxing unit, school districts share the revenue raised by
the minimum local property tax. Local school districts can
raise additional monies and enrich programs by leaving
additional amounts.
Several school districts challenged the constitutionality
of Senate Bill 351 in June 1991. In August 1991, the State
District Court held that the creation of the CEDs did not
violate the Texas Constitution. In November 1991, the case
was appealed to the Texas Supreme Court. The appeal was based
upon (among others) the claim that the creation of CEDs
amounted to a State property tax in contravention of the State
constitution. On January 30, 1992 (the day before property
tax payments for 1991 could be paid without becoming
delinquent and incurring penalties), the Texas Supreme Court
reversed the decision of the State District Court. While the
Texas Supreme Court concluded that the CEDs and the taxes they
levy are unconstitutional, the Court allowed the Legislature
until June 1, 1993 to develop a new plan to be put in place by
September 1993. In the interim, the CEDs could continue to
collect and distribute the school district property taxes for
the 1991 and 1992 years, notwithstanding the fact that the
levy has been declared unconstitutional by the Texas Supreme
Court.
In February 1993, the Texas Legislature 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 73rd State Legislature enacted in late May 1993 and
the Governor signed on May 31, 1993, Senate Bill 7, which
included provisions concerning the operation of school
districts as well as created 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 is denied in all respects and that the district
court's injunction is vacated. In all other respects, the
Supreme Court affirmed the district court's judgment.
VIRGINIA SERIES
ECONOMIC GROWTH AND STRUCTURE. The rate of economic
growth in the Commonwealth of Virginia has increased steadily
over the past decade. From 1984 to 1993, the Commonwealth's
4.8 percent rate of growth in per capita personal income was
slightly ahead of the national rate of growth of 4.7 percent.
During 1990 and 1992, Virginia's per capita personal income
grew at a slightly lower rate than the U.S. average. Per
capita income in Virginia has been consistently above national
levels over the past decade and, in 1993, was $21,634 compared
with the national level of $20,817. The services sector in
Virginia generated the largest number of jobs in 1992 (19.7%),
followed by wholesale and retail trade (10.6%), manufacturing
(10.5%), federal government employment (including civilian and
military, 10.0%) and local government employment (8.0%).
Because of Virginia's proximity to Washington, D.C. and the
concentration of military installations in the Commonwealth
(the largest such concentration in the United States), the
federal government has a greater economic impact on Virginia
relative to its size than on any of the other States except
Alaska and Hawaii. There can be no assurances that current
efforts by the federal government to restructure the defense
budget would not have an adverse effect on the long-term
economic conditions of the Commonwealth.
According to statistics published by the U.S. Department
of Labor, the Commonwealth 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. Unemployment rates in Virginia
from 1984 to 1993 were substantially below the national rates.
In 1993, an average of 5 percent of Virginians were unemployed
as compared with the national average of 6.8 percent.
Population during that decade generally grew faster than the
national rate, then slowed in 1992 and 1993, so that in 1993
the 1.8% rate in Virginia equaled the national rate. The rate
of increase in such population growth has declined since
reaching a high of 2.1 percent annually in 1987 and, in 1993,
was approximately 1.8 percent.
Virginia is one of 20 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.
BUDGET AND DEFICIT MATTERS. 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.
The budgetary process begins in May of even-numbered years,
approximately 14 months before the start of a biennium when
the Governor gives initial guidance to State agencies
regarding base budgets, maximum employment levels and policy
initiatives. By the following December, final revenue
estimates are submitted by the Department of Taxation and
reviewed by the Governor, the Advisory Board of Economists and
the Advisory Council on Revenue Estimates. Final adjustments
to revenues and services are then made, and a bill detailing
the Governor's budget is prepared. The Governor is required
by statute to present the budget bill and a narrative summary
of the bill to the General Assembly by December 20 in the year
immediately prior to each even-year session. In the odd-year
sessions of the General Assembly, amendments are considered to
the Appropriation Act of the previous year.
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. Up to 15 percent of a general fund
appropriation to an agency may be withheld, if required.
The Constitution further requires the Governor to ensure
that expenses do not exceed anticipated total revenues plus
fund balances during the two-and-a-half-year period following
the end of the General Assembly session in which
appropriations are made. 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 the Commonwealth's average
annual tax revenues derived from taxes on income and retail
sales as certified by the Auditor of Public Accounts for the
three immediately preceding fiscal years. If in any year
total revenues are forecasted to decline by more than two
percent of the certified tax revenues collected in the most
recently ended fiscal year, the General Assembly may
appropriate an amount for transfer from the Revenue
Stabilization Fund to the General Fund in an amount not to
exceed one-half of the forecasted shortfall. Earnings in
excess of the 10 percent cap are transferred to the General
Fund as received. As of June 30, 1994, approximately $79
million was on deposit in the Fund for the 1994-1996 Biennium.
In fiscal 1994, revenues increased 6.0 percent from the
previous year, while total expenditures increased by 4.5
percent. Revenues exceeded expenditures by $731.2 million, an
increase of 20.0 percent over fiscal 1993.
TAX MATTERS. General fund revenues are principally
composed of direct taxes. In fiscal year 1994, approximately
94.9 percent of total tax revenues was derived from five major
taxes imposed by the Commonwealth on individual and fiduciary
income, sales and use, corporate income, public services
corporations and premiums of insurance companies.
Nongeneral revenues consist of all revenues not formally
accounted for in the general fund. Included in this category
are special taxes and user charges earmarked for specific
purposes, the majority of institutional revenues and revenues
from the sale of property and commodities, plus receipts from
the federal government.
Approximately 50 percent of the nongeneral revenues
consist of grants and donations from the federal government,
motor vehicle taxes and institutional revenues. Institutional
revenues consist primarily of fees and charges collected by
institutions of higher education, medical and mental hospitals
and correctional institutions. Motor vehicle-related taxes
include the motor vehicle fuel tax, a motor vehicle sales and
use tax, oil excise tax, fees generated from driver's
licenses, title registration, and motor vehicle registrations
and other miscellaneous revenues.
DEBT MANAGEMENT. In September 1991, the Debt Capacity
Advisory Committee was created by the Governor through an
executive order. During the 1994 General Assembly session,
the Committee was established under the general laws of the
Commonwealth. 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 the Commonwealth. The committee reviews
the outstanding debt of all agencies, institutions, boards and
authorities of the Commonwealth for which the Commonwealth has
either a direct or indirect pledge of tax revenues or moral
obligation. The committee released its first report in
January 1992 and its most recent report in January 1994.
The Department of Planning and Budget has prepared a Six-
Year Capital Outlay Plan for the Commonwealth. The Plan lists
proposed capital projects, and it recommends how the proposed
projects should be financed. More specifically, the Plan
distinguishes between immediate demands and longer-term needs,
assesses the State's ability to meet its highest priority
needs and outlines approaches for addressing priorities in
terms of costs, benefits and financing mechanisms.
The Constitution of Virginia prohibits the creation of
debt by or on behalf of the Commonwealth that is backed by the
Commonwealth'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:
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 the Commonwealth; and to redeem a
previous debt obligation of the Commonwealth. 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) provides 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.
Based on individual, fiduciary and corporate income taxes
and the State sales and use tax, as certified as of July 1,
1994, the debt limits and remaining debt margins under Article
X, Section 9 are set forth below (in $ thousands).
SECTION 9(A)(2) GENERAL OBLIGATION DEBT LIMIT(5):
Debt Limit (30% of 1.15 times annual tax revenues
for fiscal year 1994) $1,954,008
Less Bonds Outstanding: (none) -
Debt Margin $1,954,008
SECTION 9(B) GENERAL OBLIGATION DEBT LIMIT:
Debt Limit (1.15 times average tax revenues for
three fiscal years as calculated above) $6,136,996
Less Bonds Outstanding:
Public Facilities Bonds 372,470
Transportation Facilities Refunding Bond
71,825
Debt Margin $5,692,701
Additional Section 9(b) Debt Borrowing Restriction:
Four-year authorization restriction
(25% of 9(b) Debt Limit) $1,534,249
Less 9(b) Debt authorized in past three years
612,944
Total Additional Borrowing
Restriction (maximum amount
that could be authorized
by the General Assembly) $921,305
SECTION 9(C) GENERAL OBLIGATION DEBT LIMIT AND DEBT MARGIN
Debt Limit (1.15 times average tax revenues for
three fiscal years as calculated above) $6,136,996
Less Bonds Outstanding:
Parking Facilities 10,645
Transportation Facilities 122,267
Higher Education Institutions 419,710
Debt Margin $5,584,374
Article X further provides in Section 9(d) that the
restrictions of Section 9 are not applicable to any obligation
incurred by the Commonwealth or any of its institutions,
agencies or authorities if the full faith and credit of the
Commonwealth 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. Together, payments to these
authorities totaled $87.3 million in fiscal 1994.
The Commonwealth Transportation Board ("CTB") had $533.5
million in Section 9(d) transportation facility bonds
outstanding as of June 30, 1994. This debt was issued to
finance costs related to CTB's Route 28 project, its U.S.
Route 58 Corridor Development Program and its Northern
Virginia Transportation District Program. 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 construction, capital and other needs of State
highways, airports, mass transportation and ports. The
Virginia Port Authority has also issued bonds in the
approximate amount of $106 million which are secured by a
portion of the Transportation Trust Fund. The fund balance of
the Transportation Trust Fund administered by the
Transportation Board at June 30, 1994, was $278.9 million.
The Commonwealth is also involved in numerous leases that
are subject to appropriation of funding by the General
Assembly. For all capital leases, the principal balance was
$27.5 million as of June 30, 1994.
The Commonwealth finances the acquisition of certain
personal property and equipment through installment purchase
agreements. The length of the agreements and the interest
rates charged vary. In most cases, the agreements are
collateralized by the personal property and equipment
acquired. Installment purchase agreements contain
nonappropriation clauses indicating that continuation of the
installment purchase is subject to funding by the General
Assembly. The balance of installment purchase obligations was
$37.7 million as of June 30, 1994.
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 the Commonwealth. Should the need arise, the
Commonwealth may consider funding deficiencies in the
respective debt service reserves for such moral obligation
debt. To date, none of these authorities has advised the
Commonwealth that any such deficiencies exist.
LOCAL GOVERNMENT. Local government in the Commonwealth
is comprised of 95 counties, 41 incorporated cities, and 190
incorporated towns. The Commonwealth is unique among the
several States in that cities and counties are independent,
and their land areas do not overlap. Cities and counties are
the units of general government that have traditionally
provided all services not provided by the Commonwealth; they
levy and collect their own taxes. On the other hand, towns
constitute a part of the counties in which they are located;
they levy and collect taxes for town purposes, but their
residents are also subject to county taxes. The largest
expenditure by local governments in the Commonwealth are for
education, but local governments also provide other services
such as water and sewer, police and fire protection and
recreational facilities.
According to figures prepared by the Auditor of Public
Accounts of Virginia, the total outstanding general obligation
and revenue debt of counties in the Commonwealth was
approximately $4.1 billion as of June 30, 1993, most of which
was borrowed for school construction. The amount of debt of
Virginia's cities outstanding as of June 30, 1993, was
approximately $3.6 billion, while towns had approximately $233
million outstanding as of June 30, 1993.
PENDING LITIGATION. On March 28, 1989, in DAVIS V.
MICHIGAN the United States Supreme Court declared
unconstitutional a Michigan statute exempting from state
income tax the retirement benefits paid to former workers by
the State and local governments but not comparable benefits
paid by the federal government. At that time, Virginia
exempted State and local but not federal government 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, were filed by federal retirees seeking refunds of
Virginia income taxes. These suits have been consolidated as
HARPER V. DEPARTMENT OF TAXATION. HARPER is a suit by federal
retirees seeking refund of State income taxes paid during the
period from 1985 to 1988. An initial decision adverse to the
plaintiffs was handed down in 1990 by the trial court in
Alexandria, Virginia. Several appellate and further trial
proceedings have occurred since that date. In June 1993, the
U.S. Supreme Court reversed a decision of the Virginia Supreme
Court favorable to the Commonwealth and remanded the case for
further proceedings. The opinion requires that Virginia
"choose the form of relief it will provide, . . . consistent
with federal due process principles." A subsequent decision
by the trial court denying refunds was again appealed to the
Virginia Supreme Court in May 1994, and the Court stayed
further proceedings until January 1995, pending the outcome of
General Assembly action on various settlement proposals. The
stay has been lifted, and further arguments were heard by the
Virginia Supreme Court in June 1995. No decision is expected
to be handed down before September 15, 1995.
In a July 1994 special session, the Virginia General
Assembly passed emergency legislation to provide payments to
federal retirees in settlement of the principal amount,
excluding interest, of the retirees' claims for overpaid
taxes. The settlement payments are to be made over a five-
year period, commencing on March 31, 1995. The total amount
of the proposed settlement is $340 million plus earnings on
the investment of such amount that may be appropriated. These
amounts will be paid to participating retirees in installments
of $60 million on March 31, 1995, and $70 million on each
succeeding March 31 through 1999, subject to appropriation by
the General Assembly.
Retirees who choose to accept and remain eligible to
recover such taxes must have responded to the Department of
Taxation by November 1, 1994. By February 1, 1995, retirees
must have signed and returned to the Tax Commissioner a
settlement agreement releasing the Commonwealth from any
further liability for claims arising out of such taxes and
dismissing any related litigation to which the taxpayer is a
party. Approximately 90% of the retirees accepted the
settlement. The legislation also provides that in the event
the total principal amount of the claims of taxpayers opting
out of the settlement exceeds $20 million, the entire
settlement is null and void unless reauthorized by the General
Assembly on or before March 1, 1995. Although claims of
retirees opting out exceeded $20 million, the General Assembly
in its regular 1995 session reauthorized the settlement, and
the Governor signed the reauthorization legislation on
February 28, 1995. The General Assembly also enacted
legislation to provide relief to retirees who failed to meet
deadlines in the original settlement legislation, or filed
incomplete claims. The total principal amount of the claims
of the retirees opting out of the settlement is in excess of
$47 million. Those retirees opting out have elected to be
bound by the final resolution of pending litigation.
If the courts ultimately rule that the Commonwealth must
refund taxes imposed prior to DAVIS V. MICHIGAN, the potential
cost of refunding all Virginia income taxes paid on federal
government pensions for taxable years 1985, 1986, 1987 and
1988 to federal government pensioners who opted out of the
settlement is approximately $75 million, including interest
earnings as of March 1, 1995. The outcome of this litigation
cannot be predicted.
CURRENT RATING. Most recently, Moody's has rated the
long-term general obligation bonds of the Commonwealth 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.
<PAGE>
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 an 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 payment 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 rating 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 (+)
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.
B
Issues rated B are regarded as having only an adequate
capacity for timely payment; such capacity may be damaged by
changing conditions or short-term adversities.
C
This rating is assigned to short-term debt obligations
with a doubtful capacity for payment.
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 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 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 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.
DEMAND BOND OR NOTES RATINGS
Certain demand securities empower the holder at his
option to require the issuer, usually through a remarketing
agent, to repurchase the security upon notice at par with
accrued interest. This is also referred to as a put option.
The ratings of the demand provision may be changed or
withdrawn at any time if, in Fitch's judgment, changing
circumstances warrant such action.
Fitch demand provision ratings carry the same symbols and
related definitions as its short-term ratings.
<PAGE>
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<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF INVESTMENTS
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-90.7% AMOUNT VALUE
_____________ __________________
<S> <C> <C>
ARIZONA-84.1%
Arizona Board of Regents - Arizona State University, System Revenue,
Refunding:
6.125%, 7/1/2015........................................................ $ 100,000 $ 101,303
5.50%, 7/1/2019......................................................... 750,000 699,683
Arizona Educational Loan Marketing Corp., Educational Loan Revenue
6.375%, 9/1/2005........................................................ 100,000 104,422
Arizona Health Facilities Authority, Hospital System Revenue, Refunding
(Samaritan Health System) 5.625%, 12/1/2015 (Insured; MBIA)............. 700,000 672,350
Casa Grande Industrial Development Authority, PCR
(Frito-Lay, Inc. Pollution Control Project) 6.60%, 12/1/2010 (Guaranteed; Pepsico) 200,000 205,036
Chandler, Water and Sewer Revenue, Refunding 6.25%, 7/1/2013 (Insured; FGIC) 200,000 205,026
Douglas Industrial Development Authority, IDR, Refunding (KMart Corp.
Project)
6%, 1/1/2003............................................................ 460,000 459,673
Glendale, Improvement Revenue, District Number 59 6%, 1/1/2013.............. 100,000 98,917
Maricopa County Hospital District Number 1, Hospital Facilities, Refunding:
6.25%, 6/1/2010 (Insured; FGIC)......................................... 100,000 104,302
6.125%, 6/1/2015 (Insured; FGIC)........................................ 200,000 201,666
Maricopa County Industrial Development Authority:
Health Facility Revenue (Catholic Healthcare West) 5.50%, 7/1/2010 (Insured; MBIA) 500,000 484,460
MFHR, Refunding (Laguna Private Apartments Project) 6.75%, 7/1/2019..... 1,000,000 1,007,670
Maricopa County Pollution Control Corp., PCR, Refunding
(Public Service Co.-Palo Verde) 6.375%, 8/15/2023....................... 1,000,000 913,060
Maricopa County School District:
Number 6 (Washington Elementary) 6%, 7/1/2009 (Insured; AMBAC).......... 200,000 207,908
Number 28 (Kyrene Elementary) 6%, 7/1/2013 (Insured; AMBAC)
(Prerefunded 7/1/2001) (a)............................................ 175,000 183,615
School Improvement Number 3 (Tempe Elementary) 6%, 7/1/2008
(Prerefunded 7/1/2006) (a)............................................ 100,000 101,824
Maricopa County Stadium District, Revenue 5.50%, 7/1/2013 (Insured; MBIA)... 1,000,000 954,600
Maricopa County Unified School District, School Improvement:
Chandler, Refunding 6.40%, 7/1/2010 (Insured; FGIC)..................... 300,000 312,732
Gilbert, Refunding, Zero Coupon, 7/1/2005 (Insured; FGIC) (b)........... 1,860,000 1,049,914
Paradise Valley 5.875%, 7/1/2012 (Insured; FGIC)........................ 200,000 198,380
Scottsdale 6%, 7/1/2012 (Prerefunded 7/1/2002) (a)...................... 100,000 105,854
City of Mesa 5.70%, 7/1/2008 (Insured; MBIA)................................ 300,000 299,421
Navajo County Pollution Control Corp., PCR, Refunding (Arizona Public Service
Co.)
5.875%, 8/15/2028 (Insured; AMBAC)...................................... 1,000,000 967,990
City of Phoenix, Refunding:
5.10%, 7/1/2013......................................................... 750,000 675,848
Street and Highway User Revenue:
6.60%, 7/1/2007....................................................... 250,000 267,905
6.25%, 7/1/2011 (Insured; FGIC)....................................... 200,000 206,456
Phoenix Civic Improvement Corp.:
Wastewater System Lease Revenue:
6.125%, 7/1/2014 (Prerefunded 7/1/2003) (a)........................... 100,000 107,924
6.125%, 7/1/2023 (Prerefunded 7/1/2003) (a)........................... 500,000 539,095
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
ARIZONA (CONTINUED)
Phoenix Civic Improvement Corp. (continued):
Water Systems Revenue 5.40%, 7/1/2014................................... $ 1,000,000 $ 926,730
Phoenix Industrial Development Authority, SFMR
6.30%, 12/1/2012 (Insured: FNMA, GNMA) (c).............................. 1,000,000 987,380
Pima County, Tuscon Unified School District Number 1, School Improvement:
6.10%, 7/1/2010 (Insured; FGIC)......................................... 100,000 101,958
5.875%, 7/1/2014 (Insured; FGIC)........................................ 1,000,000 992,520
Pima and Maricopa Counties Industrial Development Authority, Multi-Family
Revenue
5.875%, 1/1/2029 (Insured; FNMA)........................................ 500,000 456,180
Salt River Agricultural Improvement and Power District,
Electric System Revenue (Salt River Project):
6%, 1/1/2013.......................................................... 150,000 150,185
5.50%, 1/1/2028....................................................... 1,000,000 901,070
Refunding 5.75%, 1/1/2013............................................. 200,000 193,942
City of Scottsdale Municipal Property Corp., Excise Tax Revenue, Refunding
6.25%, 11/1/2014 (Insured; FGIC)........................................ 100,000 101,976
City of Tempe 6%, 7/1/2009.................................................. 200,000 204,512
City of Tuscon, Refunding:
6.10%, 7/1/2012 (Insured; FGIC)......................................... 250,000 253,300
Water System Revenue:
5.75%, 7/1/2012....................................................... 100,000 98,384
5.75%, 7/1/2018....................................................... 500,000 478,385
University of Arizona, COP (Administrative and Packaging Facility Project)
6%, 7/15/2023 (Insured; MBIA)........................................... 1,000,000 989,160
University of Arizona Medical Center Corp., HR, Refunding
6.25%, 7/1/2010 (Insured; MBIA)......................................... 200,000 207,032
U.S. RELATED-6.6%
Commonwealth of Puerto Rico, Refunding 6%, 7/1/2014......................... 400,000 391,492
Puerto Rico Electric Power Authority, Power Revenue:
6%, 7/1/2010............................................................ 550,000 541,876
6.25%, 7/1/2017......................................................... 520,000 517,473
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $20,297,684).................... $19,930,589
===========
SHORT_TERM MUNICIPAL INVESTMENTS-9.3%
ARIZONA;
Pima County, Industrial Development Authority, Industrial Revenue, VRDN
(Tuscon Electric Power-Ivington Project):
4.70%, 7/1/2022 (LOC; Societe Generale) (d)........................... $ 1,950,000 $ 1,950,000
4.70%, 10/1/2022 (LOC; Bank of America) (d)........................... 100,000 100,000
_________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $2,050,000)................... $ 2,050,000
============
TOTAL INVESTMENTS-100.0%
(cost $22,347,684)...................................................... $21,980,589
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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 Association
FNMA Federal National Mortgage Association MFHR Multi-Family Housing Revenue
GNMA Government National Mortgage Association PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<TABLE>
<CAPTION>
FITCH (E) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ __________ ____________
<S> <C> <C> <C>
AAA Aaa AAA 48.6%
AA Aa AA 19.4
A A A 16.4
BBB Baa BBB 2.1
BB Ba BB 4.2
F1+ VMIG1 SP1 9.3
------
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) Wholly held by the custodian in a segregated account as
collateral
for a delayed delivery security.
(c) Purchased on a when-issued basis.
(d) Secured by letter of credit. Securities payable on
demand. The
interest rate, which is subject to change, is based upon
bank prime rates
or an index of market rates.
(e) Fitch currently provides creditworthiness information
for a limited
number of investments.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $22,347,684)-see statement...................................... $21,980,589
Interest receivable..................................................... 354,387
Receivable for shares of Beneficial Interest subscribed................. 29,558
Prepaid expenses........................................................ 11,230
Due from The Dreyfus Corporation........................................ 8,185
_______
22,383,949
LIABILITIES:
Due to Distributor...................................................... $ 7,815
Due to Custodian........................................................ 94,110
Payable for investment securities purchased............................. 1,003,150
Payable for shares of Beneficial Interest redeemed...................... 13
Accrued expenses and other liabilities.................................. 51,116 1,156,204
_______ ______
NET ASSETS ................................................................ $21,227,745
==========
REPRESENTED BY:
Paid-in capital......................................................... $21,938,293
Accumulated net realized (loss) on investments.......................... (343,453)
Accumulated net unrealized (depreciation) on investments-Note 3......... (367,095)
_______
NET ASSETS at value......................................................... $21,227,745
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 1,018,275
==========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 647,399
==========
NET ASSET VALUE per share:
Class A Shares
($12,972,013 / 1,018,275 shares)...................................... $12.74
======
Class B Shares
($8,255,732 / 647,399 shares)......................................... $12.75
======
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $1,173,115
EXPENSES:
Management fee-Note 2(a).............................................. $ 106,761
Shareholder servicing costs-Note 2(c)................................. 68,466
Distribution fees (Class B shares)-Note 2(b).......................... 37,203
Auditing fees......................................................... 8,357
Prospectus and shareholders' reports.................................. 6,495
Organization expenses................................................. 4,600
Registration fees..................................................... 2,360
Custodian fees........................................................ 2,269
Legal fees............................................................ 1,819
Trustees' fees and expenses-Note 2(d)................................. 195
Miscellaneous......................................................... 9,833
_____
248,358
Less-expense reimbursement from Manager due to
undertakings-Note 2(a)............................................ 210,380
_____
TOTAL EXPENSES.................................................. 37,978
______
INVESTMENT INCOME-NET........................................... 1,135,137
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(343,444)
Net unrealized appreciation on investments.............................. 602,025
_____
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 258,581
______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,393,718
==========
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
______________________________
1994 1995
______________ _____________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 748,595 $ 1,135,137
Net realized (loss) on investments...................................... -- (343,444)
Net unrealized appreciation (depreciation) on investments for the year.. (1,152,136) 602,025
_______ ______
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (403,541) 1,393,718
_______ ______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (524,294) (722,637)
Class B shares........................................................ (224,301) (412,500)
Net realized gain on investments:
Class A shares........................................................ (5,370) _
Class B shares........................................................ (2,805) _
_______ ______
TOTAL DIVIDENDS................................................... (756,770) (1,135,137)
______ _______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 8,029,274 3,423,651
Class B shares........................................................ 5,684,625 2,606,355
Dividends reinvested:
Class A shares........................................................ 282,465 336,271
Class B shares........................................................ 94,531 161,187
Cost of shares redeemed:
Class A shares........................................................ (736,531) (3,489,944)
Class B shares........................................................ (534,479) (1,143,645)
__________ ___________
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS...... 12,819,885 1,893,875
__________ ___________
TOTAL INCREASE IN NET ASSETS.................................... 11,659,574 2,152,456
NET ASSETS:
Beginning of year....................................................... 7,415,715 19,075,289
___________ ___________
End of year............................................................. $19,075,289 $21,227,745
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES
__________________________________
CLASS A CLASS B
_______________ _______________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
1994 1995 1994 1995
______ _______ _______ _______
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 594,166 281,816 420,705 206,514
Shares issued for dividends reinvested. 21,163 27,031 7,085 12,967
Shares redeemed........................ (54,791) (283,309) (39,666) (93,196)
_______ ________ _______ _______
NET INCREASE IN SHARES OUTSTANDING 560,538 25,538 388,124 126,285
======= ======= ======= =======
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA 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 CLASS B SHARES
_____________ _____________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
_____________ _____________
PER SHARE DATA: 1993(1) 1994 1995 1993(2) 1994 1995
____ ____ ____ ______ _____ _____
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $12.50 $13.12 $12.60 $12.65 $13.12 $12.61
____ ____ ____ ______ _____ _____
INVESTMENT OPERATIONS:
Investment income-net.............................. .51 .75 .75 .21 .68 .69
Net realized and unrealized gain (loss) on investments .62 (.51) .14 .47 (.50) .14
____ ____ _____ ____ ____ ____
TOTAL FROM INVESTMENT OPERATIONS................. 1.13 .24 .89 .68 .18 .83
____ ____ _____ ____ ____ ____
DISTRIBUTIONS:
Dividends from investment income-net............... (.51) (.75) (.75) (.21) (.68) (.69)
Dividends from net realized gain on investments.... -- (.01) -- -- (.01) --
____ ____ ____ ____ ____ ____
TOTAL DISTRIBUTIONS.............................. (.51) (.76) (.75) (.21) (.69) (.69)
____ ____ ____ ____ ____ ____
Net asset value, end of year....................... $13.12 $12.60 $12.74 $13.12 $12.61 $12.75
===== ====== ====== ======= ======= =======
TOTAL INVESTMENT RETURN(3)............................. 14.01%(4) 1.61% 7.41% 18.49%(4) 1.16% 6.88%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ........... -- -- -- .50%(4) .50% .50%
Ratio of net investment income to average net assets 5.71%(4) 5.51% 6.04% 4.61%(4) 4.95% 5.54%
Decrease reflected in above expense ratios due to
undertaking by the Manager ...................... 1.87%(4) 1.26% 1.07% 1.68%(4) 1.27% 1.10%
Portfolio Turnover Rate ........................... 5.94%(5) 3.65% 21.96% 5.94%(5) 3.65% 21.96%
Net Assets, end of year (000's Omitted)............ $5,671 $12,506 $12,972 $1,745 $6,569 $8,256
(1) From September 3, 1992 (commencement of operations) to April 30, 1993.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA 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 fifteen series including the Arizona Series (the
"Series"). Dreyfus
Service Corporation, until August 24, 1994, acted as the
distributor of the
Fund's shares. Dreyfus Service Corporation is a wholly-owned
subsidiary of
The Dreyfus Corporation ("Manager"). Effective August 24, 1994,
the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI
Holdings, Inc., the parent company of which is Boston
Institutional Group,
Inc.
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 offers both Class A and Class B shares. Class A
shares are
subject to a sales charge imposed at the time of purchase and
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.
Other
differences between the two Classes include the services offered
to and the
expenses borne by each Class and certain voting rights.
(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 STATE MUNICIPAL BOND FUND, ARIZONA 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, 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 $262,000
available for Federal income tax purposes to be applied against
future net
securities profits, if any, realized subsequent to April 30,
1995. The
carryover does not include net realized securities losses from
November 1,
1994 through April 30, 1995 which are treated, for Federal
income tax
purposes, as arising in fiscal 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 average
daily value of the Series' 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, 1994 through April 2, 1995 to
reimburse all fees
and expenses of the Series (excluding 12b-1 distribution plan
fees and
certain expenses as described above), and thereafter through
April 30, 1995,
to reduce the shareholder services plan fee paid by and
reimburse such excess
expenses of the Series, to the extent that the Series' aggregate
expenses
(excluding certain expenses as described above) exceeded
specified annual
percentages of the Series' average daily net assets. The expense
reimbursement, pursuant to the undertakings, amounted to
$210,380 for the
year ended April 30, 1995.
The Manager has currently undertaken through June 30, 1995
or until such
time as the net assets of the Series exceed $50 million,
regardless of
whether they remain at that level, 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).
The undertaking may be modified by the Manager from time to
time,
provided that the resulting expense reimbursement would not be
less than the
amount required pursuant to the Agreement.
Dreyfus Service Corporation retained $5,509 during the year
ended April
30, 1995 from commissions earned on sales of the Series' Class A
shares.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Prior to August 24, 1994, Dreyfus Service Corporation
retained $9,435 from
contingent deferred sales charges imposed upon redemptions of
the Series' Class
B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised
Distribution Plan with respect to Class B shares only (the
"Class B
Distribution Plan") pursuant to Rule 12b-1 under the Act.
Pursuant to the
Class B Distribution Plan, effective August 24, 1994, the Fund
pays the
Distributor for distributing the Series' Class B shares at an
annual rate of
.50 of 1% of the value of the average daily net assets of Class
B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B
Distribution Plan") provided that the Series pays Dreyfus
Service Corporation
at an annual rate of .50 of 1% of the value of the Series' Class
B shares
average daily net assets, for the costs and expenses in
connection with
advertising, marketing and distributing the Series' Class B
shares. Dreyfus
Service Corporation made payments to one or more Service Agents
based on the
value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $26,079 was charged to
the Series
pursuant to the Class B Distribution Plan and $11,124 was
charged to the
Series pursuant to the prior Class B Distribution Plan.
(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 and Class B shares for servicing shareholder
accounts. 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 Serv-
ice Agents in respect of these services. The Distributor
determines the
amounts to be paid to Service Agents. From May 1, 1994 through
August 23,
1994, $9,574 and $5,562 were charged to Class A and Class B
shares,
respectively, by Dreyfus Service Corporation. From August 24,
1994 through
April 30, 1995, $20,352 and $13,040 were charged to Class A and
Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services
Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund
were "affiliated persons," as defined in the Act, of the Manager
and/or
Dreyfus Service Corporation. Each trustee who is not an
"affiliated person"
receives from the Fund an annual fee of $2,500 and an attendance
fee of $250
per meeting. The Chairman of the Board receives an additional
25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities
amounted to $13,042,072 and $10,087,640, respectively, for the
year ended
April 30, 1995, and consisted entirely of long-term and
short-term municipal
investments.
At April 30, 1995, accumulated net unrealized depreciation
on investments
was $367,095, consisting of $178,743 gross unrealized
appreciation and
$545,838 gross unrealized depreciation.
At April 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 STATE MUNICIPAL BOND FUND, ARIZONA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
We have audited the accompanying statement of assets and
liabilities,
including the statement of investments, of Premier State
Municipal Bond Fund,
Arizona Series (one of the series constituting the Premier State
Municipal
Bond Fund) as of April 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 April 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 State Municipal Bond Fund, Arizona Series at
April 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
June 6, 1995
<PAGE>
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF INVESTMENTS
<CAPTION>
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-92.9% AMOUNT VALUE
------------ ------------
<S> <C> <C>
COLORADO--88.1%
Adams County, PCR, Refunding (Public Service Co. of Colorado Project)
5.875%, 4/1/2014 (Insured; MBIA)........................................ $ 200,000 $ 196,738
Arvada, Sales and Use Tax Revenue, Refunding and Improvement
6.25%, 12/1/2012 (Insured; FGIC)........................................ 200,000 205,080
Colorado Board of Community Colleges and Occupational Education, Revenue
(Red Rocks Community College Project) 6%, 11/1/2019 (Insured; AMBAC).... 300,000 297,336
Colorado Health Facilities Authority, Revenues:
Hospital (PSL Healthcare Systems Project) 6.875%, 2/15/2023............. 500,000 483,420
Refunding (Boulder Community Hospital) 5.875%, 10/1/2023 (Insured; MBIA) 200,000 193,164
Colorado Housing Finance Authority, Single Family Program
7.55%, 8/1/2023 (Insured; FHA).......................................... 195,000 201,893
Colorado Springs, Utilities Revenue:
6.75%, 11/15/2021....................................................... 200,000 212,516
Refunding 6.50% 11/15/2015.............................................. 165,000 171,117
Colorado Water Resource Power Development Authority, Clean Water Revenue
6.30%, 9/1/2014......................................................... 200,000 205,952
Denver City and County, Airport Revenue 7%, 11/15/2025...................... 200,000 195,556
Garfield, Pitkin and Eagle Counties, School District Number 1
9%, 12/15/2008 (Insured; MBIA).......................................... 200,000 255,918
Lakewood, Multi-Family Housing Revenue, Mortgage
6.55%, 10/1/2015 (Insured; FHA)......................................... 200,000 199,094
Metro Wastewater Reclamation District, Gross Revenue 6%, 4/1/2010........... 200,000 202,494
Platte River Power Authority, Power Revenue, Refunding 6.125%, 6/1/2014..... 200,000 202,136
San Miguel County Housing Authority, Multi-Family Housing Revenue, Refunding
(Telluride Village Apartments Project) 6.40%, 7/1/2023.................. 300,000 277,947
Westminster, Sales and Use Tax Refunding, Revenue 6.25%, 12/1/2012
(Insured; FGIC)......................................................... 200,000 204,710
U.S. RELATED-4.8%
Puerto Rico Electric Power Authority, Power Revenue 6%, 7/1/2014 (Insured; FSA) 200,000 201,436
------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $3,866,801)....................................................... $3,906,507
==========
SHORT-TERM MUNICIPAL INVESTMENTS-7.1%
COLORADO:
Colorado Student Obligation Board Authority, Student Loan Revenue, VRDN
4.65% (LOC; Student Loan Marketing Association; Sumitomo Bank Ltd.) (a,b) $ 200,000 $ 200,000
</TABLE>
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF INVESTMENTS (CONTINUED)
<CAPTION>
APRIL 30, 1995
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------------ ------------
<S> <C> <C>
COLORADO (CONTINUED)
Denver City and County, VRDN (Rose Medical Center) 4.25% (Insured; AMBAC) (b) $ 100,000 $ 100,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $300,000)......................................................... $ 300,000
===========
TOTAL INVESTMENTS-100.0%
(cost $4,166,801)....................................................... $4,206,507
==========
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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 PCR Pollution Control Revenue
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<CAPTION>
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- --------- -------------------- -----------------------
<S> <C> <C> <C>
AAA Aaa AAA 44.1%
AA Aa AA 28.4
BBB Baa BBB 22.7
F1 MIG1 SP1 4.8
------
100.0%
======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) 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.
(c) Fitch currently provides creditworthiness information
for a limited number of investments.
See notes to financial statements.
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $4,166,801)-see statement....................................... $4,206,507
Cash.................................................................... 52,475
Receivable for shares of Beneficial Interest subscribed................. 79,251
Interest receivable..................................................... 73,436
Prepaid expenses-Note 1(e).............................................. 26,337
Due from The Dreyfus Corporation........................................ 3,559
----------
4,441,565
LIABILITIES:
Due to Distributor...................................................... $ 2,131
Payable for investment securities purchased............................. 200,036
Accrued expenses........................................................ 36,855 239,022
--------- ----------
NET ASSETS ................................................................ $4,202,543
===========
REPRESENTED BY:
Paid-in capital......................................................... $4,193,030
Accumulated net realized (loss) on investments.......................... (30,193)
Accumulated net unrealized appreciation on investments-Note 3........... 39,706
----------
NET ASSETS at value......................................................... $4,202,543
===========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 80,713
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 257,285
===========
NET ASSET VALUE per share:
Class A Shares
($1,003,407 / 80,713 shares).......................................... $12.43
======
Class B Shares
($3,199,136 / 257,285 shares)......................................... $12.43
======
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF OPERATIONS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
INVESTMENT INCOME:
INTEREST INCOME......................................................... $182,239
EXPENSES:
Management fee-Note 2(a).............................................. $ 16,404
Shareholder servicing costs-Note 2(c)................................. 22,633
Distribution fees (Class B shares)-Note 2(b).......................... 11,180
Organization expenses-Note 1(e)....................................... 6,271
Prospectus and shareholders' reports.................................. 4,111
Legal fees............................................................ 2,916
Registration fees..................................................... 2,130
Custodian fees........................................................ 1,025
Auditing fees......................................................... 645
Trustees' fees-Note 2(d).............................................. 29
Miscellaneous......................................................... 2,821
--------
70,165
Less-expense reimbursement from Manager due to
undertakings-Note 2(a)............................................ 58,829
--------
TOTAL EXPENSES.................................................. 11,336
--------
INVESTMENT INCOME-NET........................................... 170,903
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(30,193)
Net unrealized appreciation on investments.............................. 39,706
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 9,513
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $180,416
=========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF CHANGES IN NET ASSETS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
OPERATIONS:
Investment income-net..................................................... $ 170,903
Net realized (loss) on investments........................................ (30,193)
Net unrealized appreciation on investments for the period................. 39,706
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ 180,416
-----------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares.......................................................... (46,233)
Class B shares.......................................................... (124,670)
-----------
TOTAL DIVIDENDS..................................................... (170,903)
-----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares.......................................................... 2,423,449
Class B shares.......................................................... 4,771,752
Dividends reinvested:
Class A shares.......................................................... 27,461
Class B shares.......................................................... 77,605
Cost of shares redeemed:
Class A shares.......................................................... (1,455,718)
Class B shares.......................................................... (1,651,519)
-----------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS........ 4,193,030
-----------
TOTAL INCREASE IN NET ASSETS...................................... 4,202,543
NET ASSETS:
Beginning of period....................................................... ---
-----------
End of period............................................................. $ 4,202,543
==========
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------------------
CLASS A CLASS B
------------ ------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................ 196,569 386,112
Shares issued for dividends reinvested..................................... 2,240 6,325
Shares redeemed............................................................ (118,096) (135,152)
------------ ------------
NET INCREASE IN SHARES OUTSTANDING................................... 80,713 257,285
============ ============
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO 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 the period May 6, 1994 (commencement of operations) to
April
30, 1995. This information has been derived from the Series'
financial statements.
<TABLE>
<CAPTION>
PER SHARE DATA: CLASS A SHARES CLASS B SHARES
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period.................................... $12.50 $12.50
------- -------
INVESTMENT OPERATIONS:
Investment income-net................................................... .76 .69
Net realized and unrealized (loss) on investments....................... (.07) (.07)
------- -------
TOTAL FROM INVESTMENT OPERATIONS...................................... .69 .62
------- -------
DISTRIBUTIONS;
Dividends from investment income-net.................................... (.76) (.69)
------- -------
Net asset value, end of period.......................................... $12.43 $12.43
====== =======
TOTAL INVESTMENT RETURN(1).................................................. 5.83%(2) 5.26%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................. - .50%(2)
Ratio of net investment income to average net assets.................... 6.20%(2) 5.58%(2)
Decrease reflected in above expense ratios due to undertakings
by the Manager........................................................ 1.99%(2) 1.97%(2)
Portfolio Turnover Rate................................................. 21.81%(3) 21.81%(3)
Net Assets, end of period (000's Omitted)............................... $1,003 $3,199
(1) Exclusive of sales load.
(2) Annualized.
(3) Not annualized.
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO 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 fifteen series
of
shares of Beneficial Interest including the Colorado Series (the
"Series") which commenced operations on May 6, 1994.
Dreyfus Service Corporation, until August 24, 1994, acted as the
distributor of the Fund's shares. Dreyfus Service Corporation is
a wholly-owned subsidiary of The Dreyfus Corporation
("Manager").
Effective August 24, 1994, the Manager became a direct subsidiar
y
of Mellon Bank, N.A.
As of April 30, 1995, Major Trading Corporation, a
subsidiary of Mellon Bank Investments Corporation, held 34,070
shares of Class A and 33,922 shares of Class B. Mellon Bank
Investments Corporation is a subsidiary of Mellon Bank.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group,
Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between the two
Classes include the services offered to and the expenses borne
by
each Class and certain voting rights.
(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. Investmen
ts
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 mortization 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 applicabl
e
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 $563
available for Federal income tax purposes to be applied against
future net securities profit, if any, realized subsequent to
April
30, 1995. The carryover does not include net realized securities
losses from November 1, 1994 through April 30, 1995 which are
treated, for Federal income tax purposes, as arising in
fiscal 1996. If not applied, the carryover expires in fiscal
2003.
(E) OTHER: Organization expenses paid by the Series are
included in prepaid expenses and are being amortized to
operations
from May 6, 1994, the date operations commenced, over the period
during which it is expected that a benefit will be realized, not
to exceed five years. At April 30, 1995, the unamortized balance
of such expenses amounted to $25,083.
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 Series' 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
6, 1994 through April 2, 1995 to reimburse all fees and expenses
of the Series (excluding 12b-1 distribution plan fees and
certain expenses as described above), and thereafter through
April 30, 1995, to reduce management fee paid by and reimburse
such excess expenses of the Series', to the extent that the
Series
aggregate expenses (excluding certain expenses as described
above)
exceeded specified annual percentages of the Series' average
daily
net assets. The expense reimbursement, pursuant to the
undertakings, amounted to $58,829 for the period ended April 30,
1995.
The Manager has currently undertaken through June 30, 1995
or until such time as the net assets of the Series exceed $50
million, regardless of whether they remain at that level, to
reimburse all fees and expenses of the Series (excluding 12b-1
distribution plan fees, and certain expenses as described
above).
The undertaking may be modified by the Manager from time to
time,
provided that the resulting expense reimbursement would not be
less than the amount required pursuant to the Agreement.
Dreyfus Service Corporation retained $671 during the period
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to 12b-1 under the
Act.
Pursuant to the Class B Distribution Plan, effective August 24,
1994, the Fund pays the distributor for distributing the Series'
Class B shares at an annual rate of .50 of 1% of
the value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B Distribution Plan") provided that the Series' pay
Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of
the Series' Class B shares average daily net assets, for the
costs
and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents
based on the value of the Series' Class B shares owned by
clients
of the Service Agent.
During the period ended April 30, 1995, $9,770 was charged
to the Series pursuant to the Class B Distribution Plan and
$1,410
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 6, 1994 through August 23, 1994, $368 and $937 were
charged to Class A and Class B shares, respectively,
by Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $1,498 and $4,653 were charged to the Class A
and
Class B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee
of $2,500 and an attendance fee of $250 per meeting. The
Chairman
of the Board receives an additional 25% of such compensation.
NOTE 3--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $6,784,482 and $2,585,794, respectively,
for the period ended April 30, 1995, and consisted entirely of
long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on investments was $39,706, consisting of $64,805 gross
unrealized
appreciation and $25,099 gross unrealized depreciation.
At April 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 STATE MUNICIPAL BOND FUND, COLORADO SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of Premier
State Municipal Bond Fund, Colorado Series (one of the Series
constituting the Premier State Municipal Bond Fund), as of April
30, 1995, and the related statements of operations and
changes in net assets and financial highlights for the period
from May 6, 1994 (commencement of operations) to April 30, 1995.
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 audit.
We conducted our audit 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, 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 audit provides 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, Colorado Series at April 30, 1995, the results of its
operations, the changes in its net assets and the financial
highlights for the period from May 6, 1994 to April 30, 1995,
in conformity with generally accepted accounting principles.
(Ernst & Young LLP Signature Logo)
New York, New York
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
-------------- --------------
<S> <C> <C>
CONNECTICUT--85.4%
Connecticut:
7.20%, 3/1/2007 (Prerefunded 3/1/1999) (a).............................. $ 1,350,000 $ 1,484,811
6.90%, 3/15/2009 (Prerefunded 3/15/2000) (a)............................ 3,000,000 3,299,310
5.50%, 3/15/2010........................................................ 3,000,000 2,916,690
6.875%, 7/15/2010 (Prerefunded 7/15/2000) (a)........................... 7,100,000 7,823,774
6.75%, 3/1/2011 (Prerefunded 3/1/2001) (a).............................. 3,000,000 3,307,830
Special Tax Obligation Revenue (Transportation Infrastructure):
Refunding 6.125%, 2/15/2008........................................... 8,800,000 9,061,096
Refunding 5.375%, 9/1/2008............................................ 2,500,000 2,381,950
6.80%, 12/1/2009 (Prerefunded 12/1/1999) (a).......................... 3,000,000 3,284,880
7.125%, 6/1/2010...................................................... 8,400,000 9,490,404
6.75%, 6/1/2011 (Prerefunded 6/1/2003) (a)............................ 8,500,000 9,390,205
Connecticut Clean Water Fund, Revenue
7%, 1/1/2011............................................................ 6,700,000 7,131,882
Connecticut Development Authority, Revenue:
First Mortgage Gross
(Elim Park Baptist Home Inc. Project) 9%, 12/1/2020................... 3,565,000 3,752,056
Health Care:
(Jerome Home Project) 8%, 11/1/2019................................... 1,970,000 2,025,062
(Masonic Charity Foundation of Connecticut) 6.50%, 8/1/2020 (Insured; AMBAC) 4,150,000 4,262,797
Life Care Facilities
(Seabury Project) 10%, 9/1/2021....................................... 11,175,000 11,606,132
Pollution Control:
(New England Power Co. Project) 7.25%, 10/15/2015..................... 4,000,000 4,203,160
(Pfizer Inc. Project) 6.55%, 2/15/2013................................ 2,000,000 2,084,340
Solid Waste and Electric
(Ogden Martin System-Bristol Inc.) 10%, 7/1/2014...................... 2,250,000 2,336,738
Water Facilities, Refunding:
(Bridgeport Hydraulic Project):
7.25%, 6/1/2020................................................... 1,000,000 1,047,760
5.60%, 6/1/2028 (Insured; MBIA)................................... 2,600,000 2,351,336
(Stamford Water Company Project) 5.30%, 9/1/2028...................... 1,000,000 841,900
Connecticut Health and Educational Facilities Authority, Revenue:
7%, 1/1/2020 (Insured; MBIA)............................................ 3,000,000 3,231,630
(Bristol Hospital) 7%, 7/1/2020 (Insured; MBIA)......................... 2,850,000 3,066,287
(Cherry Brook Nursing Center Project) 6%, 11/1/2022..................... 4,600,000 4,479,204
(Connecticut College) 6.625%, 7/1/2011 (Insured; MBIA).................. 1,200,000 1,264,392
(Danbury Hospital) 6.50%, 7/1/2014 (Insured; MBIA)...................... 3,250,000 3,355,527
(Fairfield University) 6.90%, 7/1/2014.................................. 1,500,000 1,500,540
(Hartford University):
6.75%, 7/1/2012....................................................... 3,500,000 3,319,295
6.80%, 7/1/2022....................................................... 8,500,000 7,712,900
8%, 7/1/2018.......................................................... 3,125,000 3,571,531
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- ---------------
CONNECTICUT (CONTINUED)
Connecticut Health and Educational Facilities Authority, Revenue (continued):
(Hebrew Home and Hospital) 7%, 8/1/2030 (Insured; FHA)................. $ 865,000 $ 871,807
(Johnson Evergreen Corp.) 8.50%, 7/1/2022............................... 4,500,000 4,640,490
(Lawrence and Memorial Hospital):
7%, 7/1/2020 (Insured; MBIA) (Prerefunded 7/1/2000) (a)............... 2,500,000 2,766,400
6.25%, 7/1/2022 (Insured; MBIA) (Prerefunded 7/1/2002) (a)............ 3,750,000 4,039,537
(Lutheran General Health Care System) 7.375%, 7/1/2019.................. 1,400,000 1,674,232
(Manchester Memorial Hospital) 7%, 7/1/2010 (Insured; MBIA)............. 1,000,000 1,076,590
(Mansfield Nursing Center Project) 6%, 11/1/2022........................ 2,700,000 2,629,098
(Middlesex Hospital) 6.25%, 7/1/2022 (Insured; MBIA).................... 2,500,000 2,503,175
(New Britain Memorial Hospital) 7.75%, 7/1/2022......................... 16,000,000 16,153,760
(Norwalk Hospital) 6.25%, 7/1/2022 (Insured; MBIA)...................... 3,600,000 3,604,572
(Nursing Home Program-Noble Horizon) 6%, 11/1/2022...................... 1,500,000 1,460,610
(Quinnipiac College):
6%, 7/1/2013.......................................................... 4,550,000 4,081,259
7.25%, 7/1/2019 (Prerefunded 7/1/1999) (a)............................ 2,375,000 2,613,473
7.75%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 1,000,000 1,140,890
(Refunding-Saint Francis Hospital and Medical Center)
6.20%, 7/1/2022 (Insured; MBIA)....................................... 1,725,000 1,713,598
(Sacred Heart University) 5.80%, 7/1/2023............................... 1,700,000 1,379,669
(Saint Raphael Hospital):
6.20%, 7/1/2014 (Insured; AMBAC)...................................... 1,100,000 1,105,599
6.625%, 7/1/2014 (Insured; AMBAC)..................................... 2,500,000 2,601,150
(Taft School) 7.375%, 7/1/2020 (Prerefunded 7/1/2000) (a)............... 1,150,000 1,289,759
(Waterbury Hospital) 7%, 7/1/2020 (Insured; FSA)........................ 4,450,000 4,787,710
(William W. Backus Hospital):
6%, 7/1/2012.......................................................... 1,500,000 1,411,095
6.375%, 7/1/2022...................................................... 2,250,000 2,161,507
(Yale-New Haven Hospital) 7.10%, 7/1/2025 (Insured; MBIA)............... 10,475,000 11,368,099
Connecticut Higher Education Supplemental Loan Authority, Revenue:
7.375%, 11/15/2005...................................................... 10,000 10,554
7.50%, 11/15/2010....................................................... 1,955,000 2,064,284
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
7.20%, 11/15/2008....................................................... 11,545,000 12,152,960
7.50%, 11/15/2009....................................................... 810,000 856,688
5.60%, 5/15/2014........................................................ 4,000,000 3,725,280
6.45%, 5/15/2022........................................................ 6,000,000 5,954,160
6.70%, 11/15/2022....................................................... 17,500,000 17,932,600
6.75%, 11/15/2023....................................................... 6,000,000 6,173,880
6.05%, 11/15/2025....................................................... 11,225,000 10,671,383
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
CONNECTICUT (CONTINUED)
Connecticut Municipal Electric Energy Cooperative, Power Supply System Revenue
7%, 1/1/2016 (Insured; AMBAC)........................................... $ 1,000,000 $ 1,037,390
Connecticut Resources Recovery Authority:
(Middle Connecticut System Bonds) 7.875%, 11/15/2012 (Insured; MBIA).... 2,500,000 2,675,900
(Municipal Service Fee Subordinated Bridgeport) 7.50%, 1/1/2009......... 2,500,000 2,605,925
(Resources Recovery-American Refunding-Fuel) 8%, 11/15/2015............. 11,835,000 12,916,364
Eastern Connecticut Resource Recovery Authority, Solid Waste Revenue
(Wheelabrator Lisbon Project):
5.50%, 1/1/2014....................................................... 10,000,000 8,485,800
5.50%, 1/1/2020....................................................... 7,250,000 5,950,873
New Haven 7.40%, 8/15/2011.................................................. 1,500,000 1,593,210
South Central Connecticut Regional Water Authority, Water Systems Revenue:
5.75%, 8/1/2012 (Insured; AMBAC)........................................ 6,000,000 5,877,300
7.125%, 8/1/2012 (Prerefunded 8/1/1996) (a)............................. 2,480,000 2,607,621
Stamford 6.60%, 1/15/2010................................................... 2,750,000 3,043,315
Stratford 7.30%, 3/1/2012 (Prerefunded 3/1/2001) (a)........................ 1,130,000 1,277,635
U. S. RELATED-14.6%
Puerto Rico:
(Public Improvement):
7.70%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 3,000,000 3,429,240
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)............................ 6,000,000 6,676,260
Refunding 5.50%, 7/1/2013 .............................................. 3,000,000 2,778,810
Puerto Rico Aqueduct and Sewer Authority, Revenue
7.875%, 7/1/2017........................................................ 1,860,000 2,047,376
Puerto Rico Electric Power Authority, Power Revenue 7%, 7/1/2021............ 6,775,000 7,275,402
Puerto Rico Highway and Transportation Authority, Highway Revenue:
6.236%, 7/1/2010(b)..................................................... 3,200,000 2,780,000
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. 5,000,000 5,511,500
Puerto Rico Industrial Medical and Environmental Pollution Control Facilities
Financing Authority, Revenue (Motorola Inc. Project) 6.75%, 1/1/2014.... 2,000,000 2,117,160
Puerto Rico Municipal Finance Agency 5%, 7/1/1998 ......................... 3,655,000 3,633,582
Puerto Rico Ports Authority, Special Facilities Revenue
(American Airlines) 6.30%, 6/1/2023..................................... 2,000,000 1,891,960
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities:
7.125%, 7/1/2009 (Prerefunded 7/1/1998) (a)........................... 4,830,000 5,232,291
Refunding 5.75%, 7/1/2015............................................. 8,000,000 7,561,520
Virgin Islands Public Finance Authority, Revenue, Refunding
7.25%, 10/1/2018........................................................ 2,000,000 2,067,340
---------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $351,813,948)................... $363,275,061
===============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- --------- -------------------- ----------------------
<S> <C> <C> <C>
AAA Aaa AAA 32.4%
AA Aa AA 32.9
A A A 16.2
BBB Baa BBB 11.3
Not Rated (d) Not Rated (d) Not Rated (d) 7.2
-----
100.0%
======
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation FSA Financial Security Assurance
FHA Federal Housing Administration MBIA Municipal Bond Investors Assurance Insurance
Corporation
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collataralized by U.S.
government securities which are held in escrow and are
used to pay prinicpal 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 Fund may invest.
(e) At April 30, 1995, the series had $96,059,865 (25.9% 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 STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $351,813,948)-see statement..................................... $363,275,061
Cash.................................................................... 150,836
Interest receivable..................................................... 8,243,086
Receivable for shares of Beneficial Interest subscribed................. 150,513
Prepaid expenses........................................................ 9,609
--------------
371,829,105
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $168,937
Due to Distributor...................................................... 91,478
Payable for shares of Beneficial Interest redeemed...................... 75,057
Accrued expenses and other liabilities.................................. 104,687 440,159
---------- --------------
NET ASSETS ................................................................ $371,388,946
==============
REPRESENTED BY:
Paid-in capital......................................................... $362,106,350
Accumulated net realized capital losses and distributions in excess
of net realized gain on investments................................... (2,178,517)
Accumulated net unrealized appreciation on investments-Note 3........... 11,461,113
--------------
NET ASSETS at value......................................................... $371,388,946
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 28,568,040
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,013,154
==============
NET ASSET VALUE per share:
Class A Shares
($335,964,194 / 28,568,040 shares).................................... $11.76
=======
Class B Shares
($35,424,752 / 3,013,154 shares)...................................... $11.76
=======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $25,194,629
EXPENSES:
Management fee-Note 2(a).............................................. $ 2,082,924
Shareholder servicing costs-Note 2(c)................................. 1,182,330
Distribution fees (Class B shares)-Note 2(b).......................... 170,234
Professional fees..................................................... 52,876
Custodian fees........................................................ 38,846
Prospectus and shareholders' reports.................................. 16,912
Trustees' fees and expenses-Note 2(d)................................. 3,371
Registration fees..................................................... 1,825
Miscellaneous......................................................... 24,945
-------------
3,574,263
Less--reduction in management fee due to
undertakings-Note 2(a) 35,533
-------------
TOTAL EXPENSES.................................................. 3,538,730
-------------
INVESTMENT INCOME-NET........................................... 21,655,899
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(1,973,798)
Net unrealized (depreciation) on investments............................ (287,865)
-------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (2,261,663)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $19,394,236
=============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
--------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income--net................................................. $ 21,803,044 $ 21,655,899
Net realized (loss) on investments..................................... (185,245) (1,973,798)
Net unrealized (depreciation) on investments for the year.............. (15,446,724) (287,865)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. 6,171,075 19,394,236
-------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income--net:
Class A shares....................................................... (20,717,006) (19,881,887)
Class B shares....................................................... (1,086,038) (1,774,012)
From net realized gain on investments:
Class A shares....................................................... (758,152) --
Class B shares....................................................... (50,982) --
In excess of net realized gain on investments:
Class A shares....................................................... (18,247) --
Class B shares....................................................... (1,227) --
-------------- --------------
TOTAL DIVIDENDS.................................................. (22,631,652) (21,655,899)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares....................................................... 44,016,008 15,947,221
Class B shares....................................................... 25,201,426 5,896,601
Dividends reinvested:
Class A shares....................................................... 12,291,154 11,434,147
Class B shares....................................................... 839,531 1,240,658
Cost of shares redeemed:
Class A shares....................................................... (37,453,609) (53,507,884)
Class B shares....................................................... (1,518,578) (3,788,582)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS.......................................... 43,375,932 (22,777,839)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 26,915,355 (25,039,502)
NET ASSETS:
Beginning of year...................................................... 369,513,093 396,428,448
-------------- --------------
End of year............................................................ $396,428,448 $371,388,946
============== ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------------------------------------------------------------------
CLASS A CLASS B
--------------------------------- --------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
--------------------------------- --------------------------------
1994 1995 1994 1995
------------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 3,521,978 1,373,091 2,016,083 503,373
Shares issued for dividends reinvested. 987,215 983,180 67,670 106,773
Shares redeemed........................ (3,026,083) (4,637,620) (125,740) (329,539)
-------------- -------------- -------------- -----------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING........ 1,483,110 (2,281,349) 1,958,013 280,607
============== ============== =============== ===========
</TABLE>
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.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
----------------------------------------------- ---------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------------------- ---------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.88 $11.28 $11.45 $12.26 $11.81 $11.89 $12.26 $11.80
------- ------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............ .77 .72 .71 .68 .67 .18 .61 .61
Net realized and unrealized gain (loss)
on investments................. .40 .17 .81 (.42) (.05) .37 (.43) (.04)
------- ------- ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.17 .89 1.52 .26 .62 .55 .18 .57
------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.77) (.72) (.71) (.68) (.67) (.18) (.61) (.61)
Dividends from net realized gain
on investments................. -- -- -- (.03) -- -- (.03) --
Dividends in excess of net realized gain
on investments................. -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS............ (.77) (.72) (.71) (.71) (.67) (.18) (.64) (.61)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year..... $11.28 $11.45 $12.26 $11.81 $11.76 $12.26 $11.80 $11.76
======== ====== ========== ======= ========= ========= ========= ========
TOTAL INVESTMENT RETURN(2)........... 11.10% 8.14% 13.62% 1.92% 5.47% 16.08%(3) 1.26% 4.99%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .21% .52% .69% .80% .89% 1.12%(3) 1.36% 1.41%
Ratio of net investment income to
average net assets............. 6.81% 6.30% 5.93% 5.44% 5.77% 4.57%(3) 4.78% 5.21%
Decrease reflected in above expense ratios
due to undertakings by the Manager .75% .41% .21% .09% .01% .12%(3) .08% .01%
Portfolio Turnover Rate.......... 6.30% 8.53% 24.22% 10.83% 10.48% 24.22% 10.83% 10.48%
Net Assets, end of year (000's Omitted) $183,788 $280,305 $360,020 $364,182 $335,964 $9,492 $32,246 $35,425
- ----------------------------
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) 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 fifteen series
including the Connecticut Series (the "Series"). Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor
of the Fund's shares. Dreyfus Service Corporation is a
wholly-owned subsidiary of The Dreyfus Corporation ("Manager").
Effective August 24, 1994, the Manager became a direct subsidiar
y
of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the
two Classes include the services offered to and the
expenses borne by each Class and certain voting rights.
(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: Securitie
s
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 applicabl
e
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 $513,000 available for Federal income tax purposes
to be applied against future net securities profits, if any,
realized subsequent to April 30, 1995. The carryover does not
include net realized securities losses from November 1, 1994
through April 30, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, $33,000 of
the carryover expires in fiscal 2002 and $480,000 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 average daily value of the Series' 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, 1994
through June 30, 1994, to waive receipt of the management fee
payable to it by the Series in excess of an annual rate of .50
of
1% (excluding certain expenses as described above) of the
Series'
average daily net assets and thereafter, had undertaken from
July
1, 1994 through July 7, 1994 to reduce the management fee paid
by
the Series, to the extent that the Series' aggregate expenses
(excluding 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 $35,533 for the year ended April 30,
1995.
Dreyfus Service Corporation retained $9,130 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $21,361 from contingent deferred sales charges imposed
upon redemptions of the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B Distribution Plan, effective
August 24, 1994, the Fund pays the Distributor for distributing
the Series' Class B shares at an annual rate of .50 of 1% of the
value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $117,044 was charged
to
the Series pursuant to the Class B Distribution Plan and $53,190
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $284,876 and $26,594
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $576,791 and $58,523 were charged to Class A and
Class B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $43,233,085 and $64,530,561,
respectively,
for the year ended April 30, 1995, and consisted entirely of
long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on
investments was $11,461,113, consisting of $17,120,455 gross
unrealized appreciation and $5,659,342 gross unrealized
depreciation.
At April 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 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, 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 April 30, 1995 by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Premier State Municipal Bond
Fund, Connecticut Series at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_______ _______
<S> <C> <C>
FLORIDA-95.1%
Alachua County Health Facilities Authority, Health Facilities Revenue
(Refunding - Santa Fe Healthcare Facilities Project) 7.60%, 11/15/2013.. $ 3,500,000 $ 3,602,725
Arcadia, Water and Sewer Revenue 7.75%, 12/1/2021........................... 2,215,000 2,339,306
Brevard County Health Facilities Authority, HR
(Holmes Regional Medical Center Project) 5.70%, 10/1/2008............... 4,585,000 4,546,578
Broward County Health Facilities Authority, Revenue, Refunding
(Broward County Nursing Home) 7.50%, 8/15/2020 (LOC; Allied Irish Bank) (a) 1,000,000 1,045,610
Charlotte County, Health Care Facilities Revenue
(Charlotte Community Mental Health Project) 9.25%, 7/1/2020............. 1,650,000 1,827,128
Clay County Housing Finance Authority, SFMR
8.20%, 6/1/2021 (Collateralized; GNMA).................................. 670,000 715,004
Dade County, Aviation Revenue:
6.55% 10/1/2013 (Insured; MBIA)......................................... 4,225,000 4,371,734
(Miami International Airport) 5.75%, 10/1/2015.......................... 2,250,000 2,143,485
Dade County Educational Facilities Authority, Revenue (Saint Thomas
University)
7.65%, 1/1/2014 (LOC; Sun Bank, Prerefunded 1/1/2000) (a,b)............. 2,500,000 2,817,050
Dade County Health Facilities Authority, HR
(South Shore Hospital and Medical Center) 7.60%, 8/1/2024 (Insured; FHA) 2,505,000 2,685,786
Dade County Housing Finance Authority, Revenue, Refunding:
MFMR (Cutler Meadows Apartment) 6.50%, 7/1/2022 (Insured; FHA).......... 1,785,000 1,791,069
SFMR 6.70%, 4/1/2028 (Collateralized: FNMA & GNMA)...................... 4,500,000 4,518,000
Dunes Community Development District, Revenue, Refunding
(Intracoastal Waterway Bridge) 5.50%, 10/1/2007......................... 7,895,000 7,673,308
Duval County Housing Finance Authority, SFMR:
7.85%, 12/1/2022 (Collateralized; GNMA)................................. 2,625,000 2,774,783
7.70%, 9/1/2024 (Collateralized; GNMA).................................. 1,460,000 1,570,303
Escambia County, PCR (Champion International Corp. Project) 5.875%, 6/1/2022 5,000,000 4,487,200
Escambia County Housing Finance Authority, SFMR 7.80%, 4/1/2022............. 1,205,000 1,280,059
Florida Board of Education, Capital Outlay, Refunding 5.125%, 6/1/2018...... 4,450,000 3,916,044
Florida Housing Finance Agency:
(Brittany Rosemont Apartments) 7%, 2/1/2035............................. 6,000,000 6,139,080
Multi-Family Housing (Driftwood Terrace Project)
7.65%, 12/20/2031 (Collateralized; GNMA).............................. 3,440,000 3,642,685
Single Family Mortgage, Refunding 6.65%, 1/1/2024....................... 3,500,000 3,533,495
Florida Municipal Power Agency, Revenue (All Requirements Power Supply
Project)
5.10%, 10/1/2025 (Insured; AMBAC)....................................... 6,000,000 5,203,740
Florida Turnpike Authority, Turnpike Revenue:
7.50%, 7/1/2019 (Prerefunded 7/1/1999) (b).............................. 5,685,000 6,342,982
(Refunding - Department of Transportation) 5%, 7/1/2019................. 3,000,000 2,592,090
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
FLORIDA (CONTINUED)
Greater Orlando Aviation Authority, Airport Facilities Revenue, Refunding
5.50%, 10/1/2008 (Insured; AMBAC)....................................... $ 5,940,000 $ 5,823,814
5.50%, 10/1/2013 (Insured; AMBAC)....................................... 4,750,000 4,497,205
Highlands County Health Facilities Authority, Revenue (Adventist Sunbelt
Hospital)
7%, 11/15/2014.......................................................... 1,500,000 1,604,985
Hillsborough County, Utility Revenue, Refunding:
6.625%, 8/1/2011........................................................ 4,000,000 4,110,680
7%, 8/1/2014............................................................ 4,765,000 4,995,292
Hillsborough County Aviation Authority, Revenue, Refunding:
(Delta Airlines):
6.80%, 1/1/2024....................................................... 2,500,000 2,476,325
7.75%, 1/1/2024....................................................... 1,500,000 1,565,130
(Tampa International Airport) 5.375%, 10/1/2023 (Insured; FGIC)......... 5,750,000 5,140,500
Hillsborough County Port District, Revenue (Tampa Port Authority)
8.25%, 6/1/2009 (Prerefunded 12/1/2000) (b)............................. 3,000,000 3,375,270
Indian Trace Community Development District,
Water and Sewer Revenue 8.50%, 4/1/1997................................. 340,000 361,624
Jackson County, PCR, Refunding (Gulf Power Co. Project) 6.75%, 3/1/2022..... 3,930,000 4,051,044
Jacksonville, Capital Improvement Revenue Certificates (Gator Bowl Project)
5.50%, 10/1/2019 (Insured; AMBAC)....................................... 2,225,000 2,075,124
Jacksonville Electric Authority, Revenue, Refunding (Bulk Power - Scherer 4
Project)
5.25%, 10/1/2021........................................................ 1,250,000 1,103,913
Jacksonville Health Facilities Authority, HR, Refunding (Saint Luke's
Hospital)
7.125%, 11/15/2020...................................................... 6,700,000 7,170,273
Lake County, Resource Recovery IDR, Refunding (NRG/Recovery Group)
5.85%, 10/1/2009........................................................ 6,000,000 5,616,780
Leesburg, HR, Refunding:
(Leesburg Regional Medical Center Project - A):
6.25%, 7/1/2009....................................................... 1,850,000 1,794,056
6.125%, 7/1/2012...................................................... 5,000,000 4,733,000
(Leesburg Regional Medical Center Project - B) 5.65%, 7/1/2008.......... 4,000,000 3,691,720
Leon County Educational Facilities Authority, COP (Southgate Residence Hall
Project):
3.75%, 12/1/1995........................................................ 259,200 25,920
9%, 9/1/2014 (c)........................................................ 5,235,000 523,500
Miami Beach Redevelopment Agency, Tax Increment Revenue
(City Center - Historic Convention Village) 5.625%, 12/1/2009........... 2,000,000 1,884,980
Nassau County, PCR, Refunding (ITT Rayonier, Inc. Project):
7.65%, 6/1/2006......................................................... 4,500,000 4,696,965
6.20%, 7/1/2015......................................................... 1,420,000 1,369,235
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
FLORIDA (CONTINUED)
North Miami, Educational Facilities Revenue (Johnson & Whales University
Project)
6.10%, 4/1/2013......................................................... $ 5,000,000 $ 4,978,150
North Miami Health Facilities Authority, Health Facilities Revenue
(Villa Maria Nursing Housing Project) 7.50%, 9/1/2012................... 2,735,000 2,924,125
Orange County, Sales Tax Revenue 5.375%, 1/1/2024........................... 4,425,000 3,976,039
Orange County Health Facilities Authority, Health Facilities Revenue
(Mental Health Service Project) 9.25%, 7/1/2020......................... 3,815,000 4,052,255
Orlando and Orange County Expressway Authority, Expressway Revenue, Refunding
(Junior Lien):
5.125%, 7/1/2020 (Insured; FGIC)...................................... 5,120,000 4,493,363
5.95%, 7/1/2023....................................................... 2,500,000 2,407,325
Orlando Utilities Commission, Water and Electric Revenue:
5.125%, 10/1/2019....................................................... . 3,220,000 2,814,570
5.25%, 10/1/2023........................................................ 3,000,000 2,639,280
5.50%, 10/1/2026........................................................ 12,440,000 11,320,400
5.50%, 10/1/2027........................................................ 4,000,000 3,636,320
Refunding 5%, 10/1/2020................................................. 4,900,000 4,179,896
Osceola County Industrial Development Authority, Revenue
(Community Provider Pooled Loan Program) 7.75%, 7/1/2017................ 5,235,000 5,555,696
Palm Beach County, Solid Waste Industrial Development Revenue:
(Okeelanta Power LP Project) 6.85%, 2/15/2021........................... . 11,000,000 10,463,530
(Osceola Power LP) 6.85%, 1/1/2014...................................... 4,300,000 4,219,590
Palm Beach County Housing Finance Authority, Single Family Mortgage,
Purchase Revenue 6.55%, 4/1/2027........................................ 2,750,000 2,735,205
Pinellas County, PCR, Refunding (Florida Power Corp.) 7.20%, 12/1/2014...... 3,000,000 3,178,590
Pinellas County Housing Finance Authority, SFMR:
7.70%, 8/1/2022......................................................... 2,810,000 2,996,584
(Multi-County Program) 6.70%, 2/1/2028 (Insured; FHA)................... 5,000,000 5,043,800
Saint Lucie County:
Sales Tax Revenue, Refunding 5%, 10/1/2019.............................. 2,500,000 2,158,625
SWDR (Florida Power and Light Co. Project) 7.15%, 2/1/2023.............. 4,000,000 4,190,600
Sunrise, Special Tax District Number 1, Refunding
6.375%, 11/1/2021 (LOC; Bayerische Hypotheken-und Weschel Bank) (a)..... 2,500,000 2,571,775
Tampa, Water and Sewer Revenue, Refunding
6.60%, 10/1/2014 (Insured; FGIC, Prerefunded 10/1/2002) (b)............. . 10,000,000 10,998,800
Volushia County Health Facilities Authority, Hospital Facilities Revenue
(Memorial Health System Project):
8.125%, 6/1/2008 (Prerefunded 6/1/2000) (b)........................... 1,970,000 2,280,019
8.25%, 6/1/2020 (Prerefunded 6/1/2000) (b)............................ 2,500,000 2,907,325
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
U.S. RELATED_4.9%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ $ 5,000,000 $ 5,063,200
Virgin Islands Port Authority, Airport Revenue (Cyril E. King Airport
Project)
8.10%, 10/1/2005........................................................ 2,500,000 2,719,675
Virgin Islands Public Finance Authority, Revenue, Refunding 7.25%, 10/1/2018 5,400,000 5,581,818
_______
TOTAL INVESTMENTS (cost $267,814,810)....................................... $274,333,134
============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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 MFMR Multi-Family Mortgage Revenue
FNMA Federal National Mortgage Association PCR Pollution Control Revenue
GNMA Government National Mortgage Association SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
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 AAA 34.3%
AA Aa AA 15.4
A A A 13.3
BBB Baa BBB 21.8
BB Ba BB 1.5
Not Rated (e) Not Rated (e) Not Rated (e) 13.7
_____
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 excrow 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) Non-income producing security; interest payment in
default. The
valuation of these securities has been determined in good
faith under the
direction of the Board of Trustees.
(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 Manager to be of
comparable
quality to
those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $267,814,810)-see statement..................................... $274,333,134
Interest receivable..................................................... 4,216,905
Receivable for shares of Beneficial Interest subscribed................. 180,323
Prepaid expenses........................................................ 7,731
___________
278,738,093
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $126,390
Due to Distributor...................................................... 68,248
Due to Custodian........................................................ 58,657
Payable for shares of Beneficial Interest redeemed...................... 732,097
Accrued expenses........................................................ 64,610 1,050,002
______ ____________
NET ASSETS ................................................................ $277,688,091
REPRESENTED BY: ============
Paid-in capital......................................................... $268,303,949
Accumulated undistributed net realized gain on investments.............. 2,865,818
Accumulated net unrealized appreciation on investments-Note 3(b)........ 6,518,324
____________
NET ASSETS at value......................................................... $277,688,091
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 17,390,524
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,742,539
===========
NET ASSET VALUE per share:
Class A Shares
($252,406,357 / 17,390,524 shares).................................... $14.51
===========
Class B Shares
($25,281,734 / 1,742,539 shares)...................................... $14.51
===========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $19,094,594
EXPENSES:
Management fee-Note 2(a).............................................. $1,599,553
Shareholder servicing costs-Note 2(c)................................. 911,108
Distribution fees (Class B shares)-Note 2(b).......................... 118,848
Professional fees..................................................... 39,749
Custodian fees........................................................ 32,107
Prospectus and shareholders' reports.................................. 23,243
Trustees' fees and expenses-Note 2(d)................................. 3,592
Registration fees..................................................... 2,406
Miscellaneous......................................................... 22,740
_________
2,753,346
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 27,718
_________
TOTAL EXPENSES.................................................. 2,725,628
__________
INVESTMENT INCOME-NET........................................... 16,368,966
__________
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3(a).............................. $4,399,552
Net realized gain on financial futures-Note 3(a)........................ 11,431
__________
NET REALIZED GAIN..................................................... 4,410,983
Net unrealized (depreciation) on investments............................ (2,782,324)
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,628,659
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $17,997,625
===========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
__________________________________
1994 1995
______________ _______________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 18,361,672 $ 16,368,966
Net realized gain on investments........................................ 322,634 4,410,983
Net unrealized (depreciation) on investments for the year............... (12,210,827) (2,782,324)
____________ ___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 6,473,479 17,997,625
____________ ___________
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (17,572,099) (15,149,356)
Class B shares........................................................ (789,573) (1,219,610)
From net realized gain on investments:
Class A shares........................................................ (884,752) (716,166)
Class B shares........................................................ (51,557) (65,057)
In excess of net realized gain on investments:
Class A shares........................................................ (721,877) --
Class B shares........................................................ (42,065) --
____________ ___________
TOTAL DIVIDENDS................................................... (20,061,923) (17,150,189)
____________ ___________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 43,755,340 12,537,474
Class B shares........................................................ 18,173,895 5,009,096
Dividends reinvested:
Class A shares........................................................ 6,943,770 5,971,345
Class B shares........................................................ 401,953 509,461
Cost of shares redeemed:
Class A shares........................................................ (48,253,346) (56,564,392)
Class B shares........................................................ (856,937) (2,889,736)
___________ ___________
Increase (Decrease) In Net Assets From
Beneficial Interest Transactions................................ 20,164,675 (35,426,752)
___________ ___________
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 6,576,231 (34,579,316)
NET ASSETS:
Beginning of year....................................................... 305,691,176 312,267,407
___________ ___________
End of year............................................................. $312,267,407 $277,688,091
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________
CLASS A CLASS B
__________________________ ___________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
___________________________ __________________________
1994 1995 1994 1995
_______ _______ _______ _______
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 2,866,976 877,487 1,194,240 350,773
Shares issued for dividends reinvested. 457,470 419,064 26,554 35,744
Shares redeemed........................ (3,200,998) (3,988,619) (56,660) (202,194)
_________ _________ _________ ________
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING.......... 123,448 (2,692,068) 1,164,134 184,323
========= ========= ========= ========
</TABLE>
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.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
___________________________________________________ ___________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
___________________________________________________ ___________________
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
_____ _____ _____ _____ ____ ______ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.34 $13.93 $14.33 $15.02 $14.43 $14.59 $15.01 $14.42
______ ______ ______ ______ _______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net............ .99 .95 .92 .85 .81 .24 .77 .73
Net realized and unrealized gain (loss)
on investments................ .61 .41 .86 (.51) .12 .42 (.51) .13
______ ______ ______ ______ _______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS 1.60 1.36 1.78 .34 .93 .66 .26 .86
______ ______ ______ ______ _______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net (.99) (.95) (.92) (.85) (.81) (.24) (.77) (.73)
Dividends from net realized gain
on investments................. (.02) (.01) (.17) (.04) (.04) -- (.04) (.04)
Dividends in excess of net realized gain
on investments................. -- -- -- (.04) -- -- (.04) --
______ ______ ______ ______ _______ ______ ______ ______
TOTAL DISTRIBUTIONS............ (1.01) (.96) (1.09) (.93) (.85) (.24) (.85) (.77)
______ ______ ______ ______ _______ ______ ______ ______
Net asset value, end of year..... $13.93 $14.33 $15.02 $14.43 $14.5 $15.01 $14.42 $14.51
====== ====== ====== ====== ======= ====== ====== ======
TOTAL INVESTMENT RETURN (2).......... 12.40% 10.09% 12.84% 2.14% 6.71% 15.60%(3) 1.54% 6.21%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .21% .52% .69% .80% .90% 1.12%(3) 1.34% 1.41%
Ratio of net investment income to
average net assets............. 7.11% 6.65% 6.21% 5.61% 5.67% 4.87%(3) 4.91% 5.13%
Decrease reflected in above expense
ratios due to undertakings
by the Manager................. .74% .41% .21% .10% .01% .12%(3) .09% .01%
Portfolio Turnover Rate.......... .28% 20.99% 33.18% 20.84% 50.62% 33.18% 20.84% 50.62%
Net Assets, end of year (000's Omitted) $177,927 $245,474 $299,775 $289,791 $252,406 $5,916 $22,476 $25,282
_______________________________
(1) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(2) Exclusive of sales load.
(3) 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 fifteen series including the Florida Series (the
"Series"). Dreyfus
Service Corporation, until August 24, 1994, acted as the
distributor of the
Fund's shares. Dreyfus Service Corporation is a wholly-owned
subsidiary of
The Dreyfus Corporation ("Manager"). Effective August 24, 1994,
the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI
Holdings, Inc., the parent company of which is Boston
Institutional Group,
Inc.
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 offers both Class A and Class B shares. Class A
shares are
subject to a sales charge imposed at the time of purchase and
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.
Other
differences between the two Classes include the services offered
to and the
expenses borne by each Class and certain voting rights.
(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: Securitie
s
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
discount 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 STATE MUNICIPAL BOND FUND, FLORIDA 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 average
daily value of the Series' 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, 1994 through June 30, 1994 to waive
receipt of the
management fee payable to it by the Series in excess of an
annual
rate of .50
of 1% (excluding certain expenses as described above) of the
Series' average
daily net assets and thereafter, had undertaken from July 1,
1994
through
July 7, 1994 to reduce the management fee paid by the Series, to
the extent
that the Series' aggregate expenses (excluding 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 $27,718 for the year ended April 30, 1995.
Dreyfus Service Corporation retained $10,581 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained
$15,723 from contingent deferred sales charges imposed upon
redemptions of the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised
Distribution Plan with respect to Class B shares only (the
"Class
B Distribution Plan") pursuant to Rule 12b-1 under the Act.
Pursuant to the Class B Distribution Plan, effective August 24,
1994, the Fund pays the Distributor for distributing the Series'
Class B shares at an annual rate of .50 of 1% of the value of
the
average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Series pay Dreyfus
Service
Corporation at an annual rate of .50 of 1% of the value of the
Series' Class B shares average daily net assets, for the costs
and
expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents
based on the value of the Series' Class B shares owned by
clients
of the Service Agent.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the year ended April 30, 1995, $82,256 was charged to
the Series pursuant to the Class B Distribution Plan and $36,592
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $224,083 and $18,296
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $443,562 and $41,128 were charged to Class A and
Class B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of
the Fund were "affiliated persons," as defined in the Act, of
the
Manager and/or Dreyfus Service Corporation. Each trustee who is
not an "affiliated person" receives 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:
(A) The aggregate amount of purchases and sales of investmen
t
securities amounted to $254,116,519 and $288,649,689,
respectively, for the year ended April 30, 1995, and consisted
entirely of long-term and short-term municipal investments.
The Series is engaged in trading financial futures contracts
.
The Series is exposed to market risk as a result of changes in
the
value of the underlying financial instruments. Investments in
financial futures require the Series to "mark to market" on a
daily basis, which reflects the change in the market value of
the
contract at the close of each day's trading. Accordingly,
variation margin payments are made or received to reflect daily
unrealized gains or losses. When the contracts are closed, the
Series recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consists
of cash or cash equivalents, up to approximately 10% of the
contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the
contract
is traded and is subject to change. At April 30, 1995, there
were
no financial futures contracts outstanding.
(B) At April 30, 1995, accumulated net unrealized
appreciation
on investments was $6,518,324, consisting of $12,641,304 gross
unrealized appreciation and $6,122,980 gross unrealized
depreciation.
At April 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 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, 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 April 30, 1995 by correspondence with the
custodian.
An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating
the overall
financial statement presentation. We believe that our audits
provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights
referred to above present fairly, in all material respects, the
financial
position of Premier State Municipal Bond Fund, Florida Series at
April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-93.0% AMOUNT VALUE
_______ ______
<S> <C> <C>
GEORGIA-91.1%
Albany, Sewer System Revenue 6.50%, 7/1/2009 (Insured; MBIA)................ $ 100,000 $ 105,644
Albany-Dougherty Inner City Authority, Revenue, Refunding 6%, 2/1/2011...... 200,000 200,516
Athens-Clarke County Unified Government, Water and Sewer Revenue, Refunding
5.875%, 1/1/2008 (Insured; FGIC)........................................ 265,000 264,155
Atlanta:
Airport Facilities Revenue:
6.50%, 1/1/2013....................................................... 150,000 152,241
6%, 1/1/2014 (Insured; AMBAC)......................................... 1,000,000 976,870
COP (Atlanta Pretrial Detention Center Project) 6.25%, 12/1/2011 (Insured; MBIA) 300,000 307,806
GO 6.10%, 12/1/2019..................................................... 1,000,000 996,140
School Improvement:
5.60%, 12/1/2012...................................................... 1,000,000 969,500
5.60%, 12/1/2018...................................................... 1,000,000 934,870
Atlanta Downtown Development Authority, Revenue, Refunding
(Underground Atlanta Project) 6.25%, 10/1/2016.......................... 200,000 201,686
Bartow County, Water and Sewer Revenue, Refunding 6%, 9/1/2015
(Insured; AMBAC)........................................................ 450,000 444,748
Chatham County School District 6.25%, 8/1/2016.............................. 1,000,000 1,018,830
Cobb County Housing Authority, MFMR, Refunding (Garrison Plantation
Development)
5.75%, 7/1/2014 (Insured: FHA, FNMA)(a)................................. 1,070,000 1,011,728
Columbus, Water and Sewer Revenue, Refunding:
6.25%, 5/1/2011 (Insured; FGIC)......................................... 155,000 159,472
5.70%, 5/1/2020......................................................... 500,000 466,030
Columbus Hospital Authority, Revenue Certificates (Saint Francis Hospital)
6.20%, 1/1/2010 (Insured; MBIA)......................................... 200,000 203,886
Coweta County School System:
6.35%, 8/1/2012......................................................... 100,000 102,661
Refunding 5.75%, 2/1/2010 (Insured; FGIC)............................... 200,000 197,050
Dekalb County Development Authority, Revenue
(Wesley Homes, Inc-Budd Terrace Project) 6.75%, 10/1/2013
(LOC; Wachovia Bank of Georgia, N.A.) (b)............................... 200,000 205,738
Dekalb County Health Facilities, GO 5.50%, 1/1/2020......................... 1,000,000 915,550
Dekalb County School District, Refunding 5.60%, 7/1/2010.................... 500,000 488,965
Dekalb County Water and Sewer Authority, Revenue 5.125%, 10/1/2014.......... 1,000,000 894,040
Downtown Savannah Authority, Revenue, Refunding
(Chatham County Projects) 5%, 1/1/2011.................................. 1,000,000 912,500
Fayette County School District 6.125%, 3/1/2015............................. 500,000 506,070
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
GEORGIA (CONTINUED)
Fulco Hospital Authority, Revenue Anticipation Certificates
(Georgia Baptist Healthcare) 6.25%, 9/1/2013............................ $ 250,000 $ 231,983
Fulton County, Water and Sewer Revenue, Refunding
6.375%, 1/1/2014 (Insured; FGIC)........................................ 290,000 306,278
Fulton County Building Authority, Revenue, Refunding
(County Government and Health Facilities Project)
6.125%, 1/1/2011...................................................... 300,000 305,445
Fulton County Development Authority, Special Facilities Revenue, Refunding
(Delta Air Lines Inc. Project) 6.95%, 11/1/2012......................... 245,000 246,009
Fulton County Hospital Authority, Revenue Anticipation Certificates
(Northside Hospital Project)
6.625%, 10/1/2016 (Insured; MBIA) (Prerefunded 10/1/2002) (c)......... 200,000 220,222
Fulton Dekalb Hospital Authority, HR, Refunding Certificates
5.50%, 1/1/2012 (Insured; MBIA)......................................... 1,000,000 944,650
Gainesville and Hall County Hospital Authority, Revenue Anticipation
Certificates
(Northeast Healthcare Project) 6.25%, 10/1/2012 (Insured; MBIA)......... 100,000 101,630
Gainesville, Water and Sewer Revenue, Refunding 6%, 11/15/2012 (Insured; FGIC) 300,000 306,207
Georgia, GO:
6.30%, 3/1/2008......................................................... 100,000 108,056
6.65%, 3/1/2009......................................................... 1,000,000 1,110,320
5.65%, 3/1/2012 (d)..................................................... 1,000,000 992,400
Georgia Housing and Finance Authority, Revenue:
(Home Ownership Opportunity Program) 6.50%, 12/1/2011................... 180,000 184,631
Single Family Mortgage:
5.20%, 12/1/2013 (Insured; FHA)....................................... 990,000 863,795
6.50%, 12/1/2017 (Insured; FHA)....................................... 1,000,000 1,006,980
Georgia Municipal Electric Authority, Power Revenue, Refunding
6.125%, 1/1/2014 (Insured; FGIC)........................................ 300,000 297,171
Gwinnett County School District 6.25%, 2/1/2011............................. 500,000 511,560
Hancock County, Various Purpose Asset Guaranty 6.70%, 4/1/2015.............. 1,000,000 1,042,410
Henry County and Henry County Water and Sewer Authority, Revenue, Refunding
6.50%, 2/1/2011 (Insured; MBIA)......................................... 100,000 104,603
Metropolitan Atlanta Rapid Transportation Authority, Sales Tax Revenue,
Refunding
6.25%, 7/1/2020 (Insured; AMBAC)........................................ 300,000 309,249
Monroe County Development Authority, PCR (Oglethorpe Power Corp. Scherer
Project)
6.80%, 1/1/2011......................................................... 100,000 106,884
Municipal Electric Authority of Georgia, Special Obligation
(First Crossover-General Resolution) 6.50%, 1/1/2020.................... 100,000 104,143
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
GEORGIA (CONTINUED)
Private Colleges and Universities Authority, Revenue:
(Agnes Scott College Projects) 5.50%, 6/1/2013.......................... $ 1,000,000 $ 941,000
Refunding (Spellman College Project) 6.20%, 6/1/2014 (Insured; FGIC).... 1,000,000 1,008,700
Roswell, GO 5.65%, 2/1/2011 (d)............................................. 1,000,000 986,570
Savannah Economic Development Authority, PCR, Refunding
(Union Camp Corp. Project) 6.80%, 2/1/2012.............................. 200,000 207,034
Savannah Hospital Authority, Revenue, Refunding (Saint Joseph's Hospital
Project)
6.20%, 7/1/2023......................................................... 1,000,000 933,320
Sugar Hill Public Utility, Revenue, Refunding 5.90%, 1/1/2014 (Insured; FSA) 500,000 492,175
Wayne County Development Authority, PCR (ITT Rayonier Inc. Project)
6.10%, 11/1/2007........................................................ 750,000 752,775
U.S. RELATED-1.9%
Puerto Rico, GO, Refunding 6%, 7/1/2014..................................... 600,000 587,238
___________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $28,390,713).................... $27,950,134
===========
SHORT-TERM MUNICIPAL INVESTMENTS-7.0%
U.S. RELATED;
Puerto Rico Electric Power Authority, Power Revenue, VRDN
3.89%, 7/1/2023 (Insured; FSA) (e)
(cost $2,100,000)....................................................... $ 2,100,000 $ 2,100,000
==========
TOTAL INVESTMENTS-100.0%
(cost $30,490,713)...................................................... $30,050,134
==========
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation HR Hospital Revenue
COP Certificate of Participation 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
FSA Financial Security Assurance PCR Pollution Control Revenue
GO General Obligation VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (F) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_________ _______ _________________ ___________________
<S> <C> <C> <C>
AAA Aaa AAA 40.2%
AA Aa AA 46.2
A A A 10.3
BBB Baa BBB 2.5
BB Ba BB .8
______
100.0%
======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly held by the custodian in a segregated account as
collateral for a delayed delivery security.
(b) Secured by letters of credit.
(c) Bonds which are prerefunded are collaterized 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) Purchased on delayed delivery basis.
(e) Securites payable on demand. The interest rate, which
is
subject to change, is based upon bank prime rates or an
index of market rates.
(f) 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, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $30,490,713)-see statement...................................... $30,050,134
Interest receivable..................................................... 540,330
Receivable for shares of Beneficial Interest subscribed................. 22,989
Prepaid expenses........................................................ 10,911
Due from The Dreyfus Corporation........................................ 1,151
__________
30,625,515
LIABILITIES:
Due to Distributor...................................................... $ 13,904
Due to Custodian........................................................ 142,645
Payable for investment securities purchased............................. 2,015,538
Accrued expenses and other liabilities.................................. 39,705 2,211,792
_________ _________
NET ASSETS.................................................................. $28,413,723
==========
REPRESENTED BY:
Paid-in capital......................................................... $29,382,983
Accumulated net realized (loss) on investments.......................... (528,681)
Accumulated net unrealized (depreciation) on investments-Note 3......... (440,579)
__________
NET ASSETS at value......................................................... $28,413,723
==========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 701,962
=======
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,517,320
=========
NET ASSET VALUE per share:
Class A Shares
($8,984,991 / 701,962 shares)......................................... $12.80
=====
Class B Shares
($19,428,732 / 1,517,320 shares)...................................... $12.80
=====
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 1,634,792
EXPENSES:
Management fee-Note 2(a).............................................. $149,119
Shareholder servicing costs-Note 2(c)................................. 95,657
Distribution fees (Class B shares)-Note 2(b).......................... 88,285
Prospectus and shareholders' reports.................................. 8,500
Professional fees..................................................... 7,586
Custodian fees........................................................ 3,185
Registration fees..................................................... 1,304
Trustees' fees and expenses-Note 2(d)................................. 262
Miscellaneous......................................................... 16,479
_______
370,377
Less-expense reimbursement from Manager due to
undertaking-Note 2(a)............................................. 214,310
_______
TOTAL EXPENSES.................................................. 156,067
_________
INVESTMENT INCOME-NET........................................... 1,478,725
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (508,036)
Net unrealized appreciation on investments.............................. 667,389
_________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 159,353
__________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,638,078
==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________
1994 1995
_______ _______
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 1,112,595 $ 1,478,725
Net realized (loss) on investments...................................... (5,970) (508,036)
Net unrealized appreciation (depreciation) on investments for the year.. (1,498,005) 667,389
___________ _________
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (391,380) 1,638,078
___________ _________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (503,813) (548,712)
Class B shares........................................................ (608,782) (930,013)
_________ _________
TOTAL DIVIDENDS................................................... (1,112,595) (1,478,725)
___________ ___________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 4,256,182 698,373
Class B shares........................................................ 11,270,678 4,788,621
Dividends reinvested:
Class A shares........................................................ 363,383 386,985
Class B shares........................................................ 335,961 479,506
Cost of shares redeemed:
Class A shares........................................................ (1,324,053) (2,172,832)
Class B shares........................................................ (720,668) (2,227,045)
___________ ___________
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS...... 14,181,483 1,953,608
__________ _________
TOTAL INCREASE IN NET ASSETS.................................... 12,677,508 2,112,961
NET ASSETS:
Beginning of year....................................................... 13,623,254 26,300,762
__________ __________
End of year............................................................. $26,300,762 $28,413,723
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES
_________________________________________________________
CLASS A CLASS B
________________________ _______________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
________________________ ________________________
1994 1995 1994 1995
_________ ________ _______ ________
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 314,626 56,480 832,134 380,245
Shares issued for dividends reinvested. 26,952 30,950 24,944 38,336
Shares redeemed........................ (99,638) (178,009) (53,747) (180,856)
_______ _________ ________ _______
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING.......... 241,940 (90,579) 803,331 237,725
======= ======== ======= =======
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA 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 CLASS B SHARES
__________________________________ ________________________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
__________________________________ _________________________________
PER SHARE DATA: 1993(1) 1994 1995 1993(2) 1994 1995
_______ ____ ____ _______ ____ _____
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $12.50 $13.27 $12.69 $12.71 $13.27 $12.69
______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net.............................. .51 .73 .73 .20 .67 .66
Net realized and unrealized gain (loss) on investments .77 (.58) .11 .56 (.58) .11
____ _____ ____ ____ ______ _____
TOTAL FROM INVESTMENT OPERATIONS................. 1.28 .15 .84 .76 .09 .77
____ _____ ____ ____ ______ _____
DISTRIBUTIONS;
Dividends from investment income-net............... (.51) (.73) (.73) (.20) (.67) (.66)
_____ _____ ____ ____ ______ _____
Net asset value, end of year....................... $13.27 $12.69 $12.80 $13.27 $12.69 $12.80
===== ===== ===== ===== ===== =====
TOTAL INVESTMENT RETURN(3)............................. 15.91%(4) .97% 6.87% 20.66%(4) .46% 6.33%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............ .07% .25% .50%(4) .58% .75%
Ratio of net investment income to average net assets 5.55%(4) 5.41% 5.80% 4.60%(4) 4.85% 5.27%
Decrease reflected in above expense ratios due
to undertakings by the Manager................... 1.46%(4) 1.02% .78% 1.37%(4) 1.02% .80%
Portfolio Turnover Rate............................ 37.79%(5) 6.76% 34.04% 37.79%(5) 6.76% 34.04%
Net Assets, end of year (000's Omitted)............ $7,304 $10,058 $8,985 $6,319 $16,243 $19,429
</TABLE>
(1) From September 3, 1992 (commencement of operations) to
April 30, 1993.
(2) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
See notes to financial statements.
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 fifteen series
including the Georgia Series (the "Series"). Dreyfus
Service Corporation, until August 24, 1994, acted as the
distributor of the Fund's shares. Dreyfus Service Corporation is
a wholly-owned subsidiary of The Dreyfus Corporation
("Manager").
Effective August 24, 1994, the Manager became a direct subsidiar
y
of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the
two Classes include the services offered to and the
expenses borne by each Class and certain voting rights.
(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: Securitie
s
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 applicabl
e
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 $381,000 available for Federal income tax purposes
to be applied against future net securities profits, if any,
realized subsequent to April 30, 1995. The carryover does not
include net realized securities losses from November 1, 1994
through April 30, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, $14,625 of
the carryover expires in fiscal 2002 and $366,375 of the
carryover expires in 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 average daily value of the Series' 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 Manager has undertaken from May 1, 1994 through June
30, 1995 or until such time as the net assets of the Series
exceed $50 million, regardless of whether they remain at that
level, 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). The expense
reimbursement, pursuant to the undertaking, amounted to $214,310
for the year ended April 30, 1995.
The undertaking may be modified by the Manager from time to
time, provided that the resulting expense reimbursement would
not
be less than the amount required pursuant to the Agreement.
Dreyfus Service Corporation retained $864 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $12,961 from contingent deferred sales charges imposed
upon redemptions of the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 of the
Act. Pursuant to the Class B Distribution Plan, effective August
24, 1994, the Fund pays the Distributor for distributing the
Series' Class B shares at an annual rate of .50 of 1% of
the value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series' Class B
shares average daily net assets, for the costs and expenses in
connection with advertising, marketing and distributing the
Series' Class B shares. Dreyfus Service Corporation made
payments
to one or more Service Agents based on the value of the Series'
Class B shares owned by clients of the Service Agent.
During the year ended April 30, 1995, $61,066 was charged to
the Series pursuant to the Class B Distribution Plan and $27,219
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $7,959 and $13,610
were
charged to Class A and Class B shares, respectively, by Dreyfus
Service Corporation. From August 24, 1994 through April 30,
1995,
$15,680 and $30,533 were charged to Class A and Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $30,749,706 and $26,857,025,
respectively,
for the year ended April 30, 1995, and consisted entirely of
long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized depreciation
on
investments was $440,579, consisting of $299,791 gross unrealize
d
appreciation and $740,370 gross unrealized depreciation.
At April 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 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, 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 April 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 State Municipal Bond
Fund, Georgia Series at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS APRIL 30 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.8% AMOUNT VALUE
-------------- ------------
<S> <C> <C>
MARYLAND--90.9%
Anne Arundel County:
Consolidated Water and Sewer 7.75%, 3/15/2008........................... $ 1,000,000 $ 1,094,510
PCR (Baltimore Gas and Electric Co. Project) 6%, 4/1/2024............... 4,375,000 4,263,481
Baltimore:
7%, 10/15/2007 (Insured; MBIA).......................................... 1,500,000 1,696,650
7.15%, 10/15/2008....................................................... 1,275,000 1,433,011
PCR (General Motors Corp.) 5.35%, 4/1/2008.............................. 6,000,000 5,555,760
Port Facilities Revenue (Consolidated Coal Sales) 6.50%, 12/1/2010...... 6,240,000 6,482,736
Baltimore City Housing Corp., MFHR, Refunding
7.25%, 7/1/2023 (Collateralized; FNMA).................................. 3,270,000 3,407,994
Baltimore County:
Mortgage Revenue:
(First Mortgage - Pickersgill) 7.70%, 1/1/2021........................ 3,000,000 3,122,520
(Refunding - Tindeco Wharf Project) 6.50%, 12/20/2012 (Collateralized; GNMA) 1,500,000 1,536,510
PCR, Refunding (Bethlehem Steel Corp. Project):
7.50%, 6/1/2015....................................................... 3,500,000 3,536,330
7.55%, 6/1/2017....................................................... 2,500,000 2,512,750
(Refunding - County Pension Funding) 5.20%, 4/1/2009.................... 3,500,000 3,333,155
Calvert County, PCR, Refunding
(Baltimore Gas and Electric Co. Project) 5.55%, 7/15/2014............... 4,000,000 3,741,880
Gaithersburg, EDR, Refunding (First Mortgage - Asbury Methodist)
5.75%, 1/1/2011......................................................... 3,000,000 2,811,300
Howard County:
COP 8.15%, 2/15/2020.................................................... 605,000 816,429
Consolidated Public Improvement, Refunding 5.25%, 8/15/2012............. 1,500,000 1,401,210
EDR, Refunding (M.O.R. XIV Associates Project) 7.75%, 6/1/2012.......... 2,500,000 2,700,750
Howard County Metropolitan District 6.125%, 5/15/2023....................... 2,000,000 2,011,080
Kent County, College Revenue, Refunding (Washington College Project)
7.70%, 7/1/2018......................................................... 1,750,000 1,872,815
Maryland Community Development Administration,
Department of Housing and Community Development:
MFHR:
5.45%, 5/15/2013 (Insured; FHA)................................... 1,750,000 1,605,012
5.95%, 5/15/2013.................................................. 12,200,000 11,692,236
6.50%, 5/15/2013.................................................. 5,000,000 5,114,450
8.875%, 5/15/2021................................................. 525,000 538,902
7.30%, 5/15/2023.................................................. 2,205,000 2,305,658
Zero Coupon, 5/15/2032............................................ 11,550,000 679,833
6.85%, 5/15/2033.................................................. 5,000,000 5,090,700
6.70%, 5/15/2036 (Insured: FHA) (a)............................... 5,415,000 5,340,219
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30,1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
MARYLAND (CONTINUED)
Maryland Community Development Administration,
Department of Housing and Community Development (continued):
Single Family Program:
7.40%, 4/1/2009................................................... $ 1,000,000 $ 1,059,060
6.95%, 4/1/2011................................................... 6,435,000 6,739,118
7.70%, 4/1/2015................................................... 1,680,000 1,780,178
6.55%, 4/1/2026................................................... 7,500,000 7,460,100
6.75%, 4/1/2026................................................... 3,650,000 3,689,055
7.375%, 4/1/2026.................................................. 2,000,000 2,076,820
Zero Coupon, 4/1/2029............................................. 85,075,000 5,888,041
7.625%, 4/1/2029.................................................. 7,890,000 8,221,932
7.45%, 4/1/2032................................................... 6,410,000 6,737,551
Maryland Department of Transportation, Consolidated Transportation
6.375%, 9/1/2006........................................................ 5,000,000 5,312,750
Maryland Economic Development Corp., Revenue
(Health and Mental Hygiene Providers Facilities Acquisition Program):
8.375%, 3/1/2013...................................................... 4,520,000 4,708,077
8.75%, 3/1/2017....................................................... 5,255,000 5,497,045
Maryland Health and Higher Educational Facilities Authority, Revenue:
(Anne Arundel Medical Center) 5.25%, 7/1/2013 (Insured; AMBAC).......... 3,530,000 3,217,277
(Bon Secours Hospital) 7.375%, 9/1/2017 (Prerefunded 7/1/2000) (b)...... 2,575,000 2,906,196
(Francis Scott Key Medical Center):
5%, 7/1/2018.......................................................... 5,000,000 4,316,350
7%, 7/1/2025 (Prerefunded 7/1/2000) (b,c)............................. 6,500,000 7,224,165
(Good Samaritan Hospital) 5.70%, 7/1/2009............................... 3,140,000 3,076,980
(Greater Baltimore Medical Center) 6.75%, 7/1/2019 (Prerefunded 7/1/2001) (b) 4,250,000 4,708,022
(Refunding - Johns Hopkins Hospital) 5%, 7/1/2023....................... 2,000,000 1,675,060
(Refunding - Memorial Hospital of Cumberland) 6.50%, 7/1/2017 (Insured; MBIA) 1,000,000 1,005,360
(Refunding - Peninsula Regional Medical Project) 5%, 7/1/2023 (Insured; MBIA) 8,220,000 6,961,107
(Refunding - Roland Park Project) 7.75%, 7/1/2012....................... 2,230,000 2,333,918
(Union Hospital of Cecil County) 6.70%, 7/1/2009........................ 2,320,000 2,338,722
(University of Maryland Medical Systems):
7%, 7/1/2022 (Insured; FGIC) ......................................... 4,500,000 5,092,425
Refunding:
5.40%, 7/1/2008 (Insured; FGIC)................................... 2,625,000 2,531,288
5.375%, 7/1/2013 (Insured; FGIC).................................. 4,500,000 4,148,820
Maryland Industrial Development Financing Authority, EDR
(Holy Cross Health Systems Corp.) 5.50%, 12/1/2015...................... 10,630,000 9,554,138
(Medical Waste Association) 8.75%, 11/15/2010........................... 775,000 775,000
Maryland Local Government Insurance Trust, Capitalization Program, COP
7.125%, 8/1/2009........................................................ 3,250,000 3,490,468
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
MARYLAND (CONTINUED)
Maryland Stadium Authority, Sports Facility LR 7.60%, 12/15/2019............ $ 5,250,000 $ 5,691,158
Maryland Transportation Authority, Transportation Facilities Project Revenue:
9%, 7/1/2015 (Prerefunded 7/1/1995) (b)................................. 1,790,000 1,840,675
Refunding 5.70%, 7/1/2005............................................... 3,700,000 3,774,074
Maryland Water Quality Financing Administration, Revolving Loan Fund Revenue:
7.25%, 9/1/2011......................................................... 2,250,000 2,465,753
7.25%, 9/1/2012......................................................... 5,500,000 6,027,395
6.70%, 9/1/2013......................................................... 1,200,000 1,278,660
7.10%, 9/1/2013......................................................... 600,000 659,256
Montgomery County Housing Opportunities Commission, Revenue:
Multi-Family Mortgage:
7.05%, 7/1/2032....................................................... 2,485,000 2,553,835
7.375%, 7/1/2032...................................................... 4,630,000 4,817,700
Single Family Mortgage 7.375%, 7/1/2017................................. 1,875,000 1,962,919
Montgomery County Revenue Authority, LR
(Olney Indoor Swim Center Project)
6.30%, 7/15/2012 (Prerefunded 7/15/2000) (b)............................ 2,110,000 2,272,998
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project) 6.20%, 7/1/2010 .......... 5,000,000 4,941,400
Prince Georges County:
Consolidated Public Improvement, Refunding:
6.75%, 7/1/2001....................................................... 830,000 917,573
6.75%, 7/1/2010 (Prerefunded 7/1/2001) (b)........................... 1,170,000 1,243,769
5.25%, 10/1/2010...................................................... 1,000,000 932,790
EDR, Refunding (Capitol View II) 9%, 9/1/2002 (d)....................... 7,506,000 6,380,100
PCR, Refunding (Potomac Electric Project) 6%, 9/1/2022.................. 3,750,000 3,661,088
Revenue Project, Refunding (Dimensions Health Corp.):
5.375%, 7/1/2014 ..................................................... 3,000,000 2,620,860
5.30%, 7/1/2024 ...................................................... 6,000,000 4,968,600
Solid Waste Management System Revenue 5.25%, 6/15/2013.................. 3,800,000 3,243,984
Stormwater Management 5.50%, 3/15/2013.................................. 2,780,000 2,643,224
Prince Georges County Housing Authority:
Mortgage Revenue, Refunding:
(New Keystone Apartment Project) 6.80%, 7/1/2025 (Insured: FHA & MBIA) 4,300,000 4,441,470
(Stevenson Apartments Project) 6.35%, 7/20/2020 (Collateralized; GNMA) 3,000,000 3,008,250
(Timber Ridge/Cypress Creek) 5.625%, 12/20/2013 (Collateralized; GNMA) 5,355,000 5,016,939
SFMR 6.60%, 12/1/2025 (Collateralized: FNMA & GNMA)..................... 5,000,000 5,042,600
University of Maryland, System Auxiliary Facility and Tuition Revenue:
6.50%, 10/1/2002........................................................ 1,420,000 1,562,923
5.375%, 4/1/2009........................................................ 3,500,000 3,352,580
Refunding 5%, 10/1/2010................................................. 3,000,000 2,700,720
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30,1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- ------------
MARYLAND (CONTINUED)
Washington D.C. Metropolitan Transit Authority, Gross Revenue, Refunding
5.25%, 7/1/2014 (Insured: FGIC)......................................... $ 1,000,000 $ 903,540
Washington Suburban Sanitary District, General Construction
6.50%, 11/1/2014 (Prerefunded 11/1/2001) (b)............................ 2,690,000 2,947,648
U. S. RELATED-7.9%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 4,000,000 4,050,560
Guam Power Authority, Revenue 6.30%, 10/1/2012.............................. 3,400,000 3,346,858
Puerto Rico Commonwealth 5.85%, 7/1/2009 ................................... 5,000,000 4,970,950
Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue 5.40%, 7/1/2006 ........................................ 11,000,000 10,493,670
Puerto Rico Public Buildings Authority, Revenue, Refunding 5.70%, 7/1/2009 3,500,000 3,439,625
-------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $324,814,120)................... $330,399,048
=============
SHORT-TERM MUNICIPAL INVESTMENTS-1.2%
MARYLAND;
Maryland Energy Financing Administration, Obligation Revenue, VRDN
(Baltimore Ferst Project) 4.10% (cost $4,000,000) (e)................... $ 4,000,000 $ 4,000,000
============
TOTAL INVESTMENTS-100.0%
(cost $328,814,120)..................................................... $334,399,048
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LR Lease Revenue
COP Certificate of Participation 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 PCR Pollution Control Revenue
FHA Federal Housing Administration SFMR Single Family Mortgage Revenue
GNMA Government National Mortgage Association VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (F) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- -------- --------- -------------------- -----------------------
<S> <C> <C> <C>
AAA Aaa AAA 23.4%
AA Aa AA 40.1
A A A 21.6
BBB Baa BBB 5.1
F1+ & F1 MIG1, VMIG1 & P1 SP1 & A1 1.2
Not Rated(g) Not Rated(g) Not Rated(g) 8.6
-------
100.0%
=======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Purchased on a delayed delivery basis.
(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) Wholly held by the custodian in a segregated account as
collateral for a delayed delivery security.
(d) Non-income producing security; interest payment in
default.
(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) Fitch currently provides creditworthiness information
for a limited number of investments.
(g) 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.
(h) At April 30, 1995, the Fund had $107,807,082 (32% of
net
assets) and $84,818,231 (25.2% of net assets) invested
in securities whose payment of principal and interest
is
dependent upon revenues generated from housing projects
and health care projects, respectively.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30,1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $328,814,120)-see statement..................................... $334,399,048
Cash.................................................................... 434,719
Interest receivable..................................................... 5,882,272
Receivable for shares of Beneficial Interest subscribed................. 1,663,731
Receivable for investment securities sold............................... 501,250
Prepaid expenses........................................................ 9,833
-------------
342,890,853
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 152,805
Due to Distributor...................................................... 83,840
Payable for investment securities purchased............................. 5,448,257
Payable for shares of Beneficial Interest redeemed...................... 206,732
Accrued expenses........................................................ 75,491 5,967,125
------------
NET ASSETS ................................................................ $336,923,728
=============
REPRESENTED BY:
Paid-in capital......................................................... $330,700,472
Accumulated undistributed net realized gain on investments.............. 638,328
Accumulated net unrealized appreciation on investments-Note 3........... 5,584,928
-------------
NET ASSETS at value......................................................... $336,923,728
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 24,072,403
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 2,798,533
==============
NET ASSET VALUE per share:
Class A Shares
($301,833,626 / 24,072,403 shares).................................... $12.54
=======
Class B Shares
($35,090,102 / 2,798,533 shares)...................................... $12.54
=======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $22,777,401
EXPENSES:
Management fee-Note 2(a).............................................. $1,901,194
Shareholder servicing costs-Note 2(c)................................. 1,117,864
Distribution fees (Class B shares)-Note 2(b).......................... 162,359
Professional fees..................................................... 43,186
Custodian fees........................................................ 36,791
Prospectus and shareholders' reports.................................. 25,114
Registration fees..................................................... 4,811
Trustees' fees and expenses-Note 2(d)................................. 2,678
Miscellaneous......................................................... 28,721
----------
3,322,718
Less-reduction in management fee due to
undertakings-Note 2(a).................................... ........ 32,614
----------
TOTAL EXPENSES.................................................. 3,290,104
-------------
INVESTMENT INCOME-NET........................................... 19,487,297
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 874,479
Net unrealized appreciation on investments.............................. 276,297
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,150,776
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $20,638,073
=============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
------------------------------
1994 1995
-------------- ------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 20,691,632 $ 19,487,297
Net realized gain (loss) on investments................................. (231,661) 874,479
Net unrealized appreciation (depreciation) on investments for the year.. (16,463,923) 276,297
-------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 3,996,048 20,638,073
------------- ------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (19,640,636) (17,819,972)
Class B shares........................................................ (1,050,996) (1,667,325)
From net realized gain on investments:
Class A shares........................................................ (741,468) ---
Class B shares........................................................ (53,530) ---
In excess of net realized gain on investments:
Class A shares........................................................ (4,187) ---
Class B shares........................................................ (302) ---
------------- ------------
TOTAL DIVIDENDS................................................... (21,491,119) (19,487,297)
------------ -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 44,119,678 15,871,084
Class B shares........................................................ 27,026,693 7,200,284
Dividends reinvested:
Class A shares........................................................ 12,863,992 11,260,663
Class B shares........................................................ 759,890 1,087,620
Cost of shares redeemed:
Class A shares........................................................ (43,091,205) (61,788,292)
Class B shares........................................................ (1,376,544) (3,903,364)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 40,302,504 (30,272,005)
=============
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 22,807,433 (29,121,229)
NET ASSETS:
Beginning of year....................................................... 343,237,524 366,044,957
-------------- -------------
End of year............................................................. $366,044,957 $336,923,728
============== =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
CLASS A CLASS B
-------------------------------- --------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- --------------------------------
1994 1995 1994 1995
--------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 3,339,080 1,283,464 2,042,409 582,210
Shares issued for dividends reinvested 978,190 913,405 57,973 88,247
Shares redeemed........................ (3,303,860) (5,049,171) (106,081) (321,839)
-------------- -------------- -------------- -----------
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING.... 1,013,410 (2,852,302) 1,994,301 348,618
============== =============== =============== ==========
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND 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 CLASS A SHARES
----------------------------------------------- --------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------------------- ---------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------ ----- ------ ------ ------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.61 $12.13 $12.43 $13.02 $12.46 $12.64 $13.02 $12.46
------- ------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............ .85 .79 .76 .73 .70 .20 .65 .63
Net realized and unrealized gain (loss)
on investments................. .53 .35 .68 (.53) .08 .38 (.53) .08
------- -------- ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.38 1.14 1.44 .20 .78 .58 .12 .71
------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.85) (.79) (.76) (.73) (.70) (.20) (.65) (.63)
Dividends from net realized gain
on investments................. (.01) (.05) (.09) (.03) -- -- (.03) --
Dividends in excess of net realized
gain on investments............ -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------ -------
TOTAL DISTRIBUTIONS............ (.86) (.84) (.85) (.76) (.70) (.20) (.68) (.63)
------- ------- ------- ------- ------ ------- ------- -------
Net asset value, end of year..... $12.13 $12.43 $13.02 $12.46 $12.54 $13.02 $12.46 $12.54
======= ======= ======= ======= ======= ======= ======= ========
TOTAL INVESTMENT RETURN (2).......... 12.24% 9.68% 11.93% 1.33% 6.52% 15.74%(3) .75% 5.94%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .21% .53% .69% .80% .90% 1.09%(3) 1.37% 1.44%
Ratio of net investment income to
average net assets............. 6.98% 6.40% 5.93% 5.51% 5.69% 4.55%(3) 4.82% 5.13%
Decrease reflected in above expense
ratios due to undertakings by
the Manager.................... .75% .41% .22% .10% .01% .12%(3) .08% .01%
Portfolio Turnover Rate.......... 1.45% 16.21% 17.92% 10.27% 35.39% 17.92% 10.27% 35.39%
Net Assets, end of year (000's Omitted) $179,959 $254,240 $337,307 $335,518 $301,834 $5,931 $30,527 $35,090
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
See notes to financial statements.
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 fifteen series
including the Maryland Series (the "Series"). Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of
the Fund's shares. Dreyfus Service Corporation is a wholly-owned
subsidiary of The Dreyfus Corporation ("Manager"). Effective
August 24, 1994, the Manager became a direct subsidiary of
Mellon
Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the
two Classes include the services offered to and the expenses
borne by each Class and certain voting rights.
(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: Securitie
s
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 applicabl
e
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 Series' 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, 1994
through June 30, 1994 to waive receipt of the management fee
payable to it by the Series in excess of an annual rate of .50
of 1% (excluding certain expenses as described above) of the
Series' average daily net assets and thereafter, had undertaken
from July 1, 1994 through July 7, 1994 to reduce the management
fee paid by the Series, to the extent that the Series' aggregate
expenses (excluding certain expense 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 $32,614 for the year ended April 30,
1995.
Dreyfus Service Corporation retained $10,085 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $14,513 from contingent deferred sales charges imposed
upon redemptions of the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B Distribution Plan, effective
August 24, 1994, the Fund pays the Distributor for distributing
the Series' Class B shares at an annual rate of .50 of 1% of the
value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $112,582 was charged
to
the Series pursuant to the Class B Distribution Plan and $49,777
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
accounts. 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 in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. From May 1,
1994 through August 23, 1994, $260,906 and $24,888 were charged
to Class A and Class B shares, respectively, by Dreyfus Service
Corporation. From August 24, 1994 through April 30, 1995,
$522,094 and $56,291 were charged to Class A and Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $200,447,897 and $226,481,040,
respectively, for the year ended April 30, 1995, and consisted
entirely of long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on
investments was $5,584,928, consisting of $11,272,899 gross
unrealized appreciation and $5,687,971 gross unrealized
depreciation.
At April 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 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, 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 April 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 State Municipal Bond
Fund, Maryland Series at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
MASSACHUSETTS-86.8% -------------- -------------
<S> <C> <C>
Boston Industrial Development Financing Authority, Sewer Facility Revenue
(Harbor Electric Energy Co. Project) 7.375%, 5/15/2015.................. $ 2,500,000 $ 2,595,650
Boston Water and Sewer Commission, Revenue:
7.875%, 11/1/1996....................................................... 295,000 315,638
7.875%, 11/1/2013....................................................... 605,000 643,018
7.10%, 11/1/2019 (Insured; MBIA, Prerefunded 11/1/1999) (a)............. 1,000,000 1,104,100
Leominster 7.50%, 4/1/2009 (Insured; MBIA, Prerefunded 4/1/2000) (a)........ 1,275,000 1,428,982
Lynn Water and Sewer Commission, General Revenue
7.25%, 12/1/2010 (Insured; MBIA, Prerefunded 12/1/2000) (a)............. 1,000,000 1,125,250
Massachusetts Bay Transportation Authority:
6.204%, 3/1/2021 (Insured; MBIA) (b,c).................................. 2,300,000 1,992,375
7%, 3/1/2021............................................................ 1,000,000 1,110,600
Massachusetts College Building Authority, Project Revenue
7.80%, 5/1/2016 (Insured; MBIA, Prerefunded 5/1/1998) (a)............... 1,000,000 1,101,030
Massachusetts Commonwealth:
7.25%, 3/1/2000 (Insured; FGIC)......................................... 650,000 723,860
7.25%, 3/1/2009 (Insured; FGIC, Prerefunded 3/1/2000) (a)............... 350,000 389,452
7%, 8/1/2012............................................................ 1,850,000 1,991,784
Massachusetts Education Loan Authority, Education Loan Revenue
7.75%, 1/1/2008 (Insured; MBIA)......................................... 1,310,000 1,414,158
Massachusetts Health and Educational Facilities Authority, Revenue:
(Berkshire Health Systems):
7.50%, 10/1/2008 (Insured; MBIA)...................................... 1,000,000 1,100,950
6.75%, 10/1/2019 (Insured; MBIA)...................................... 1,750,000 1,813,473
(Capital Asset Program) 7.30%, 10/1/2018 (Insured; MBIA)................ 3,750,000 4,066,162
(Medical Center of Central Massachusetts) 7.10%, 7/1/2021............... 1,000,000 1,027,260
(New England Deaconess Hospital) 6.875%, 4/1/2022....................... 6,000,000 6,093,360
(Refunding - Milton Hospital) 7%, 7/1/2016 (Insured; MBIA).............. 2,050,000 2,196,493
(Salem Hospital) 7.25%, 7/1/2009 (Insured; MBIA)........................ 370,000 387,693
(South Shore Hospital) 7.50%, 7/1/2020
(Insured; MBIA, Prerefunded 7/1/2000) (a)............................. 2,000,000 2,258,240
(University Hospital) 7.25%, 7/1/2019 (Insured; MBIA)................... 2,750,000 2,992,440
Massachusetts Housing Finance Agency, Housing Revenue:
Multi-Family Residential 7.80%, 8/1/2022 (Insured; FHA)................. 1,500,000 1,562,790
Residential:
8.50%, 8/1/2020....................................................... 15,000 15,752
8.40%, 8/1/2021....................................................... 260,000 275,642
Single Family:
7.80%, 12/1/2005...................................................... 930,000 962,550
7.90%, 6/1/2014....................................................... 980,000 1,039,153
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
----------- ----------
MASSACHUSETTS (CONTINUED)
Single Family (continued):
8.10%, 12/1/2021...................................................... $ 2,400,000 $ 2,543,328
7.95%, 6/1/2023....................................................... 2,000,000 2,125,860
Massachusetts Industrial Finance Agency, Revenue:
(Brooks School) 5.95%, 7/1/2023......................................... 1,000,000 968,080
(Leonard Morse Hospital) 8%, 10/15/2014 (Prerefunded 10/15/1999) (a).... 1,000,000 1,141,620
(Provider Lease Program) 8.75%, 7/15/2009............................... 695,000 723,474
(Refunding - Harvard Community Health) 8.125%, 10/1/2017................ 750,000 820,643
Massachusetts Municipal Wholesale Electric Co.,
Power Supply Systems Revenue:
5.20%, 7/1/1998....................................................... 2,000,000 2,005,060
8.75%, 7/1/2018 (d)................................................... 3,410,000 3,771,783
6.125%, 7/1/2019...................................................... 1,200,000 1,153,848
Massachusetts Port Authority, Special Project Revenue
(Harborside Hyatt) 10%, 3/1/2026........................................ 3,000,000 3,247,290
Massachusetts Water Resources Authority
7.625%, 4/1/2014 (Prerefunded 4/1/2000) (a)............................. 750,000 847,072
New England Education Loan Marketing Corp., Refunding (Student Loan):
5%, 6/1/1998............................................................ 3,400,000 3,322,888
5.70%, 7/1/2005......................................................... 1,000,000 978,790
Somerville Housing Development Corp., Multi-Family Revenue, Refunding
7.50%, 1/1/2024 (Collateralized; FNMA).................................. 1,000,000 1,050,570
University of Lowell Building Authority 7.60%, 11/1/2010 (Insured; FSA)..... 750,000 812,385
U. S. RELATED-13.2%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 1,500,000 1,518,960
Puerto Rico Commonwealth:
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a).............................. 1,000,000 1,112,710
5.375%, 7/1/2022 (Insured; MBIA) (e).................................... 2,500,000 2,291,575
Refunding 6%, 7/1/2014.................................................. 2,000,000 1,957,460
Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue:
6.136%, 7/1/2009 (b).................................................. 1,000,000 873,750
6.236%, 7/1/2010 (b).................................................. 1,000,000 868,750
Puerto Rico Electric Power Authority, Power Revenue
8%, 7/1/2008 (Prerefunded 7/1/1998) (a)................................. 500,000 558,750
Virgin Islands Public Finance Authority, Revenue, Refunding
7.25%, 10/1/2018........................................................ 1,000,000 1,033,670
-----------
TOTAL INVESTMENTS (cost $74,096,213)........................................ $77,456,171
===========
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
SUMMARY OF ABBREVIATIONS
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance
FHA Federal Housing Administration
MBIA Municipal Bond Investors Assurance
FNMA Federal National Mortgage Association
Insurance Corporation
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<TABLE>
<CAPTION>
FITCH (F) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- -------- -------- ------------------ ---------------------
<S> <C> <C> <C>
AAA Aaa AAA 44.3%
AA Aa AA 8.6
A A A 33.9
BBB Baa BBB 5.3
Not Rated (g) Not Rated (g) Not Rated (g) 7.9
------
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, 1995, this
security amounted to $1,992,375 or 2.6% of net assets.
(d) Wholly held by the custodian in a segregated account
as collateral for a delayed delivery security.
(e) Purchased on delayed delivery basis.
(f) Fitch currently provides creditworthiness information
for a limited number of investments.
(g) 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.
(h) At April 30, 1995, the Fund had $22,871,073 (29.7%) of
net assets invested in securities whose payment of principal
and interest is dependent upon revenues generated from
health
care projects.
(i) At April 30, 1995, 32.8% of the Fund's 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, 1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $74,096,213)-see statement...................................... $77,456,171
Cash.................................................................... 425,860
Interest receivable..................................................... 1,394,556
Receivable for shares of Beneficial Interest subscribed................. 191,595
Prepaid expenses........................................................ 4,628
===========
79,472,810
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 34,915
Due to Distributor...................................................... 17,578
Payable for investment securities purchased............................. 2,354,992
Payable for shares of Beneficial Interest redeemed...................... 84,388
Accrued expenses........................................................ 29,511 2,521,384
---------- -----------
NET ASSETS ................................................................ $76,951,426
===========
REPRESENTED BY:
Paid-in capital......................................................... $74,086,484
Accumulated net realized capital losses and distribution in excess
of net realized gain on investments-Note 1(c)......................... (495,016)
Accumulated net unrealized appreciation on investments-Note 3........... 3,359,958
-----------
NET ASSETS at value......................................................... $76,951,426
===========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 6,307,679
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 366,391
===========
NET ASSET VALUE per share:
Class A Shares
($72,731,047 / 6,307,679 shares)...................................... $11.53
======
Class B Shares
($4,220,379 / 366,391 shares)......................................... $11.52
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
INVESTMENT INCOME:
<S> <C> <C>
INTEREST INCOME......................................................... $5,411,347
EXPENSES:
Management fee-Note 2(a).............................................. $ 426,673
Shareholder servicing costs-Note 2(c)................................. 253,821
Distribution fees (Class B shares)-Note 2(b).......................... 19,533
Prospectus and shareholders' reports.................................. 15,517
Professional fees..................................................... 9,588
Custodian fees........................................................ 8,025
Registration fees..................................................... 3,326
Trustees' fees and expenses-Note 2(d)................................. 669
Miscellaneous......................................................... 15,635
---------
752,787
Less-reduction in management fee due to
undertakings-Note 2(a).................................... ........ 7,190
---------
TOTAL EXPENSES.................................................. 745,597
----------
INVESTMENT INCOME-NET........................................... 4,665,750
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(120,750)
Net unrealized (depreciation) on investments........................... (311,459)
---------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (432,209)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $4,233,541
==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
-------------------------------
1994 1995
------------- -------------
OPERATIONS:
<S> <C> <C>
Investment income-net................................................... $ 4,904,107 $ 4,665,750
Net realized gain (loss) on investments................................. 38,609 (120,750)
Net unrealized (depreciation) on investments for the year............... (3,301,993) (311,459)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 1,640,723 4,233,541
------------- -------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (4,768,195) (4,451,783)
Class B shares........................................................ (135,912) (213,967)
From net realized gain on investments:
Class A shares........................................................ (303,176) ---
Class B shares........................................................ (11,985) ---
In excess of net realized gain on investments:
Class A shares........................................................ (12,471) (343,505)
Class B shares........................................................ (493) (17,797)
------------- -------------
TOTAL DIVIDENDS................................................... (5,232,232) (5,027,052)
------------- -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 6,515,438 4,730,079
Class B shares........................................................ 2,835,004 1,042,859
Dividends reinvested:
Class A shares........................................................ 2,622,716 2,596,861
Class B shares........................................................ 68,991 123,653
Cost of shares redeemed:
Class A shares........................................................ (8,594,165) (10,711,882)
Class B shares........................................................ (56,768) (603,243)
-------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 3,391,216 (2,821,673)
-------------- ------------
TOTAL (DECREASE) IN NET ASSETS.................................. (200,293) (3,615,184)
NET ASSETS:
Beginning of year....................................................... 80,766,903 80,566,610
-------------- --------------
End of year............................................................. $80,566,610 $76,951,426
============= =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------------------------------------------
CLASS A CLASS B
------------------------------- -------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------- -------------------------------
1994 1995 1994 1995
-------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 531,050 413,848 229,412 90,978
Shares issued for dividends reinvested. 214,378 228,208 5,666 10,873
Shares redeemed........................ (710,422) (939,699) (4,659) (53,757)
-------------- ------------ ------------- -----------
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING............... 35,006 (297,643) 230,419 48,094
============== ============ ============= ==========
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS 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 CLASS B SHARES
----------------------------------------------- ---------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------------------- ---------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------- ------ ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.69 $11.05 $11.41 $12.13 $11.64 $11.79 $12.13 $11.63
-------- ------- ------ ------- ------ ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............ .79 .75 .73 .71 .69 .19 .64 .63
Net realized and unrealized
gain (loss) on investments..... .37 .36 .73 (.44) (.06) .34 (.45) (.06)
------- ------- ------- ------- ------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.16 1.11 1.46 .27 .63 .53 .19 .57
------- ------- ------- ------- ------- -------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.79) (.75) (.73) (.71) (.69) (.19) (.64) (.63)
Dividends from net realized
gain on investments............ (.01) -- (.01) (.05) -- -- (.05) --
Dividends in excess of net realized
gain on investments............ -- -- -- -- (.05) -- -- (.05)
------ ------- ------- ------- ------- -------- ------- -------
TOTAL DISTRIBUTIONS............ (.80) (.75) (.74) (.76) (.74) (.19) (.69) (.68)
------- ------- ------- ------- -------- -------- ------- --------
Net asset value, end of year..... $11.05 $11.41 12.13 $11.64 $11.53 $12.13 $11.63 $11.52
------- ------- ------- ------- -------- -------- ------- --------
TOTAL INVESTMENT RETURN(2)........... 11.23% 10.32% 13.14% 2.08% 5.72% 15.56%(3) 1.44% 5.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .19% .55% .69% .82% .94% 1.15%(3) 1.36% 1.45%
Ratio of net investment income to
average net assets............. 7.21% 6.65% 6.16% 5.80% 6.04% 4.92%(3) 5.18% 5.47%
Decrease reflected in above expense ratios
due to undertakings by the Manager .78% .41% .24% .11% .01% .13%(3). 10% .01%
Portfolio Turnover Rate.......... 47.07% 24.75% 11.36% 12.04% 13.62% 11.36% 12.04% 13.62
Net Assets, end of year (000's Omitted) $57,328 $66,873 $79,701 $76,865 $72,731 $1,066 $3,702 $4,220
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
See notes to financial statements.
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 fifteen series including the Massachusetts Series (the
"Series").
Dreyfus Service Corporation, until August 24, 1994, acted as the
distributor
of the Fund's shares. Dreyfus Service Corporation is a
wholly-owned
subsidiary of The Dreyfus Corporation ("Manager"). Effective
August 24, 1994,
the Manager became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI
Holdings, Inc., the parent company of which is Boston
Institutional Group,
Inc.
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 offers both Class A and Class B shares. Class A
shares are
subject to a sales charge imposed at the time of purchase and
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.
Other
differences between the two Classes include the services offered
to and the
expenses borne by each Class and certain voting rights.
(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.
Dividends in excess of net realized gains on investment for
financial
statement purposes result primarily from losses from securities
transactions
during the year ended April 30, 1995 which are treated for
Federal income tax
purposes as arising in Fiscal 1996.
(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 average
daily value of the Series' 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, 1994 through June 30, 1994 to waive
receipt of the
management fee payable to it by the Series in excess of an
annual rate of .50
of 1% (excluding certain expenses as described above) of the
Series' average
daily net assets and thereafter, had undertaken from July 1,
1994 through
July 7, 1994 to reduce the management fee paid by the Series, to
the extent
that the Series' aggregate expenses (excluding 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 $7,190 for the year ended April 30, 1995.
Dreyfus Service Corporation retained $3,502 during the year
ended April
30, 1995 from commissions earned on sales of the Series' Class A
shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $620 from
contingent deferred sales charges imposed upon redemptions of
the Series'
Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised
Distribution Plan with respect to Class B shares only (the
"Class B
Distribution Plan") pursuant to Rule 12b-1 under the Act.
Pursuant to the
Class B Distribution Plan, effective August 24, 1994, the Fund
pays the
Distributor for distributing the Series' Class B shares at an
annual rate of
.50 of 1% of the value of the average daily net assets of Class
B shares.
Prior to August 24, the Distribution Plan ("prior Class B
Distribution
Plan") provided that the Series pay Dreyfus Service Corporation
at an annual
rate of .50 of 1% of the value of the Series' Class B shares
average daily net
assets, for the costs and expenses in connection with
advertising, marketing
and distributing the Series' Class B shares. Dreyfus Service
Corporation made
payments to one or more Service Agents based on the value of the
Series' Class
B shares owned by clients of the Service Agent.
During the year ended April 30, 1995, $13,418 was charged to
the Series
pursuant to the Class B Distribution Plan and $6,115 was charged
to the
Series pursuant to the prior Class B Distribution Plan.
(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 and Class B shares for servicing shareholder
accounts. 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 in respect of these services. The
Distributor determines the
amounts to be paid to Service Agents. From May 1, 1994 through
August 23,
1994, $60,131 and $3,058 were charged to Class A and Class B
shares,
respectively, by Dreyfus Service Corporation. From August 24,
1994 through
April 30, 1995, $124,045 and $6,708 were charged to Class A and
Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services
Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund
were "affiliated persons," as defined in the Act, of the Manager
and/or
Dreyfus Service Corporation. Each trustee who is not an
"affiliated person"
receives from the Fund an annual fee of $2,500 and an attendance
fee of $250
per meeting. The Chairman of the Board receives an additional
25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities
amounted to $13,572,300 and $18,625,062, respectively, for the
year ended
April 30, 1995, and consisted entirely of long-term and
short-term municipal
investments.
At April 30, 1995, accumulated net unrealized appreciation
on investments
was $3,359,958, consisting of $4,251,127 gross unrealized
appreciation and
$891,169 gross unrealized depreciation.
At April 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 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, 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 April 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 State Municipal Bond Fund, Massachusetts
Series at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.4% AMOUNT VALUE
-------------- -------------
<S> <C> <C>
MICHIGAN-96.7%
Allendale Public School District 5.875%, 5/1/2014 (Insured; MBIA)........... $ 1,000,000 $ 977,070
Breitung Township School District, Refunding 5.50%, 5/1/2012 (Insured; AMBAC) 2,500,000 2,380,650
Brighton Area School District, Refunding:
Zero Coupon, 5/1/2014 (Insured; AMBAC).................................. 8,000,000 2,492,480
6%, 5/1/2020 (Insured; AMBAC)........................................... 1,750,000 1,718,868
Capital Region Airport Authority, Airport Revenue
6.70%, 7/1/2021 (Insured; MBIA)......................................... 2,500,000 2,596,800
Central Michigan University, Refunding 6%, 10/1/2013 (Insured; MBIA)........ 1,965,000 1,949,752
Chippewa Valley Schools 7%, 5/1/2010 (Prerefunded 5/1/2001) (a)............. 1,275,000 1,420,656
Detroit:
(Development Area No. 1) 7.60%, 7/1/2010................................ 4,150,000 4,385,346
Sewer Disposal System Revenue:
7.125%, 7/1/2019 (Prerefunded 7/1/1999) (a)........................... 2,735,000 2,998,216
5.70%, 7/1/2023 (Insured; FGIC)....................................... 10,000,000 9,464,100
(Unlimited Tax) 6.35%, 4/1/2014......................................... 3,410,000 3,275,748
Water Supply Systems Revenue, Refunding
8.217%, 7/1/2022 (Insured; FGIC) (b).................................. 1,500,000 1,541,250
Detroit School District (School Building and Site)
(Wayne County) 6.25%, 5/1/2012.......................................... 1,750,000 1,757,630
East Lansing Building Authority, Refunding 6.90%, 10/1/2011................. 1,375,000 1,445,194
Flint Michigan Refunding Tax Increment Finance Authority 5.75%, 6/1/2002.... 3,000,000 3,044,100
Garden City Building Authority, Refunding 5.75%, 11/1/2017 (Insured; AMBAC). 1,120,000 1,074,987
Grand Ledge Public School District 6.60%, 5/1/2024 (Insured; MBIA).......... 2,750,000 2,879,250
Grand Rapids Community College 5.90%, 5/1/2022 (Insured; MBIA).............. 4,650,000 4,533,564
Grand Rapids Housing Finance Authority, Multi-Family Revenue, Refunding
7.625%, 9/1/2023 (Collateralized; FNMA)................................. 1,000,000 1,064,750
Greater Detroit Resource Recovery Authority, Revenue 9.25%, 12/13/2008...... 1,250,000 1,314,675
Huron Valley School District, Refunding 6.125%, 5/1/2020 (Insured; FGIC).... 1,735,000 1,703,423
Kent Hospital Finance Authority, Hospital Facility Revenue (Butterworth
Hospital)
7.25%, 1/15/2012 (Prerefunded 1/15/2000) (a)............................ 1,000,000 1,109,190
Lapeer Economic Development Corp., Ltd. Obligation Revenue
(Lapeer Health Services Project) 8.625%, 2/1/2020 (Prerefunded 2/1/2000) (a) 2,000,000 2,334,080
Livonia Public Schools, School District Refunding 5.125%, 5/1/2022 (Insured; FGIC) 2,000,000 1,737,460
Michigan Building Authority, Revenue:
6.75%, 10/1/2007 (Insured; AMBAC)....................................... 1,600,000 1,724,096
6.75%, 10/1/2011........................................................ 2,000,000 2,118,260
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
MICHIGAN (CONTINUED)
Michigan Higher Education Student Loan Authority, Student Loan Revenue:
6.875%, 10/1/2007 (Insured; AMBAC)...................................... $ 2,250,000 $ 2,388,532
6%, 9/1/2008............................................................ 2,000,000 2,004,040
7.55%, 10/1/2008 (Insured; MBIA)........................................ 1,625,000 1,776,287
Michigan Hospital Finance Authority, HR:
(Crittenton Hospital) 6.70%, 3/1/2007................................... 2,250,000 2,341,418
(Daughters of Charity National Health Systems-Providence Hospital) 7%, 11/1/2021 2,700,000 2,815,776
(McLaren Obligation Group) 7.50%, 9/15/2021 (Prerefunded 9/15/2001) (a). 1,250,000 1,431,150
(Mercy Mount Clemens Corp.) 6.25%, 5/15/2011............................ 2,000,000 2,009,940
Refunding:
(Detroit Medical Center) 8.125%, 8/15/2012............................ 220,000 240,920
(Genesys Health Systems) 8.125%, 10/1/2021............................ 5,000,000 5,171,550
(Middle Michigan Obligation Group) 6.625%, 6/1/2010................... 2,000,000 2,018,260
(Oakwood Obligation Group) 5.625%, 11/1/2018.......................... 2,500,000 2,305,925
(Pontiac Osteopathic Hospital) 6%, 2/1/2014........................... 5,250,000 4,510,170
(Sisters of Mercy Health Corp.) 6.25%, 2/15/2009 (Insured; FSA)....... 1,065,000 1,084,330
(Sisters of Mercy Health Corp.) 7.50%, 2/15/2018 (Prerefunded 2/15/2001) (a) 2,250,000 2,555,077
Michigan Housing Development Authority:
(Home Improvement Program) 7.65%, 12/1/2012............................. 2,150,000 2,246,750
MFHR 8.375%, 7/1/2019 (Insured; FGIC)................................... 1,550,000 1,658,763
Rental Housing Revenue:
6.50%, 4/1/2006....................................................... 2,000,000 2,039,360
7.70%, 4/1/2023 (Insured; FSA)........................................ 4,185,000 4,425,596
SFMR:
7.55%, 12/1/2014...................................................... 210,000 222,776
7.50%, 6/1/2015....................................................... 2,355,000 2,493,757
8%, 6/1/2018.......................................................... 290,000 306,098
7.75%, 12/1/2019...................................................... 2,480,000 2,619,178
6.95%, 12/1/2020...................................................... 1,750,000 1,802,238
Michigan Job Development Authority, PCR
(Chrysler Corp. Project) 5.70%, 11/1/1999............................... 1,000,000 999,200
Michigan Municipal Bond Authority, Revenue (State Revolving Fund):
6.50%, 10/1/2014........................................................ 2,500,000 2,591,675
6.50%, 10/1/2017........................................................ 3,500,000 3,596,355
Michigan Strategic Fund:
Ltd. Obligation Revenue:
(Northeastern Community Mental Health Foundation) 8.25%, 1/1/2009..... 1,555,000 1,594,264
Refunding (Ledyard Association Ltd. Partnership Project)
6.25%, 10/1/2011 (Insured; ITT Lyndon Property Insurance Co.)..... 3,075,000 3,093,665
(WMX Technologies Inc. Project) 6%, 12/1/2013......................... 4,000,000 3,848,200
Solid Waste Disposal Revenue Refunding
(Genesee Power Station Project) 7.50%, 1/1/2021....................... 3,000,000 2,932,770
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
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 $ 5,077,521
7.875%, 12/1/2019..................................................... 2,720,000 2,946,250
7.65%, 9/1/2020 (Insured; FGIC)....................................... 2,250,000 2,470,658
6.55%, 6/1/2024 (Insured; MBIA)....................................... 1,700,000 1,732,521
Water Supply Systems (Frenchtown Charter Township Water Treatment
and Distribution Systems) 6.50%, 5/1/2013............................. 2,500,000 2,539,100
Monroe County Economic Development Corp., Ltd. Obligation Refunding, Revenue
(Detroit Edison Co. Project) 6.95%, 9/1/2022 (Insured; FGIC)............ 2,000,000 2,247,700
Northville, Special Assessment (Wayne County) 7.875%, 1/1/2006.............. 1,685,000 1,853,989
Northwestern Michigan College, Community College Improvement Revenue,
Refunding 7%, 7/1/2011...................................................... 1,800,000 1,885,176
Oakland County Economic Development Corp., Ltd. Obligation Revenue
(Pontiac Osteopathic Hospital Project) 9.625%, 1/1/2020 (Prerefunded 1/1/2000) (a) 1,680,000 2,023,678
Rockford Public Schools, Refunding (Kent County School Building and Site)
7.375%, 5/1/2019 (Prerefunded 5/1/2000) (a)............................. 2,000,000 2,225,640
Romulus Community Schools, Capital Appreciation Refunding
Zero Coupon, 5/1/2019..................................................... 2,390,000 539,064
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 3,874,529
Royal Oak Michigan Finance Authority, Revenue, Refunding 5.25%, 11/15/2019.. 3,625,000 3,172,890
Saginaw-Midland Municipal Water Supply Corp. 5.25%, 9/1/2016................ 1,000,000 887,230
Wayne Charter County, Airport Revenue (Detroit Metropolitan Wayne County
Airport):
5.25%, 12/1/2013 (Insured; MBIA)........................................ 4,000,000 3,641,320
5.25%, 12/1/2021 (Insured; MBIA)........................................ 1,000,000 876,920
West Ottawa Public School District, Refunding 6%, 5/1/2020 (Insured; FGIC).. 3,115,000 3,059,584
Western Michigan University, Revenue 6.125%, 11/15/2022 (Insured; FGIC)..... 6,970,000 6,837,918
White Cloud Public Schools, Refunding 5.50%, 5/1/2020....................... 2,000,000 1,844,620
Wyoming Public Schools, Refunding 5.90%, 5/1/2022........................... 1,000,000 962,170
U.S. RELATED-1.7%
Puerto Rico Housing Finance Corp., MFMR
7.50%, 4/1/2022 (LOC; Government Development Bank) (c).................. 2,510,000 2,636,579
Virgin Islands Port Authority, Airport Revenue (Cyril E. King Airport
Project)
8.10%, 10/1/2005........................................................ 500,000 543,935
--------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $179,583,731)..................................................... $186,044,607
==============
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS-1.6% AMOUNT VALUE
-------------- --------------
MICHIGAN:
Michigan Housing Development Authority, Rental Housing Revenue VRDN
4.65% (LOC; Credit Suisse) (c,d)................................... $ 2,000,000 $ 2,000,000
Michigan Strategic Fund, LTD. Obligation Revenue VRDN
(Coil Center Project) 5.37% (LOC; Tokai Bank) (c,d)..................... 1,000,000 1,000,000
--------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $3,000,000)....................................................... $ 3,000,000
===========
TOTAL INVESTMENTS-100.0%
(cost $182,583,731)..................................................... $189,044,607
============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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 Mortage Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH(E) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ------- -------- ------------------ -------------------
<S> <C> <C> <C>
AAA Aaa AAA 40.2%
AAA Aa AA 23.1
A A A 16.7
BBB Baa BBB 13.2
F1 MIG1 SP1 1.6
Not Rated(f) Not Rated(f) Not Rated(f) 5.2
--------
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 at
the earliest
refunding date.
(b) Inverse floater security - the interest rate is subject
to change
periodically.
(c) Secured by letters of credit.
(d) 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.
(e) Fitch currently provides creditworthiness information
for a limited
number of investments.
(f) 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 STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $182,583,731)-see statement..................................... $189,044,607
Cash.................................................................... 133,417
Interest receivable..................................................... 3,806,150
Receivable for shares of Beneficial Interest subscribed................. 267,533
Prepaid expenses........................................................ 7,684
--------------
193,259,391
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $88,043
Due to Distributor...................................................... 46,822
Payable for shares of Beneficial Interest redeemed...................... 9,261
Accrued expenses........................................................ 40,564 184,690
----------
NET ASSETS ................................................................ $193,074,701
============
REPRESENTED BY:
Paid-in capital......................................................... $185,926,409
Accumulated undistributed net realized gain on investments.............. 687,416
Accumulated net unrealized appreciation on investments-Note 3........... 6,460,876
------------
NET ASSETS at value......................................................... $193,074,701
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 11,667,982
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,088,416
===========
NET ASSET VALUE per share:
Class A Shares
($176,603,546 / 11,667,982 shares).................................... $15.14
=======
($16,471,155 / 1,088,416 shares)...................................... $15.13
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF OPERATIONS APRIL 30,1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,845,609
EXPENSES:
Management fee-Note 2(a).............................................. $1,074,186
Shareholder servicing costs-Note 2(c)................................. 646,502
Distribution fees (Class B shares)-Note 2(b).......................... 76,730
Professional fees..................................................... 25,821
Custodian fees........................................................ 21,807
Prospectus and shareholders' reports.................................. 18,133
Registration fees..................................................... 4,495
Trustees' fees and expenses-Note 2(d)................................. 1,733
Miscellaneous......................................................... 25,021
------------
1,894,428
Less--reduction in management fee due to
undertakings--Note 2(a)............................................ 18,112
------------
TOTAL EXPENSES.................................................. 1,876,316
-------------
INVESTMENT INCOME--NET........................................... 10,969,293
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,828,821
Net unrealized (depreciation) on investments............................ (818,115)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,010,706
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $11,979,999
===========
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,
--------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income--net................................................... $ 11,313,866 $ 10,969,293
Net realized gain on investments........................................ 2,315,880 1,828,821
Net unrealized (depreciation) on investments for the year............... (6,895,275) (818,115)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 6,734,471 11,979,999
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (10,845,933) (10,186,162)
Class B shares........................................................ (467,933) (783,131)
Net realized gain on investments:
Class A shares........................................................ (956,415) (2,793,660)
Class B shares........................................................ (54,414) (239,175)
-------------- --------------
TOTAL DIVIDENDS................................................... (12,324,695) (14,002,128)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 24,628,252 10,587,097
Class B shares........................................................ 11,297,694 4,942,392
Dividends reinvested:
Class A shares........................................................ 6,427,971 7,582,697
Class B shares........................................................ 347,542 656,238
Cost of shares redeemed:
Class A shares........................................................ (22,803,586) (27,084,772)
Class B shares........................................................ (760,491) (2,852,874)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS................................ 19,137,382 (6,169,222)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 13,547,158 (8,191,351)
NET ASSETS:
Beginning of year....................................................... 187,718,894 201,266,052
-------------- --------------
End of year............................................................. $201,266,052 $193,074,701
============== =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------------------------------------------------------------
CLASS A CLASS B
-------------------------------- -------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- ------------------------------
1994 1995 1994 1995
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold........................... 1,535,330 701,669 706,062 327,697
Shares issued for dividends reinvested. 401,916 511,163 21,767 44,292
Shares redeemed........................ (1,430,077) (1,819,806) (48,928) (191,401)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING............. 507,169 (606,974) 678,901 180,588
=========== ============= ============== ===========
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN 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 CLASS B SHARES
--------------------------------------------------- ------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
--------------------------------------------------- ------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.80 $14.34 $14.80 $15.65 $15.27 $15.20 $15.64 $15.27
------- ------ ------ ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net........... 1.01 .95 .92 .89 .85 .24 .80 .77
Net realized and unrealized gain (loss)
on investments................. .54 .46 .98 (.30) .11 .44 (.29) .10
------- ------ ------ ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.55 1.41 1.90 .59 .96 .68 .51 .87
------- ------ ------ ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income--net (1.01) (.95) (.92) (.89) (.85) (.24) (.80) (.77)
Dividends from net realized gain
on investments................. -- -- (.13) (.08) (.24) -- (.08) (.24)
------- ------ ------ ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS........... (1.01) (.95) (1.05) (.97) (1.09) (.24) (.88) (1.01)
------- ------ ------ ------- ------- ------- ------- -------
Net asset value, end of year..... $14.34 $14.80 $15.65 $15.27 $15.14 $15.64 $15.27 $15.13
====== ======= ======= ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN (2)........ 11.61% 10.12% 13.25% 3.65% 6.65% 15.50%(3) 3.11% 6.01%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .20% .53% .69% .81% .92% 1.18%(3) 1.38% 1.44%
Ratio of net investment income to
average net assets........... 7.07% 6.47% 6.01% 5.56% 5.66% 4.85%(3) 4.88% 5.10%
Decrease reflected in above expense
ratios due to undertakings by
the Manager.................... .79% .42% .25% .11% .01% .14%(3) .09% .01%
Portfolio Turnover Rate.......... 27.31% 21.42% 14.99% 19.96% 48.30% 14.99% 19.96% 48.30%
Net Assets, end of year
(000's Omitted)................ $111,696 $145,159 $184,138 $187,405 $176,604 $3,581 $13,861 $16,471
(1) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
See notes to financial statements.
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 fifteen series including the Michigan Series (the
"Series"). Dreyfus
Service Corporation, until August 24, 1994, acted as the
distributor of the
Fund's shares. Dreyfus Service Corporation is a wholly-owned
subsidiary of
The Dreyfus Corporation ("Manager"). Effective August 24, 1994,
the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI
Holdings, Inc., the parent company of which is Boston
Institutional Group,
Inc.
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 offers both Class A and Class B shares. Class A
shares are
subject to a sales charge imposed at the time of purchase and
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.
Other
differences between the two Classes include the services offered
to and the
expenses borne by each Class and certain voting rights.
(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
discount 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 STATE MUNICIPAL BOND FUND, MICHIGAN 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 average
daily value of the Series' 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, 1994 through June 30, 1994 to waive
receipt of the
management fee payable to it by the Series in excess of an
annual rate of .50
of 1% (excluding certain expenses as described above) of the
Series' average
daily net assets and thereafter, had undertaken from July 1,
1994 through
July 7, 1994 to reduce the management fee paid by the Series, to
the extent
that the Series' aggregate expenses (excluding 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 $18,112 for the year ended April 30, 1995.
Dreyfus Service Corporation retained $7,854 during the year
ended April
30, 1995 from commissions earned on sales of the Series' Class A
shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $17,687
from contingent deferred sales charges imposed upon redemptions
of the
Series' Class B shares.
(b) On August 3, 1994, the Series' shareholders approved a
revised
Distribution Plan with respect to Class B shares only (the
"Class B
Distribution Plan") pursuant to Rule 12b-1 under the Act.
Pursuant to the
Class B Distribution Plan, effective August 24, 1994, the Fund
pays the
Distributor for distributing the Series' Class B shares at an
annual rate of
.50 of 1% of the value of the average daily net assets of Class
B.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B
Distribution Plan") provided that the Series pay Dreyfus Service
Corporation
at an annual rate of .50 of 1% of the value of the Series' Class
B
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
shares average daily net assets, for the costs and expenses in
connection
with advertising, marketing and distributing the Series' Class B
shares.
Dreyfus Service Corporation made payments to one or more Service
Agents based
on the value of the Series' Class B shares owned by clients of
the Service
Agent.
During the year ended April 30 1995, $52,967 was charged to
the Series
pursuant to the Class B Distribution Plan and $23,763 was
charged to the
Series pursuant to the prior Class B Distribution Plan.
(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 and Class B shares for servicing shareholder
accounts. 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 Serv
ice Agents in respect of these services. The Distributor
determines the
amounts to be paid to Service Agents. From May 1, 1994 through
August 23,
1994, $147,668 and $11,774 were charged to Class A and Class B
shares,
respectively, by Dreyfus Service Corporation. From August 24,
1994 through
April 30, 1995, $302,233 and $26,591 were charged to Class A and
Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services
Plan.
(d) Prior to August 24, 1994, certain officers and trustees
of the Fund
were "affiliated persons," as defined in the Act, of the Manager
and/or
Dreyfus Service Corporation. Each trustee who is not an
"affiliated person"
receives from the Fund an annual fee of $2,500 and an attendance
fee of $250
per meeting. The Chairman of the Board receives an additional
25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities
amounted to $164,401,933 and $173,322,699, respectively, for the
year ended
April 30, 1995, and consisted entirely of long-term and
short-term municipal
investments.
At April 30, 1995, accumulated net unrealized appreciation
on investments
was $6,460,876, consisting of $8,177,217 gross unrealized
appreciation and
$1,716,341 gross unrealized depreciation.
At April 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 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, 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 April 30, 1995 by correspondence with the
custodian.
An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating
the overall
financial statement presentation. We believe that our audits
provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights
referred to above present fairly, in all material respects, the
financial
position of Premier State Municipal Bond Fund, Michigan Series
at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-92.1% AMOUNT VALUE
-------------- --------------
<S> <C> <C>
MINNESOTA-85.2%
Anoka County:
Resources Recovery Revenue (Northern States Power Co.) 7.15%, 12/1/2008. $ 1,150,000 $ 1,226,521
Solid Waste Disposal Revenue (United Power Association Project)
6.95%, 12/1/2008 (Guaranteed; National Rural Utilities Cooperative
Finance Corp.).............................................................. 3,825,000 4,012,922
Burnsville, MFHR Refunding (Coventry Court Apartments)
7.50%, 9/1/2027 (Insured; FHA).......................................... 2,250,000 2,360,362
Dakota County Housing and Redevelopment Authority, South-Saint Paul Revenue
Refunding (Single Family-GNMA Program) 8.10%, 9/1/2012.................. 185,000 194,191
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 2,899,750
Eagan, MFHR Refunding (Forest Ridge Apartments) 7.50%, 9/1/2017 (Insured; FHA) 1,000,000 1,054,880
Eden Prairie, MFHR Refunding:
(Eden Investments Project) 7.40%, 8/1/2025 (Insured; FHA)............... 500,000 523,870
(Welsh Parkway Apartments) 8%, 7/1/2026 (Insured; FHA).................. 2,895,000 3,098,316
Edina:
Hospital Systems Revenue (Fairview Hospital) 7.125%, 7/1/2006........... 1,000,000 1,054,990
Housing Development Revenue Refunding (Edina Park Plaza Project)
7.70%, 12/1/2028 (Insured; FHA)....................................... 2,500,000 2,624,450
Hubbard County, Solid Waste Disposal Revenue (Potlatch Corp. Project)
7.375%, 8/1/2013........................................................ 1,000,000 1,059,820
Minneapolis:
Home Ownership and Renovation Program 5.60%, 12/1/2014.................. 1,755,000 1,699,156
Home Ownership Program 7.10%, 6/1/2021.................................. 755,000 780,693
HR:
(Lifespan Inc.-Abbot Hospital) 7%, 12/1/2014 (Prerefunded 12/1/1999) (a) 1,500,000 1,653,345
(Lifespan Inc.-Minneapolis Children's Medical Center Project):
8.125%, 8/1/2017.................................................. 1,500,000 1,662,780
7%, 12/1/2020..................................................... 5,650,000 6,121,606
MFHR Refunding (Churchill Apartments Project) 7.05%, 10/1/2022 (Insured; FHA) 4,000,000 4,135,480
MFMR (Seward Towers Project) 7.375%, 12/20/2030 (Collateralized; GNMA).. 2,350,000 2,463,411
Minneapolis Community Development Agency, Ltd. Tax Support Development
Revenue:
8.375%, 6/1/2007........................................................ 2,500,000 2,784,700
8%, 12/1/2009........................................................... 300,000 313,986
7.75%, 12/1/2019........................................................ 2,890,000 3,109,929
7.40%, 12/1/2021........................................................ 2,000,000 2,123,660
Minneapolis-Saint Paul Housing and Redevelopment Authority,
Health Care Systems Revenue:
8%, 8/15/2014 (Prerefunded 8/15/2000) (a)............................. 3,000,000 3,461,670
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
MINNESOTA (CONTINUED)Minneapolis-Saint Paul Housing and Redevelopment Authority (continued):
Health Care Systems Revenue (continued):
(Group Health Plan Inc., Project) 6.75%, 12/1/2013.................... $ 2,750,000 $ 2,816,000
(Healthspan):
5%, 11/15/2013 (Insured; AMBAC)................................... 7,500,000 6,621,375
4.75%, 11/15/2018 (Insured; AMBAC)................................ 4,000,000 3,308,000
Minneapolis-Saint Paul Housing Finance Board, SFMR:
8.875%, 11/1/2018 (Collateralized; GNMA)................................ 145,000 153,952
8.30%, 8/1/2021 (Collateralized; GNMA).................................. 410,000 438,196
7.30%, 8/1/2031 (Collateralized; GNMA).................................. 6,475,000 6,759,058
Minneapolis-Saint Paul Metropolitan Apartments Community, 7.80%, 1/1/2014... 3,000,000 3,319,980
Minnesota Agricultural and Economic Development Board,
Minnesota Small Business Development Loan Revenue:
9%, Series B, 8/1/2008................................................ 75,000 78,341
9%, Series C, 8/1/2008................................................ 245,000 255,915
8.125%, Lot 1, 8/1/2009............................................... 765,000 795,164
8.125%, Lot 2, 8/1/2009............................................... 500,000 519,715
8.125%, Lot 3, 8/1/2009............................................... 815,000 847,135
8.20%, 8/1/2009....................................................... 655,000 688,680
8.375%, 8/1/2010...................................................... 1,385,000 1,458,627
Minnesota Higher Education Facilities Authority,
Mortgage Revenue (University of Saint Thomas)
7.125%, 9/1/2014 (Prerefunded 9/1/2000) (a)............................. 2,095,000 2,317,342
Minnesota Housing Finance Agency:
Rental Housing 6.10%, 8/1/2009.......................................... 2,585,000 2,595,262
Single Family Mortgage:
7.35%, 7/1/2016....................................................... 1,930,000 2,031,093
7.30%, 1/1/2017....................................................... 1,140,000 1,198,619
7.90%, 7/1/2019....................................................... 1,745,000 1,849,299
7.45%, 7/1/2022....................................................... 2,830,000 2,990,065
7.95%, 7/1/2022....................................................... 1,830,000 1,935,975
6.15%, 1/1/2026....................................................... 1,730,000 1,658,586
6.95%, 7/1/2026....................................................... 3,000,000 3,104,700
8%, 7/1/2029.......................................................... 115,000 119,612
Minnesota Public Facilities Authority, Water Pollution Control Revenue:
7.10%, 3/1/2012......................................................... 2,350,000 2,534,452
6.95%, 3/1/2013......................................................... 3,000,000 3,227,010
6.50%, 3/1/2014......................................................... 5,200,000 5,455,840
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
MINNESOTA (CONTINUED)Northern Municipal Power Agency, Electric System Refunding Revenue
7.25%, 1/1/2016......................................................... $ 3,500,000 $ 3,767,960
City of Red Wing, Health Care Facilities Refunding Revenue (River Region
Obligation Group)
6.50%, 9/1/2022......................................................... 3,445,000 3,284,222
Saint Cloud, Hospital Facilities Revenue (Saint Cloud Hospital)
7%, 7/1/2020 (Insured; AMBAC)........................................... 1,000,000 1,110,180
Saint Louis Park, Health Care Facilities Revenue (Health Systems Obligated
Group)
5.20%, 7/1/2016 (Insured; AMBAC)........................................ 3,285,000 2,953,806
Saint Paul Housing and Redevelopment Authority:
HR (Saint Paul Ramsey Medical Center Project) 5.50%, 5/15/2013 (Insured; AMBAC) 2,000,000 1,882,200
SFMR Refunding 6.90%, 12/1/2021......................................... 2,940,000 3,019,527
Saint Paul Port Authority:
First Lien Tax Increment Refunding (Energy Park Project) 5%, 2/1/2008
(Insured; AGIC)............................................................. 5,495,000 5,000,285
IDR Refunding (Hampden Building Project) 9.25%, 6/1/2011................ 1,065,000 1,095,661
Sartell, PCR Refunding (Champion International Corp. Project) 6.95%, 10/1/2012 5,000,000 5,187,500
Seaway Port Authority of Duluth,
Industrial Development Dock and Wharf Revenues Refunding (Cargill Inc.
Project)
6.80%, 5/1/2012......................................................... 3,000,000 3,190,860
Southern Minnesota Municipal Power Agency, Power Supply System Revenue
5%, 1/1/2013............................................................ 2,000,000 1,757,960
U.S. RELATED-6.9%
Commonwealth of Puerto Rico, 5.875%, 7/1/2018 (Insured; AMBAC)............. 4,000,000 3,952,280
Puerto Rico Highway and Transportation Authority, Highway Revenue 5.55%, 7/1/2010 6,900,000 6,449,844
Puerto Rico Industrial Tourist and Environmental Educational Medical Control
Facilities
Financing Authority, HR 6.25%, 7/1/2024 (Insured; MBIA)................. 1,000,000 1,024,880
-------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $147,216,373)..................................................... $153,175,646
=================
SHORT-TERM MUNICIPAL INVESTMENTS-7.9%
MINNESOTA-5.0%
Cloquet, PCR, VRDN (Potlatch Corp. Project) 4.70% (LOC; Credit Suisse) (b,c) $ 5,900,000 $ 5,900,000
Golden Valley, IDR Refunding, VRDN (Graco Inc. Project) 4.95% (LOC; Fuji Bank)(b,c) 2,380,000 2,380,000
U.S. RELATED-2.9%
Puerto Rico Electric Power Authority, Revenue, VRDN 3.89% (c)............... 4,850,000 4,850,000
-------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $13,130,000)...................................................... $ 13,130,000
=================
TOTAL INVESTMENTS-100.0%
(cost $160,346,373)..................................................... $166,305,646
===============
</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
GNMA Government National Mortgage Association MFMR Multi-Family Mortgage Revenue
HR Hospital Revenue PCR Pollution Control Revenue
IDR Industrial Development Revenue SFMR Single Family Mortgage Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
</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 45.1%
AA Aa AA 23.7
A A A 14.8
BBB Baa BBB 10.1
F1 MIG1 SP1 1.4
Not Rated(e) Not Rated(e) Not Rated(e) 4.9
--------
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 & Poor's, have been determined by the Manager
to be of comparable quality to those rated securities
in
which the Fund may invest.
(f) At April 30, 1995, the Series had $44,308,903 (26.3% of
net assets) invested in securities whose payment of
principal and interest is dependent upon revenues
generated from housing projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $160,346,373)-see statement..................................... $166,305,646
Interest receivable..................................................... 3,160,573
Receivable for shares of Beneficial Interest subscribed................. 89,155
Prepaid expenses........................................................ 5,013
===============
169,560,387
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 76,950
Due to Distributor...................................................... 44,470
Due to Custodian........................................................ 153,042
Payable for shares of Beneficial Interest redeemed...................... 594,335
Accrued expenses........................................................ 30,343 899,140
---------- ------------
NET ASSETS ................................................................ $168,661,247
==============
REPRESENTED BY:
Paid-in capital......................................................... $164,236,597
Accumulated net realized (loss) on investments.......................... (1,534,623)
Accumulated net unrealized appreciation on investments-Note 3........... 5,959,273
-------------
NET ASSETS at value......................................................... $168,661,247
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 9,760,988
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,555,569
==============
NET ASSET VALUE per share:
Class A Shares
($145,444,496 / 9,760,988 shares)..................................... $14.90
=======
Class B Shares
($23,216,751 / 1,555,569 shares)...................................... $14.92
=======
</TABLE>
<TABLE>
<CAPTION>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $11,286,344
EXPENSES:
Management fee-Note 2(a).............................................. $ 943,548
Shareholder servicing costs-Note 2(c)................................. 544,144
Distribution fees (Class B shares)-Note 2(b).......................... 109,771
Professional fees..................................................... 22,297
Custodian fees........................................................ 19,410
Prospectus and shareholders' reports.................................. 15,136
Trustees' fees and expenses-Note 2(d)................................. 1,555
Registration fees..................................................... 707
Miscellaneous......................................................... 25,877
------------
1,682,445
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 15,888
------------
TOTAL EXPENSES.................................................. 1,666,557
------------
INVESTMENT INCOME-NET........................................... 9,619,787
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (1,533,666)
Net unrealized appreciation on investments.............................. 3,390,900
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,857,234
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $11,477,021
============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
1994 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 9,612,891 $ 9,619,787
Net realized gain (loss) on investments................................. 328,294 (1,533,666)
Net unrealized appreciation (depreciation) on investments for the year.. (7,418,754) 3,390,900
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 2,522,431 11,477,021
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (8,924,857) (8,494,472)
Class B shares........................................................ (688,034) (1,125,315)
Net realized gain on investments:
Class A shares........................................................ (612,621) (40,522)
Class B shares........................................................ (63,215) (6,066)
-------------- --------------
TOTAL DIVIDENDS................................................... (10,288,727) (9,666,375)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 21,498,686 5,767,528
Class B shares........................................................ 17,944,220 3,173,322
Dividends reinvested:
Class A shares........................................................ 6,412,443 5,693,880
Class B shares........................................................ 538,255 758,030
Cost of shares redeemed:
Class A shares........................................................ (14,422,611) (23,226,166)
Class B shares........................................................ (941,707) (1,976,764)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 31,029,286 (9,810,170)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 23,262,990 (7,999,524)
NET ASSETS:
Beginning of year....................................................... 153,397,781 176,660,771
-------------- --------------
End of year............................................................. $176,660,771 $168,661,247
============== ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------- --------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- --------------------------------
1994 1995 1994 1995
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 1,381,812 395,165 1,148,723 215,707
Shares issued for dividends reinvested. 413,858 389,703 34,815 51,805
Shares redeemed........................ (937,234) (1,600,971) (61,204) (136,616)
-------------- ------------- -------------- --------------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING.......... 858,436 (816,103) 1,122,334 130,896
============== ============= ============== =============
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA 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 CLASS B SHARES
---------------------------------------------- ---------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
---------------------------------------------- ---------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.74 $14.28 $14.63 $15.31 $14.72 $14.86 $15.32 $14.74
------- ------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net........... 1.02 .96 .92 .87 .83 .24 .78 .75
Net realized and unrealized gain (loss)
on investments................. .56 .36 .77 (.53) .18 .46 (.52) .18
------- ------- ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.58 1.32 1.69 .34 1.01 .70 .26 .93
------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income--net (1.02) (.96) (.92) (.87) (.83) (.24) (.78) (.75)
Dividends from net realized gain
on investments................. (.02) (.01) (.09) (.06) -- -- (.06) --
------- ------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS............ (1.04) (.97) (1.01) (.93) (.83) (.24) (.84) (.75)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year..... $14.28 $14.63 $15.31 $14.72 $14.90 $15.32 $14.74 $14.92
====== ======= ======= ======= ======= ======= ======== =======
TOTAL INVESTMENT RETURN (2).......... 11.89% 9.45% 11.96% 2.08% 7.14% 16.32%(3) 1.55% 6.57%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .20% .53% .69% .80% .90% 1.16%(3) 1.38% 1.44%
Ratio of net investment income to
average net assets............. 7.19% 6.53% 6.13% 5.61% 5.68% 4.83%(3) 4.91% 5.13%
Decrease reflected in above expense ratios
due to undertakings by the Manager .79% .41% 24% .11% .01% .14%(3) .09% .01%
Portfolio Turnover Rate.......... 14.04% 12.32% 23.42% 12.21% 51.95% 23.42% 12.21% 51.95%
Net Assets, end of year (000's Omitted) $85,066 $122,782 $148,765 $155,657 $145,444 $4,633 $21,004 $23,217
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
See notes to financial statements.
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 fifteen series
including the Minnesota Series (the "Series"). Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor
of the Fund's shares. Dreyfus Service Corporation is a wholly
owned subsidiary of The Dreyfus Corporation ("Manager").
Effective August 24, 1994, the Manager became a direct subsidiar
y
of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the
two Classes include the services offered to and the expenses
borne by each Class and certain voting rights.
(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: Securitie
s
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, 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 applicabl
e
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 $1,306,000 available for Federal income tax
purposes to be applied against future net securities profits, if
any, realized subsequent to April 30, 1995. The carryover does
not include net realized securities losses from November 1,
1994 through April 30, 1995 which are treated, for Federal
income
tax purposes, as arising in fiscal 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 average daily value of the Series' 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, 1994
through June 30, 1994 to waive receipt of the management fee
payable to it by the Series in excess of an annual rate of .50
of 1% (excluding certain expenses as described above) of the
Series' average daily net assets and thereafter, had undertaken
from July 1, 1994 through July 7, 1994 to reduce the management
fee paid by the Series, to the extent that the Series' aggregate
expenses (excluding 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 $15,888 for the year ended April 30,
1995.
Dreyfus Service Corporation retained $2,908 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $8,131 from contingent deferred sales charges imposed
upon redemptions of the Series' Class B shares.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
NOTES TO FINANCIAL STATEMENTS (Continued)
(b) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B Distribution Plan, effective
August 24, 1994, the Fund pays the Distributor for distributing
the Series' Class B shares at an annual rate of .50 of 1% of the
value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $75,643 was charged to
the Series pursuant to the Class B Distribution Plan and $34,128
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $122,540 and $17,064
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through April
30, 1995, $251,460 and $37,821 were charged to Class A and Class
B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(d) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $139,604,184 and $144,792,223,
respectively, for the year ended April 30, 1995, and consisted
entirely of long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on
investments was $5,959,273, consisting of $7,287,608 gross
unrealized appreciation and $1,328,335 gross unrealized
depreciation.
At April 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 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, 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 April 30, 1995 by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Premier State Municipal Bond
Fund, Minnesota Series at April 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
June 6, 1995
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.4% AMOUNT VALUE
------------ ------------
<S> <C> <C>
NORTH CAROLINA-73.2%
Asheville, COP, Refunding 6.50%, 2/1/2008................................... $ 500,000 $ 527,575
Board of Governors of the University of North Carolina, Revenue
(University of North Carolina Hospital - Chapel Hill) 6%, 2/15/2024..... 3,000,000 2,823,990
Buncombe County Metropolitan Sewage District, Sewage System Revenue:
6.75%, 7/1/2022 (Prerefunded; 7/1/2002) (a)............................. 500,000 556,610
Refunding 5.50%, 7/1/2022 (Insured; FGIC)............................... 1,125,000 1,047,105
Charlotte, COP (Convention Facility Project):
6.75%, 12/1/2021 (Prerefunded; 12/1/2001) (Insured; AMBAC) (a)......... 1,000,000 1,111,620
Refunding 5.25%, 12/1/2020 (Insured; AMBAC)............................. 4,000,000 3,581,120
Charlotte-Mecklenberg Hospital Authority, Health Care System Revenue:
5.75%, 1/1/2012......................................................... 1,285,000 1,256,602
6.25%, 1/1/2020......................................................... 500,000 503,935
Cleveland County, Sanitary District, Water 6.75%, 3/1/2015 (Insured; FGIC).. 290,000 308,351
Coastal Regional Solid Waste Management Authority, Solid Waste Disposal
System Revenue 6.50%, 6/1/2008.......................................... 1,000,000 1,046,690
Craven County Industrial Facilities and Pollution Control Financing
Authority, PCR
Refunding (Weyerhaeuser Co. Project) 6.35%, 1/1/2010.................... 2,000,000 2,022,800
Dare County, COP 6.60%, 5/1/2006 (Insured; MBIA)............................ 400,000 431,256
Durham County, COP (Jail Facilities and Computer Equipment Project)
6.625%, 5/1/2014........................................................ 850,000 876,580
Fayetteville Public Works Commission, Revenue, Refunding
6.50%, 3/1/2014 (Prerefunded; 3/1/2000) (Insured; FGIC) (a)............ 350,000 378,595
Forsyth County, COP (1991 Allied Health Technologies Building Project)
6.50%, 6/1/2012......................................................... 300,000 312,798
Greensboro, COP (1991 Greensboro Coliseum Arena Expansion Project)
6.25%, 12/1/2011........................................................ 500,000 515,705
Haywood County, Industrial Facilities and PCR, Refunding
(Champion International Corp. Project) 6.85%, 5/1/2014.................. 500,000 512,025
Martin County Industrial Facilities and Pollution Control Financing
Authority, Revenue
(Solid Waste Disposal - Weyerhaeuser Project):
7.25%, 9/1/2014....................................................... 400,000 420,424
6.80%, 5/1/2024....................................................... 2,000,000 2,059,300
New Hanover County Industrial Facilities and Pollution Control Financing
Authority,
Solid Waste Disposal Revenue (Occidental Petroleum) 6.50%, 8/1/2014..... 1,000,000 984,770
North Carolina Eastern Municipal Power Agency, Power System Revenue
5.75%,12/1/2016........................................................ 1,865,000 1,666,098
North Carolina Eastern Municipal Power Agency, Power System Revenue
(continued):
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF INVESTMENTS (CONTINUED)
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- -------------
NORTH CAROLINA (CONTINUED)
Refunding:
5.875%, 1/1/2013...................................................... $ 5,000,000 $ 4,604,950
6%, 1/1/2013.......................................................... 2,500,000 2,349,525
6.50%, 1/1/2017....................................................... 1,000,000 985,040
North Carolina Educational Facilities Finance Agency, Revenue
(Duke University Project) 6.75%, 10/1/2021.............................. 500,000 521,800
North Carolina Housing Finance Agency:
Multi-Family Revenue, Refunding 6.90%, 7/1/2024 (Insured: FHA).......... 485,000 496,839
Single Family Revenue:
7.05%, 9/1/2020....................................................... 1,465,000 1,513,389
6.10%, 9/1/2025 (Insured; FHA)........................................ 4,000,000 4,081,640
6.70%, 9/1/2026....................................................... 2,250,000 2,272,162
North Carolina Medical Care Commission, HR:
(Annie Penn Memorial Hospital Project) 7.50%, 8/15/2021................. 4,500,000 4,565,655
(Duke University Hospital Project) 7%, 6/1/2021 (Prerefunded; 6/1/2001) (a) 3,000,000 3,349,260
(Presbyterian Hospital Project) 7.375%, 10/1/2020 (Prerefunded; 10/1/2000) (a) 250,000 282,100
Refunding:
(Carolina Medicorp Project) 5.50%, 5/1/2015........................... 500,000 465,595
(Mercy Hospital Project) 6.50%, 8/1/2015.............................. 1,000,000 996,520
(North Carolina Baptist Hospital Project) 6%, 6/1/2022................ 1,000,000 981,560
(Southeastern General Hospital Project) Zero Coupon, 6/1/2006 (Insured; FSA) 1,000,000 541,940
North Carolina Municipal Power Agency, Number 1 Catawba Electric Revenue:
7%, 1/1/1996............................................................ 200,000 205,372
5%, 1/1/2015............................................................ 1,000,000 834,690
5.75%, 1/1/2015......................................................... 6,250,000 5,733,000
5.75%, 1/1/2020 (Insured; MBIA)......................................... 2,000,000 1,903,760
Pitt County, Revenue (Pitt County Memorial Hospital) 6.90%, 12/1/2021....... 540,000 566,676
Surry County Northern Hospital District, Health Care Facilities Revenue,
Refunding
7.875%, 10/1/2021....................................................... 1,000,000 1,032,450
Wake County, Hospital System Revenue, Refunding:
Zero Coupon, 10/1/2010 (Insured; MBIA).................................. 2,200,000 885,192
5.125%, 10/1/2026 (Insured; MBIA)....................................... 3,250,000 2,821,130
Wake County Industrial Facilities and Pollution Control
Financing Authority,
Revenue
(Carolina Power and Light) 6.90%, 4/1/2009.............................. 2,000,000 2,088,980
U.S. RELATED-26.2%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,025,280
Guam Government 5.40%, 11/15/2018........................................... 2,000,000 1,698,240
Commonwealth of Puerto Rico:
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF INVESTMENTS (CONTINUED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- -------------
U.S. RELATED (CONTINUED)
Public Improvement:
7.70%, 7/1/2020 (Prerefunded; 7/1/2000) (a)........................... $ 1,000,000 $ 1,143,080
6.80%, 7/1/2021 (Prerefunded; 7/1/2002) (a)........................... 600,000 667,626
Refunding 5.50%, 7/1/2013............................................... 2,000,000 1,852,540
Puerto Rico Highway Authority, Revenue, Refunding
8%, 7/1/2003 (Prerefunded; 7/1/1998) (a)................................ 2,000,000 2,229,380
Puerto Rico Highway and Transportation Authority, Highway Revenue
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. 3,600,000 3,968,280
Puerto Rico Port Authority, Special Facilities Revenue
(American Airlines, Inc. Project) 6.30%, 6/1/2023....................... 1,500,000 1,418,970
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health
Facilities, Refunding:
6%, 7/1/2012.......................................................... 850,000 832,974
5.75%, 7/1/2015....................................................... 7,000,000 6,616,330
Virgin Islands Public Finance Authority, Revenue, Refunding,
Matching Fund Loan Notes 7.25%, 10/1/2018............................... 1,500,000 1,550,505
-------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $92,201,710)...................................................... $91,026,379
=============
SHORT-TERM MUNICIPAL INVESTMENT-.6%
NORTH CAROLINA;
North Carolina Educational Facilities Finance Agency , Revenue, VRDN
(Bowman Grey School Medical Project) 4.60% (LOC; Wachovia Bank) (b,c)
(cost $500,000)......................................................... $ 500,000 $ 500,000
=============
TOTAL INVESTMENTS-100.0%
(cost $92,701,710)...................................................... $91,526,379
=============
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation FHA Federal Housing Administration
LOC Letter of Credit PCR Pollution Control Revenue
COP Certificate of Participation FSA Financial Security Assurance
MBIA Municipal Bond Investors Assurance VRDN Variable Rate Demand Notes
Insurance Corporation HR Hospital Revenue
FGIC Financial Guaranty Insurance Company
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<TABLE>
<CAPTION>
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- -------- -------- ------------------ -------------------
<S> <C> <C> <C>
AAA Aaa AAA 27.8%
AA Aa AA 18.8
A A A 37.8
BBB Baa BBB 13.4
F1 MIG1 SP1 .5
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) 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.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
APRIL 30, 1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $92,701,710)-see statement...................................... $91,526,379
Interest receivable..................................................... 1,687,856
Receivable for shares of Beneficial Interest subscribed................. 54,021
Prepaid expenses........................................................ 7,108
-----------
93,275,364
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 22,973
Due to Distributor...................................................... 36,898
Due to Custodian........................................................ 589,674
Payable for shares of Beneficial Interest redeemed...................... 63,957
Accrued expenses........................................................ 47,104 760,606
---------- -----------
NET ASSETS ................................................................. $92,514,758
===========
REPRESENTED BY:
Paid-in capital......................................................... $96,294,013
Accumulated net realized (loss) on investments.......................... (2,603,924)
Accumulated net unrealized (depreciation) on investments-Note 3(b)...... (1,175,331)
-----------
NET ASSETS at value......................................................... $92,514,758
===========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 3,945,385
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,327,642
===========
NET ASSET VALUE per share:
Class A Shares
($50,204,678 / 3,945,385 shares)...................................... $12.72
======
Class B Shares
($42,310,080 / 3,327,642 shares)...................................... $12.71
======
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1995
INVESTMENT INCOME:
<S> <C> <C>
INTEREST INCOME......................................................... $ 6,103,845
EXPENSES:
Management fee-Note 2(a).............................................. $ 535,236
Shareholder servicing costs-Note 2(c)................................. 319,198
Distribution fees (Class B shares)-Note 2(b).......................... 199,899
Custodian fees........................................................ 14,145
Professional fees..................................................... 13,948
Prospectus and shareholders' reports.................................. 12,560
Registration fees..................................................... 961
Trustees' fees and expenses-Note 2(d)................................. 826
Miscellaneous......................................................... 45,664
-----------
1,142,437
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 297,996
-----------
TOTAL EXPENSES.................................................. 844,441
-----------
INVESTMENT INCOME-NET........................................... 5,259,404
-----------
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments (including options transactions)-Note 3(a) $(2,391,318)
Net realized gain on financial futures-Note 3(a)........................ 48,742
-----------
NET REALIZED (LOSS)................................................... (2,342,576)
Net unrealized appreciation on investments.............................. 2,019,925
-----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (322,651)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 4,936,753
===========
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
1994 1995
-------------- --------------
OPERATIONS:
<S> <C> <C>
Investment income-net................................................... $ 5,023,340 $ 5,259,404
Net realized (loss) on investments...................................... (259,519) (2,342,576)
Net unrealized appreciation (depreciation) on investments for the year.. (6,321,383) 2,019,925
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (1,557,562) 4,936,753
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (3,507,400) (3,229,769)
Class B shares........................................................ (1,515,940) (2,029,635)
-------------- --------------
TOTAL DIVIDENDS................................................... (5,023,340) (5,259,404)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 23,248,700 3,792,421
Class B shares........................................................ 28,953,805 5,258,725
Dividends reinvested:
Class A shares........................................................ 1,920,032 1,700,541
Class B shares........................................................ 941,663 1,251,870
Cost of shares redeemed:
Class A shares........................................................ (9,403,883) (23,036,441)
Class B shares........................................................ (1,465,324) (3,172,359)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS................................ 44,194,993 (14,205,243)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 37,614,091 (14,527,894)
NET ASSETS:
Beginning of year....................................................... 69,428,561 107,042,652
-------------- --------------
End of year............................................................. $107,042,652 $ 92,514,758
============== ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------------------------------------------------------------------
CLASS A CLASS B
--------------------------------- --------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
--------------------------------- --------------------------------
1994 1995 1994 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 1,697,042 302,337 2,120,383 420,696
Shares issued for dividends reinvested. 141,385 135,607 69,404 100,207
Shares redeemed........................ (691,793) (1,840,173) (108,062) (256,909)
--------------- -------------- -------------- --------------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING.......... 1,146,634 (1,402,229) 2,081,725 263,994
=============== ============== ============== ==============
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA 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 CLASS B SHARES
------------------------------------ --------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------ --------------------------
PER SHARE DATA: 1992(1) 1993 1994 1995 1993(2) 1994 1995
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $12.00 $12.39 $13.40 $12.73 $12.90 $13.39 $12.72
------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net..................... .62 .78 .74 .70 .20 .66 .64
Net realized and unrealized gain (loss)
on investments.......................... .39 1.02 (.67) (.01) .49 (.67) (.01)
------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS........ 1.01 1.80 .07 .69 .69 (.01) .63
------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net...... (.62) (.78) (.74) (.70) (.20) (.66) (.64)
Dividends from net realized gain on investments - (.01) - - - - -
------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS..................... (.62) (.79) (.74) (.70) (.20) (.66) (.64)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.............. $12.39 $13.40 $12.73 $12.72 $13.39 $12.72 $12.71
====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN (3)................... 11.36%(4) 14.97% .29% 5.70% 18.53%(4) (.27%) 5.12%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets... - .29% .44% .65% .79%(4) 1.00% 1.18%
Ratio of net investment income to
average net assets...................... 6.35%(4) 5.94% 5.38% 5.63% 4.47%(4) 4.78% 5.08%
Decrease reflected in above expense ratios
due to undertakings by the Manager...... 1.14%(4) .76% .50% .31% .56%(4) .48% .30%
Portfolio Turnover Rate................... 15.01%(5) 5.76% 11.62% 12.02% 5.76% 11.62% 12.02%
Net Assets, end of year (000's Omitted)... $26,387 $56,284 $68,074 $50,205 $13,145 $38,968 $42,310
(1) From August 1, 1991 (commencement of operations) to April 30, 1992.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
See notes to financial statements.
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 fifteen series
including the North Carolina Series (the "Series").
Dreyfus Service Corporation, until August 24, 1994, acted as the
distributor of the Fund's shares. Dreyfus Service Corporation is
a wholly-owned subsidiary of The Dreyfus Corporation
("Manager").
Effective August 24, 1994, the Manager became a direct subsidiar
y
of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between the two
Classes include the services offered to and the expenses borne
by
each Class and certain voting rights.
(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. Investmen
ts
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 issued 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 applicabl
e
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 $1,533,000 available for Federal income tax
purposes
to be applied against future net securities profits, if any,
realized subsequent to April 30, 1995. The carryover does not
include net realized securities losses from November 1, 1994
through April 30, 1995 which are treated, for Federal
income tax purposes, as arising in fiscal 1996. If not applied,
$225,000 of the carryover expires in fiscal 2002 and $1,308,000
of 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 average daily value of the Series' 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, 1994
through
June 30, 1994 to waive receipt of the management fee payable to
it
by the Series in excess of an annual rate of .20 of 1% (excludin
g
certain expenses as described above) of the Series' average
daily net assets and thereafter, had undertaken through
April 30, 1995 to reduce the management fee paid by the Series,
to the extent that the Series' aggregate expenses (excluding
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 $297,996 for the year ended April 30, 1995.
Dreyfus Service Corporation retained $5,095 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $13,979 during the year ended April 30, 1995 from
contingent deferred sales charges imposed upon redemptions of
the
Series' Class B shares.
(B) On August 3, 1994, Series shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the
"Class B Distribution Plan") pursuant to Rule 12b-1 under the
Act.
Pursuant to the Class B Distribution Plan, effective August 24,
1994, the Fund pays the Distributor for distributing the Series'
Class B shares at an annual rate of .50 of 1% of the value of
the
average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B Distribution Plan") provided that the Series pays
Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of
the Series' Class B shares average daily net assets, for the
costs
and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents
based on the value of the Series' Class B shares owned by
clients
of the Service Agents.
During the year ended April 30, 1995, $136,431 was charged
to the Series pursuant to the Class B Distribution Plan and
$63,468 was charged to the Series pursuant to the prior Class B
Distribution Plan.
(C) Under the Shareholder Service 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 and Class B shares for
servicing shareholder accounts. The service 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 in respect of these services. The
Distributor determines the amounts to be paid to Service
Agents. From May 1, 1994 through August 23, 1994, $52,956 and
$31,456 were charged to Class A and Class B shares,
respectively,
by Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $90,383 and $68,494 were charged to Class A and
Class B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives 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:
(A) The aggregate amount of purchases and sales of
investment securities, excluding options transactions, amounted
to
$20,683,385 and $31,587,918, respectively, for the year ended
April 30, 1995, and consisted entirely of long-term and
short-term
municipal investments.
In addition, the following table summarizes the Series'
call/put options written transactions for the year ended April
30,
1995:
<TABLE>
<CAPTION>
OPTIONS TERMINATED
--------------------------
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED COST GAIN
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPTIONS WRITTEN:
Contracts outstanding April 30, 1994........ - -
Contracts written........................... 250 $ 172,627
----------- -----------
250 172,627
Contracts Terminated;
Expired................................... 250 172,627 - $172,627
----------- ----------- ----------- -----------
Total contracts terminated................ 250 $ 172,627 $172,627
----------- ----------- ----------- -----------
Contracts outstanding April 30, 1995........ - -
=========== ===========
</TABLE>
As a writer of call options, the Series receives a premium at
the outset and then bears the market risk of unfavorable changes
in the price of the financial instrument underlying the option.
Generally, the Series would incur a gain, to the extent of the
premium, if the price of the underlying financial instrument
decreases between the date the option is written and the date on
which the option is terminated. Generally, the Series
would realize a loss, if the price of the financial instrument
increases between those dates. At April 30, 1995, there were no
call options written outstanding.
As a writer of put options, the Series receives a premium at
the outset and then bears the market risk of unfavorable changes
in the price of the financial instrument underlying the option.
Generally, the Series would incur again, to the extent of the
premium, if the price of the underlying financial instrument
increases between the date the option is written and the
date on which the option is terminated. Generally, the Series
would realize a loss, if the price of the financial instrument
declines between those dates. At April 30, 1995, there were no
put
options written outstanding.
The Series engages in trading financial futures contracts.
The Series is exposed to market risk as a result of changes in
the
value of the underlying financial instruments. Investments in
financial futures require the Series to "mark to market" on a
daily basis, which reflects the change in the market
value of the contract at the close of each day's trading.
Accordingly, variation margin payments are received to reflect
daily unrealized gains or losses. When the contracts are closed,
the Series recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian,
which consist of cash or cash equivalents, up to approximately
10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the
contract
is traded and is subject to change. At April 30, 1995, there
were
no financial futures contracts outstanding.
(B) At April 30, 1995, accumulated net unrealized
depreciation on investments was $1,175,331, consisting of
$1,842,605 gross unrealized appreciation and $3,017,936 gross
unrealized depreciation.
At April 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 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, 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 April 30, 1995 by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Premier State Municipal Bond
Fund, North Carolina Series at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS--98.7% AMOUNT VALUE
_________ ___________
OHIO--90.2%
<S> <C> <C>
Akron, Waterworks System Mortgage Improvement Revenue 6%, 3/1/2014 (Insured; FGIC) $ 1,000,000 $ 999,900
Akron Bath Copley Joint Township Hospital District, Revenue
(Summa Health Systems) 5.75% 11/15/2008................................. 5,000,000 4,903,150
Akron-Wilbeth Housing Development Corp., First Mortgage Revenue
7.90%, 8/1/2003 (Insured; FHA).......................................... 1,805,000 2,137,932
Allen County, Industrial First Mortgage Revenue, Refunding
6.75%, 11/15/2008 (Guaranteed; K-Mart Corp.)............................ 1,280,000 1,268,749
City of Barberton, Hospital Facilities Revenue
(The Barberton Citizens Hospital Co. Project) 7.25%, 1/1/2012........... 2,400,000 2,520,840
Butler County, Hospital Facilities Revenue, Refunding and Improvement
(Fort Hamilton Hughes Hospital) 7.25%, 1/1/2001......................... 4,000,000 4,037,360
City of Cambridge, HR Refunding (Guernsey Memorial Hospital Project)
8%, 12/1/2006........................................................... 2,000,000 2,124,640
Canton 7.875%, 12/1/2008 (Prerefunded 12/1/1998) (a)........................ 1,000,000 1,125,220
Clermont County, Hospital Facilities Revenue, Refunding (Mercy Health
Systems):
6%, 9/1/2019 (Insured; AMBAC)........................................... 2,000,000 1,962,180
7.50%, 9/1/2019 (Prerefunded 9/1/1999) (Insured; AMBAC) (a)............. 820,000 916,366
7.50%, 9/1/2019 (Prerefunded 9/1/2001) (Insured; AMBAC) (a)............. 180,000 203,764
City of Cleveland:
Airport System Improvement Revenue 6%, 1/1/2024 (Insured; FGIC)......... 7,000,000 6,758,150
COP (Motor Vehicle, Motorized and Communication Equipment) 7.10%, 7/1/2002 2,000,000 2,087,940
Parking Facility Improvement Revenue 8%, 9/15/2012...................... 5,000,000 5,216,900
School District 8%, 12/1/2001........................................... 1,675,000 1,951,040
Waterworks First Mortgage Revenue 6.25%, 1/1/2015 (Insured; AMBAC)...... 1,000,000 1,016,610
Cuyahoga County:
Health Care Facilities Revenue (Judson Retirement Community) 8.875%, 11/15/2019 3,500,000 3,789,870
HR:
(Fairview General Hospital) 7.375%, 8/1/2019 (Prerefunded 8/1/1999) (a) 4,000,000 4,444,280
(Meridia Health Systems) 7%, 8/15/2023................................ 1,750,000 1,801,800
Refunding:
(Deaconess Hospital) 7.45%, 10/1/2018 (Prerefunded 10/1/2000) (a). 5,000,000 5,697,950
(Meridia Health Systems) 7.25%, 8/15/2019......................... 4,715,000 4,947,921
Jail Facilities 7%, 10/1/2013 (Prerefunded 10/1/2001) (a)............... 6,125,000 6,876,354
Refunding:
(Cleveland Clinic Foundation) 8%, 12/1/2015....................... 1,000,000 1,073,320
(Mount Sinai Medical Center) 8.125%, 11/15/2014................... 1,000,000 1,083,450
Eaton, IDR Refunding (Baxter International Inc. Project) 6.50%, 12/1/2012... 1,500,000 1,489,020
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
OHIO (CONTINUED)
Euclid City School District 7.10%, 12/1/2011................................ $ 1,000,000 $ 1,076,030
Village of Evendale, IDR Refunding (Ashland Oil Inc. Project) 6.90%, 11/1/2010 2,000,000 2,059,360
Fairfield City School District, School Improvement Unlimited Tax:
7.20%, 12/1/2011 (Insured; FGIC)........................................ 1,000,000 1,132,790
7.20%, 12/1/2012 (Insured; FGIC)........................................ 1,250,000 1,415,987
Fairlawn, Health Care Facilities Revenue (Village at Saint Edward Project)
8.75%, 10/1/2019........................................................ 2,420,000 2,591,360
Franklin County:
Hospital Improvement Revenue (The Children's Hospital Project) 6.60%, 11/1/2011 1,500,000 1,538,190
HR:
(Holy Cross Health Systems Corp.-Mount Carmel Health) 6.75%, 6/1/2019 2,500,000 2,530,225
Refunding Improvement:
(The Children's Hospital Project) 6.60%, 5/1/2013................. 4,000,000 4,079,080
(Riverside United Hospital) 7.60%, 5/15/2020 (Prerefunded 5/15/2000) (a) 5,300,000 5,992,922
(Worthington Christian Village Congregate Care Project):
10.25%, 8/1/2015................................................ 840,000 905,260
7.80%, 2/1/2017 (Insured; FHA).................................. 5,690,000 6,223,210
Gallia County, Local School District 7.375%, 12/1/2004...................... 570,000 651,538
Greater Cleveland Gateway Economic Development Corp.:
Senior Lien Excise Tax Revenue 6.875%, 9/1/2005 (Insured; FSA).......... 1,500,000 1,637,880
Stadium Revenue 7.50%, 9/1/2005......................................... 5,675,000 6,100,511
Hamilton City, Electric Systems Mortgage Revenue, Refunding:
6%, 10/15/2023 (Insured; FGIC).......................................... 1,500,000 1,467,915
6.30% 10/15/2025 (Insured; FGIC)........................................ 2,000,000 2,021,220
Hamilton County:
Hospital Facilities Improvement Revenue, Refunding (Deaconess Hospital)
7%, 1/1/2012.......................................................... 2,570,000 2,696,058
Hospital Facilities Refunding Revenue (Episcopal Retirement Homes, Inc.)
6.80%, 1/1/2008 (LOC; The Fifth Third Bank) (b)....................... 2,450,000 2,578,086
Mortgage Revenue (Judson Care Center) 7.80%, 8/1/2019 (Insured; FHA).... 3,970,000 4,249,885
Sewer Systems Improvement Revenue, Refunding
6.70%, 12/1/2013 (Prerefunded 6/1/2001) (a)........................... 2,000,000 2,206,140
Hilliard School District, School Improvement 5.75%, 12/1/2019 (Insured; FGIC) 4,500,000 4,328,055
Kirtland Local School District 7.50%, 12/1/2009............................. 760,000 839,253
Knox County, IDR (Weyerhaeuser Co. Project) 9%, 10/1/2007................... 1,000,000 1,217,530
Lowellville, Sanitary Sewer Systems Revenue (Browning-Ferris Industries Inc.)
7.25%, 6/1/2006......................................................... 1,300,000 1,373,034
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ ________
OHIO (CONTINUED)
Mahoning County, Health Care Facilities Revenue
(Youngstown Osteopathic Hospital Project)
7.60%, 8/1/2010 (LOC; Marine Midland Bank) (b).......................... $ 3,775,000 $ 4,142,949
Marion County, Health Care Facilities Revenue (United Church Homes Inc.):
8.875%, 12/1/2012 (Prerefunded 12/1/1999) (a)........................... 2,305,000 2,733,914
Refunding and Improvement 6.375%, 11/15/2010............................ 3,000,000 2,805,060
Miami County, Hospital Facilities Revenue, Refunding
(Upper Valley Medical Center) 8.375%, 5/1/2013.......................... 525,000 566,601
Montgomery County, Water Revenue (Greater Moraine-Beavercreek)
6.25%, 11/15/2012 (Insured; FGIC)....................................... 1,500,000 1,536,735
Moraine, Solid Waste Disposal Revenue (General Motors Corp. Project)
6.75%, 7/1/2014......................................................... 5,000,000 5,102,150
Muskingum County, Revenue, Refunding (Franciscan Health Advisory Services)
7.50%, 3/1/2012......................................................... 3,185,000 3,281,537
North Royalton City School District 6.10%, 12/1/2019 (Insured; MBIA)........ 2,000,000 1,999,860
State of Ohio:
Economic Development Revenue:
Ohio Enterprise Bond Fund (VSM Corp. Project) 7.375%, 12/1/2011....... 885,000 922,285
(Sponge Inc. Project) 8.375%, 6/1/2014................................ 1,675,000 1,850,657
Higher Educational Facility Revenue (University of Dayton Project)
5.80%, 12/1/2014 (Insured; FGIC)...................................... 1,000,000 973,700
Mortgage Revenue (Odd Fellows Home Ohio Inc. Project)
8.15%, 8/1/2017 (Insured; FHA)........................................ 350,000 382,064
PCR (Standard Oil Co. Project)
6.75%, 12/1/2015 (Guaranteed; British Petroleum Co. p.l.c.)........... 1,350,000 1,506,371
Ohio Air Quality Development Authority, Revenue:
(Columbus and Southern Power Co. Project)
6.375%, 12/1/2020 (Insured; FGIC)..................................... 2,000,000 2,040,800
Pollution Control:
(Cincinnati Gas and Electric) 10.125%, 12/1/2015...................... 900,000 947,178
(Pennsylvania Power Co. Project):
5.90%, 5/1/2018 (Insured; AMBAC).................................. 2,240,000 2,171,501
8.10%, 9/1/2018................................................... 1,000,000 1,054,890
Refunding:
(Cleveland Electric Illuminating Co. Project) 6.85%, 7/1/2023..... 5,250,000 4,700,167
(Ohio Edison) 7.45%, 3/1/2016 (Insured; FGIC)..................... 3,500,000 3,827,600
Refunding:
(JMG Funding Limited Partnership Project) 6.375%, 4/1/2029 (Insured; AMBAC) 2,500,000 2,543,475
(Ohio Power Co. Project) 7.40%, 8/1/2009.............................. 1,500,000 1,551,960
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
OHIO (CONTINUED)
Ohio Building Authority
State Facilities:
(Columbus State Building Project)
7.35%, 10/1/2005 (Prerefunded 10/1/1999) (a)...................... $ 1,795,000 $ 2,013,326
(Juvenile Correctional Projects) 6.60%, 10/1/2014 (Insured; AMBAC).... 1,660,000 1,761,160
Refunding (James Rhodes) 6.375%, 6/1/2008............................. 1,670,000 1,736,666
Ohio Capital Corp. for Housing, MFHR Refunding
7.60%, 11/1/2023 (Collateralized; FNMA)................................. 1,250,000 1,317,025
Ohio Higher Educational Facility Community, Revenue
(Case Western Reserve Project):
7.70%, 10/1/2018 (Prerefunded 10/1/1997) (a).......................... 485,000 526,385
7.70%, 10/1/2018...................................................... 15,000 16,280
6%, 10/1/2022......................................................... 1,000,000 981,480
Ohio Housing Finance Agency:
Mortgage Revenue (Saint Francis Court Apartment Project)
8%, 10/1/2026 (Insured; FHA).......................................... 695,000 736,165
SFMR (GNMA Mortgage Backed Securities Program):
8.25%, 12/15/2019 .................................................... 185,000 195,273
8.125%, 3/1/2020 ..................................................... 455,000 478,355
Zero Coupon, 9/1/2021................................................. 18,820,000 2,506,448
7.85%, 9/1/2021 ...................................................... 2,150,000 2,264,530
7.65%, 3/1/2029 ...................................................... 5,425,000 5,655,780
7.80%, 3/1/2030 ...................................................... 3,495,000 3,679,291
Ohio Public Facilities Community, Higher Education Facilities 7.25%, 5/1/2004 1,300,000 1,427,868
Ohio Turnpike Commission, Turnpike Revenue 5.75%, 2/15/2024................. 1,500,000 1,440,795
Ohio Water Development Authority:
Pollution Control Facilities Revenue:
(Cleveland Electric Illuminating Project) 8%, 10/1/2023............... 5,800,000 6,120,334
(Ohio Edison) 8.10%, 10/1/2023........................................ 3,700,000 3,864,206
(Pennsylvania Power Co. Project) 8.10%, 9/1/2018...................... 2,000,000 2,117,840
Refunding:
(Ohio Edison) 7.625%, 7/1/2023.................................... 9,390,000 9,542,681
(Toledo Edison Co.):
7.55%, 6/1/2023 ................................................ 2,000,000 2,009,800
8%, 10/1/2023 .................................................. 3,635,000 3,694,614
Revenue (Fresh Water) 5.90%, 12/1/2015 (Insured; AMBAC)................. 3,000,000 2,950,680
Ottawa County, Sanitary Sewer Systems Special Assessment
(Portage-Catawba Island Sewer Project) 7%, 9/1/2011 (Insured; AMBAC).... 1,000,000 1,094,600
Shelby County, Hospital Facilities Revenue, Refunding and Improvement
(The Shelby County Memorial Hospital Association) 7.70%, 9/1/2018....... 2,500,000 2,581,850
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
OHIO (CONTINUED)
South Euclid, Recreation Facilities 7%, 12/1/2011........................... $2,285,000 $2,447,555
Southwest Regional Water District, Water Revenue:
6%, 12/1/2015 (Insured; MBIA)........................................... 1,600,000 1,584,960
6%, 12/1/2020 (Insured; MBIA)........................................... 1,250,000 1,225,888
Springdale, Hospital Facilities First Mortgage Revenue,
(Southwestern Seniors Services, Inc.):
5.875%, 11/1/2012..................................................... 3,000,000 2,707,080
6%, 11/1/2018......................................................... 1,250,000 1,079,888
Stark County, Refunding 5.70%, 11/15/2017 (Insured; AMBAC).................. 1,675,000 1,615,270
Student Loan Funding Corp.:
Student Loan Revenue, Refunding 7.20%, 8/1/2003......................... 3,150,000 3,237,035
Student Loan Senior Subordinated Revenue 6.15%, 8/1/2010................ 6,775,000 6,668,971
University of Cincinnati
COP 6.75%, 12/1/2009 (Insured; MBIA).................................... 750,000 806,933
University of Ohio, General Receipts:
5%, 12/1/2018 (Insured; FGIC)........................................... 1,250,000 1,091,813
Revenue 7.15%, 12/1/2009 (Prerefunded 12/1/1998) (a).................... 6,000,000 6,556,740
Warren 7.75%, 11/1/2010 (Prerefunded 11/1/2000) (a)......................... 2,785,000 3,195,119
Washington, Water Systems Mortgage Revenue 5.30%, 12/1/2013 (Insured; AMBAC) 1,000,000 927,420
U.S. RELATED-8.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 3,000,000 3,037,920
Puerto Rico Highway and Transportation Authority, Highway Revenue
5.45%, 7/1/2007......................................................... 15,500,000 14,744,685
Virgin Islands Public Finance Authority, Revenue, Refunding
Matching Fund Loan Notes 7.25%, 10/1/2018............................... 4,200,000 4,341,414
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,450,000 3,599,627
____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $285,172,015)..................................................... $297,569,429
============
SHORT-TERM MUNICIPAL INVESTMENTS--1.3%
OHIO:
City of Columbus, Sewer Revenue, Refunding VRDN 4.65% (c)................... $3,000,000 $3,000,000
Montgomery County, IDR (Modern Industrial Plastics Project)
VRDN 5.07% (LOC; Industrial Bank of Japan) (b,c)........................ 1,000,000 1,000,000
____________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $4,000,000)....................................................... $4,000,000
=============
TOTAL INVESTMENTS--100.0%
(cost $289,172,015)..................................................... $ 301,569,429
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation IDR Industrial Development Revenue
COP Certificate of Participation 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 MFHR Multi-Family Housing 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
</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 29.9%
AA Aa AA 6.8
A A A 25.9
BBB Baa BBB 23.5
B B B 6.7
F1 MIG1 SP1 1.3
Not Rated (e) Not Rated (e) Not Rated (e) 5.9
______
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 or
Standard & Poors, have been determined by the Manager
to
be of comparable quality to those rated securities in
which the Fund may invest.
(f) At April 30 1995, the Fund had $93,172,110 (30.4% 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, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $289,172,015)--see statement..................................... $301,569,429
Cash.................................................................... 3,326,600
Interest receivable..................................................... 5,600,300
Receivable for shares of Beneficial Interest subscribed................. 598,719
Prepaid expenses........................................................ 11,039
___________
311,106,087
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 139,336
Due to Distributor...................................................... 76,690
Payable for investment securities purchased............................. 4,421,760
Payable for shares of Beneficial Interest redeemed...................... 388,493
Accrued expenses........................................................ 58,209 5,084,488
___________ ____________
NET ASSETS ................................................................ $306,021,599
============
REPRESENTED BY:
Paid-in capital......................................................... $293,858,896
Accumulated net realized (loss) on investments.......................... (234,711)
Accumulated net unrealized appreciation on investments--Note 3.......... 12,397,414
____________
NET ASSETS at value......................................................... $306,021,599
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 21,645,959
==========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 2,596,941
=========
NET ASSET VALUE per share:
Class A Shares
($273,224,593 / 21,645,959 shares).................................... $12.62
======
Class B Shares
($32,797,006 / 2,596,941 shares)...................................... $12.63
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $20,981,909
EXPENSES:
Management fee--Note 2(a)............................................. $ 1,707,720
Shareholder servicing costs--Note 2(c)................................ 983,675
Distribution fees (Class B shares)--Note 2(b)......................... 149,342
Professional fees..................................................... 88,216
Custodian fees........................................................ 33,703
Prospectus and shareholders' reports.................................. 24,676
Trustees' fees and expenses--Note 2(d)................................ 2,738
Registration fees..................................................... 2,492
Miscellaneous......................................................... 42,098
__________
3,034,660
Less reduction in management fee due to
undertakings--Note 2(a)........................................... 28,783
__________
TOTAL EXPENSES.................................................. 3,005,877
__________
INVESTMENT INCOME--NET.......................................... 17,976,032
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments--Note 3.............................. $ (231,734)
Net unrealized (depreciation) on investments............................ (1,447,408)
____________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (1,679,142)
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $16,296,890
===========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
________________________
1994 1995
_______ _______
<S> <C> <C>
OPERATIONS:
Investment income_net.................................................. $ 18,204,926 $17,976,032
Net realized gain (loss) on investments................................. 1,272,432 (231,734)
Net unrealized (depreciation) on investments for the year............... (10,949,018) (1,447,408)
_____________ ___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 8,528,340 16,296,890
_____________ ___________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net:
Class A shares........................................................ (17,203,535) (16,395,897)
Class B shares........................................................ (1,001,391) (1,580,135)
Net realized gain on investments:
Class A shares........................................................ (616,962) (737,090)
Class B shares........................................................ (46,746) (80,832)
____________ ___________
TOTAL DIVIDENDS................................................... (18,868,634) (18,793,954)
____________ ___________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 29,869,777 14,075,586
Class B shares........................................................ 21,032,260 7,880,402
Dividends reinvested:
Class A shares........................................................ 11,652,834 11,395,733
Class B shares........................................................ 757,951 1,146,894
Cost of shares redeemed:
Class A shares........................................................ (34,259,537) (43,645,693)
Class B shares........................................................ (1,396,011) (3,696,758)
____________ ___________
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 27,657,274 (12,843,836)
____________ ___________
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 17,316,980 (15,340,900)
NET ASSETS:
Beginning of year....................................................... 304,045,519 321,362,499
_____________ ____________
End of year............................................................. $ 321,362,499 $306,021,599
============= ============
</TABLE>
<TABLE>
<CAPTION>
SHARES
____________________________
CLASS A CLASS B
________________ ________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
________________ ________________
1994 1995 1994 1995
_______ _______ _______ _______
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 2,243,350 1,122,269 1,576,802 625,670
Shares issued for dividends reinvested. 877,259 911,859 57,130 91,754
Shares redeemed........................ (2,588,901) (3,506,799) (106,127) (296,186)
__________ __________ _________ ________
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING............ 531,708 (1,472,671) 1,527,805 421,238
========== ========== ========= ========
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OHIO 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 CLASS B SHARES
_________________________________________ __________________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
_________________________________________ __________________________
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
______ ______ ______ ______ ______ _______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.54 $12.00 $12.35 $13.09 $12.70 $12.69 $13.09 $12.71
______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income_net........... .86 .80 .77 .74 .73 .20 .66 .66
Net realized and unrealized gain (loss)
on investments................. .46 .36 .81 (.36) (.05) .40 (.35) (.05)
____ ____ ____ ____ ____ ____ ____ ____
TOTAL FROM INVESTMENT OPERATIONS 1.32 1.16 1.58 .38 .68 .60 .31 .61
____ ____ ____ ____ ____ ____ ____ ____
DISTRIBUTIONS:
Dividends from investment income_net (.86) (.80) (.77) (.74) (.73) (.20) (.66) (.66)
Dividends from net realized gain
on investments................. .- (.01) (.07) (.03) (.03) .- (.03) (.03)
____ ____ ____ ____ ____ ____ ____ ____
TOTAL DISTRIBUTIONS............ (.86) (.81) (.84) (.77) (.76) (.20) (.69) (.69)
____ ____ ____ ____ ____ ____ ____ ____
Net asset value, end of year..... $12.00 $12.35 $13.09 $12.70 $12.62 $13.09 $12.71 $12.63
===== ===== ===== ===== ===== ===== ===== =====
TOTAL INVESTMENT RETURN (2).......... 11.84% 9.97% 13.24% 2.78% 5.63% 16.36%(3) 2.24% 5.06%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .21% .52% .70% .81% .92% 1.17%(3) 1.38% 1.44%
Ratio of net investment income to
average net assets............. 7.20% 6.53% 6.03% 5.57% 5.84% 4.62%(3) 4.89% 5.29%
Decrease reflected in above expense
ratios due to undertakings by
the Manager.................... .78% .41% .23% .12% .01% .13%(3) .10% .01%
Portfolio Turnover Rate.......... 3.00% 13.68% 6.08% 7.73% 39.53% 6.08% 7.73% 39.53%
Net Assets, end of year (000's Omitted) $176,223 $243,074 $295,564 $293,706 $273,225 $8,482 $27,657 $32,797
(1) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
See notes to financial statements.
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 fifteen series
including the Ohio Series (the "Series"). Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of
the Fund's shares. Dreyfus Service Corporation is a wholly-owned
subsidiary of The Dreyfus Corporation ("Manager"). Effective
August 24, 1994, the Manager became a direct subsidiary of
Mellon
Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the
two Classes include the services offered to and the expenses
borne by each Class and certain voting rights.
(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: Securitie
s
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
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 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 applicabl
e
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 $232,000 available for Federal income tax purposes
to be applied against future net securities profits, if any,
realized subsequent to April 30, 1995. 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 average daily value of the Series' 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, 1994
through June 30, 1994, to waive receipt of the management fee
payable to it by the Series in excess of an annual rate of .50
of
1% (excluding certain expenses as described above) of the
Series'
average daily net assets and thereafter, had undertaken from
July
1, 1994 through July 7, 1994 to reduce the management fee paid
by
the Series, to the extent that the Series' aggregate expenses
(excluding 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 $28,783 for the year ended April 30,
1995.
Dreyfus Service Corporation retained $10,740 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $23,606 from contingent deferred sales charges imposed
upon redemptions of the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B Distribution Plan, effective
August 24, 1994, the Fund pays the Distributor for distributing
the Series'
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Class B shares at an annual rate of .50 of 1% of the value of
the
average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service agent.
During the year ended April 30, 1995, $104,049 was charged
to
the Series pursuant to the Class B Distribution Plan and $45,293
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $229,922 and $22,647
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $471,643 and $52,024 were charged to Class A and
Class B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $203,531,636 and $214,491,868,
respectively, for the year ended April 30, 1995, and consisted
entirely of long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on
investments was $12,397,414, consisting of $14,625,697 gross
unrealized appreciation and $2,228,283 gross unrealized
depreciation.
At April 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 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, 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 April 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 highlight
s
referred to above present fairly, in all material respects, the
financial position of Premier State Municipal Bond Fund, Ohio
Series at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF INVESTMENTS APRIL 30,1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-86.5% AMOUNT VALUE
------------ ------------
<S> <C> <C>
OREGON-75.2%Beaverton, Water Revenue 6.125%, 6/1/2014 (Insured; FSA).................... $ 200,000 $ 201,346
Clackamas County School District 6.15%, 6/1/2014 (Insured; AMBAC)........... 200,000 203,200
Douglas County Hospital Facility Authority, Revenue, Refund
(Health Facilities-Catholic Health) 6%, 11/15/2015 (Insured; MBIA)...... 200,000 199,758
Eugene, Electric Utility Revenue 5.80%, 8/1/2019............................ 200,000 195,400
Multnomah County, Revenue 6.10%, 10/1/2014.................................. 200,000 203,138
State of Oregon, Department of Transportation, Revenue, Regional Light Rail
Fund
(Westside Project) 6.25%, 6/1/2009 (Insured; MBIA)...................... 200,000 208,104
State of Oregon, Elderly and Disabled Housing 6.10%, 8/1/2015............... 200,000 203,564
Oregon Health, Housing, Educational and Cultural Facilities Authority,
Refunding (Lewis and Clark College Project) 6.125%, 10/1/2024 (Insured; MBIA) 200,000 200,558
Oregon Higher Education Building 6%, 12/1/2015.............................. 200,000 202,170
Oregon Housing and Community Services Department, SFMR 6.875%, 7/1/2028..... 200,000 205,514
Portland Sewer System, Revenue 6.25%, 6/1/2015.............................. 300,000 306,477
Salem, GO 5.70%, 8/1/2009 (Insured; MBIA)................................... 200,000 198,056
Salem-Keitzer School District 6%, 6/1/2014 (Insured; FGIC).................. 200,000 201,378
Tualatin Valley Water District, Water Revenue 6%, 6/1/2013.................. 200,000 203,716
Umatilla County School District 6%, 7/1/2014 (Insured; AMBAC)............... 200,000 201,274
Washington County School District - Beaverton 6%, 6/1/2012.................. 200,000 202,218
U.S. RELATED-11.3%
Puerto Rico Electric Power Authority, Power Revenue
6%, 7/1/2014 (Insured; FSA)............................................. 500,000 503,590
------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $3,778,638)..................... $3,839,461
============
SHORT-TERM MUNICIPAL INVESTMENTS-13.5%
OREGON-9.0%
State of Oregon, Economic Development Revenue, VRDN (Jae Oregon, Inc.
Project)
5.075%, 3/1/1999 (LOC; The Bank of Tokyo, LTD.) (a)..................... $ 400,000 $ 400,000
U.S. RELATED-4.5%
Puerto Rico Electric Power Authority, Power Revenue 3.89%, 7/1/2023 (b)..... 200,000 200,000
------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $600,000)...................... $ 600,000
============
TOTAL INVESTMENTS-100.0%
(cost $4,378,638)....................................................... $4,439,461
============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GO General Obligation VRDN Variable Rate Demand Notes
LOC Letter of Credit
</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 47.7%
AA Aa AA 27.3
A A A 16.0
F-1 MIG1 SP1 9.0
--------
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letter of credit. Securities payable on
demand. The interest rate, which is subject to change,
is based upon bank prime rates or an index of market
rates.
(b) Inverse floater security - the interest rate is subject
to change periodically.
(c) Fitch currently provides creditworthiness information
for a limited number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30,1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $4,378,638)-see statement....................................... $4,439,461
Interest receivable..................................................... 83,952
Receivable for shares of Beneficial Interest subscribed................. 39,479
Prepaid expenses-Note 1(e).............................................. 22,599
Due from The Dreyfus Corporation........................................ 1,695
----------
4,587,186
LIABILITIES:
Due to Distributor...................................................... $ 1,491
Due to Custodian........................................................ 195,475
Payable for shares of Beneficial Interest redeemed...................... 18,460
Accrued expenses and other liabilities.................................. 37,157 252,583
------------ ----------
NET ASSETS ................................................................ $4,334,603
==========
REPRESENTED BY:
Paid-in capital......................................................... $4,273,780
Accumulated net unrealized appreciation on investments-Note 3........... 60,823
----------
NET ASSETS at value......................................................... $4,334,603
==========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 220,224
==========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 114,490
==========
NET ASSET VALUE per share:
Class A Shares
($2,851,704 / 220,224 shares)......................................... $12.95
======
Class B Shares
($1,482,899 / 114,490 shares)......................................... $12.95
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF OPERATIONS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
INVESTMENT INCOME:
<S> <C> <C>
INTEREST INCOME......................................................... $164,596
EXPENSES:
Management fee-Note 2(a).............................................. $15,174
Shareholder servicing costs-Note 2(c)................................. 14,592
Organization expenses-Note 1(e)....................................... 5,511
Distribution fees (Class B shares)-Note 2(b).......................... 5,333
Prospectus and shareholders' reports.................................. 3,472
Registration fees..................................................... 1,564
Custodian fees........................................................ 557
Professional fees..................................................... 529
Trustees' fees and expenses-Note 2(d)................................. 28
Miscellaneous......................................................... 2,860
-------
49,620
Less-expense reimbursement from Manager due to
undertakings-Note 2(a)............................................ 44,131
-------
TOTAL EXPENSES.................................................... 5,489
--------
INVESTMENT INCOME-NET....................................................... 159,107
NET UNREALIZED APPRECIATION ON INVESTMENTS.................................. 60,823
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $219,930
========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF CHANGES IN NET ASSETS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
OPERATIONS:
<S> <C> <C>
Investment income-net....................................................................... $ 159,107
Net unrealized appreciation on investments for the period................................... 60,823
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................. 219,930
------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares............................................................................ (100,688)
Class B shares............................................................................ (58,419)
------------
TOTAL DIVIDENDS...................................................................... (159,107)
------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares............................................................................ 4,457,134
Class B shares............................................................................ 2,868,459
Dividends reinvested:
Class A shares............................................................................ 86,034
Class B shares............................................................................ 53,564
Cost of shares redeemed:
Class A shares............................................................................ (1,725,732)
Class B shares............................................................................ (1,465,679)
------------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.......................... 4,273,780
------------
TOTAL INCREASE IN NET ASSETS........................................................ 4,334,603
NET ASSETS:
Beginning of period......................................................................... =============
End of period............................................................................... $ 4,334,603
============
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------------------
CLASS A CLASS B
------------ ------------
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C>
Shares sold................................................................... 352,683 227,550
Shares issued for dividends reinvested........................................ 6,837 4,254
Shares redeemed............................................................... (139,296) (117,314)
------------ ------------
NET INCREASE IN SHARES OUTSTANDING...................................... 220,224 114,490
============ ============
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OREGON 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 the period May 6, 1994 (commencement of operations) to April
30, 1995. This information has been derived from the Series'
financial statements.
<TABLE>
<CAPTION>
PER SHARE DATA: CLASS A SHARES CLASS B SHARES
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period............................... $12.50 $12.50
------- -------
INVESTMENT OPERATIONS:
Investment income-net .76 .69
Net unrealized gain on investments................................. .45 .45
------- -------
TOTAL FROM INVESTMENT OPERATIONS.................................. 1.21 1.14
------- -------
DISTRIBUTIONS;
Dividends from investment income-net .............................. (.76) (.69)
------- -------
Net asset value, end of period..................................... $12.95 $12.95
======= =======
TOTAL INVESTMENT RETURN (1)(2)......................................... 10.12% 9.57%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets (2)........................ .01% .51%
Ratio of net investment income to average net assets (2)........... 5.95% 5.47%
Decrease reflected in above expense ratios due to undertakings
by the Manager (2)............................................... 1.59% 1.62%
Portfolio Turnover Rate............................................ -- --
Net Assets, end of period (000's Omitted).......................... $2,852 $1,483
- --------------------
</TABLE>
(1) Exclusive of sales load.
(2) Annualized.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OREGON 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 fifteen series
including the Oregon Series (the "Series") which commenced
operations on May 6, 1994. Dreyfus Service Corporation, until
August 24, 1994, acted as the distributor of the Fund's shares.
Dreyfus Service Corporation is a wholly-owned subsidiary of The
Dreyfus Corporation ("Manager"). Effective August 24, 1994, the
Manager became a direct subsidiary of Mellon Bank, N.A.
As of April 30, 1995 Major Trading Corporation, a subsidiary
of Mellon Bank Investments Corporation, held 103,036 shares of
Class A and 77,729 shares of Class B. Mellon Bank Investments
Corporation is a subsidiary of Mellon Bank.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts 02109, is a wholly-owned subsidiary of FDI
Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI Holdings, Inc., the parent company of which is
Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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.
Other differences between the two Classes include the services
offered to and the expenses borne by each Class and certain
voting rights.
(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, 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.
(E) OTHER: Organization expenses paid by the Series are
included in prepaid expenses and are being amortized to
operations from May 6, 1994, the date operations commenced, over
the period during which it is expected that a benefit will be
realized, not to exceed five years. At April 30, 1995, the
unamortized balance of such expenses amounted to $22,046.
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 Series' 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 6, 1994 through April 2, 1995, to reimburse all fees and
expenses of the Series (excluding 12b-1 distribution plan fees
and certain expenses as described above), and thereafter through
April 30, 1995, to reduce the shareholder services plan fee paid
by and reimburse such excess expenses of the Series, to the
extent that the Series' aggregate expenses (excluding certain
expenses as described above) exceeded specified annual
percentages of the Series' average daily net assets. The expense
reimbursement, pursuant to the undertakings, amounted to $44,131
for the period ended April 30, 1995.
The Manager has currently undertaken through June 30, 1995
or until such time as the net assets of the Series exceed $50
million, regardless of whether they remain at that level, 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).
The undertaking may be modified by the Manger from time to
time, provided that the resulting expense reimbursement would
not be less than the amount required pursuant to the Agreement.
(B) On August 3, 1994, the Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Distribution Plan, effective August 24, 1994, the Fund pays the
Distributor for distributing the Series' Class B shares at an
annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $4,598 was charged to
the Series pursuant to the Class B Distribution Plan and $735
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services.
The Distributor determines the amounts to be paid to Service
Agents. From May 6, 1994 through August 23, 1994, $527 and $368
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $3,703 and $2,299 were charged to Class A and
Class B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $5,078,626 and $700,000, respectively,
for the period ended April 30, 1995, and consisted entirely of
long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on investments was $60,823, consisting of $62,836 gross
unrealized appreciation and $2,013 gross unrealized
depreciation.
At April 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 STATE MUNICIPAL BOND FUND, OREGON SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of Premier
State Municipal Bond Fund, Oregon Series (one of the series
constituting the Premier State Municipal Bond Fund) as of April
30, 1995, and the related statements of operations and changes
in net assets and financial highlights for the period from May
6, 1994 (commencement of operations) to April 30, 1995. 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 audit.
We conducted our audit 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, 1995 by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides 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, Oregon Series at April 30, 1995, and the results of its
operations, the changes in its net assets and the financial
highlights for the period from May 6, 1994 to April 30, 1995,
in conformity with generally accepted accounting principles.
(Ernst & Young LLP Signature Logo)
New York, New York
June 6, 1995
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
APRIL 30,1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.6% AMOUNT VALUE
-------------- -----------
<S> <C> <C>
PENNSYLVANIA-86.4%
Allegheny County, Airport Revenue, Refunding
(Pittsburgh International Airport)
5.75%, 1/1/2008 (Insured; FSA).......................................... $ 2,005,000 $ 1,971,196
Allegheny County Hospital Development Authority, Revenue
(Magee-Womens Hospital) 5.625%, 10/1/2020 (Insured; FGIC) (a).......... 6,000,000 5,553,780
Allegheny County Industrial Development Authority, Revenue:
Commercial Development, Refunding
(Kaufmann Medical Office Building) 6.80%, 3/1/2015 (Insured; FHA) (a). 3,500,000 3,709,265
Medical Center, Refunding (Presbyterian Medical Center of
Oakmont Pennsylvania, Inc.) 6.75%, 2/1/2026 (Insured; FHA)............ 2,000,000 2,012,000
Specialized Enterprise
(Baldwin Health Center) 8.35%, 2/1/2016 (Insured; FHA)................ 4,610,000 4,883,880
Allegheny County Residential Finance Authority, SFMR:
7.40%, 12/1/2022........................................................ 1,945,000 2,048,630
7.95%, 6/1/2023......................................................... 1,195,000 1,260,856
Allentown, Refunding 5.65%, 7/15/2010 (Insured: AMBAC)...................... 1,000,000 983,880
Beaver County Industrial Development Authority, PCR, Refunding
(Ohio Edison Project) 7.75%, 9/1/2024................................... 3,150,000 3,252,627
(Pennsylvania Power Company Mansfield Project) 7.15%, 9/1/2021.......... 3,000,000 3,021,360
Berks County:
Zero Coupon, 5/15/2013 (Insured: FGIC).................................. 3,105,000 1,029,742
Zero Coupon, 5/15/2014 (Insured; FGIC).................................. 3,345,000 1,039,693
Berks County Municipal Authority:
HR (Reading Hospital Medical Center Project) 5.50%, 10/1/2008 (Insure 3,500,000 3,415,545
Revenue (Phoebe Berks Village, Inc. Project) 8.25%, 5/15/2022........... 2,445,000 2,529,695
Blair County Hospital Authority, Revenue (Altoona Hospital Project)
6.375%, 7/1/2013 (Insured; AMBAC)....................................... 5,000,000 5,094,950
Bradford County Industrial Development Authority, SWDR
(International Paper Company Projects) 6.60%, 3/1/2019.................. 3,250,000 3,257,540
Butler County Hospital Authority, Revenue, Refunding:
Health Center (Saint Francis Health Care Project) 6%, 5/1/2008.......... 1,860,000 1,839,335
Hospital (Butler Memorial Hospital) 8%, 7/1/2016........................ 2,000,000 2,109,880
Cambria County Industrial Development Authority, RRR
(Cambria Cogen Project):
7.75%, 9/1/2019, Series F-1 (LOC; Fuji Bank) (b)...................... 1,750,000 1,838,043
7.75%, 9/1/2019, Series F-2 (LOC; Fuji Bank) (b)...................... 2,750,000 2,903,643
Dauphin County General Authority, HR (Hapsco - Western Pennsylvania
Hospital Project) 5.50%, 7/1/2023 (Insured; MBIA)....................... 2,300,000 2,097,945
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30,1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
PENNSYLVANIA (CONTINUED)
Delaware County Authority:
HR (Crozer - Chester Medical Center) 5.30%, 12/15/2011 (Insured; MBIA).. $ 2,750,000 $ 2,582,003
Revenue (Elwyn Inc. Project) 8.35%, 6/1/2015............................ 4,300,000 4,695,987
Doylestown Hospital Authority, HR, Refunding
5.20%, 7/1/2008 (Insured; AMBAC)........................................ 2,255,000 2,131,358
Erie Higher Educational Building Authority, College Revenue
(Mercyhurst College Project) 7.85%, 9/15/2019 (Prerefunded 9/15/1999) (c) 1,000,000 1,115,370
Lancaster County Solid Waste Management Authority,
Resource Recovery System Revenue 8.50%, 12/15/2010...................... 1,145,000 1,208,857
Langhorne Manor Borough Higher Educational and Health Authority, HR
(Lower Bucks Hospital) 7%, 7/1/2005..................................... 2,375,000 2,369,941
Lehigh County General Purpose Authority, Revenue (Wiley House):
8.75%, 11/1/2014 (LOC; Northeastern Bank of Pennsylvania) (b)........... 3,785,000 3,763,955
9.50%, 11/1/2016........................................................ 2,000,000 2,073,520
Lehigh County Industrial Development Authority, PCR, Refunding
(Pennsylvania Power and Light Company Project)
5.50%, 2/15/2027 (Insured; MBIA)........................................ . 12,235,000 11,128,956
Luzerne County Industrial Development Authority, Exempt Facilities Revenue,
Refunding
(Pennsylvania Gas and Water Company Project) 7.125%, 12/1/2022.......... 4,000,000 4,031,360
Montgomery County Higher Educational and Health Authority:
HR (Abington Memorial Hospital) 5.125%, 6/1/2014 (Insured; AMBAC)....... 3,000,000 2,685,000
Revenue:
First Mortgage (Montgomery Income Project) 10.50%, 9/1/2020........... 3,000,000 3,213,990
(Northwestern Corporation) 8.375%, 6/1/2009........................... 2,685,000 2,792,695
Montgomery County Industrial Development Authority,
RRR 7.50%, 1/1/2012 (LOC; Banque Paribas) (b)........................... 5,000,000 5,269,950
Northampton County Industrial Development Authority, Refunding, Revenue:
(Moravian Hall Square Project) 7.45%, 6/1/2014 (LOC; Meridian Bank) (b). 1,800,000 1,880,136
Pollution Control (Bethlehem Steel) 7.55%, 6/1/2017..................... 5,700,000 5,746,170
Pennsylvania Economic Development Financing Authority:
Exempt Facilities Revenue (Macmillan Ltd. Partnership Project) 7.60%, 12/1/2020 3,500,000 3,697,540
RRR (Northampton Generating Project):
6.40%, 1/1/2009....................................................... 2,500,000 2,398,700
6.50%, 1/1/2013....................................................... 6,500,000 6,035,965
Wastewater Treatment Revenue (Sun Co. Inc. - R and M Project) 7.60%, 12/1/2024 4,240,000 4,482,443
Pennsylvania Higher Education Assistance Agency, Student Loan Revenue,
7.05%, 10/1/2016 (Insured; AMBAC)....................................... 2,500,000 2,624,275
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------------ ------------
PENNSYLVANIA (CONTINUED)
Pennsylvania Higher Educational Facilities Authority, Revenue:
College and University (Temple University) 5.75%, 4/1/2031 (Insured; MBIA) $ 3,100,000 $ 2,891,494
Refunding (Drexel University) 6.375%, 5/1/2017.......................... 6,820,000 6,635,383
(Thomas Jefferson University)
6%, 7/1/2019.......................................................... 3,555,000 3,518,846
Pennsylvania Housing Finance Agency:
6.057%, 4/1/2025........................................................ 6,000,000 5,688,060
Single Family Mortgage:
7.875%, 10/1/2020..................................................... 1,435,000 1,519,407
8.15%, 10/1/2021...................................................... 1,475,000 1,573,412
8.15%, 4/1/2024....................................................... 585,000 612,524
6.90%, 4/1/2025....................................................... 6,250,000 6,413,438
Pennsylvania Intergovernmental Cooperative Authority,
Special Tax Revenue:
(City of Philadelphia Funding Program) 5.625%, 6/15/2023 (Insured; MBIA) 3,000,000 2,809,230
Refunding 5%, 6/15/2013 (Insured; MBIA)............................... 2,000,000 1,784,700
Refunding 5%, 6/15/2022 (Insured; MBIA)............................... . 10,875,000 9,297,255
Philadelphia, Water and Wastewater Revenue:
Refunding 5.625%, 6/15/2008 (Insured; FSA).............................. 5,000,000 4,956,150
6.25%, 8/1/2010 (Insured; MBIA) (d)..................................... 2,730,000 2,855,798
5.60%, 8/1/2018 (Insured; MBIA) (d)..................................... 4,645,000 4,363,374
Refunding 5.25%, 6/15/2023 (Insured; MBIA).............................. . 11,405,000 10,108,023
Philadelphia Hospital and Higher Education Facilities Authority:
HR:
(Albert Einstein Medical Center) 7%, 10/1/2021........................ 1,500,000 1,508,400
(Graduate Health System Obligation) 7.25%, 7/1/2018................... 5,250,000 5,284,073
Refunding (Children's Hospital Philadelphia):
5.375%, 2/15/2014................................................. 3,060,000 2,765,995
5%, 2/15/2021..................................................... . 9,805,000 8,254,928
Revenue:
(Northwestern Corporation) 8.375%, 6/1/2009........................... 1,885,000 1,994,349
Refunding (Philadelphia MR Project) 5.875%, 8/1/2007.................. 4,620,000 4,370,566
Philadelphia Industrial Development Authority, IDR, Refunding
(Ashland Oil Inc. Project) 5.70%, 6/1/2005.............................. 2,500,000 2,480,875
Philadelphia Municipal Authority,
LR, Refunding 5.60%, 11/15/2009 (Insured; FGIC)......................... 2,100,000 2,040,969
Pittsburgh School District, Refunding 5.50%, 9/1/2013 (Insured; FGIC)....... 3,000,000 2,850,240
Pittsburgh Urban Redevelopment Authority:
Mortgage Revenue 7.05%, 4/1/2023........................................ 1,785,000 1,825,734
Single Family Mortgage 7.40%, 4/1/2024................................. 860,000 897,556
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
PENNSYLVANIA (CONTINUED)
Schuylkill County Industrial Development Authority, Refunding
First Mortgage Revenue (Valley Health Concerns) 8.75%, 3/1/2012......... $ 1,000,000 $ 1,039,080
RRR (Schuylkill Energy Resources Inc.) 6.50%, 1/1/2010.................. 7,330,000 7,002,642
Sewickley Valley Hospital Authority, Revenue
(Allegheny County-Sewickley Valley Hospital Project)
7.50%, 10/1/2014........................................................ 850,000 939,174
Southeastern Transportation Authority, Special Revenue 5.75%, 3/1/2020
(Insured; FGIC)......................................................... 5,500,000 5,254,810
Washington County Industrial Development Authority, Revenue, Refunding
(Presbyterian Medical Center) 6.75%, 1/15/2023 (Insured; FHA)........... 3,000,000 3,050,970
York County Hospital Authority, Revenue
(Health Center - Village at Sprenkle Drive) 7.75%, 4/1/2022............. 1,205,000 1,261,695
U.S. RELATED-13.2%
Commonwealth of Puerto Rico, Refunding 5%, 7/1/2021......................... . 11,730,000 9,864,695
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 4,500,000 4,556,880
Guam Government 5.375%, 11/15/2013.......................................... 4,000,000 3,483,920
Puerto Rico Highway and Transportation Authority,
Highway Revenue:
5.40%, 7/1/2006....................................................... 10,000,000 9,539,700
5.25%, 7/1/2020....................................................... 6,600,000 5,760,082
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities, Refunding 5.70%, 7/1/2009................................ 5,000,000 4,913,750
--------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $285,003,923)................... $287,749,833
============
SHORT-TERM MUNICIPAL INVESTMENTS-.4%
PENNSYLVANIA:
Allegheny County Hospital Development Authority, Revenue, VRDN
(Presbyterian Health Center) 4.70% (Insured; MBIA) (e).................. $ 900,000 $ 900,000
Bucks County Industrial Development Authority, VRDN
(Oxford Falls Housing Finance Corp.) 5.20% (e).......................... 300,000 300,000
--------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $1,200,000).................... $ 1,200,000
============
TOTAL INVESTMENTS-100.0%
(cost $286,203,923)..................................................... $288,949,833
============
</TABLE>
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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
LR Lease Revenue VRDN Variable Rate Demand Notes
LOC Letter of Credit
</TABLE>
<TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<CAPTION>
FITCH (F) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- -------- -------- ------------------ --------------------
<S> <C> <C> <C>
AAA Aaa AAA 36.3%
AA Aa AA 12.2
A A A 18.5
BBB Baa BBB 20.9
BB Ba BB .8
F1 MIG1/P1 SP1/A1 .4
Not Rated(g) Not Rated(g) Not Rated(g) 10.9
-------
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) 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) Purchased on a delayed delivery basis.
(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) Fitch currently provides creditworthiness information
for a limited number of investments.
(g) 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.
(h) At April 30, 1995, the Series had $81,681,861 (28.2% of
net assets) invested in securities whose payment of
principal and interest is dependent upon revenue
generated from health care projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $286,203,923)-see statement..................................... $288,949,833
Cash.................................................................... 1,043,021
Interest receivable..................................................... 5,428,845
Receivable for investment securities sold............................... 2,117,410
Receivable for shares of Beneficial Interest subscribed................. 385,597
Prepaid expenses........................................ 8,768
------------
297,933,474
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 132,481
Due to Distributor...................................................... 89,385
Payable for investment securities purchased............................. 7,393,085
Payable for shares of Beneficial Interest redeemed...................... 259,179
Accrued expenses and other liabilities.................................. 47,796 7,921,926
----------
NET ASSETS ................................................................ $290,011,548
============
REPRESENTED BY:
Paid-in capital......................................................... $284,243,046
Accumulated net realized gain on investments............................ 3,022,592
Accumulated net unrealized appreciation on investments-Note 3........... 2,745,910
-------------
NET ASSETS at value......................................................... $290,011,548
=============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 13,646,390
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 4,348,530
=============
NET ASSET VALUE per share:
Class A Shares
($219,949,295 / 13,646,390 shares).................................... $16.12
======
Class B Shares
($70,062,253 / 4,348,530 shares)...................................... $16.11
======
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
INVESTMENT INCOME:
INTEREST INCOME......................................................... $19,301,632
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,589,232
Shareholder servicing costs-Note 2(c)................................. 980,796
Distribution fees (Class B shares)-Note 2(b).......................... 325,145
Professional fees..................................................... 42,272
Custodian fees........................................................ 32,086
Prospectus and shareholders' reports.................................. 23,653
Registration fees..................................................... 5,902
Trustees' fees and expenses-Note 2(d)................................. 2,585
Miscellaneous......................................................... 23,310
-----------
3,024,981
Less--reduction in management fee due to
undertakings-Note 2(a)............................................ 26,631
-----------
TOTAL EXPENSES.................................................. 2,998,350
-----------
INVESTMENT INCOME-NET........................................... 16,303,282
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 3,749,748
Net unrealized (depreciation) on investments............................ (2,373,737)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,376,011
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $17,679,293
===========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
---------------------------
1994 1995
-------------- ------------
OPERATIONS:
Investment income-net................................................... $ 15,490,843 $ 16,303,282
Net realized gain (loss) on investments................................. (638,867) 3,749,748
Net unrealized (depreciation) on investments for the year............... (11,269,771) (2,373,737)
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 3,582,205 17,679,293
-------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (13,483,408) (12,907,659)
Class B shares........................................................ (2,007,435) (3,395,623)
From net realized gain on investments:
Class A shares........................................................ (420,030) ---
Class B shares........................................................ (79,933) ---
In excess of net realized gain on investments:
Class A shares........................................................ (74,174) ---
Class B shares........................................................ (14,115) ---
-------------- --------------
TOTAL DIVIDENDS................................................... (16,079,095) (16,303,282)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 41,975,312 14,323,499
Class B shares........................................................ 47,612,555 13,962,833
Dividends reinvested:
Class A shares........................................................ 7,051,281 6,652,944
Class B shares........................................................ 1,277,978 2,024,872
Cost of shares redeemed:
Class A shares........................................................ (24,912,768) (37,539,324)
Class B shares........................................................ (1,382,027) (5,465,675)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 71,622,331 (6,040,851)
--------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 59,125,441 (4,664,840)
NET ASSETS:
Beginning of year....................................................... 235,550,947 294,676,388
-------------- --------------
End of year............................................................. $294,676,388 $290,011,548
============= ============
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------------------------------------------------------------
CLASS A CLASS B
--------------------- --------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- ---------------------------
1994 1995 1994 1995
----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 2,482,244 900,647 2,815,030 881,375
Shares issued for dividends reinvested. 418,362 421,108 76,056 128,216
Shares redeemed........................ (1,489,929) (2,389,230) (83,242) (350,112)
----------- ----------- ---------- ---------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING.......... 1,410,677 (1,067,475) 2,807,844 659,479
============ =========== =========== =========
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA 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 CLASS B SHARES
----------------------------------------------- ---------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
----------------------------------------------- -------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------- ------- ----- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.68 $15.21 $15.73 $16.61 $16.01 $16.10 $16.60 $16.01
------- ------- ------- ----- ------- -------- ------- ------
INVESTMENT OPERATIONS:
Investment income-net............ 1.12 1.06 1.02 .95 .91 .26 .85 .83
Net realized and unrealized gain (loss)
on investments................. .55 .56 .99 (.57) .11 .50 (.56) .10
------- ------- ------- ----- ------- -------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS 1.67 1.62 2.01 .38 1.02 .76 .29 .93
------- ------- ------- ----- ------- -------- ------- ------
DISTRIBUTIONS:
Dividends from investment income-net (1.12) (1.06) (1.02) (.95) (.91) (.26) (.85) (.83)
Dividends from net realized gain
on investments................. (.02) (.04) (.11) (.03) .- .- (.03) .-
Dividends in excess of net realized gain
on investments................. .- .- .- .- .- .- .- .-
------- ------- ------- ----- ------- -------- ------- ------
TOTAL DISTRIBUTIONS............ (1.14) (1.10) (1.13) (.98) (.91) (.26) (.88) (.83)
------- ------- ------- ----- ------- -------- ------- ------
Net asset value, end of year..... $15.21 $15.73 $16.61 $16.01 $16.12 $16.60 $16.01 $16.11
====== ======== ====== ====== ======= ======== ======== ======
TOTAL INVESTMENT RETURN (2).......... 11.74% 10.97% 13.19% 2.17% 6.65% 16.39%(3) 1.65% 6.02%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .22% .56% .69% .81% .92% 1.14%(3) 1.38% 1.44%
Ratio of net investment income to
average net assets............. 7.32% 6.75% 6.24% 5.61% 5.77% 4.90%(3) 4.95% 5.22%
Decrease reflected in above expense
ratios due to undertakings
by the Manager................. .79% .41% .25% .12% .01% .15%(3) .10% .01%
Portfolio Turnover Rate.......... 25.74% 38.97% 8.64% 7.21% 55.19% 8.64% 7.21% 55.19%
Net Assets, end of year (000's Omitted) $113,439 $158,437 $220,920 $235,619 $219,949 $14,631 $59,057 $70,062
- ------------------
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
See notes to financial statements.
</TABLE>
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 fifteen series
including the Pennsylvania Series (the "Series"). Dreyfus
Service Corporation, until August 24, 1994, acted as the
distributor of the Fund's shares. Dreyfus Service Corporation is
a wholly-owned subsidiary of The Dreyfus Corporation
("Manager"). Effective August 24, 1994, the Manager became a
direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts 02109, is a wholly-owned subsidiary of FDI
Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI Holdings, Inc., the parent company of which is
Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the two Classes include the services offered to and the expenses
borne by each Class and certain voting rights.
(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 average daily value of the Series' 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, 1994 through June 30, 1994 to waive receipt of the
management fee payable to it by the Series in excess of an
annual rate of .50 of 1% (excluding certain expenses as
described above) of the Series' average daily net assets and
thereafter, had undertaken from July 1, 1994 through July 7,
1994 to reduce the management fee paid by the Series, to the
extent that the Series' aggregate expenses (excluding 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 $26,631 for the year ended April 30, 1995.
Dreyfus Service Corporation retained $9,316 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $27,522 during the year ended April 30, 1995 from
contingent deferred sales charges imposed upon redemptions of
the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B Distribution Plan, effective
August 24, 1994, the Fund pays the Distributor for distributing
the Series' Class B shares at an annual rate of .50 of 1% of the
value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B Distribution Plan") provided that the Fund pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $226,769 was charged
to the Series pursuant to the Class B Distribution Plan and
$98,376 was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services.
The Distributor determines the amounts to be paid to Service
Agents. From May 1, 1994 through August 23, 1994, $184,959 and
$49,188 were charged to Class A and Class B shares,
respectively, by Dreyfus Service Corporation. From August 24,
1994 through April 30, 1995, $374,846 and $113,385 were charged
to the Class A and Class B shares, respectively, by the
Distributor pursuant to the Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $248,986,025 and $255,289,378,
respectively, for the year ended April 30, 1995, and consisted
entirely of long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on investments was $2,745,910, consisting of $6,610,872 gross
unrealized appreciation and $3,864,962 gross unrealized
depreciation.
At April 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 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, 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 April 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 State Municipal Bond
Fund, Pennsylvania Series at April 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 Singature Logo)
New York, New York
June 6, 1995
<PAGE>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-97.6%
AMOUNT VALUE
<TABLE>
<CAPTION>
------------- -------------
<S> <C> <C>
TEXAS--96.3%
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc., Project):
7%, 12/1/2011......................................................... $ 1,550,000 $ 1,546,838
7.50%, 12/1/2029...................................................... 3,800,000 3,882,042
Amarillo Health Facilities Corp., HR (High Plains Baptist Hospital)
6.562%, 1/3/2022 (Insured; FSA)......................................... 4,500,000 4,621,950
Austin, Utility Systems Revenue, Refunding
5.75%, 5/15/2024 (Insured; FGIC)........................................ 5,000,000 4,724,100
Bexar County:
(Detention Facilities) 5.25%, 6/15/2013................................. 1,975,000 1,786,190
Refunding, Limited Tax 5%, 6/15/2010.................................... 8,000,000 7,270,400
Brazos Higher Education Authority Inc., Student Loan Revenue, Refunding:
5.70%, 6/1/2004......................................................... 3,500,000 3,492,405
6.80%, 12/1/2004........................................................ 850,000 893,920
Brazos River Authority, PCR (Texas Utilities Electric Company)
7.875%, 3/1/2021........................................................ 500,000 543,350
Burleson Independent School District (Johnson and Tarrant Counties)
Unlimited Tax School Building and Refunding, Zero Coupon, 8/1/2014...... 1,515,000 458,787
Clear Creek Independent School District,
Unlimited Tax Schoolhouse 5.50%, 2/1/2015............................... 1,300,000 1,211,002
Clint Independent School District, Refunding
7%, 3/1/2015............................................................ 750,000 788,670
Coastal Bend Health Facilities Development Corp.,
(Incarnate Word Health Service) 6%, 11/15/2022.......................... 2,500,000 2,399,250
Coppell Independent School District (Dallas County)
Unlimited Tax School Building and Refunding, Zero Coupon, 8/15/2025..... 2,000,000 294,820
Dallas-Fort Worth Regional Airport, Joint Revenue
6.625%, 11/1/2021 (Insured; FGIC)....................................... 1,250,000 1,279,988
El Paso Housing Authority, Multi-Family Revenue
(Section 8 Projects) 6.25%, 12/1/2009................................... 2,510,000 2,507,440
Grapevine-Colleyville Independent School District,
Refunding 5.125%, 8/15/2022............................................. 2,235,000 1,933,566
Gulf Coast Waste Disposal Authority, SWDR
(Champion International Corp. Project) 7.25%, 4/1/2017.................. 1,000,000 1,040,480
Harris County, Toll Road Revenue, Senior Lien
5.30%, 8/15/2013 (Insured; AMBAC)....................................... 2,000,000 1,845,580
Harris County Health Facilities Development Corp., Health Care System Revenue
(Sisters of Charity) 7.10%, 7/1/2021.................................... 1,000,000 1,060,860
County, PCR, Refunding (Nucor Corp. Project) 7.375%, 8/1/2009.......... 750,000 811,365
Lewisville Independent School District 5.35%, 8/15/2014..................... 2,750,000 2,538,140
Matagorda County Navigation District No. 1, PCR
(Collateralized Houston Lighting and Power) 7.875%, 2/1/2019............ 500,000 528,265
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- -------------
TEXAS (CONTINUED)
Montgomery County Health Facilities Development Corp., Hospital Mortgage Revenue
(Woodlands Medical Center Project) 8.85%, 8/15/2014..................... $ 585,000 $ 625,973
North Central Health Facility Development Corp., Revenue (Presbyterian Health
Care)
5.90%, 6/1/2021 ........................................................ 2,300,000 2,152,110
North Texas Higher Education Authority, Inc., Student Loan Revenue
7.25%, 4/1/2003 (Insured; AMBAC)........................................ 1,000,000 1,076,370
Red River Authority, PCR
(Hoechst Celanese Corp. Project) 6.875%, 4/1/2017....................... 2,600,000 2,665,052
Sabine River Authority, PCR
(Texas Utility Co. Project) 7.75%, 4/1/2016............................. 500,000 515,680
San Antonio:
Electric and Gas Revenue 5.75%, 2/1/2011................................ 2,000,000 1,983,440
Refunding 5.75%, 8/1/2013............................................... 3,000,000 2,917,140
Water Revenue (Prior Lien) 7.125%, 5/1/2016 (Prerefunded 5/1/1999) (a).. 750,000 822,195
Texas (Veterans Housing Assistance) 6.80%, 12/1/2023........................ 3,200,000 3,252,800
Texas City Independent School District:
5%, 8/15/2011........................................................... 1,030,000 905,205
5%, 8/15/2012........................................................... 940,000 819,445
Texas Health Facilities Development Corp., HR, Refunding
(All Saints Episcopal Hospitals) 6.25%, 8/15/2022 (Insured; MBIA)....... 2,000,000 1,997,160
Texas Higher Education Coordinating Board, College Student Loan Revenue
7.30%, 10/1/2003........................................................ 800,000 827,856
Texas Housing Agency, Single Family Mortgage Revenue
9.375%, 9/1/2016 (Insured; FHA)......................................... 480,000 493,632
Texas Municipal Power Agency, Refunding 5.75%, 9/1/2012 (Insured; MBIA)
(Prerefunded 9/1/2002) (a).............................................. 775,000 806,907
Texas National Research Laboratory Commission, Financing Corp., LR
(Superconducting Super Collider) 7.10%, 12/1/2021....................... 1,000,000 1,015,000
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation) 8.875%, 9/1/2011 (Prerefunded 9/1/2001) (a) 560,000 679,347
Texas Water Resources Finance Authority, Revenue 7.625%, 8/15/2008.......... 400,000 430,508
Tomball Hospital Authority, Revenue, Refunding 6%, 7/1/2013................. 5,000,000 4,466,100
Tyler Texas Health Facility Development Corp., HR
(East Texas Medical Center Regional Health) 6.625%, 11/1/2011........... 1,885,000 1,784,737
West Side Calhoun County Navigation District, SWDR:
(Union Carbide Chemical and Plastics)
8.20%, 3/15/2021...................................................... 500,000 539,395
(Union Carbide Chemicals Project)
6.40%, 5/1/2023....................................................... 2,000,000 1,895,640
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------------ -------------
U.S. RELATED-1.3%
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities 6.875%, 7/1/2012 (Prerefunded 7/1/2002)(a)............ $ 1,000,000 $ 1,117,169
-------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $80,255,009)...................................................... $81,248,269
=============
SHORT-TERM MUNICIPAL INVESTMENTS-2.4%
TEXAS:
Port Development Corp. of Texas, IDR, VRDN (Pasadena Terminal Co. Inc.)
4.95% (LOC; ABN-AMRO Bank)(b,c)......................................... $ 1,000,000 $ 1,000,000
Trinity River Industrial Development Authority, IDR, VRDN
(Toys 'R' Us Project) 4.50% (LOC; Bankers Trust) (b,c).................. 1,000,000 1,000,000
-------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $2,000,000)....................................................... $ 2,000,000
=============
TOTAL INVESTMENTS-100.0%
(cost $82,255,009)...................................................... $83,248,269
=============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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 PCR Pollution Control Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
LR Lease 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 38.9%
AA Aa AA 32.6
A A A 7.4
BBB Baa BBB 19.5
Not Rated (e) Not Rated (e) Not Rated (e) 1.6
--------
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 & 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 STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $82,255,009)-see statement...................................... $83,248,269
Cash.................................................................... 110,481
Interest receivable..................................................... 1,662,233
Receivable for shares of Beneficial Interest subscribed................. 30,406
Prepaid expenses........................................................ 1,396
-----------
85,052,785
LIABILITIES:
Due to Distributor...................................................... $24,634
Payable for shares of Beneficial Interest redeemed...................... 86,423
Accrued expenses........................................................ 20,536 131,593
-------- -------------
NET ASSETS ................................................................ $84,921,192
=============
REPRESENTED BY:
Paid-in capital......................................................... $83,738,170
Accumulated undistributed net realized gain on investments.............. 189,762
Accumulated net unrealized appreciation on investments-Note 3........... 993,260
-------------
NET ASSETS at value......................................................... $84,921,192
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 3,291,402
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 812,923
=============
NET ASSET VALUE per share:
Class A Shares
($68,103,304 / 3,291,402 shares)...................................... $20.69
=======
Class B Shares
($16,817,888 / 812,923 shares)........................................ $20.69
=======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,624,146
EXPENSES:
Management fee-Note 2(a).............................................. $485,593
Shareholder servicing costs-Note 2(c)................................. 269,470
Distribution fees (Class B shares)-Note 2(b).......................... 82,303
Professional fees..................................................... 13,196
Prospectus and shareholders' reports.................................. 10,896
Custodian fees........................................................ 10,805
Registration fees..................................................... 10,468
Trustees' fees and expenses-Note 2(d)................................. 793
Miscellaneous......................................................... 12,861
----------
896,385
Less--Management fee waived due to
undertaking-Note 2(a)............................................. 485,593
----------
TOTAL EXPENSES.................................................. 410,792
------------
INVESTMENT INCOME-NET........................................... 5,213,354
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $336,502
Net unrealized appreciation on investments.............................. 460,699
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 797,201
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $6,010,555
=============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
-------------------------------
1994 1995
---------- ------------
<S> <C> <C>
OPERATIONS:
Investment income--net.................................................. $ 5,213,286 $ 5,213,354
Net realized gain (loss) on investments................................. (9,624) 336,502
Net unrealized appreciation (depreciation) on investments for the year.. (3,426,202) 460,699
---------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 1,777,460 6,010,555
---------- ------------
DIVIDENDS TO SHAREHOLDERS:
From investment income--net:
Class A shares........................................................ (4,588,600) (4,315,213)
Class B shares........................................................ (624,686) (898,141)
From net realized gain on investments:
Class A shares........................................................ (484,938) -
Class B shares........................................................ (80,902) -
In excess of net realized gain on investments:
Class A shares........................................................ (117,512) -
Class B shares........................................................ (19,605) -
---------- ------------
TOTAL DIVIDENDS................................................... (5,916,243) (5,213,354)
----------- ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 15,134,395 1,872,238
Class B shares........................................................ 10,828,176 1,960,522
Dividends reinvested:
Class A shares........................................................ 2,405,249 1,978,459
Class B shares........................................................ 427,887 498,663
Cost of shares redeemed:
Class A shares........................................................ (10,038,595) (12,622,094)
Class B shares........................................................ (873,440) (1,719,028)
----------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 17,883,672 (8,031,240)
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 13,744,889 (7,234,039)
NET ASSETS:
Beginning of year....................................................... 78,410,342 92,155,231
----------- -------------
End of year............................................................. $92,155,231 $84,921,192
============= ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------------------------
CLASS A CLASS B
--------------------- --------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
---------------------- --------------------
1994 1995 1994 1995
--------- ---------- --------- -------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 699,480 92,136 498,740 96,542
Shares issued for dividends reinvested. 111,346 97,778 19,835 24,656
Shares redeemed........................ (466,348) (636,330) (40,687) (86,401)
---------- ------------ ------------- -------------
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING............. 344,478 (446,416) 477,888 34,797
============== ============ ============= =============
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS 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 CLASS B SHARES
---------------------- --------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-----------------------------------------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------- ------- ------ ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $18.58 $19.25 $19.89 $21.23 $20.41 $20.52 $21.23 $20.41
------- ------- ------- ------- ------- -------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net........... 1.40 1.36 1.29 1.25 1.22 .33 1.13 1.10
Net realized and unrealized gain (loss)
on investments................. .67 .69 1.37 (.66) .28 .71 (.66) .28
------ ------- ------- ------- ------- ------ ------- ------
2.07 2.05 2.66 .59 1.50 1.04 .47 1.38
DISTRIBUTIONS:
Dividends from investment income--net........ (1.40) (1.36) (1.29) (1.25) (1.22) (.33) (1.13) (1.10)
Dividends from net realized gain
on investments................. -- (.05) (.03) (.13) -- -- (.13) --
Dividends in excess of net realized gain
on investments................. -- -- -- (.03) -- -- (.03) --
-------- ------- ------- ------- ------- ------ ------- ------
TOTAL DISTRIBUTIONS............ (1.40) (1.41) (1.32) (1.41) (1.22) (.33) (1.29) (1.10)
------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of year..... $19.25 $19.89 $21.23 $20.41 $20.69 $21.23 $20.41 $20.69
======= ======= ======= ======= ====== ======= ======= ======
TOTAL INVESTMENT RETURN(2)........... 11.54% 10.97% 13.80% 2.62% 7.63% 17.60%(3) 2.05% 7.05%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets -- .15% .36% .39% .37% .82%(3) .94% .89%
Ratio of net investment income to
average net assets........... 7.29% 6.78% 6.18% 5.78% 6.01% 4.81%(3) 5.15% 5.46%
Decrease reflected in above expense ratios
due to undertakings by the Manager 1.27% .88% .62% .55% .55% .49%(3) .54% .55%
Portfolio Turnover Rate.......... 1.95% 7.49% 14.94% 9.68% 38.68% 14.94% 9.68% 38.68%
Net Assets, end of year (000's Omitted) $15,139 $37,208 $72,037 $76,277 $68,103 $6,373 $15,878 $16,818
- --------------------
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
See notes to financial statements.
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 fifteen series
including the Texas Series (the "Series"). Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of
the Fund's shares. Dreyfus Service Corporation is a wholly-owned
subsidiary of The Dreyfus Corporation ("Manager"). Effective
August 24, 1994, the Manager became a direct subsidiary of
Mellon
Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between
the
two Classes include the services offered to and the expenses
borne by each Class and certain voting rights.
(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
judgement
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: Securitie
s
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
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 applicabl
e
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 Series' 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 Manager has undertaken from May 1, 1994 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 $485,593
for
the year ended April 30, 1995.
The undertaking may be modified by the Manager from time to
time, provided that the resulting expense reimbursement would
not
be less than the amount required pursuant to the Agreement.
Dreyfus Service Corporation retained $128 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $4,981 from contingent deferred sales charges imposed
upon redemptions of the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B Distribution Plan, effective
August 24, 1994, the Fund pays the Distributor for distributing
the Series' Class B shares at an annual rate of .50 of 1% of the
value of the average daily net assets of Class B Shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class
B Distribution Plan") provided that the Fund pays Dreyfus
Service
Corporation at an annual rate of .50 of 1% of the value of the
Series' Class B shares average daily net assets, for the costs
and expenses in connection with advertising marketing and
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service Agents.
During the year ended April 30, 1995 $56,193 was charged to
the Series pursuant to the Class B Distribution Plan and $26,110
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(C) Under the Shareholder Service 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 and Class B shares for
servicing shareholder accounts. The service 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $60,108 and $13,056
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through April
30, 1995, $119,464 and $28,096 were charged to Class A and Class
B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $55,510,096 and $62,782,827,
respectively,
for the year ended April 30, 1995, and consisted entirely of
long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on
investments was $993,260, consisting of $2,094,802 gross
unrealized appreciation and $1,101,542 gross unrealized
depreciation.
At April 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 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, 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 April 30, 1995 by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Premier State Municipal Bond
Fund, Texas Series at April 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
June 6, 1995
<PAGE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, Virginia Series
STATEMENT OF INVESTMENTS APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
-------------------------------
<S> <C> <C>
VIRGINIA-90.9%
Alexandria Redevelopment and Housing Authority,
MFHR, (United Dominion - Parkwood Court) 6.625%, 5/1/2006............... $ 3,000,000 $ 3,103,020
Arlington County Industrial Development Authority,
Hospital Facility Revenue (Arlington Hospital)
7.125%, 9/1/2021 (Prerefunded 9/1/2001)(a).............................. 200,000 225,410
Augusta County Industrial Development Authority, HR
(Augusta Hospital Corp. Project) 7%, 9/1/2021 (Prerefunded 9/1/2001)(a). 2,750,000 3,068,203
Chesapeake, Water and Sewer System Revenue, Refunding 6.50%, 7/1/2012....... 1,000,000 1,033,350
Chesapeake Bay Bridge and Tunnel Commission District, Revenue,
Refunding-General Resolution 6.375%, 7/1/2022 (Insured; MBIA)........... 1,500,000 1,518,375
Chesapeake Hospital Authority, Hospital Facility Revenue, Refunding
(Chesapeake General Hospital) 5.25%, 7/1/2018 (Insured; MBIA)........... 1,000,000 888,390
Community Housing Finance Corp. Arlington County,
Collateralized Mortgage Revenue, Refunding (Colonial Village Project):
6.125%, 12/1/2016 (Insured; FHA)...................................... 900,000 877,338
6.25%, 6/1/2022 (Insured; FHA)........................................ 1,000,000 970,730
Covington-Alleghany County Industrial Development Authority,
Hospital Facility Revenue (Alleghany Regional Hospital) 6.875%, 4/1/2022 1,000,000 1,031,850
Fairfax County Park Authority, Park Facilities Revenue
6.625%, 7/15/2020....................................................... 2,665,000 2,640,455
Fairfax County Water Authority, Water Revenue:
5%, 4/1/2016............................................................ 2,000,000 1,731,200
6.125%, 1/1/2029 (Prerefunded 1/1/2000)(a).............................. 2,000,000 2,099,380
6.697%, 4/1/2029 (b,c).................................................. 2,000,000 1,760,000
Franklin 6.40%, 1/15/2012................................................... 1,000,000 1,032,880
Fredericksburg Industrial Development Authority, Hospital Facility Revenue,
Refunding
(MWH Medicorp Obligation Group) 6.70%, 8/15/2009 (Insured; FGIC)........ 195,000 206,934
Giles County Industrial Development Authority,
Solid Waste Disposal Facility Revenue (Hoechst Celanese Corp. Project)
6.625%, 12/1/2022....................................................... 1,500,000 1,501,455
Hampton Roads Medical College, General Revenue, Refunding 6.875%, 11/15/2016 500,000 517,420
Harrisonburg Redevelopment and Housing Authority,
MFHR, Refunding:
(Battery Heights Project) 7.375%, 11/20/2028.......................... 500,000 525,230
(Hanover Crossing Apartments Project) 6.35%, 3/1/2023................. 2,000,000 1,941,380
Henrico County 6.90%, 10/1/2009 (Prerefunded 10/1/1998)(a).................. 300,000 324,666
PREMIER STATE MUNICIPAL BOND FUND, Virginia Series
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------------------------
VIRGINIA (CONTINUED)
Industrial Development Authority of Albermarle County,
HR, Refunding (Martha Jefferson Hospital):
5.875%, 10/1/2013..................................................... $ 2,360,000 $ 2,217,196
5.50%, 10/1/2020...................................................... 1,500,000 1,288,035
Industrial Development Authority of the City of Lynchburg,
Educational Facilities Revenue (Randolph-Macon Woman's College)
5.875%, 9/1/2013........................................................ 500,000 488,710
Industrial Development Authority of the City of Williamsburg,
Hospital Facility Revenue (Williamsburg Community Hospital) 5.75%, 10/1/2022 2,000,000 1,771,920
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 1,029,450
HR, Refunding (Prince William Hospital)
5.625%, 4/1/2012...................................................... 1,000,000 907,110
Industrial Development Authority of the Town of West Point,
SWDR (Chesapeake Corp. Project) 6.375%, 3/1/2019........................ 2,500,000 2,375,175
Mecklenburg County Industrial Development Authority, Revenue
(Exempt Facility-Mecklenburg Cogeneration) 7.35%, 5/1/2008 (LOC; Fuji Bank) (d) 500,000 523,030
Nelson County Service Authority, Water and Sewer Revenue, Refunding
5.50%, 7/1/2018 (Insured; FGIC)......................................... 1,750,000 1,626,590
Newport News Redevelopment and Housing Authority, Mortgage Revenue, Refunding
(FHA-West Apartments-Section 8) 6.55%, 7/1/2024 (Insured; MBIA)......... 1,500,000 1,520,550
Peninsula Ports Authority, Health System Revenue, Refunding
(Riverside Health System Project) 6.625%, 7/1/2018...................... 500,000 507,310
Prince William County Park Authority, Revenue
6.875%, 10/15/2016...................................................... 3,000,000 3,094,710
Rector and Visitors of the University of Virginia, General Revenue Pledge
5.375%, 6/1/2020........................................................ 4,370,000 3,949,781
Richmond Industrial Development Authority, HR (Retreat Hospital)
7.35%, 7/1/2021......................................................... 1,900,000 1,904,313
Richmond Metropolitan Authority, Expressway Revenue, Refunding
6.375%, 7/15/2016 (Insured; FGIC)....................................... 1,500,000 1,533,870
South Boston Industrial Development Authority, HR
(Halifax Community Hospital Inc. Project) 7.375%, 9/1/2011.............. 500,000 530,075
Southeastern Public Service Authority, Revenue:
5.125%, 7/1/2013 (Insured; MBIA)........................................ 7,850,000 7,095,380
(Regional Solid Waste System):
10.50%, 7/1/2015 (Prerefunded 7/1/1995) (a)........................... 250,000 257,705
6%, 7/1/2017.......................................................... 1,750,000 1,601,828
PREMIER STATE MUNICIPAL BOND FUND, Virginia Series
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
----------------------------
VIRGINIA (CONTINUED)
Upper Occoquan Sewer Authority, Regional Sewer Revenue
6.50%, 7/1/2017 (Insured; MBIA) (Prerefunded 7/1/2001)(a)............... $ 1,000,000 $ 1,091,820
Virginia, Higher Educational Institution 6.60%, 6/1/2009 (Prerefunded 6/1/1998) (a) 300,000 320,598
Virginia Beach Development Authority:
Hospital Facility Revenue (Sentara Bayside Hospital) 6.30%, 11/1/2021... 2,000,000 1,992,320
Nursing Home Revenue (Sentara Life Care Corp.) 7.75%, 11/1/2021......... 1,000,000 1,086,990
Virginia College Building Authority, Educational Facilities, Revenue:
(Hampton University Project) 6.50%, 4/1/2008............................ 350,000 364,633
(Randolph - Macon College Project) 6.625%, 5/1/2013..................... 1,000,000 1,028,990
(Refunding - Washington and Lee University Project) 6.40%, 1/1/2012..... 500,000 516,045
Virginia Housing Development Authority:
Commonwealth Mortgage:
6.95%, 1/1/2010....................................................... 2,500,000 2,572,075
6.85%, 1/1/2027....................................................... 2,000,000 2,027,100
Multi-Family Refunding 5.90%, 11/1/2017................................. 2,000,000 1,886,100
Virginia Public Building Authority, Building Revenue 5.75%, 8/1/2012........ 1,000,000 982,730
Virginia Resources Authority, Water and Sewer System Revenue:
(Lot 7-Rapidan Service Authority) 7.125%, 10/1/2016..................... 250,000 264,250
(Lot 9-Frederick County) 6%, 10/1/2012.................................. 500,000 503,905
Virginia Transportation Board, Transportation Contract Revenue, Refunding
(United States Route 58 Corridor Program) 5.25%, 5/15/2012.............. 250,000 229,150
Washington County Industrial Development Authority,
Hospital Facility Revenue (First Mortgage - Johnston Memorial Hospital)
7%, 7/1/2022................................................................ 750,000 773,422
Winchester Industrial Development Authority, HR
2.12%, 1/1/1998 (Insured; AMBAC) (b).................................... 3,400,000 3,104,030
York County, COP 6.625%, 3/1/2012........................................... 500,000 522,350
U. S. RELATED-9.1%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,025,280
Puerto Rico (Public Improvement):
7.70%, 7/1/2020 (Prerefunded 7/1/2000) (a).............................. 1,000,000 1,143,080
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a).............................. 1,000,000 1,112,710
Puerto Rico Highway and Transportation Authority,
Highway Revenue 6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............. 2,000,000 2,204,600
Virgin Islands Public Finance Authority, Revenue, Refunding, Matching Fund
Loan Notes
7.25%, 10/1/2018........................................................ 1,500,000 1,550,505
-------------
TOTAL INVESTMENTS (cost $88,486,910)........................................ $88,523,087
=============
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, Virginia Series
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (E) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- --------- -------------------- -----------------------
<S> <C> <C> <C>
AAA Aaa AAA 32.4%
AA Aa AA 26.4
A A A 25.8
BBB Baa BBB 13.6
Not Rated (f) Not Rated (f) Not Rated (f) 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) 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, 1995,
this security amounted to $1,760,000 or 1.9% of net
assets.
(d) Secured by letters of credit.
(e) Fitch currently provides creditworthiness information
for a limited number of investments.
(f) 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.
(g) At April 30, 1995, the Fund had $23,050,378 (25.3% 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, Virginia Series
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $88,486,910)-see statement...................................... $88,523,087
Cash.................................................................... 1,221,322
Interest receivable..................................................... 1,553,168
Receivable for shares of Beneficial Interest subscribed................. 245,395
Prepaid expenses........................................................ 5,819
-------------
91,548,791
LIABILITIES:
Due to Distributor...................................................... $ 30,831
Payable for shares of Beneficial Interest redeemed...................... 231,080
Accrued expenses........................................................ 46,183 308,094
-------------
NET ASSETS ................................................................ $91,240,697
=============
REPRESENTED BY:
Paid-in capital......................................................... $93,233,506
Accumulated net realized capital losses and distributions in
excess of net realized gain on investments-Note 1(c).................. (2,028,986)
Accumulated net unrealized appreciation on investments-Note 3(b)........ 36,177
-------------
NET ASSETS at value......................................................... $91,240,697
=============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 3,893,298
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,797,143
=============
NET ASSET VALUE per share:
Class A Shares
($62,427,641 / 3,893,298 shares)...................................... $16.03
=======
Class B Shares
($28,813,056 / 1,797,143 shares)...................................... $16.03
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, Virginia Series
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,706,766
EXPENSES:
Management fee-Note 2(a).............................................. $ 496,788
Shareholder servicing costs-Note 2(c)................................. 301,541
Distribution fees (Class B shares)-Note 2(b).......................... 134,882
Professional fees..................................................... 12,877
Custodian fees........................................................ 9,551
Prospectus and shareholders' reports.................................. 7,018
Registration fees..................................................... 2,292
Trustees' fees and expenses-Note 2(d)................................. 814
Miscellaneous......................................................... 18,432
------------
984,195
Less-management fee waived due to
undertaking-Note 2(a)............................................. 496,788
------------
TOTAL EXPENSES.................................................. 487,407
------------
INVESTMENT INCOME-NET........................................... 5,219,359
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments (including options transactions)-Note 3(a) $(1,700,519)
Net realized gain on financial futures-Note 3(a)........................ 48,742
------------
NET REALIZED (LOSS)................................................... (1,651,777)
Net unrealized appreciation on investments.............................. 1,713,847
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 62,070
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $5,281,429
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, Virginia Series
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30
-------------------------------
1994 1995
--------------- -----------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 4,642,019 $ 5,219,359
Net realized (loss) on investments...................................... (105,697) (1,651,777)
Net unrealized appreciation (depreciation) on investments for the year.. (4,819,942) 1,713,847
--------------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (283,620) 5,281,429
--------------- -----------
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (3,641,582) (3,761,772)
Class B shares........................................................ (1,000,437) (1,457,587)
From net realized gain on investments:
Class A shares........................................................ (48,263) ---
Class B shares........................................................ (16,560) ---
In excess of net realized gain on investments:
Class A shares........................................................ (72,239) (120,788)
Class B shares........................................................ (24,785) (53,700)
--------------- -----------
TOTAL DIVIDENDS................................................... (4,803,866) (5,393,847)
--------------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 17,318,650 7,081,776
Class B shares........................................................ 18,814,589 5,599,985
Dividends reinvested:
Class A shares........................................................ 2,089,707 2,086,577
Class B shares........................................................ 582,077 818,920
Cost of shares redeemed:
Class A shares........................................................ (6,302,664) (11,840,016)
Class B shares........................................................ (911,833) (2,926,642)
--------------- -----------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 31,590,526 820,600
--------------- -----------
TOTAL INCREASE IN NET ASSETS.................................... 26,503,040 708,182
NET ASSETS:
Beginning of year....................................................... 64,029,475 90,532,515
--------------- -----------
End of year............................................................. $90,532,515 $ 91,240,697
=============== ============
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------------------------------------------
CLASS A CLASS B
------------------------------- -----------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------- ---------------------------
1994 1995 1994 1995
------------ --------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 1,010,771 447,976 1,095,592 356,143
Shares issued for dividends reinvested. 122,266 132,774 34,099 52,168
Shares redeemed........................ (370,731) (761,303) (53,790) (187,333)
------------ ------------- ------------- ------------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING......... 762,306 (180,553) 1,075,901 220,978
============ ============ -============== ============
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, Virginia 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 CLASS B SHARES
------------------------------------- ---------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------- ---------------------------
PER SHARE DATA: 1992(1) 1993 1994 1995 1993(2) 1994 1995
------- ----- ----- ------ ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $15.00 $15.50 $16.80 $16.02 $16.25 $16.80 $16.02
------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net..................... .78 1.00 .97 .94 .26 .88 .85
Net realized and unrealized
gain (loss) on investments.............. .50 1.31 (.75) .04 .55 (.75) .04
------- ------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS........ 1.28 2.31 .22 .98 .81 .13 .89
------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net...... (.78) (1.00) (.97) (.94) (.26) (.88) (.85)
Dividends from net realized gain on investments -- -- (.01) (.01) -- -- (.01)
Dividends in excess of net
realized gain on investments............ -- -- (.02) (.03) -- (.02) (.03)
------- ------- ------- ------- ------- ------- --------
TOTAL DISTRIBUTIONS..................... (.78) (1.01) (1.00) (.97) (.26) (.91) (.88)
------- ------- ------- ------- ------- ------- --------
Net asset value, end of year.............. $15.50 $16.80 $16.02 $16.03 $16.80 $16.02 $16.03
------- ------- ------- ------- ------- ------- --------
TOTAL INVESTMENT RETURN (3)................... 11.54%(4) 15.32% 1.10% 6.39% 17.22%(4) .54% 5.83%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets... -- .27%. 46% .39% .83%(4) 1.01% .90%
Ratio of net investment
income to average net assets............ 6.42%(4) 6.02% 5.64% 5.93% 4.62%(4) 5.02% 5.40%
Decrease reflected in above expense
ratios due to undertakings by the Manager 1.22%(4) .76% .55% .55% .54%(4) .54% .55%
Portfolio Turnover Rate................... 5.96%(5) 9.32% 30.69% 21.60% 9.32% 30.69% 21.60%
Net Assets, end of year (000's Omitted)... $23,096 $55,627 $65,279 $62,428 $8,402 $25,254 $28,813
(1) From August 1, 1991 (commencement of operations) to April 30, 1992.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
See notes to financial statements.
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 fifteen series
including the Virginia Series (the "Series"). Dreyfus
Service Corporation, until August 24, 1994, acted as the
distributor of the Fund's shares. Dreyfus Service Corporation is
a wholly-owned subsidiary of The Dreyfus Corporation
("Manager").
Effective August 24, 1994, the Manager became a direct subsidiar
y
of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between the two
Classes include the services offered to and the expenses borne
by
each Class and certain voting rights.
(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. Investmen
ts
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.
Dividends in excess of net realized gains on investment for
financial statement purposes result primarily from losses from
securities transactions during the year ended April 30, 1995
which
are treated for Federal income tax purposes as arising in Fiscal
1996.
(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 applicabl
e
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 $681,000 available for Federal income tax purposes
to be applied against future net securities profits, if any,
realized subsequent to April 30, 1995. The carryover does not
include net realized securities losses from November 1, 1994
through April 30, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 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 average daily value of the Series' 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, 1994 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
$496,788 for the year ended April 30, 1995.
The undertaking may be modified by the Manager from time to
time, provided that the resulting expense reimbursement would
not
be less than the amount required pursuant to the Agreement.
Dreyfus Service Corporation retained $3,688 during the year
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $18,356 from contingent deferred sales charges imposed
upon redemptions of the Series' Class B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the
"Class B Distribution Plan") pursuant to Rule 12b-1 under the
Act.
Pursuant to the Class B Distribution Plan, effective August 24,
1994, the Fund pays the Distributor for distributing the Series'
Class B shares at an annual rate of .50 of 1% of the value of
the
average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of
the Series' Class B shares average daily net assets, for the
costs
and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus
Service Corporation made payments to one or more Service Agents
based on the value of the Series' Class B shares owned by
clients
of the Service Agent.
During the year ended April 30, 1995, $93,928 was charged to
the Series pursuant to the Class B Distribution Plan and $40,954
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
From May 1, 1994 through August 23, 1994, $51,924 and $20,477
were
charged to Class A and Class B shares, respectively, by Dreyfus
Service Corporation. From August 24, 1994 through April 30,
1995,
$106,447 and $46,965 were charged to Class A and Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services
Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives 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:
(A) The aggregate amount of purchases and sales of
investment securities, excluding options transactions, amounted
to
$38,001,237 and $37,871,346, respectively, for the year ended
April 30, 1995, and consisted entirely of long-term and
short-term
municipal investments.
In addition, the following table summarizes the Series'
call/put options written transactions for the year ended April
30,
1995:
<TABLE>
<CAPTION>
OPTIONS TERMINATED
----------------------------
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED COST GAIN
--------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
OPTIONS WRITTEN:
Contracts outstanding April 30, 1994........ -- --
Contracts written........................... 250 $ 172,627
---------- -----------
250 172,627
Contracts terminated;
Expired................................... 250 172,627 -- $172,627
--------- ----------- --------- -----------
Total contracts terminated 250 $172,627 -- $172,627
--------- ------------ --------- --------
Contracts outstanding April 30, 1995........ -- --
=========== ==========
</TABLE>
As a writer of call options, the Series receives a premium
at the outset and then bears the market risk of unfavorable
changes in the price of the financial instrument underlying the
option. Generally, the Series would incur a gain, to the extent
of
the premium, if the price of the underlying financial instrument
decreases between the date the option is written and the date on
which the option is terminated. Generally, the Series would
realize a loss, if the price of the financial instrument
increases
between those dates. At April 30, 1995, there were no
call options written outstanding.
As a writer of put options, the Series receives a premium at
the outset and then bears the market risk of unfavorable changes
in the price of the financial instrument underlying the option.
Generally, the Series would incur a gain, to the extent of the
premium, if the price of the underlying financial instrument
increases between the date the option is written and the
date on which the option is terminated. Generally, the Series
would realize a loss, if the price of the financial instrument
declines between those dates. At April 30, 1995, there were no
put
options written outstanding.
The Series engages in trading financial futures contracts.
The Series is exposed to market risk as a result of changes in
the
value of the underlying financial instruments. Investments in
financial futures require the Series to "mark to market" on a
daily basis, which reflects the change in the market
value of the contract at the close of each day's trading.
Accordingly, variation margin payments are made or received to
reflect daily unrealized gains or losses. When the contracts are
closed, the Series recognizes a realized gain or loss. These
investments require initial margin deposits with a custodian,
which consist of cash or cash equivalents, up to approximately
10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the
contract
is traded and is subject to change. At April 30, 1995, there
were
no financial futures contracts outstanding.
(B) At April 30, 1995, accumulated net unrealized
appreciation on investments was $36,177, consisting of $2,250,13
0
gross unrealized appreciation and $2,213,953 gross unrealized
depreciation.
At April 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 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, 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 April 30, 1995 by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Premier State Municipal Bond
Fund, Virginia Series at April 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
June 6, 1995
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholder:
As your Fund's annual reporting period ended on April 30,
1995, the net asset value per share for both Class A and Class B
shares was $13.86. Income dividends of approximately $.839 per
share were paid during the period, for Class A shares,
representing a distribution rate per share of 5.78% based on
the April 30 closing maximum offering price. Class B shares paid
income dividends of approximately $.766 per share, equating to a
5.53% distribution rate per share based on the April 30 closing
net asset value. We are pleased to inform you that all dividends
paid from net investment income were fully exempt from Federal
personal income taxes.*
The last six months have seen a dramatic change in the
behavior of bond market prices. Last November marked the bottom
of
a severe downtrend. The bellwether 30-year Treasury bond reached
a high yield of 8.16% on November 7, after reaching yields as
low
as 6.17% in January of 1994. These yield adjustments were caused
by a series of rate hikes by the Federal Reserve
Board. The Fed took these measures to subdue an economy that
seemed to be growing at an inflationary pace. As 1994 drew to a
close, the bond market continued to exhibit volatility. Economic
indicators showed the overall capacity utilization rate at
85.4%,
a 15-year high, and consumer confidence near its five-year high.
Both represented strong signs of growth to which the bond market
reacted adversely.
However, during the first quarter of 1995 signs of a
slowdown started to take hold as the effect of higher interest
rates set in. Existing home sales, new construction and auto
sales
weakened. More important, jobless claims rose along with
inventories, indicating slowing sales. Many forecasters started
to
revise their expectations for economic growth, and a solid
market rally took hold as the threat of inflation began to
subside. By the end of the first calendar quarter of 1995, both
the bond market and your Series had regained much of the ground
lost in 1994. Since then, the first quarter Gross Domestic
Product (GDP) report of 2.8% showed a significant drop from the
fourth quarter level of 5.1%, and April nonfarm employment
declined by 9,000 workers, which clearly turned some bond market
skeptics into believers. This follow-through has seen the
30-year
U.S. Treasury Bond dip below the 7% yield level to 6.90% as of
May
16. There is now speculation in some market sectors about a
possible Federal Reserve lowering of interest rates to
avoid recession. Countering this theory are those who claim that
these new lower interest-rate levels could actually stimulate
the
economy during the second half of 1995.
The unexpected municipal market turnaround was largely
fueled by a shortage of securities. This technical phenomenon,
which exists in the equity market also, is pronounced in the tax
exempt market where new bond issuance is off nearly 50%, and
yields on existing municipals have achieved a historically rich
status relative to Treasuries. Recent municipal bond trading and
spread relations have corrected, a correction that is
attributable mostly to the prospect of a Federal flat tax
proposal. Such a proposal, if passed, could diminish the tax
advantage municipal bonds enjoy by providing more, or total, tax
exemption to other investments. A proposal of this kind is at
the
embryonic stage, and could go through many changes due to the
political climate. As a result, we expect the final
resolution of any change in our present tax structure to be many
months away. The more immediate concern of investors seems to be
the scarce municipal supply that is expected to continue.
Currently, the estimated net supply of municipal debt in 1995
(estimated new issuance minus bond redemptions and coupon
payments) is a negative $50 billion.
The response of investors to unexpected domestic economic
weakness ultimately supported the bond market and your Fund;
initial mixed signals, however, and continuous doubts about the
dollar caused us to adopt and maintain a cautious market
approach
with the Fund this year. This means that the Fund's income
orientation was emphasized, which was accomplished
by holding, when possible, bonds that have coupons higher than
what the current market offers. Additionally, any recent
portfolio
changes reflected what we believe were the best income
opportunities and credit risk improvements available to us. As a
balance to our defensive strategy, some non-callable bonds were
added which have greater sensitivity to market moves. Our
efforts
to provide more tax-free income and lower volatility diminished,
to some extent, the capital appreciation your Fund might
otherwise
have been able to achieve during the market spike in the first
quarter of 1995.
We have included a current Statement of Investments and
recent financial statements for your review, and look forward to
serving your investment needs in the future.
Sincerely,
Richard J. Moynihan
Director, Municipal Portfolio
Management
The Dreyfus Corporation
May 17, 1995
New York, N.Y.
* Some income may be subject to the Federal Alternative Minimum
Tax (AMT) for certain shareholders.
PREMIER MUNICIPAL BOND FUND
APRIL 30, 1995
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER
MUNICIPAL BOND FUND CLASS A SHARES AND THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX
(Exhibit A)
$18,461
Lehman Brothers Municipal Bond
Index*
In Dollars
$17,466
Premier Municipal
Bond Fund
(Class A Shares)
*Source: Lehman Brothers
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B
- ------------------------------------------------------------ -------------------------------------------------------------
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
Periods ended 4/30/95 Sales Charge Sales Charge (4.5% ) Periods ended 4/30/95 Redemption Redemption*
- ---------------------- ---------------- ---------------------- ----------------------- ------------ ----------------------
<S> <C> <C> <C> <C> <C>
1 Year 6.72% 1.92% 1 Year 6.15% 3.15%
5 Years 9.02 8.02 From Inception (1/15/93) 5.34 4.53
From Inception (11/26/86) 7.43 6.84
</TABLE>
Past performance is not predictive of future performance. Share
price and investment return fluctuate and share price may be
more
or less than original cost upon redemption.
The above graph compares a $10,000 investment made in Class A
shares of Premier Municipal Bond Fund on 11/26/86 (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 11/30/86 is used as the beginning value on 11/26/86.
All
dividends and capital gain distributions are reinvested.
Performance for Class B shares will differ from the
results shown above due to difference in charges and expenses
charged to that class.
The Fund invests primarily in 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 tax exempt bond market,
calculated
by using municipal bonds selected to be representative of the
market. The Index does not take into account charges, fees and
other expenses. 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.
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.7% AMOUNT VALUE
-------------- --------------
<S> <C> <C>
ALABAMA--1.0%
Courtland Industrial Development Board, SWDR
(Champion International Corp. Project) 6.375%, 3/1/2029................. $ 6,000,000 $ 5,739,540
ARIZONA--.5%
Tucson Airport Authority, Special Facility Revenue
(Lockheed Aermod Center, Inc.) 8.70%, 9/1/2019.......................... 2,500,000 2,815,000
COLORADO--9.8%
Dawson Ridge, Metropolitan District Number 1, Refunding:
Zero Coupon, 10/1/2017.................................................. 9,930,000 2,145,674
Zero Coupon, 10/1/2022.................................................. 47,535,000 7,298,999
Denver City and County, Airport Revenue:
7.75%, 11/15/2021....................................................... 8,000,000 8,370,160
7.25%, 11/15/2023....................................................... 10,000,000 10,026,700
7.50%, 11/15/2023....................................................... 11,775,000 12,113,178
7%, 11/15/2025.......................................................... 18,225,000 17,820,041
CONNECTICUT--2.0%
Connecticut Development Authority, First Mortgage Gross Revenue
(Elim Park Baptist Home, Inc. Project) 9%, 12/1/2020.................... 3,000,000 3,157,410
Connecticut Housing Finance Authority (Housing Mortgage Finance Program)
6.70%, 11/15/2022....................................................... 8,500,000 8,710,120
FLORIDA--2.3%
Palm Beach County, Solid Waste IDR:
(Okeelanta Power LP Project) 6.85%, 2/15/2021........................... 6,750,000 6,420,802
(Osceola Power LP) 6.95%, 1/1/2022...................................... 7,500,000 7,192,425
GEORGIA--2.1%
Atlanta, Airport Facilities Revenue, Refunding 7.25%, 1/1/2017.............. 5,000,000 5,345,300
Georgia Municipal Electric Authority, Power Revenue, Refunding
5.50%, 1/1/2020 (Insured; FGIC) (a)..................................... 4,250,000 3,936,648
Hogansville, Combined Public Utility System Revenue, Refunding
(Asset Guaranty) 6%, 10/1/2023.......................................... 3,475,000 3,255,102
ILLINOIS-12.4%
Chicago, Skyway Toll Bridge Revenue, Refunding 6.75%, 1/1/2017.............. 5,425,000 5,387,676
Chicago O'Hare International Airport, Special Facility Revenue:
(American Airlines, Inc. Project) 7.875%, 11/1/2025..................... 6,000,000 6,258,120
(United Airlines, Inc.):
8.20%, 5/1/2018....................................................... 2,165,000 2,316,290
8.50%, 5/1/2018....................................................... 3,500,000 3,751,300
East Chicago, PCR, Refunding (Inland Steel Co. Project Number 10) 6.80%, 6/1/2013 9,000,000 8,682,210
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facility)
8.75%, 3/1/2010....................................................... 6,990,000 7,362,008
8.50%, 9/1/2010....................................................... 4,535,000 4,737,352
8.25%, 8/1/2012....................................................... 4,280,000 4,373,389
</TABLE>
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
<S> <C> <C>
ILLINOIS (CONTINUED)
Illinois Health Facilities Authority, Revenue:
(Beverly Farm Foundation) 9.125%, 12/15/2015............................ $ 2,000,000 $ 2,144,300
(Delnor Community Hospital Project) 8%, 5/15/2019 (Prerefunded 5/15/1999) (b) 5,500,000 6,209,280
Robbins, RRR (Robbins Resource Recovery Partners):
9.25%, 10/15/2014....................................................... 10,000,000 10,801,100
9.25%, 10/15/2016....................................................... 10,000,000 10,801,100
INDIANA-1.3%
Indianapolis Airport Authority, Special Facilities Revenue
(Federal Express Corp. Project) 7.10%, 1/15/2017........................ 7,500,000 7,679,325
KENTUCKY-.6%
Perry County, SWDR (TJ International Project) 7%, 6/1/2024.................. 3,500,000 3,435,740
LOUISIANA-4.4%
Lake Charles Non-Profit Housing Development Corp., First Mortgage Revenue,
Refunding (Chateau Project) 7.875%, 2/15/2025 (Insured; FHA)............ 1,000,000 1,004,280
Louisiana Housing Finance Agency, MFHR, Refunding
(LaBelle Projects-A) 9.75%, 10/1/2020 (c)............................... 4,300,000 4,291,314
Louisiana Public Facilities Authority, Revenue (Student Loan) 7%, 9/1/2006.. 3,000,000 3,111,930
Parish of West Feliciana, PCR:
(Gulf States Utilities - II) 7.70%, 12/1/2014........................... 10,000,000 10,390,100
(Gulf States Utilities - III) 7.70%, 12/1/2014.......................... 6,500,000 6,753,565
MARYLAND-.4%
Maryland Community Development Administration, Department of Housing and
Community Development (Single Family Program) 7.70%, 4/1/2015........... 2,075,000 2,198,732
MASSACHUSETTS-1.1%
Massachusetts Housing Finance Agency, SFHR 7.95%, 6/1/2023.................. 2,000,000 2,125,860
New England Education Loan Marketing Corp., Student Loan Revenue
6.90%, 11/1/2009........................................................ 4,000,000 4,118,440
MICHIGAN-2.7%
Greater Detroit Resources Recovery Authority, Revenue:
9.25%, Series A, 12/13/2008............................................. 8,440,000 8,876,686
9.25%, Series D, 12/13/2008............................................. 250,000 262,935
9.25%, Series E, 12/13/2008............................................. 1,000,000 1,051,740
9.25%, Series H, 12/13/2008............................................. 2,045,000 2,150,808
Wayne County Building Authority 8%, 3/1/2017 (Prerefunded 3/1/2002) (b)..... 1,500,000 1,759,200
Western Townships Utilities Authority, Sewer Disposal System
(Limited Tax) 8.20%, 1/1/2018........................................... 1,500,000 1,673,445
NEBRASKA-.8%
Nebraska Higher Education Loan Program, Revenue 6.40%, 6/1/2013............. 5,000,000 4,910,400
NEVADA-2.3%
Clark County, IDR (Southwest Gas Corp.) 7.50%, 9/1/2032..................... 13,000,000 13,286,520
NEW HAMPSHIRE-.6%
New Hampshire Housing Finance Authority, Single Family Residential Mortgage
7.70%, 7/1/2029......................................................... 3,620,000 3,760,528
</TABLE>
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
<S> <C> <C>
NEW JERSEY-7.2%
Camden County Pollution Control Financing Authority, Solid Waste RRR
7.50%, 12/1/2010........................................................ $ 2,000,000 $ 1,940,940
New Jersey Economic Development Authority, First Mortgage Gross Revenue
(The Evergreens) 9.25%, 10/1/2022....................................... 15,000,000 15,717,600
New Jersey Sports and Exposition Authority, Revenue, Refunding
(Monmouth Park) 8%, 1/1/2025............................................ 4,000,000 4,245,920
New Jersey Turnpike Authority, Turnpike Revenue 6.50%, 1/1/2016............. 10,000,000 10,550,100
Union County Utilities Authority, Solid Waste Revenue 7.20%, 6/15/2014...... 9,500,000 9,612,670
NEW MEXICO-.3%
New Mexico Educational Assistance Foundation, Student Loan Revenue
6.85%, 12/1/2005........................................................ 1,730,000 1,766,382
NEW YORK-17.9%
Metropolitan Transportation Authority, Service Contract, Commuter Facilities
7.50%, 7/1/2016 (Prerefunded 7/1/2000) (b).............................. 3,000,000 3,397,650
New York City:
8%, 6/1/2000............................................................ 2,200,000 2,411,574
7.50%, 2/1/2001......................................................... 5,000,000 5,373,650
6%, 5/15/2008........................................................... 8,970,000 8,579,087
7.50%, 8/15/2008........................................................ 2,000,000 2,103,340
7.10%, 2/1/2009......................................................... 5,000,000 5,126,800
7%, 2/1/2020............................................................ 10,000,000 10,194,900
6.625%, 2/15/2025....................................................... 7,000,000 6,878,550
New York City Industrial Development Agency, Special Facilities Revenue
(American Airlines, Inc. Project) 8%, 7/1/2020.......................... 3,250,000 3,414,450
New York City Municipal Water Finance Authority, Water and Sewer Systems
Revenue:
7%, 6/15/2001........................................................... 1,735,000 1,942,592
7.375%, 6/15/2009 (Prerefunded 6/15/1999) (b)........................... 4,000,000 4,430,760
7%, 6/15/2015 (Prerefunded 6/15/2001) (b)............................... 755,000 840,247
New York State Dormitory Authority, Revenue:
City University System:
5.75%, 7/1/2018....................................................... 2,000,000 1,830,340
7.625%, 7/1/2020 (Prerefunded 7/1/2000) (b)........................... 4,000,000 4,558,720
State University Educational Facilities 7%, 5/15/2018 (Prerefunded 5/15/2000) (b) 3,295,000 3,651,025
New York State Energy Research and Development Authority,
Electric Facilities Revenue:
(Consolidated Edison Co. of New York, Inc.):
7.50%, 7/1/2025................................................... 3,000,000 3,187,080
7.50%, 1/1/2026................................................... 2,000,000 2,135,640
(Long Island Lighting Co.):
7.15%, 9/1/2019................................................... 3,650,000 3,535,208
7.15%, 6/1/2020................................................... 4,000,000 3,873,000
7.15%, 2/1/2022................................................... 7,500,000 7,256,250
New York State Housing Finance Agency, Revenue:
(Refunding - Health Facilities - New York City) 8%, 11/1/2008........... 5,000,000 5,537,850
Service Contract Obligation 7.30%, 3/15/2021 (Prerefunded 9/15/2001) (b) 5,000,000 5,706,000
</TABLE>
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
<S> <C> <C>
NEW YORK (CONTINUED)
New York State Local Government Assistance Corp.
7%, 4/1/2016 (Prerefunded 4/1/2001) (b)................................. $ 5,500,000 $ 6,136,845
New York State Medical Care Facilities Finance Agency, Revenue
(Mental Health Service Facilities Improvement):
7.875%, 8/15/2020..................................................... 1,295,000 1,412,068
Refunding 7.875%, 8/15/2000........................................... 1,150,000 1,323,846
NORTH CAROLINA-.4%
Martin County Industrial Facilities and Pollution Control Financing
Authority,
SWDR (Weyerhaeuser Co.) 6.80%, 5/1/5024................................. 2,000,000 2,059,300
OHIO-.6%
Gateway Economic Development Corp., Greater Cleveland Excise Tax Revenue
7.50%, 9/1/2005......................................................... 3,500,000 3,762,430
OKLAHOMA-.8%
Tulsa Municipal Airport Trust, Revenue (American Airlines, Inc.) 7.375%, 12/1/2020 4,300,000 4,373,100
PENNSYLVANIA-7.1%
Blair County Hospital Authority, Revenue (Altoona Hospital) 7.247%, 7/1/2013 (a,d) 5,000,000 5,176,900
Lancaster County Hospital Authority, Revenue (Health Center - United Church
Homes Project) 9.125%, 10/1/2014 (Prerefunded 10/1/1999) (b)............ 1,465,000 1,725,052
Lehigh County General Purpose Authority, Revenue (Wiley House):
8.75%, 11/1/2014........................................................ 2,000,000 1,988,880
9.50%, 11/1/2016........................................................ 3,000,000 3,110,280
Montgomery County Higher Education and Health Authority, Revenue
(AHF/Montgomery, Inc. Project) 10.50%, 9/1/2020......................... 3,500,000 3,749,655
Pennsylvania Convention Center Authority, Revenue, Refunding 6.70%, 9/1/2014 8,125,000 8,168,875
Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue
(Philadelphia Funding Program) 6.80%, 6/15/2022 (Prerefunded 6/15/2002) (b) 5,500,000 6,052,640
Philadelphia, Water and Sewer Revenue 7.35%, 9/1/2004....................... 4,970,000 5,700,689
Philadelphia Hospital and Higher Education Facility Authority, HR
(Graduate Health Systems) 7.25%, 7/1/2018............................... 6,100,000 6,139,589
RHODE ISLAND-.4%
Rhode Island Depositors Economic Protection Corp.,
6.95%, 8/1/2022 (Prerefunded 8/1/2002) (b).............................. 2,000,000 2,253,560
SOUTH CAROLINA-.5%
Richland-Lexington Airport District, Airport Revenue
(Colombia Metropolitan Airport) 6.125%, 1/1/2025 (Insured; AMBAC)....... 3,000,000 2,910,000
TENNESSEE-1.6%
Maury County Industrial Development Board, PCR, Refunding
(Saturn Corp. Project) 6.50%, 9/1/2024.................................. 5,500,000 5,372,675
McMinn County Industrial Development Board, PCR
(Calhoun Newsprint Co. Project) 7.625%, 3/1/2016........................ 3,000,000 3,129,600
Tennessee Housing Development Agency, Mortgage Finance 6.90%, 7/1/2025...... 1,000,000 1,019,360
</TABLE>
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
<S> <C> <C>
TEXAS-9.9%
Alliance Airport Authority, Special Facilities Revenue
(American Airlines, Inc. Project):
7%, 12/1/2011......................................................... $ 10,700,000 $ 10,678,172
7.50%, 12/1/2029...................................................... 6,000,000 6,129,540
Brazos River Authority, PCR (Texas Utilities Electric Co. Project)
7.875%, 3/1/2021........................................................ 490,000 532,483
Dallas - Fort Worth International Airport Facility Improvement Corp.,
Revenue:
(American Airlines, Inc.) 7.50%, 11/1/2025.............................. 13,000,000 13,279,500
(Delta Airlines, Inc.) 7.125%, 11/1/2026................................ 4,200,000 4,181,646
Gulf Coast Waste Disposal Authority, Revenue
(Champion International Corp.) 7.45%, 5/1/2026.......................... 7,000,000 7,369,880
Port Corpus Christi Authority, PCR, Refunding
(Hoechst Celanese Co. Project) 7.50%, 8/1/2012.......................... 4,000,000 4,311,160
Texas Housing Agency, SFMR 7.875%, 9/1/2012................................. 835,000 861,687
Texas Public Property Finance Corp., Revenue (Mental Health and Retardation
Center)
8.20%, 10/1/2012 (Prerefunded 10/1/2002) (b)............................ 8,840,000 10,450,118
UTAH-4.0%
Carbon County, SWDR, Refunding:
(East Carbon Development Corp.) 9%, 7/1/2012............................ 4,000,000 4,157,200
(Laidlaw Inc./ECDC Project) 7.50, 2/1/2010.............................. 3,300,000 3,369,201
(Sunnyside Cogeneration) 9.25%, 7/1/2018................................ 15,000,000 16,166,250
VIRGINIA-.5%
Virginia Housing Development Authority, Commonwealth Mortgage
6.20%, 7/1/2021......................................................... 3,255,000 3,077,928
WASHINGTON-.5%
Pilchuck Development Public Corp., Industrial Revenue, Refunding (Little Neck
Properties Project) 6.25%, 8/1/2010 (LOC; US Bank of Washington) (e).... 3,090,000 3,103,442
WEST VIRGINIA-2.7%
West Virginia Parkways Economic Development and Tourism Authority
5.831%, 5/16/2019 (Insured; FGIC)....................................... 8,000,000 7,671,920
West Virginia Water Development Authority, Water Development Revenue
(Loan Program II) 7.50%, 11/1/2029 (Prerefunded 11/1/1999) (b).......... 1,900,000 2,129,843
Winchester Industrial Development Authority, HR
.91%, 1/1/1996 (d)...................................................... 3,100,000 3,021,043
1.52%, 1/1/1997 (d)..................................................... 3,300,000 3,107,841
WYOMING-.5%
Sweetwater County, SWDR (FMC Corp. Project) 7%, 6/1/2024.................... 1,575,000 1,588,136
Wyoming Community Development Authority, Single Family Mortgage 8%, 6/1/2021 1,355,000 1,412,032
U.S. RELATED-.5%
Puerto Rico Commonwealth 6.25%, 7/1/2013 (Insured; MBIA) (c)................ 3,000,000 3,163,980
--------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $561,324,789)................... $585,139,443
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENT-.3% AMOUNT VALUE
-------------- --------------
<S> <C> <C>
CONNECTICUT;
Connecticut Development Authority, Health Care Revenue, VRDN
(Corp. Independent Living Project) 4.65% (LOC; Credit Commercial De
France) (e,f)
(cost $1,600,000)..................................................... $ 1,600,000 $ 1,600,000
===============
TOTAL INVESTMENTS-100.0%
(cost $562,924,789)..................................................... $586,739,443
===============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company PCR Pollution Control Revenue
FHA Federal Housing Administration RRR Resource Recovery Revenue
HR Hospital Revenue SFHR Single Family Housing Revenue
IDR Industrial Development Revenue SFMR Single Family Mortage Revenue
LOC Letter of Credit SWDR Solid Waste Disposal Revenue
MBIA Municipal Bond Investors Assurance VRDN Variable Rate Demand Notes
Insurance Corporation
</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 14.7%
AA Aa AA 5.4
A A A 16.0
BBB Baa BBB 36.8
BB Ba BB 6.1
F-1+, F-1 MIGI, VMIG1 & P1 SP1 & A1 .3
Not Rated (h) Not Rated (h) Not Rated (h) 20.7
--------
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly 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) Purchased on delayed delivery basis.
(d) Inverse floater security - the interest rate is subject
to change periodically.
(e) Secured by letter of credit.
(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) 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 Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $562,924,789)--see statement.................................... $586,739,443
Cash.................................................................... 3,714,719
Interest receivable..................................................... 12,777,511
Receivable for shares of Beneficial Interest subscribed................. 411,409
Prepaid expenses........................................................ 43,237
--------------
603,686,319
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 271,255
Due to Distributor...................................................... 164,327
Payable for investment securities purchased............................. 7,575,713
Payable for shares of Beneficial Interest redeemed...................... 459,008
Accrued expenses........................................................ 189,066 8,659,369
------------ --------------
NET ASSETS ................................................................ $595,026,950
==============
REPRESENTED BY:
Paid-in capital......................................................... $589,802,839
Accumulated net realized capital losses and distributions in excess of
net realized gain on investments...................................... (18,590,543)
Accumulated net unrealized appreciation on investments-Note 3(b)........ 23,814,654
--------------
NET ASSETS at value......................................................... $595,026,950
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 35,756,494
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 7,170,392
===============
NET ASSET VALUE per share:
Class A Shares
($495,615,827 / 35,756,494 shares).................................... $13.86
=======
Class B Shares
($99,411,123 / 7,170,392 shares)...................................... $13.86
=======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 43,228,502
EXPENSES:
Management fee--Note 2(a)............................................. $ 3,361,698
Shareholder servicing costs--Note 2(c)................................ 1,974,564
Distribution fees (Class B shares)-Note 2(b).......................... 489,529
Custodian fees........................................................ 58,925
Professional fees..................................................... 56,881
Registration fees..................................................... 52,938
Prospectus and shareholders' reports.................................. 52,285
Trustees' fees and expenses--Note 2(d)................................ 26,203
Miscellaneous......................................................... 45,341
--------------
TOTAL EXPENSES.................................................... 6,118,364
--------------
INVESTMENT INCOME--NET............................................ 37,110,138
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments (including options transactions)--Note 3(a) $(15,841,048)
Net realized gain on financial futures--Note 3(a)....................... (1,236,099)
--------------
NET REALIZED (LOSS)................................................... (17,077,147)
Net unrealized appreciation on investments.............................. 17,971,750
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 894,603
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 38,004,741
==============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
--------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income--net.................................................. $ 38,105,215 $ 37,110,138
Net realized (loss) on investments...................................... (1,468,275) (17,077,147)
Net unrealized appreciation (depreciation) on investments for the year.. (29,828,947) 17,971,750
--------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 6,807,993 38,004,741
-------------- --------------
DIVIDENDS TO SHAREHOLDERS:
From investment income--net:
Class A shares........................................................ (34,640,947) (31,608,832)
Class B shares]....................................................... (3,464,268) (5,501,306)
From net realized gain on investments:
Class A shares........................................................ (1,935,559) ---
Class B shares........................................................ (249,175) ---
In excess of net realized gain on investments:
Class A shares........................................................ (39,975) ---
Class B shares........................................................ (5,146) ---
-------------- --------------
TOTAL DIVIDENDS................................................... (40,335,070) (37,110,138)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 104,748,904 30,432,598
Class B shares........................................................ 83,821,633 14,763,131
Dividends reinvested:
Class A shares........................................................ 22,085,600 18,464,043
Class B shares........................................................ 2,282,208 3,214,657
Cost of shares redeemed:
Class A shares........................................................ (80,102,730) (99,967,298)
Class B shares........................................................ (4,090,771) (14,454,418)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 128,744,844 (47,547,287)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 95,217,767 (46,652,684)
NET ASSETS:
Beginning of year....................................................... 546,461,867 641,679,634
-------------- --------------
End of year............................................................. $641,679,634 $595,026,950
=============== =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------------------------------------------------------------------
CLASS A CLASS B
-------------------------------- --------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------- --------------------------------
1994 1995 1994 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 7,100,350 2,241,162 5,676,601 1,080,646
Shares issued for dividends reinvested. 1,502,278 1,354,808 155,727 235,883
Shares redeemed........................ (5,500,645) (7,383,625) (281,527) (1,070,587)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE)
IN SHARES OUTSTANDING.... 3,101,983 (3,787,655) 5,550,801 245,942
============== =========== ============== ==============
</TABLE>
See notes to financial statements.
PREMIER 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.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
-------------------------------------------------- ---------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
-------------------------------------------------- ---------------------------
PER SHARE DATA: 1991 1992 1993 1994 1995 1993(1) 1994 1995
------- ------- ------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.77 $13.28 $13.75 $14.45 $13.81 $14.02 $14.45 $13.81
------- ------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net........... .98 .94 .92 .89 .84 .24 .80 .77
Net realized and unrealized gain (loss)
on investments................. .51 .49 .91 (.59) 05 .43 (.59) .05
------- ------- ------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.49 1.43 1.83 .30 .89 .67 .21 .82
------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income--net (.98) (.94) (.92) (.89) (.84) (.24) (.80) (.77)
Dividends from net realized gain
on investments................. -- (.02) (.21) (.05) -- -- (.05) --
Dividends in excess of net realized gain
on investments................. -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS............ (.98) (.96) (1.13) (.94) (.84) (.24) (.85) (.77)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year..... $13.28 $13.75 $14.45 $13.81 $13.86 $14.45 $13.81 $13.86
======= ======= ======= ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(2)........... 12.13% 11.08% 13.76% 1.84% 6.72% 16.80%(3) 1.26% 6.15%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .22% .54% .74% .85% .92% 1.15%(3) 1.40% 1.44%
Ratio of net investment income to
average net assets............. 7.43% 6.90% 6.43% 6.01% 6.16% 5.13%(3) 5.33% 5.62%
Decrease reflected in above expense ratios
due to undertakings by the Manager .82% .40% .20% 06% -- .10%(3) .05% --
Portfolio Turnover Rate.......... 41.30% 50.72% 30.99% 22.15% 38.60% 30.99% 22.15% 38.60%
Net Assets, end of year (000's Omitted) $247,195 $388,793 $526,606 $546,036 $495,616 $19,855 $95,643 $99,411
</TABLE>
(1) From January 15, 1993 (commencement of initial offering)
to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
See notes to financial statements.
PREMIER 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 diversified, open-end management investment company.
Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of
the Fund's
shares. Dreyfus Service Corporation is a wholly-owned subsidiary
of The
Dreyfus Corporation ("Manager"). Effective August 24, 1994, the
Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI
Holdings, Inc., the parent company of which is Boston
Institutional Group,
Inc.
The Fund offers both Class A and Class B shares. Class A
shares are
subject to a sales charge imposed at the time of purchase and
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.
Other
differences between the two 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.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund
to declare
dividends daily from investment income-net. Such dividends are
paid monthly.
Dividends from net realized capital gain, if any, are normally
declared and
paid annually, but the Fund may make distributions on a more
frequent basis
to comply with the distribution requirements of the Internal
Revenue Code. To
the extent that net realized capital gain can be offset by
capital loss
carryovers, it is the policy of the Fund not to distribute such
gain.
PREMIER 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 $7,557,000
available for Federal income tax purposes to be applied against
future net
securities profits, if any, realized subsequent to April 30,
1995. The
carryover does not include net realized securities losses from
November 1,
1994 through April 30, 1995 which are treated, for Federal
income tax
purposes, as arising in fiscal 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 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 (exclusive
of
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 April 30, 1995.
Dreyfus Service Corporation retained $17,249 during the year
ended April
30, 1995 from commissions earned on sales of the Fund's Class A
shares.
Prior to August 24, 1994, Dreyfus Service Corporation
retained $63,511
from contingent deferred sales charges imposed upon redemptions
of the Fund's
Class B shares.
(B) On August 3, 1994, the Fund's shareholders approved a
revised
Distribution Plan with respect to Class B shares (the "Class B
Distribution
Plan") pursuant to Rule 12b-1 under the Act. Pursuant to the
Class B
Distribution Plan, effective August 24, 1994, the Fund pays the
Distributor
for distributing the Fund's Class B shares at an annual rate of
.50 of 1% of
the value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B
Distribution Plan") provided that the Fund pay Dreyfus Service
Corporation at
an annual rate of .50 of 1% of the value of the Fund's Class B
shares average
daily net assets, for costs and expenses in connection with
advertising,
marketing and distributing the Fund's Class B shares. Dreyfus
Service
Corporation made payments to one or more Service Agents based on
the value of
the Fund's Class B shares owned by clients of the Service Agent.
During the year ended April 30, 1995, $334,342 was charged
to the Fund
pursuant to the Class B Distribution Plan and $155,187 was
charged to the
Fund pursuant to the prior Class B Distribution Plan.
(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 and Class B shares for servicing shareholder
PREMIER MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
accounts. The services provided may include personal services
relating to
shareholder accounts, such as answering shareholder inquiries
regarding the
Fund and providing reports and other information, and services
related to the
maintenance of shareholder accounts. The Distributor may make
payments to
Service Agents in respect of these services. The Distributor
determines the
amounts to be paid to Service Agents. From May 1, 1994 through
August 23,
1994, $425,801 and $77,593 were charged to Class A and Class B
shares,
respectively, by Dreyfus Service Corporation. From August 24,
1994 through
April 30, 1995, $857,479 and $167,171 were charged to the Class
A and Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services
Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund
were "affiliated persons," as defined in the Act, of the Manager
and/or
Dreyfus Service Corporation. Each trustee who is not an
"affiliated person"
receives 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:
(A) The aggregate amount of purchases and sales of
investment securities,
excluding option transactions, amounted to $400,684,880 and
$436,203,780,
respectively, for the year ended April 30, 1995, and consisted
entirely of
long-term and short-term municipal investments.
In addition, the following table summarizes the Fund's
call/put options
written transactions for the year ended April 30, 1995.
<TABLE>
<CAPTION>
OPTIONS TERMINATED
--------------------------------
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED COST GAIN
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
OPTIONS WRITTEN:
Contracts outstanding April 30, 1994.... 400 $ 296,552
Contracts written....................... 20,900 9,035,735
-------------- --------------
21,300 9,332,287
-------------- --------------
Contracts terminated:
Closed................................ 5,250 2,541,539 $1,851,372 $ 690,167
Exercised............................. 3,195 2,999,705 --- ---
Expired............................... 12,855 3,791,043 --- 3,791,043
-------------- -------------- -------------- --------------
Total contracts terminated........ 21,300 9,332,287 $1,851,372 $4,481,210
============== ============== ============== ==============
Contracts outstanding April 30, 1995.... --- ---
============== ==============
</TABLE>
As a writer of call options, the Fund receives a premium at
the outset
and then bears the market risk of unfavorable changes in the
price of the
financial instrument underlying the option. Generally, the Fund
would incur a
gain, to the extent of the premiums, if the price of the
underlying financial
instrument decreases between the date the option is written and
the date on
which the option is terminated. Generally, the Fund would
realize a loss, if
the price of the financial instrument increases between those
dates.
PREMIER MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As a writer of put options, the Fund receives a premium at
the outset and
then bears the market risk of unfavorable changes
in the price of the financial instrument underlying the option.
Generally,
the Fund would incur a gain, to the extent of the premiums, if
the price of
the underlying financial instrument increases between the date
the option is
written and the date on which the option is terminated.
Generally, the Fund
would realize a loss, if the price of the financial instrument
decreases
between those dates.
The Fund is engaged in trading financial futures contracts.
The Fund is
exposed to market risk as a result of changes in the value of
the underlying
financial instruments. Investments in financial futures require
the Fund to
"mark to market" on a daily basis, which reflects the change in
the market
value of the contract at the close of each day's trading.
Accordingly,
variation margin payments are made or received to reflect daily
unrealized
gains or losses. When the contracts are closed, the Fund
recognizes a
realized gain or loss. These investments require initial margin
deposits with
a custodian, which consist of cash or cash equivalents, up to
approximately
10% of the contract amount. The amount of these deposits is
determined by the
exchange or Board of Trade on which the contract is traded and
is subject to
change. At April 30, 1995, there were no financial futures
contracts
outstanding.
(B) At April 30, 1995, accumulated net unrealized
appreciation on
investments was $23,814,654, consisting of $28,183,278 gross
unrealized
appreciation and $4,368,624 gross unrealized depreciation.
At April 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 MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and
liabilities of
Premier Municipal Bond Fund, including the statement of
investments, as of
April 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 April 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 Municipal Bond Fund at April 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
June 1, 1995
PREMIER MUNICIPAL BOND FUND
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 April
30, 1995 as "exempt-interest dividends" (not generally subject
to regular
Federal income tax).
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.
PREMIER 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
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A.
Annual Report
PREMIER MUNICIPAL
BOND FUND
April 30, 1995
(Dreyfus Logo)
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholder:
At the close of your Series' fiscal year on April 30, 1995,
the
net asset value for Class A shares was $12.74, which was $.14
(1.11%)
higher than the closing net asset value one year ago. Income
dividends
of approximately $.754 per share were paid during this period,
which
translates into a distribution rate per share of 5.65%, based on
the
April 30 closing maximum offering price.
The net asset value for Class B shares was $12.75, which was
$.14 (1.11%)
higher than the closing net asset value one year ago. Income
dividends of
approximately $.692 per share were paid during this period,
which translates
into a distribution rate per share of 5.43% based on the April
30 closing net
asset value.
We are pleased to report that all dividends paid from the
net investment
income during this period were exempt from Federal and State of
Arizona
personal income taxes.*
The past fiscal year was marked by market turbulence and
mixed economic
signals. The Series saw both sides of the volatile market as the
Bond Buyer
25 Bond Revenue Index moved approximately 117 basis points. We
attempted to
manage the Series through these difficult times by purchasing
defensive
coupons to balance the discount holdings in the portfolio and by
shortening
the average duration of the portfolio.
Factors which negatively affected the performance of the
Series during
the past fiscal year included interest rate increases by the
Federal Reserve
Board, inflation pressures, and certain conditions in the
municipal
marketplace. By the first quarter of 1995, however, these
pressures had
abated and both the market and the Series began a strong
recovery.
As your Series' fiscal year progressed, new issuance of
municipal bonds
in the specialty state sector became progressively thin, which
forced
secondary market prices to high levels. Supply continued to be
scant after
the New Year, but our investment posture remained unchanged.
Because we did
not chase the roller-coaster market as it moved through the
second and third
fiscal quarters, the Series was well positioned to capitalize on
the market
strength which materialized during the last fiscal quarter. As a
result, your
Series was able to rebound to its current level.
Overall, we view the prospect of a continuation of the
current market
rally with a cautious eye, since it appears that much of the
appreciation
expected for 1995 is already behind us. With this in mind, the
Series remains
fully invested to seek to take advantage of any additional
market run-up in
an environment witnessing a continued scarcity of securities,
and to seek a
high level of tax exempt income.
We have included a current Statement of Investments and
recent financial
statements for your review. We appreciate your investment in the
Series and
look forward to serving your investment needs in the future.
Sincerely,
[Richard J. Moynihan signature
logo]
Richard J. Moynihan
Director, Municipal Portfolio
Management
The Dreyfus Corporation
May 16, 1995
New York, N.Y.
*Some income may be subject to the Federal Alternative Minimum
Tax (AMT) for certain shareholders.
PREMIER STATE MUNICIPAL BOND FUND, APRIL 30, 1995
ARIZONA SERIES
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER
STATE MUNICIPAL BOND FUND, ARIZONA SERIES CLASS A SHARES AND THE
LEHMAN BROTHERS MUNICIPAL BOND INDEX
In Dollars
$11,698
Lehman Brothers Municipal Bond Index*
$11,383
Premier State
Municipal Bond Fund, Arizona Series
(Class A Shares)
*Source: Lehman Brothers
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
CLASS A CLASS B
______________________________ _________________________________________
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
Periods ended 4/30/95 Sales Charge Sales Charge (4.5%) Periods ended 4/30/95 Redemption Redemption*
_____________________ ________________ ___________________ _______________________ ___________ _____________________
<S> <C> <C> <C> <C> <C>
1 Year 7.41% 2.61% 1 Year 6.88% 3.88%
From Inception (9/3/92) 6.83 4.99 From Inception (1/15/93) 5.85 5.04
</TABLE>
Past performance is not predictive of future performance. Share
price and
investment return fluctuate and share price may be more or less
than original
cost upon redemption.
The above graph compares a $10,000 investment made in Class A
shares of
Premier State Municipal Bond Fund, Arizona Series on 9/3/92
(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
8/31/92 is used
as the beginning value on 9/3/92. All dividends and capital gain
distributions are reinvested. Performance for Class B shares
will differ from
the results shown above due to difference in charges and
expenses charged to
that class.
The Series invests primarily in Arizona 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 market. The
Index does
not take into account charges, fees and other expenses. Also,
unlike the Fund
which principally limits investments to Arizona municipal
obligations, the
Index is not state-specific. Further information relating to
Series
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.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF INVESTMENTS
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-90.7% AMOUNT VALUE
_____________ __________________
<S> <C> <C>
ARIZONA-84.1%
Arizona Board of Regents - Arizona State University, System Revenue,
Refunding:
6.125%, 7/1/2015........................................................ $ 100,000 $ 101,303
5.50%, 7/1/2019......................................................... 750,000 699,683
Arizona Educational Loan Marketing Corp., Educational Loan Revenue
6.375%, 9/1/2005........................................................ 100,000 104,422
Arizona Health Facilities Authority, Hospital System Revenue, Refunding
(Samaritan Health System) 5.625%, 12/1/2015 (Insured; MBIA)............. 700,000 672,350
Casa Grande Industrial Development Authority, PCR
(Frito-Lay, Inc. Pollution Control Project) 6.60%, 12/1/2010 (Guaranteed; Pepsico) 200,000 205,036
Chandler, Water and Sewer Revenue, Refunding 6.25%, 7/1/2013 (Insured; FGIC) 200,000 205,026
Douglas Industrial Development Authority, IDR, Refunding (KMart Corp.
Project)
6%, 1/1/2003............................................................ 460,000 459,673
Glendale, Improvement Revenue, District Number 59 6%, 1/1/2013.............. 100,000 98,917
Maricopa County Hospital District Number 1, Hospital Facilities, Refunding:
6.25%, 6/1/2010 (Insured; FGIC)......................................... 100,000 104,302
6.125%, 6/1/2015 (Insured; FGIC)........................................ 200,000 201,666
Maricopa County Industrial Development Authority:
Health Facility Revenue (Catholic Healthcare West) 5.50%, 7/1/2010 (Insured; MBIA) 500,000 484,460
MFHR, Refunding (Laguna Private Apartments Project) 6.75%, 7/1/2019..... 1,000,000 1,007,670
Maricopa County Pollution Control Corp., PCR, Refunding
(Public Service Co.-Palo Verde) 6.375%, 8/15/2023....................... 1,000,000 913,060
Maricopa County School District:
Number 6 (Washington Elementary) 6%, 7/1/2009 (Insured; AMBAC).......... 200,000 207,908
Number 28 (Kyrene Elementary) 6%, 7/1/2013 (Insured; AMBAC)
(Prerefunded 7/1/2001) (a)............................................ 175,000 183,615
School Improvement Number 3 (Tempe Elementary) 6%, 7/1/2008
(Prerefunded 7/1/2006) (a)............................................ 100,000 101,824
Maricopa County Stadium District, Revenue 5.50%, 7/1/2013 (Insured; MBIA)... 1,000,000 954,600
Maricopa County Unified School District, School Improvement:
Chandler, Refunding 6.40%, 7/1/2010 (Insured; FGIC)..................... 300,000 312,732
Gilbert, Refunding, Zero Coupon, 7/1/2005 (Insured; FGIC) (b)........... 1,860,000 1,049,914
Paradise Valley 5.875%, 7/1/2012 (Insured; FGIC)........................ 200,000 198,380
Scottsdale 6%, 7/1/2012 (Prerefunded 7/1/2002) (a)...................... 100,000 105,854
City of Mesa 5.70%, 7/1/2008 (Insured; MBIA)................................ 300,000 299,421
Navajo County Pollution Control Corp., PCR, Refunding (Arizona Public Service
Co.)
5.875%, 8/15/2028 (Insured; AMBAC)...................................... 1,000,000 967,990
City of Phoenix, Refunding:
5.10%, 7/1/2013......................................................... 750,000 675,848
Street and Highway User Revenue:
6.60%, 7/1/2007....................................................... 250,000 267,905
6.25%, 7/1/2011 (Insured; FGIC)....................................... 200,000 206,456
Phoenix Civic Improvement Corp.:
Wastewater System Lease Revenue:
6.125%, 7/1/2014 (Prerefunded 7/1/2003) (a)........................... 100,000 107,924
6.125%, 7/1/2023 (Prerefunded 7/1/2003) (a)........................... 500,000 539,095
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
ARIZONA (CONTINUED)
Phoenix Civic Improvement Corp. (continued):
Water Systems Revenue 5.40%, 7/1/2014................................... $ 1,000,000 $ 926,730
Phoenix Industrial Development Authority, SFMR
6.30%, 12/1/2012 (Insured: FNMA, GNMA) (c).............................. 1,000,000 987,380
Pima County, Tuscon Unified School District Number 1, School Improvement:
6.10%, 7/1/2010 (Insured; FGIC)......................................... 100,000 101,958
5.875%, 7/1/2014 (Insured; FGIC)........................................ 1,000,000 992,520
Pima and Maricopa Counties Industrial Development Authority, Multi-Family
Revenue
5.875%, 1/1/2029 (Insured; FNMA)........................................ 500,000 456,180
Salt River Agricultural Improvement and Power District,
Electric System Revenue (Salt River Project):
6%, 1/1/2013.......................................................... 150,000 150,185
5.50%, 1/1/2028....................................................... 1,000,000 901,070
Refunding 5.75%, 1/1/2013............................................. 200,000 193,942
City of Scottsdale Municipal Property Corp., Excise Tax Revenue, Refunding
6.25%, 11/1/2014 (Insured; FGIC)........................................ 100,000 101,976
City of Tempe 6%, 7/1/2009.................................................. 200,000 204,512
City of Tuscon, Refunding:
6.10%, 7/1/2012 (Insured; FGIC)......................................... 250,000 253,300
Water System Revenue:
5.75%, 7/1/2012....................................................... 100,000 98,384
5.75%, 7/1/2018....................................................... 500,000 478,385
University of Arizona, COP (Administrative and Packaging Facility Project)
6%, 7/15/2023 (Insured; MBIA)........................................... 1,000,000 989,160
University of Arizona Medical Center Corp., HR, Refunding
6.25%, 7/1/2010 (Insured; MBIA)......................................... 200,000 207,032
U.S. RELATED-6.6%
Commonwealth of Puerto Rico, Refunding 6%, 7/1/2014......................... 400,000 391,492
Puerto Rico Electric Power Authority, Power Revenue:
6%, 7/1/2010............................................................ 550,000 541,876
6.25%, 7/1/2017......................................................... 520,000 517,473
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $20,297,684).................... $19,930,589
===========
SHORT_TERM MUNICIPAL INVESTMENTS-9.3%
ARIZONA;
Pima County, Industrial Development Authority, Industrial Revenue, VRDN
(Tuscon Electric Power-Ivington Project):
4.70%, 7/1/2022 (LOC; Societe Generale) (d)........................... $ 1,950,000 $ 1,950,000
4.70%, 10/1/2022 (LOC; Bank of America) (d)........................... 100,000 100,000
_________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $2,050,000)................... $ 2,050,000
============
TOTAL INVESTMENTS-100.0%
(cost $22,347,684)...................................................... $21,980,589
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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 Association
FNMA Federal National Mortgage Association MFHR Multi-Family Housing Revenue
GNMA Government National Mortgage Association PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
</TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<TABLE>
<CAPTION>
FITCH (E) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ __________ ____________
<S> <C> <C> <C>
AAA Aaa AAA 48.6%
AA Aa AA 19.4
A A A 16.4
BBB Baa BBB 2.1
BB Ba BB 4.2
F1+ VMIG1 SP1 9.3
------
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) Wholly held by the custodian in a segregated account as
collateral
for a delayed delivery security.
(c) Purchased on a when-issued basis.
(d) Secured by letter of credit. Securities payable on
demand. The
interest rate, which is subject to change, is based upon
bank prime rates
or an index of market rates.
(e) Fitch currently provides creditworthiness information
for a limited
number of investments.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $22,347,684)-see statement...................................... $21,980,589
Interest receivable..................................................... 354,387
Receivable for shares of Beneficial Interest subscribed................. 29,558
Prepaid expenses........................................................ 11,230
Due from The Dreyfus Corporation........................................ 8,185
_______
22,383,949
LIABILITIES:
Due to Distributor...................................................... $ 7,815
Due to Custodian........................................................ 94,110
Payable for investment securities purchased............................. 1,003,150
Payable for shares of Beneficial Interest redeemed...................... 13
Accrued expenses and other liabilities.................................. 51,116 1,156,204
_______ ______
NET ASSETS ................................................................ $21,227,745
==========
REPRESENTED BY:
Paid-in capital......................................................... $21,938,293
Accumulated net realized (loss) on investments.......................... (343,453)
Accumulated net unrealized (depreciation) on investments-Note 3......... (367,095)
_______
NET ASSETS at value......................................................... $21,227,745
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 1,018,275
==========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 647,399
==========
NET ASSET VALUE per share:
Class A Shares
($12,972,013 / 1,018,275 shares)...................................... $12.74
======
Class B Shares
($8,255,732 / 647,399 shares)......................................... $12.75
======
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $1,173,115
EXPENSES:
Management fee-Note 2(a).............................................. $ 106,761
Shareholder servicing costs-Note 2(c)................................. 68,466
Distribution fees (Class B shares)-Note 2(b).......................... 37,203
Auditing fees......................................................... 8,357
Prospectus and shareholders' reports.................................. 6,495
Organization expenses................................................. 4,600
Registration fees..................................................... 2,360
Custodian fees........................................................ 2,269
Legal fees............................................................ 1,819
Trustees' fees and expenses-Note 2(d)................................. 195
Miscellaneous......................................................... 9,833
_____
248,358
Less-expense reimbursement from Manager due to
undertakings-Note 2(a)............................................ 210,380
_____
TOTAL EXPENSES.................................................. 37,978
______
INVESTMENT INCOME-NET........................................... 1,135,137
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(343,444)
Net unrealized appreciation on investments.............................. 602,025
_____
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 258,581
______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,393,718
==========
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
______________________________
1994 1995
______________ _____________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 748,595 $ 1,135,137
Net realized (loss) on investments...................................... -- (343,444)
Net unrealized appreciation (depreciation) on investments for the year.. (1,152,136) 602,025
_______ ______
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (403,541) 1,393,718
_______ ______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (524,294) (722,637)
Class B shares........................................................ (224,301) (412,500)
Net realized gain on investments:
Class A shares........................................................ (5,370) _
Class B shares........................................................ (2,805) _
_______ ______
TOTAL DIVIDENDS................................................... (756,770) (1,135,137)
______ _______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 8,029,274 3,423,651
Class B shares........................................................ 5,684,625 2,606,355
Dividends reinvested:
Class A shares........................................................ 282,465 336,271
Class B shares........................................................ 94,531 161,187
Cost of shares redeemed:
Class A shares........................................................ (736,531) (3,489,944)
Class B shares........................................................ (534,479) (1,143,645)
__________ ___________
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS...... 12,819,885 1,893,875
__________ ___________
TOTAL INCREASE IN NET ASSETS.................................... 11,659,574 2,152,456
NET ASSETS:
Beginning of year....................................................... 7,415,715 19,075,289
___________ ___________
End of year............................................................. $19,075,289 $21,227,745
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES
__________________________________
CLASS A CLASS B
_______________ _______________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
1994 1995 1994 1995
______ _______ _______ _______
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 594,166 281,816 420,705 206,514
Shares issued for dividends reinvested. 21,163 27,031 7,085 12,967
Shares redeemed........................ (54,791) (283,309) (39,666) (93,196)
_______ ________ _______ _______
NET INCREASE IN SHARES OUTSTANDING 560,538 25,538 388,124 126,285
======= ======= ======= =======
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA 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 CLASS B SHARES
_____________ _____________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
_____________ _____________
PER SHARE DATA: 1993(1) 1994 1995 1993(2) 1994 1995
____ ____ ____ ______ _____ _____
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $12.50 $13.12 $12.60 $12.65 $13.12 $12.61
____ ____ ____ ______ _____ _____
INVESTMENT OPERATIONS:
Investment income-net.............................. .51 .75 .75 .21 .68 .69
Net realized and unrealized gain (loss) on investments .62 (.51) .14 .47 (.50) .14
____ ____ _____ ____ ____ ____
TOTAL FROM INVESTMENT OPERATIONS................. 1.13 .24 .89 .68 .18 .83
____ ____ _____ ____ ____ ____
DISTRIBUTIONS:
Dividends from investment income-net............... (.51) (.75) (.75) (.21) (.68) (.69)
Dividends from net realized gain on investments.... -- (.01) -- -- (.01) --
____ ____ ____ ____ ____ ____
TOTAL DISTRIBUTIONS.............................. (.51) (.76) (.75) (.21) (.69) (.69)
____ ____ ____ ____ ____ ____
Net asset value, end of year....................... $13.12 $12.60 $12.74 $13.12 $12.61 $12.75
===== ====== ====== ======= ======= =======
TOTAL INVESTMENT RETURN(3)............................. 14.01%(4) 1.61% 7.41% 18.49%(4) 1.16% 6.88%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ........... -- -- -- .50%(4) .50% .50%
Ratio of net investment income to average net assets 5.71%(4) 5.51% 6.04% 4.61%(4) 4.95% 5.54%
Decrease reflected in above expense ratios due to
undertaking by the Manager ...................... 1.87%(4) 1.26% 1.07% 1.68%(4) 1.27% 1.10%
Portfolio Turnover Rate ........................... 5.94%(5) 3.65% 21.96% 5.94%(5) 3.65% 21.96%
Net Assets, end of year (000's Omitted)............ $5,671 $12,506 $12,972 $1,745 $6,569 $8,256
(1) From September 3, 1992 (commencement of operations) to April 30, 1993.
(2) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA 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 fifteen series including the Arizona Series (the
"Series"). Dreyfus
Service Corporation, until August 24, 1994, acted as the
distributor of the
Fund's shares. Dreyfus Service Corporation is a wholly-owned
subsidiary of
The Dreyfus Corporation ("Manager"). Effective August 24, 1994,
the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of
mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI
Holdings, Inc., the parent company of which is Boston
Institutional Group,
Inc.
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 offers both Class A and Class B shares. Class A
shares are
subject to a sales charge imposed at the time of purchase and
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.
Other
differences between the two Classes include the services offered
to and the
expenses borne by each Class and certain voting rights.
(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 STATE MUNICIPAL BOND FUND, ARIZONA 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, 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 $262,000
available for Federal income tax purposes to be applied against
future net
securities profits, if any, realized subsequent to April 30,
1995. The
carryover does not include net realized securities losses from
November 1,
1994 through April 30, 1995 which are treated, for Federal
income tax
purposes, as arising in fiscal 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 average
daily value of the Series' 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, 1994 through April 2, 1995 to
reimburse all fees
and expenses of the Series (excluding 12b-1 distribution plan
fees and
certain expenses as described above), and thereafter through
April 30, 1995,
to reduce the shareholder services plan fee paid by and
reimburse such excess
expenses of the Series, to the extent that the Series' aggregate
expenses
(excluding certain expenses as described above) exceeded
specified annual
percentages of the Series' average daily net assets. The expense
reimbursement, pursuant to the undertakings, amounted to
$210,380 for the
year ended April 30, 1995.
The Manager has currently undertaken through June 30, 1995
or until such
time as the net assets of the Series exceed $50 million,
regardless of
whether they remain at that level, 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).
The undertaking may be modified by the Manager from time to
time,
provided that the resulting expense reimbursement would not be
less than the
amount required pursuant to the Agreement.
Dreyfus Service Corporation retained $5,509 during the year
ended April
30, 1995 from commissions earned on sales of the Series' Class A
shares.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Prior to August 24, 1994, Dreyfus Service Corporation
retained $9,435 from
contingent deferred sales charges imposed upon redemptions of
the Series' Class
B shares.
(B) On August 3, 1994, Series' shareholders approved a
revised
Distribution Plan with respect to Class B shares only (the
"Class B
Distribution Plan") pursuant to Rule 12b-1 under the Act.
Pursuant to the
Class B Distribution Plan, effective August 24, 1994, the Fund
pays the
Distributor for distributing the Series' Class B shares at an
annual rate of
.50 of 1% of the value of the average daily net assets of Class
B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B
Distribution Plan") provided that the Series pays Dreyfus
Service Corporation
at an annual rate of .50 of 1% of the value of the Series' Class
B shares
average daily net assets, for the costs and expenses in
connection with
advertising, marketing and distributing the Series' Class B
shares. Dreyfus
Service Corporation made payments to one or more Service Agents
based on the
value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $26,079 was charged to
the Series
pursuant to the Class B Distribution Plan and $11,124 was
charged to the
Series pursuant to the prior Class B Distribution Plan.
(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 and Class B shares for servicing shareholder
accounts. 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 Serv-
ice Agents in respect of these services. The Distributor
determines the
amounts to be paid to Service Agents. From May 1, 1994 through
August 23,
1994, $9,574 and $5,562 were charged to Class A and Class B
shares,
respectively, by Dreyfus Service Corporation. From August 24,
1994 through
April 30, 1995, $20,352 and $13,040 were charged to Class A and
Class B
shares, respectively, by the Distributor pursuant to the
Shareholder Services
Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund
were "affiliated persons," as defined in the Act, of the Manager
and/or
Dreyfus Service Corporation. Each trustee who is not an
"affiliated person"
receives from the Fund an annual fee of $2,500 and an attendance
fee of $250
per meeting. The Chairman of the Board receives an additional
25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities
amounted to $13,042,072 and $10,087,640, respectively, for the
year ended
April 30, 1995, and consisted entirely of long-term and
short-term municipal
investments.
At April 30, 1995, accumulated net unrealized depreciation
on investments
was $367,095, consisting of $178,743 gross unrealized
appreciation and
$545,838 gross unrealized depreciation.
At April 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 STATE MUNICIPAL BOND FUND, ARIZONA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
We have audited the accompanying statement of assets and
liabilities,
including the statement of investments, of Premier State
Municipal Bond Fund,
Arizona Series (one of the series constituting the Premier State
Municipal
Bond Fund) as of April 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 April 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 State Municipal Bond Fund, Arizona Series at
April 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
June 6, 1995
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA 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, 1995 as "exempt_interest dividends" (not subject to regular
Federal and,
for individuals who are Arizona residents, Arizona 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 1995
calendar year
on Form 1099-DIV which will be mailed by January 31, 1996.
PREMIER STATE MUNICIPAL
BOND FUND, ARIZONA 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
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A.
Annual Report
Premier State
Municipal Bond Fund
Arizona Series
April 30, 1995
[Dreyfus logo]
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholder:
At the close of your Series' fiscal year on April 30, 1995,
the net asset value for Class A shares was $12.43, which was
$.07
(.56%) lower than the net asset value at inception on May 5,
1994.
Income dividends of approximately $.757 per share were paid
during
this period, which translates into an annualized distribution
rate
per share of 5.89%, based on the April 30 closing maximum
offering
price.
The net asset value for Class B shares was also $12.43,
which was $.07 (.56%) lower than the net asset value at
inception
on May 5, 1994. Income dividends of approximately $.692 per
share
were paid during this period, which translates into an
annualized
distribution rate per share of 5.64% based on the April 30
closing
net asset value.
We are pleased to report that all dividends paid from the
net investment income during this period were exempt from
Federal
and State of Colorado personal income taxes.*
The past fiscal year was marked by market turbulence and
mixed economic signals. The Series saw both sides of the
volatile
market as the Bond Buyer 25 Bond Revenue Index moved
approximately
117 basis points. We attempted to manage the Series through
these
difficult times by purchasing defensive coupons to balance the
discount holdings in the portfolio and by shortening
the average duration of the portfolio.
Factors which negatively affected the performance of the
Series during the past fiscal year included interest rate
increases by the Federal Reserve Board, inflation pressures, and
certain conditions in the municipal marketplace. By the first
quarter of 1995, however, these pressures had
abated and both the market and the Series began a strong
recovery.
As your Series' fiscal year progressed, new issuance of
municipal bonds in the specialty state sector became
progressively
thin, which forced secondary market prices to high levels.
Supply
continued to be scant after the New Year, but our investment
posture remained unchanged. Because we did not chase the
roller-coaster market as it moved through the second and third
fiscal quarters, the Series was well positioned to capitalize on
the market strength which materialized during the last fiscal
quarter. As a result, your Series was able to rebound to its
current level.
Overall, we view the prospect of a continuation of the
current market rally with a cautious eye, since it appears that
much of the appreciation expected for 1995 is already behind us.
With this in mind, the Series remains fully invested to seek to
take advantage of any additional market run-up in
an environment witnessing a continued scarcity of securities,
and to seek a high level of tax exempt income.
We have included a current Statement of Investments and
recent financial statements for your review. We appreciate your
investment in the Series and look forward to serving your
investment needs in the future.
Sincerely,
(Signature Logo)
Richard J. Moynihan
Director, Municipal Portfolio
Management
The Dreyfus Corporation
May 16, 1995
New York, N.Y.
*Some income may be subject to the Federal Alternative Minimum
Tax (AMT) for
certain shareholders.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
APRIL 30, 1995 COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT
IN PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES CLASS A
SHARES AND CLASS B SHARES AND THE LEHMAN BROTHERS MUNICIPAL BOND
INDEX
In Dollars
$10,665
Lehman Brothers Municipal Bond
Index*
$10,221
Premier State
Municipal Bond Fund, Colorado Series
(Class B Shares)
$10,098
Premier State
Municipal Bond Fund, Colorado Series
(Class A Shares)
*Source: Lehman Brothers
<TABLE>
ACTUAL AGGREGATE TOTAL RETURNS
<CAPTION>
CLASS A CLASS B
- ------------------------------------------------------------ -----------------------------------------------------------
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
Period ended 4/30/95 Sales Charge Sales Charge (4.5%) Period ended 4/30/95 Redemption Redemption*
- ------------------- -------------- ----------------- ------------------ --------- --------------
<S> <C> <C> <C> <C> <C>
From Inception (5/5/94) 5.75% .98% From Inception (5/5/94) 5.19% 2.21%
</TABLE>
Past performance is not predictive of future performance. Share
price and investment return fluctuate and share price may be
more
or less than original cost upon redemption. The above graph
compares a $10,000 investment made in Class A shares and Class B
shares of Premier State Municipal Bond Fund, Colorado 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. The Series invests primarily in
Colorado municipal securities and the performance shown in the
line graph takes into account the maximum initial sales charge
on
Class A shares and a 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 market. The Index does not take into
account charges, fees and other expenses. Also, unlike the Fund
which principally limits investments to Colorado municipal
obligations, the Index is not state-specific. Further
information
relating to Series 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.
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF INVESTMENTS
<CAPTION>
APRIL 30, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-92.9% AMOUNT VALUE
------------ ------------
<S> <C> <C>
COLORADO--88.1%
Adams County, PCR, Refunding (Public Service Co. of Colorado Project)
5.875%, 4/1/2014 (Insured; MBIA)........................................ $ 200,000 $ 196,738
Arvada, Sales and Use Tax Revenue, Refunding and Improvement
6.25%, 12/1/2012 (Insured; FGIC)........................................ 200,000 205,080
Colorado Board of Community Colleges and Occupational Education, Revenue
(Red Rocks Community College Project) 6%, 11/1/2019 (Insured; AMBAC).... 300,000 297,336
Colorado Health Facilities Authority, Revenues:
Hospital (PSL Healthcare Systems Project) 6.875%, 2/15/2023............. 500,000 483,420
Refunding (Boulder Community Hospital) 5.875%, 10/1/2023 (Insured; MBIA) 200,000 193,164
Colorado Housing Finance Authority, Single Family Program
7.55%, 8/1/2023 (Insured; FHA).......................................... 195,000 201,893
Colorado Springs, Utilities Revenue:
6.75%, 11/15/2021....................................................... 200,000 212,516
Refunding 6.50% 11/15/2015.............................................. 165,000 171,117
Colorado Water Resource Power Development Authority, Clean Water Revenue
6.30%, 9/1/2014......................................................... 200,000 205,952
Denver City and County, Airport Revenue 7%, 11/15/2025...................... 200,000 195,556
Garfield, Pitkin and Eagle Counties, School District Number 1
9%, 12/15/2008 (Insured; MBIA).......................................... 200,000 255,918
Lakewood, Multi-Family Housing Revenue, Mortgage
6.55%, 10/1/2015 (Insured; FHA)......................................... 200,000 199,094
Metro Wastewater Reclamation District, Gross Revenue 6%, 4/1/2010........... 200,000 202,494
Platte River Power Authority, Power Revenue, Refunding 6.125%, 6/1/2014..... 200,000 202,136
San Miguel County Housing Authority, Multi-Family Housing Revenue, Refunding
(Telluride Village Apartments Project) 6.40%, 7/1/2023.................. 300,000 277,947
Westminster, Sales and Use Tax Refunding, Revenue 6.25%, 12/1/2012
(Insured; FGIC)......................................................... 200,000 204,710
U.S. RELATED-4.8%
Puerto Rico Electric Power Authority, Power Revenue 6%, 7/1/2014 (Insured; FSA) 200,000 201,436
------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $3,866,801)....................................................... $3,906,507
==========
SHORT-TERM MUNICIPAL INVESTMENTS-7.1%
COLORADO:
Colorado Student Obligation Board Authority, Student Loan Revenue, VRDN
4.65% (LOC; Student Loan Marketing Association; Sumitomo Bank Ltd.) (a,b) $ 200,000 $ 200,000
</TABLE>
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF INVESTMENTS (CONTINUED)
<CAPTION>
APRIL 30, 1995
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------------ ------------
<S> <C> <C>
COLORADO (CONTINUED)
Denver City and County, VRDN (Rose Medical Center) 4.25% (Insured; AMBAC) (b) $ 100,000 $ 100,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $300,000)......................................................... $ 300,000
===========
TOTAL INVESTMENTS-100.0%
(cost $4,166,801)....................................................... $4,206,507
==========
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <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 PCR Pollution Control Revenue
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<CAPTION>
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- --------- -------------------- -----------------------
<S> <C> <C> <C>
AAA Aaa AAA 44.1%
AA Aa AA 28.4
BBB Baa BBB 22.7
F1 MIG1 SP1 4.8
------
100.0%
======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) 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.
(c) Fitch currently provides creditworthiness information
for a limited number of investments.
See notes to financial statements.
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
APRIL 30, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $4,166,801)-see statement....................................... $4,206,507
Cash.................................................................... 52,475
Receivable for shares of Beneficial Interest subscribed................. 79,251
Interest receivable..................................................... 73,436
Prepaid expenses-Note 1(e).............................................. 26,337
Due from The Dreyfus Corporation........................................ 3,559
----------
4,441,565
LIABILITIES:
Due to Distributor...................................................... $ 2,131
Payable for investment securities purchased............................. 200,036
Accrued expenses........................................................ 36,855 239,022
--------- ----------
NET ASSETS ................................................................ $4,202,543
===========
REPRESENTED BY:
Paid-in capital......................................................... $4,193,030
Accumulated net realized (loss) on investments.......................... (30,193)
Accumulated net unrealized appreciation on investments-Note 3........... 39,706
----------
NET ASSETS at value......................................................... $4,202,543
===========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 80,713
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 257,285
===========
NET ASSET VALUE per share:
Class A Shares
($1,003,407 / 80,713 shares).......................................... $12.43
======
Class B Shares
($3,199,136 / 257,285 shares)......................................... $12.43
======
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF OPERATIONS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
INVESTMENT INCOME:
INTEREST INCOME......................................................... $182,239
EXPENSES:
Management fee-Note 2(a).............................................. $ 16,404
Shareholder servicing costs-Note 2(c)................................. 22,633
Distribution fees (Class B shares)-Note 2(b).......................... 11,180
Organization expenses-Note 1(e)....................................... 6,271
Prospectus and shareholders' reports.................................. 4,111
Legal fees............................................................ 2,916
Registration fees..................................................... 2,130
Custodian fees........................................................ 1,025
Auditing fees......................................................... 645
Trustees' fees-Note 2(d).............................................. 29
Miscellaneous......................................................... 2,821
--------
70,165
Less-expense reimbursement from Manager due to
undertakings-Note 2(a)............................................ 58,829
--------
TOTAL EXPENSES.................................................. 11,336
--------
INVESTMENT INCOME-NET........................................... 170,903
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(30,193)
Net unrealized appreciation on investments.............................. 39,706
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 9,513
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $180,416
=========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
STATEMENT OF CHANGES IN NET ASSETS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
OPERATIONS:
Investment income-net..................................................... $ 170,903
Net realized (loss) on investments........................................ (30,193)
Net unrealized appreciation on investments for the period................. 39,706
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ 180,416
-----------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares.......................................................... (46,233)
Class B shares.......................................................... (124,670)
-----------
TOTAL DIVIDENDS..................................................... (170,903)
-----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares.......................................................... 2,423,449
Class B shares.......................................................... 4,771,752
Dividends reinvested:
Class A shares.......................................................... 27,461
Class B shares.......................................................... 77,605
Cost of shares redeemed:
Class A shares.......................................................... (1,455,718)
Class B shares.......................................................... (1,651,519)
-----------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS........ 4,193,030
-----------
TOTAL INCREASE IN NET ASSETS...................................... 4,202,543
NET ASSETS:
Beginning of period....................................................... ---
-----------
End of period............................................................. $ 4,202,543
==========
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------------------
CLASS A CLASS B
------------ ------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................ 196,569 386,112
Shares issued for dividends reinvested..................................... 2,240 6,325
Shares redeemed............................................................ (118,096) (135,152)
------------ ------------
NET INCREASE IN SHARES OUTSTANDING................................... 80,713 257,285
============ ============
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO 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 the period May 6, 1994 (commencement of operations) to
April
30, 1995. This information has been derived from the Series'
financial statements.
<TABLE>
<CAPTION>
PER SHARE DATA: CLASS A SHARES CLASS B SHARES
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period.................................... $12.50 $12.50
------- -------
INVESTMENT OPERATIONS:
Investment income-net................................................... .76 .69
Net realized and unrealized (loss) on investments....................... (.07) (.07)
------- -------
TOTAL FROM INVESTMENT OPERATIONS...................................... .69 .62
------- -------
DISTRIBUTIONS;
Dividends from investment income-net.................................... (.76) (.69)
------- -------
Net asset value, end of period.......................................... $12.43 $12.43
====== =======
TOTAL INVESTMENT RETURN(1).................................................. 5.83%(2) 5.26%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................. - .50%(2)
Ratio of net investment income to average net assets.................... 6.20%(2) 5.58%(2)
Decrease reflected in above expense ratios due to undertakings
by the Manager........................................................ 1.99%(2) 1.97%(2)
Portfolio Turnover Rate................................................. 21.81%(3) 21.81%(3)
Net Assets, end of period (000's Omitted)............................... $1,003 $3,199
(1) Exclusive of sales load.
(2) Annualized.
(3) Not annualized.
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, COLORADO 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 fifteen series
of
shares of Beneficial Interest including the Colorado Series (the
"Series") which commenced operations on May 6, 1994.
Dreyfus Service Corporation, until August 24, 1994, acted as the
distributor of the Fund's shares. Dreyfus Service Corporation is
a wholly-owned subsidiary of The Dreyfus Corporation
("Manager").
Effective August 24, 1994, the Manager became a direct
subsidiary
of Mellon Bank, N.A.
As of April 30, 1995, Major Trading Corporation, a
subsidiary of Mellon Bank Investments Corporation, held 34,070
shares of Class A and 33,922 shares of Class B. Mellon Bank
Investments Corporation is a subsidiary of Mellon Bank.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution
Services,
Inc., a provider of mutual fund administration services, which
in
turn is a wholly-owned subsidiary of FDI Holdings, Inc., the
parent company of which is Boston Institutional Group,
Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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. Other differences between the two
Classes include the services offered to and the expenses borne
by
each Class and certain voting rights.
(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 mortization 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 Fund has an unused capital loss carryover of $563
available for Federal income tax purposes to be applied against
future net securities profit, if any, realized subsequent to
April 30, 1995. The carryover does not include net realized
securities losses from November 1, 1994 through April 30, 1995
which are treated, for Federal income tax purposes, as arising
in
fiscal 1996. If not applied, the carryover expires in fiscal
2003.
(E) OTHER: Organization expenses paid by the Series are
included in prepaid expenses and are being amortized to
operations from May 6, 1994, the date operations commenced, over
the period during which it is expected that a benefit will be
realized, not to exceed five years. At April 30, 1995, the
unamortized balance of such expenses amounted to $25,083.
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 Series' 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 6, 1994 through April 2, 1995 to reimburse all fees and
expenses of the Series (excluding 12b-1 distribution plan fees
and
certain expenses as described above), and thereafter through
April 30, 1995, to reduce management fee paid by and reimburse
such excess expenses of the Series', to the extent that the
Series aggregate expenses (excluding certain expenses as
described
above) exceeded specified annual percentages of the Series'
average daily net assets. The expense reimbursement, pursuant to
the undertakings, amounted to $58,829 for the period ended
April 30, 1995.
The Manager has currently undertaken through June 30, 1995
or until such time as the net assets of the Series exceed $50
million, regardless of whether they remain at that level, to
reimburse all fees and expenses of the Series (excluding 12b-1
distribution plan fees, and certain expenses as described
above). The undertaking may be modified by the Manager from
time to time, provided that the resulting expense reimbursement
would not be less than the amount required pursuant to the
Agreement.
Dreyfus Service Corporation retained $671 during the period
ended April 30, 1995 from commissions earned on sales of the
Series' Class A shares.
(B) On August 3, 1994, Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to 12b-1 under the
Act.
Pursuant to the Class B Distribution Plan, effective August 24,
1994, the Fund pays the distributor for distributing the Series'
Class B shares at an annual rate of .50 of 1% of
the value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B Distribution Plan") provided that the Series' pay
Dreyfus Service Corporation at an annual rate of .50 of 1% of
the
value of the Series' Class B shares average daily net assets,
for
the costs and expenses in connection with advertising, marketing
and distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents
based on the value of the Series' Class B shares owned by
clients of the Service Agent.
During the period ended April 30, 1995, $9,770 was charged
to the Series pursuant to the Class B Distribution Plan and
$1,410 was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services.
The
Distributor determines the amounts to be paid to Service Agents.
From May 6, 1994 through August 23, 1994, $368 and $937 were
charged to Class A and Class B shares, respectively,
by Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $1,498 and $4,653 were charged to the Class A
and Class B shares, respectively, by the Distributor pursuant to
the Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $6,784,482 and $2,585,794, respectively,
for the period ended April 30, 1995, and consisted entirely of
long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on investments was $39,706, consisting of $64,805 gross
unrealized
appreciation and $25,099 gross unrealized depreciation.
At April 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 STATE MUNICIPAL BOND FUND, COLORADO SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, COLORADO SERIES
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of Premier
State Municipal Bond Fund, Colorado Series (one of the Series
constituting the Premier State Municipal Bond Fund), as of April
30, 1995, and the related statements of operations and
changes in net assets and financial highlights for the period
from May 6, 1994 (commencement of operations) to April 30, 1995.
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 audit.
We conducted our audit 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, 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 audit provides 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, Colorado Series at April 30, 1995, the results of its
operations, the changes in its net assets and the financial
highlights for the period from May 6, 1994 to April 30, 1995,
in conformity with generally accepted accounting principles.
(Ernst & Young LLP Signature logo)
New York, New York
June 6, 1995
PREMIER STATE MUNICIPAL BOND FUND, COLORADO 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 period May 6, 1994 (commencement of operations) to
April 30, 1995 as "exempt interest dividends" (not subject to
regular Federal and, for individuals who are Colorado
residents, Colorado 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 1995 calendar year on Form 1099-DIV which will
be mailed by January 31, 1996.
PREMIER STATE MUNICIPAL
BOND FUND, COLORADO 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
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A.
Annual Report
PREMIER STATE
MUNICIPAL BOND FUND
COLORADO SERIES
April 30, 1995
(Dreyfus Logo)
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholder:
At the close of your Series' fiscal year on April 30, 1995,
the net asset value for Class A shares was $12.95, which was
$.45 (3.60%) higher than the net asset value at inception on May
5, 1994. Income dividends of approximately $.756 per share were
paid during this period, which translates into an annualized
distribution rate per share of 5.65%, based on the April
30 closing maximum offering price.
The net asset value for Class B shares was also $12.95,
which was $.45 (3.60%) higher than the net asset value at
inception on May 5, 1994. Income dividends of approximately
$.693 per share were paid during this period, which translates
into an annualized distribution rate per share of 5.43% based on
the April 30 closing net asset value.
We are pleased to report that all dividends paid from the
net investment income during this period were exempt from
Federal and State of Oregon personal income taxes.*
The past fiscal year was marked by market turbulence and
mixed economic signals. The Series saw both sides of the
volatile market as the Bond Buyer 25 Bond Revenue Index moved
approximately 117 basis points. We attempted to
manage the Series through these difficult times by purchasing
defensive coupons to balance the discount holdings in the
portfolio and by shortening the average duration of the
portfolio.
Factors which negatively affected the performance of the
Series during the past fiscal year included interest rate
increases by the Federal Reserve Board, inflation pressures, and
certain conditions in the municipal marketplace. By the first
quarter of 1995, however, these pressures had abated and both
the market and the Series began a strong recovery.
As your Series' fiscal year progressed, new issuance of
municipal bonds in the specialty state sector became
progressively thin, which forced secondary market prices to high
levels. Supply continued to be scant after the New Year, but our
investment posture remained unchanged.
Because we did not chase the roller-coaster market as it moved
through the second and third fiscal quarters, the Series was
well positioned to capitalize on the market strength which
materialized during the last fiscal quarter. As a result, your
Series was able to rebound to its current level.
Overall, we view the prospect of a continuation of the
current market rally with a cautious eye, since it appears that
much of the appreciation expected for 1995 is already behind us.
With this in mind, the Series remains fully invested to seek to
take advantage of any additional market run-up in an environment
witnessing a continued scarcity of securities, and to seek a
high level of tax exempt income.
We have included a current Statement of Investments and
recent financial statements for your review. We appreciate your
investment in the Series and look forward to serving your
investment needs in the future.
Sincerely,
(Signature Logo)
Richard J. Moynihan
Director, Municipal Portfolio
Management
The Dreyfus Corporation
May 16, 1995
New York, N.Y.
*Some income may be subject to the Federal Alternative Minimum
Tax (AMT) for certain shareholders.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES APRIL 30, 1995
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PREMIER STATE
MUNICIPAL BOND FUND, OREGON SERIES CLASS A SHARES AND CLASS B SHARES AND THE
LEHMAN BROTHERS MUNICIPAL BOND INDEX
$10,665
Lehman Brothers Municipal Bond
Index*
In Dollars
$10,664
Premier State
Municipal Bond
Fund, Oregon Series (Class B Shares)
$10,503
Premier State
Municipal Bond
Fund, Oregon Series (Class A Shares)
*Source: Lehman Brothers
ACTUAL AGGREGATE TOTAL RETURNS
CLASS A CLASS B
---------------------------------------- ----------------------------------------------------------
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
Period ended 4/30/95 Sales Charge Sales Charge (4.5%) Period ended 4/30/95 Redemption Redemption*
- --------------------- ------------ ------------------- -------------------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
From Inception (5/5/94) 9.98% 5.02% From Inception (5/5/94) 9.44% 6.44%
</TABLE>
Past performance is not predictive of future performance. Share
price and investment return fluctuate and share price may be
more or less than original cost upon redemption. The above
graph compares a $10,000 investment made in Class A shares and
Class B shares of Premier State Municipal Bond Fund, Oregon
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. The Series invests primarily in
Oregon municipal securities and the performance shown in the
line graph takes into account the maximum initial sales charge
on Class A shares and a 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 market. The Index does not take into
account charges, fees and other expenses. Also, unlike the Fund
which principally limits investments to Oregon municipal
obligations, the Index is not state-specific. Further
information relating to Series 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.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF INVESTMENTS APRIL 30,1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-86.5% AMOUNT VALUE
------------ ------------
<S> <C> <C>
OREGON-75.2%Beaverton, Water Revenue 6.125%, 6/1/2014 (Insured; FSA).................... $ 200,000 $ 201,346
Clackamas County School District 6.15%, 6/1/2014 (Insured; AMBAC)........... 200,000 203,200
Douglas County Hospital Facility Authority, Revenue, Refund
(Health Facilities-Catholic Health) 6%, 11/15/2015 (Insured; MBIA)...... 200,000 199,758
Eugene, Electric Utility Revenue 5.80%, 8/1/2019............................ 200,000 195,400
Multnomah County, Revenue 6.10%, 10/1/2014.................................. 200,000 203,138
State of Oregon, Department of Transportation, Revenue, Regional Light Rail
Fund
(Westside Project) 6.25%, 6/1/2009 (Insured; MBIA)...................... 200,000 208,104
State of Oregon, Elderly and Disabled Housing 6.10%, 8/1/2015............... 200,000 203,564
Oregon Health, Housing, Educational and Cultural Facilities Authority,
Refunding (Lewis and Clark College Project) 6.125%, 10/1/2024 (Insured; MBIA) 200,000 200,558
Oregon Higher Education Building 6%, 12/1/2015.............................. 200,000 202,170
Oregon Housing and Community Services Department, SFMR 6.875%, 7/1/2028..... 200,000 205,514
Portland Sewer System, Revenue 6.25%, 6/1/2015.............................. 300,000 306,477
Salem, GO 5.70%, 8/1/2009 (Insured; MBIA)................................... 200,000 198,056
Salem-Keitzer School District 6%, 6/1/2014 (Insured; FGIC).................. 200,000 201,378
Tualatin Valley Water District, Water Revenue 6%, 6/1/2013.................. 200,000 203,716
Umatilla County School District 6%, 7/1/2014 (Insured; AMBAC)............... 200,000 201,274
Washington County School District - Beaverton 6%, 6/1/2012.................. 200,000 202,218
U.S. RELATED-11.3%
Puerto Rico Electric Power Authority, Power Revenue
6%, 7/1/2014 (Insured; FSA)............................................. 500,000 503,590
------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $3,778,638)..................... $3,839,461
============
SHORT-TERM MUNICIPAL INVESTMENTS-13.5%
OREGON-9.0%
State of Oregon, Economic Development Revenue, VRDN (Jae Oregon, Inc.
Project)
5.075%, 3/1/1999 (LOC; The Bank of Tokyo, LTD.) (a)..................... $ 400,000 $ 400,000
U.S. RELATED-4.5%
Puerto Rico Electric Power Authority, Power Revenue 3.89%, 7/1/2023 (b)..... 200,000 200,000
------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $600,000)...................... $ 600,000
============
TOTAL INVESTMENTS-100.0%
(cost $4,378,638)....................................................... $4,439,461
============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GO General Obligation VRDN Variable Rate Demand Notes
LOC Letter of Credit
</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 47.7%
AA Aa AA 27.3
A A A 16.0
F-1 MIG1 SP1 9.0
--------
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letter of credit. Securities payable on
demand. The interest rate, which is subject to change,
is based upon bank prime rates or an index of market
rates.
(b) Inverse floater security - the interest rate is subject
to change periodically.
(c) Fitch currently provides creditworthiness information
for a limited number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30,1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $4,378,638)-see statement....................................... $4,439,461
Interest receivable..................................................... 83,952
Receivable for shares of Beneficial Interest subscribed................. 39,479
Prepaid expenses-Note 1(e).............................................. 22,599
Due from The Dreyfus Corporation........................................ 1,695
----------
4,587,186
LIABILITIES:
Due to Distributor...................................................... $ 1,491
Due to Custodian........................................................ 195,475
Payable for shares of Beneficial Interest redeemed...................... 18,460
Accrued expenses and other liabilities.................................. 37,157 252,583
------------ ----------
NET ASSETS ................................................................ $4,334,603
==========
REPRESENTED BY:
Paid-in capital......................................................... $4,273,780
Accumulated net unrealized appreciation on investments-Note 3........... 60,823
----------
NET ASSETS at value......................................................... $4,334,603
==========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 220,224
==========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 114,490
==========
NET ASSET VALUE per share:
Class A Shares
($2,851,704 / 220,224 shares)......................................... $12.95
======
Class B Shares
($1,482,899 / 114,490 shares)......................................... $12.95
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF OPERATIONS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
INVESTMENT INCOME:
<S> <C> <C>
INTEREST INCOME......................................................... $164,596
EXPENSES:
Management fee-Note 2(a).............................................. $15,174
Shareholder servicing costs-Note 2(c)................................. 14,592
Organization expenses-Note 1(e)....................................... 5,511
Distribution fees (Class B shares)-Note 2(b).......................... 5,333
Prospectus and shareholders' reports.................................. 3,472
Registration fees..................................................... 1,564
Custodian fees........................................................ 557
Professional fees..................................................... 529
Trustees' fees and expenses-Note 2(d)................................. 28
Miscellaneous......................................................... 2,860
-------
49,620
Less-expense reimbursement from Manager due to
undertakings-Note 2(a)............................................ 44,131
-------
TOTAL EXPENSES.................................................... 5,489
--------
INVESTMENT INCOME-NET....................................................... 159,107
NET UNREALIZED APPRECIATION ON INVESTMENTS.................................. 60,823
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $219,930
========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
STATEMENT OF CHANGES IN NET ASSETS
FROM MAY 6, 1994 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1995
OPERATIONS:
<S> <C>
Investment income-net....................................................................... $ 159,107
Net unrealized appreciation on investments for the period................................... 60,823
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................. 219,930
------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares............................................................................ (100,688)
Class B shares............................................................................ (58,419)
------------
TOTAL DIVIDENDS...................................................................... (159,107)
------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares............................................................................ 4,457,134
Class B shares............................................................................ 2,868,459
Dividends reinvested:
Class A shares............................................................................ 86,034
Class B shares............................................................................ 53,564
Cost of shares redeemed:
Class A shares............................................................................ (1,725,732)
Class B shares............................................................................ (1,465,679)
------------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.......................... 4,273,780
------------
TOTAL INCREASE IN NET ASSETS........................................................ 4,334,603
NET ASSETS:
Beginning of period......................................................................... =============
End of period............................................................................... $ 4,334,603
============
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------------------
CLASS A CLASS B
------------ ------------
CAPITAL SHARE TRANSACTIONS:
<S> <C> <C>
Shares sold................................................................... 352,683 227,550
Shares issued for dividends reinvested........................................ 6,837 4,254
Shares redeemed............................................................... (139,296) (117,314)
------------ ------------
NET INCREASE IN SHARES OUTSTANDING...................................... 220,224 114,490
============ ============
</TABLE>
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OREGON 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 the period May 6, 1994 (commencement of operations) to April
30, 1995. This information has been derived from the Series'
financial statements.
<TABLE>
<CAPTION>
PER SHARE DATA: CLASS A SHARES CLASS B SHARES
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period............................... $12.50 $12.50
------- -------
INVESTMENT OPERATIONS:
Investment income-net .76 .69
Net unrealized gain on investments................................. .45 .45
------- -------
TOTAL FROM INVESTMENT OPERATIONS.................................. 1.21 1.14
------- -------
DISTRIBUTIONS;
Dividends from investment income-net .............................. (.76) (.69)
------- -------
Net asset value, end of period..................................... $12.95 $12.95
======= =======
TOTAL INVESTMENT RETURN (1)(2)......................................... 10.12% 9.57%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets (2)........................ .01% .51%
Ratio of net investment income to average net assets (2)........... 5.95% 5.47%
Decrease reflected in above expense ratios due to undertakings
by the Manager (2)............................................... 1.59% 1.62%
Portfolio Turnover Rate............................................ -- --
Net Assets, end of period (000's Omitted).......................... $2,852 $1,483
- --------------------
</TABLE>
(1) Exclusive of sales load.
(2) Annualized.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OREGON 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 fifteen series
including the Oregon Series (the "Series") which commenced
operations on May 6, 1994. Dreyfus Service Corporation, until
August 24, 1994, acted as the distributor of the Fund's shares.
Dreyfus Service Corporation is a wholly-owned subsidiary of The
Dreyfus Corporation ("Manager"). Effective August 24, 1994, the
Manager became a direct subsidiary of Mellon Bank, N.A.
As of April 30, 1995 Major Trading Corporation, a subsidiary
of Mellon Bank Investments Corporation, held 103,036 shares of
Class A and 77,729 shares of Class B. Mellon Bank Investments
Corporation is a subsidiary of Mellon Bank.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The
Distributor, located at One Exchange Place, Boston,
Massachusetts 02109, is a wholly-owned subsidiary of FDI
Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned
subsidiary of FDI Holdings, Inc., the parent company of which is
Boston Institutional Group, Inc.
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 offers both Class A and Class B shares. Class A
shares are subject to a sales charge imposed at the time of
purchase and 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.
Other differences between the two Classes include the services
offered to and the expenses borne by each Class and certain
voting rights.
(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, 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.
(E) OTHER: Organization expenses paid by the Series are
included in prepaid expenses and are being amortized to
operations from May 6, 1994, the date operations commenced, over
the period during which it is expected that a benefit will be
realized, not to exceed five years. At April 30, 1995, the
unamortized balance of such expenses amounted to $22,046.
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 Series' 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 6, 1994 through April 2, 1995, to reimburse all fees and
expenses of the Series (excluding 12b-1 distribution plan fees
and certain expenses as described above), and thereafter through
April 30, 1995, to reduce the shareholder services plan fee paid
by and reimburse such excess expenses of the Series, to the
extent that the Series' aggregate expenses (excluding certain
expenses as described above) exceeded specified annual
percentages of the Series' average daily net assets. The expense
reimbursement, pursuant to the undertakings, amounted to $44,131
for the period ended April 30, 1995.
The Manager has currently undertaken through June 30, 1995
or until such time as the net assets of the Series exceed $50
million, regardless of whether they remain at that level, 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).
The undertaking may be modified by the Manger from time to
time, provided that the resulting expense reimbursement would
not be less than the amount required pursuant to the Agreement.
(B) On August 3, 1994, the Series' shareholders approved a
revised Distribution Plan with respect to Class B shares only
(the "Class B Distribution Plan") pursuant to Rule 12b-1 under
the Act. Pursuant to the Class B
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Distribution Plan, effective August 24, 1994, the Fund pays the
Distributor for distributing the Series' Class B shares at an
annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior
Class B Distribution Plan") provided that the Series pay Dreyfus
Service Corporation at an annual rate of .50 of 1% of the value
of the Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing the Series' Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on
the value of the Series' Class B shares owned by clients of the
Service Agent.
During the year ended April 30, 1995, $4,598 was charged to
the Series pursuant to the Class B Distribution Plan and $735
was charged to the Series pursuant to the prior Class B
Distribution Plan.
(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 and Class B shares for
servicing shareholder accounts. 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 in respect of these services.
The Distributor determines the amounts to be paid to Service
Agents. From May 6, 1994 through August 23, 1994, $527 and $368
were charged to Class A and Class B shares, respectively, by
Dreyfus Service Corporation. From August 24, 1994 through
April 30, 1995, $3,703 and $2,299 were charged to Class A and
Class B shares, respectively, by the Distributor pursuant to the
Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees
of the Fund were "affiliated persons," as defined in the Act, of
the Manager and/or Dreyfus Service Corporation. Each trustee who
is not an "affiliated person" receives from the Fund an annual
fee of $2,500 and an attendance fee of $250 per meeting. The
Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities amounted to $5,078,626 and $700,000, respectively,
for the period ended April 30, 1995, and consisted entirely of
long-term and short-term municipal investments.
At April 30, 1995, accumulated net unrealized appreciation
on investments was $60,823, consisting of $62,836 gross
unrealized appreciation and $2,013 gross unrealized
depreciation.
At April 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 STATE MUNICIPAL BOND FUND, OREGON SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, OREGON SERIES
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of Premier
State Municipal Bond Fund, Oregon Series (one of the series
constituting the Premier State Municipal Bond Fund) as of April
30, 1995, and the related statements of operations and changes
in net assets and financial highlights for the period from May
6, 1994 (commencement of operations) to April 30, 1995. 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 audit.
We conducted our audit 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, 1995 by correspondence with the
custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides 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, Oregon Series at April 30, 1995, and the results of its
operations, the changes in its net assets and the financial
highlights for the period from May 6, 1994 to April 30, 1995,
in conformity with generally accepted accounting principles.
(Ernst & Young LLP Signature Logo)
New York, New York
June 6, 1995
PREMIER STATE MUNICIPAL BOND FUND, OREGON 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 period May 6, 1994 (commencement of operations) to
April 30, 1995 as "exempt--interest dividends" (not subject to
regular Federal and, for individuals who are Oregon residents,
Oregon 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 1995 calendar year on Form 1099--DIV which
will be mailed by January 31, 1996.
PREMIER STATE MUNICIPAL
BOND FUND, OREGON 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
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A.
Annual Report
PREMIER STATE
MUNICIPAL BOND FUND
OREGON SERIES
April 30, 1995
(Dreyfus Logo)
<PAGE>
PREMIER 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 the Registrant's Registration
Statement on Form N-1A as filed on July 12, 1995.
ITEM 16. Exhibits - All references are to the Registrant's
Registration Statement on Form N-1A, filed on July 12,
1995 (File No. 33-7496) (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. 12 to the Registration Statement on Form N-1A,
filed on June 22, 1994.
(3) Not Applicable.
<F1> (4) Form of Agreement and Plan of Reorganization.
(5) Not Applicable.
(6) Registrant's Management Agreement is incorporated by
reference to Exhibit (5) to the Registration
Statement.
(7) Registrant's Distribution Agreement is incorporated
by reference to Exhibit (6)(a) to the Registration
Statement.
- ----------------
[FN] Filed herewith as Exhibit A to the Proxy Statement/
Prospectus.
<PAGE>
(8) Not Applicable.
(9) Registrant's Custody Agreement is incorporated by
reference to Exhibit (8) to the Registration
Statement.
(10) Registrant's Distribution Plan, entered into
pursuant
to Rule 12b-1 under the Investment Company Act of
1940, as amended, is incorporated by reference to
Exhibit (15) to the Registration Statement.
(11) 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.
(12) Opinion and consent of Stroock & Stroock & Lavan
regarding tax matters is incorporated by reference
to Exhibit (12) to the Registration Statement on Form N-14,
filed on July 26, 1995.
(13) Not Applicable.
(14) Consent of Independent Auditors is incorporated by
reference to Exhibit (14) to the Registration Statement on Form
N-14, filed on July 26, 1995.
(15) Not Applicable.
<F2>(16) Powers of Attorney.
(17) Form of Proxy.
- ----------------
[FN] 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
29th day of September, 1995.
PREMIER 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
Eric B. Fischman and Ruth D. Liebert, 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.
<TABLE>
<CAPTION>
<S> <C> <C>
/S/MARIE E. CONNOLLY President and Treasurer September 29, 1995
Marie E. Connolly (Principal Executive
Officer)
/S/JOHN F. TOWER, III Assistant Treasurer September 29, 1995
John F. Tower, III (Principal Financial
and Accounting Officer)
/S/JOSEPH S. DIMARTINO Trustee September 29, 1995
Joseph S. DiMartino
/S/CLIFFORD L. ALEXANDER, JR. Trustee September 29, 1995
Clifford L. Alexander, Jr.
/S/PEGGY C. DAVIS Trustee September 29, 1995
Peggy C. Davis
/S/ERNEST KAFKA Trustee September 29, 1995
Ernest Kafka
/S/SAUL B. KLAMAN Trustee September 29, 1995
Saul B. Klaman
/S/NATHAN LEVENTHAL Trustee September 29, 1995
Nathan Leventhal
</TABLE>
