September 1, 1994
PREMIER STATE MUNICIPAL
BOND FUND
SUPPLEMENT TO PROSPECTUS
DATED SEPTEMBER 1, 1994
THE FOLLOWING ANTICIPATED CHANGES HAVE OCCURRED:
I. CONSUMMATION OF THE MERGER
THE FOLLOWING INFORMATION SUPPLEMENTS AND SUPERSEDES ANY CONTRARY
INFORMATION CONTAINED IN THE FUND'S PROSPECTUS.
On August 24, 1994, the previously announced merger between The
Dreyfus Corporation ("Dreyfus") and a subsidiary of Mellon Bank Corporation
("Mellon") was completed, and as a result, Dreyfus now is a wholly-owned
subsidiary of Mellon Bank, N.A. instead of a publicly-owned corporation.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, Mellon managed more than $130 billion in assets as of July
31, 1994, including approximately $6 billion in mutual fund assets. As of
June 30, 1994, various subsidiaries of Mellon provided non-investment
services, such as custodial or administration services, for approximately
$747 billion in assets, including approximately $97 billion in mutual fund
assets.
(CONTINUED ON REVERSE SIDE)
II. NEW DISTRIBUTOR
THE FOLLOWING INFORMATION SUPERSEDES AND REPLACES ANY CONTRARY
INFORMATION CONTAINED IN THE FUND'S PROSPECTUS AND
SPECIFICALLY IN THE SECTION ENTITLED "HOW TO BUY FUND SHARES."
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 Institutional Administration
Services, Inc., a provider of mutual fund administration services, the parent
company of which is Boston Institutional Group, Inc.
Accordingly, references in the Prospectus to Dreyfus Service
Corporation as the Fund's distributor should be substituted with Premier
Mutual Fund Services, Inc.
III.NEW RULE 12B-1 PLAN ARRANGEMENTS IMPLEMENTED
THE FOLLOWING INFORMATION SUPERSEDES AND REPLACES THE INFORMATION
CONTAINED IN THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DISTRIBUTION PLAN
AND SHAREHOLDER SERVICES 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 Class B shares of each Series at an annual rate of .50 of 1%
of the value of the average daily net assets of Class B.
IV. RESULTS OF FUND SHAREHOLDER VOTE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SUPERSEDES ANY CONTRARY
INFORMATION CONTAINED IN THE FUND'S PROSPECTUS.
On August 3, 1994, the shareholders of each Series of the Fund voted
to (a) approve (i) a new investment advisory agreement with Dreyfus, and (ii)
a new Distribution Plan with respect to Class B, each of which became
effective upon consummation of the merger between Dreyfus and a subsidiary of
Mellon.
PSTEBF/090194
(Lion Logo)
PREMIER STATE MUNICIPAL BOND FUND
PROSPECTUS SEPTEMBER 1, 1994
- -----------------------------------------------------------------------------
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 and Class B shares of each Series are being
offered. 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 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, 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.
Part B (also known as the Statement of Additional Information), dated
September 1, 1994, 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
666.
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............................. 39
HOW TO BUY FUND SHARES............................. 41
SHAREHOLDER SERVICES............................... 45
HOW TO REDEEM FUND SHARES.......................... 48
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN.... 52
DIVIDENDS, DISTRIBUTIONS AND TAXES................. 53
PERFORMANCE INFORMATION............................ 61
GENERAL INFORMATION................................ 62
Page 2
<TABLE>
<CAPTION>
FEE TABLE
ARIZONA SERIES COLORADO SERIES
------------------------- ----------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......... 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge).. -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.................... .55% .55% .55% .55%
12b-1 Fees......................... -- .50% -- .50%
Other Expenses..................... .56% .56% .40% .40%
Total Fund Operating Expenses...... 1.11% 1.61% .95% 1.45%
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>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR........................... $56 $46 $16 $54 $45 $15
3 YEARS.......................... $79 $71 $51 $74 $66 $46
5 YEARS.......................... $103 $98 $88 $95 $89 $79
10 YEARS**....................... $174 $166 $166 $156 $148 $148
</TABLE>
<TABLE>
<CAPTION>
CONNECTICUT SERIES FLORIDA SERIES
------------------------- -------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..... 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.................... .55% .55% .55% .55%
12b-1 Fees......................... -- .50% -- .50%
Other Expenses..................... .34% .34% .35% .35%
Total Fund Operating Expenses...... .89% 1.39% .90% 1.40%
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>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR........................... $54 $44 $14 $54 $44 $14
3 YEARS........................... $72 $64 $44 $72 $64 $44
5 YEARS........................... $92 $86 $76 $93 $87 $77
10 YEARS**........................ $150 $141 $141 $151 $142 $142
*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>
Page 3
<TABLE>
<CAPTION>
FEE TABLE
GEORGIA SERIES MARYLAND SERIES
----------------------- --------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........ 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge).... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................... .55% .55% .55% .55%
12b-1 Fees........................ -- .50% -- .50%
Other Expenses.................... .54% .54% .35% .35%
Total Fund Operating Expenses..... 1.09% 1.59% .90% 1.40%
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>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR................... $56 $46 $16 $54 $44 $14
3 YEARS.................. $78 $70 $50 $72 $64 $44
5 YEARS.................. $102 $97 $87 $93 $87 $77
10 YEARS**............... $172 $163 $163 $151 $142 $142
</TABLE>
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES MICHIGAN SERIES
-------------------------- --------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........ 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees............ .55% .55% .55% .55%
12b-1 Fees................. -- .50% -- .50%
Other Expenses............. .38% .38% .37% .37%
Total Fund Operating Expenses...... .93% 1.43% .92% 1.42%
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>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
--------- ---------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 YEAR............ $54 $45 $15 $54 $44 $14
3 Years........... $73 $65 $45 $73 $65 $45
5 Years........... $94 $88 $78 $94 $88 $78
10 Years**........ $154 $145 $145 $153 $144 $144
*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.
Page 4
</TABLE>
<TABLE>
<CAPTION>
FEE TABLE
MINNESOTA SERIES NORTH CAROLINA SERIES
----------------------------- -----------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
---------- ------- ---------- --------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).............. 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.................... .55% .55% .55% .55%
12b-1 Fees......................... -- .50% -- .50%
Other Expenses..................... .36% .36% .39% .39%
Total Fund Operating Expenses...... .91% 1.41% .94% 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>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
--------- ---------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 Year.......... $54 $44 $14 $54 $45 $15
3 Years......... $73 $65 $45 $74 $66 $46
5 Years......... $93 $87 $77 $95 $89 $79
10 Years**...... $152 $143 $143 $155 $146 $146
</TABLE>
<TABLE>
<CAPTION>
OHIO SERIES OREGON SERIES
------------------------ --------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
------------ ---------- ------- ---------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......... 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.................. .55% .55% .55% .55%
12b-1 Fees....................... -- .50% -- .50%
Other Expenses................... .38% .38% .40% .40%
Total Fund Operating Expenses .93% 1.43% .95% 1.45%
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>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
---------- -------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1 Year................... $54 $45 $15 $54 $45 $15
3 Years.................. $73 $65 $45 $74 $66 $46
5 Years.................. $94 $88 $78 $95 $89 $79
10 Years**............... $154 $145 $145 $156 $148 $148
*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>
Page 5
<TABLE>
<CAPTION>
FEE TABLE
PENNSYLVANIA SERIES TEXAS SERIES
-------------------------- --------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
---------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)....... 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge).. -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................. .55% .55% .55% .55%
12b-1 Fees...................... -- .50% -- .50%
Other Expenses.................. .38% .38% .39% .39%
Total Fund Operating Expenses... .93% 1.43% .94% 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>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
---------- --------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1 Year........... $54 $45 $15 $54 $45 $15
3 Years.......... $73 $65 $45 $74 $66 $46
5 Years.......... $94 $88 $78 $95 $89 $79
10 Years**....... $154 $145 $145 $155 $146 $146
*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>
Page 6
<TABLE>
<CAPTION>
FEE TABLE
VIRGINIA SERIES
--------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
---------- ---------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............. 4.50% --
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................. .55% .55%
12b-1 Fees...................... -- .50%
Other Expenses.................. .46% .46%
Total Fund Operating Expenses... 1.01% 1.51%
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>
<CAPTION>
CLASS A CLASS B CLASS B*
------- ------- --------
<S> <C> <C> <C>
1 Year............................... $55 $45 $15
3 Years.............................. $76 $68 $48
5 Years.............................. $98 $92 $82
10 Years**........................... $163 $154 $154
*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>
- -------------------------------------------------------------------------
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. For Class A, Other Expenses are based on data for the Fund's fiscal
year ended April 30, 1994, except for the Arizona, Colorado and Oregon
Series for which Other Expenses are based on estimated amounts for the current
fiscal year. For Class B, Other Expenses are estimated based on expenses
incurred by Class A. Long-term investors in Class B 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."
Page 8
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited
(except where indicated) by Ernst & Young LLP, the Fund's independent
auditors, whose report thereon appears in the Statement of Additional
Information. Further financial data and related notes are included in the
Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a
share of beneficial interest outstanding, total investment return, ratios
to average net assets and other supplemental data for each Series for the
periods indicated. This information has been derived from information
provided in the Series' financial statements.
<TABLE>
<CAPTION>
ARIZONA SERIES
-------------------------------------------------------
CLASS A SHARES CLASS B SHARES
-------------------------- ----------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------- -----------------------
<S> <C> <C> <C> <C>
PER SHARE DATA: 1993(1) 1994 1993(2) 1994
---------- --------- ------- ------
Net asset value, beginning of year..... $12.50 $13.12 $12.65 $13.12
------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net.................. .51 .75 .21 .68
Net realized and unrealized gain (loss)
on investments..................... .62 (.51) .47 (.50)
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS..... 1.13 .24 .68 .18
------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net...... (.51) (.75) (.21) (.68)
Dividends from net realized gain on investments -- (.01) -- (.01)
------- ------- ------- -------
TOTAL DISTRIBUTIONS................ (.51) (.76) (.21) (.69)
------- ------- ------- -------
Net asset value, end of year........... $13.12 $12.60 $13.12 $12.61
======= ======= ======= ======
TOTAL INVESTMENT RETURN(3)................. 14.01%(4) 1.61% 18.49%(4) 1.16%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.... -- -- .50%(4) .50%
Ratio of net investment income
to average net assets............... 5.71%(4) 5.51% 4.61%(4) 4.95%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation...... 1.87%(4) 1.26% 1.68%(4) 1.27%
Portfolio Turnover Rate............. 5.94%(5) 3.65% 5.94%(5) 3.65%
Net Assets, end of year (000's omitted).... $5,671 $12,506 $1,745 $6,569
(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>
Page 8
<TABLE>
<CAPTION>
COLORADO SERIES
--------------------------------
CLASS A SHARES CLASS B SHARES
--------------- -----------------
PERIOD ENDED JUNE 30, 1994
PER SHARE DATA: (UNAUDITED)(1)
<S> <C> <C>
Net asset value, beginning of period............ $12.50 $12.50
-------- -------
INVESTMENT OPERATIONS:
Investment income-net........................... .12 .11
Net realized and unrealized (loss) on investments... (.05) (.06)
-------- -------
TOTAL FROM INVESTMENT OPERATIONS................ .07 .05
-------- -------
DISTRIBUTIONS:
Dividends from investment income-net................ (.12) (.11)
-------- -------
Net asset value, end of period...................... $12.45 $12.44
====== =======
TOTAL INVESTMENT RETURN(2).............................. 3.78%(3) 2.74%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............. -- .50%(3)
Ratio of net investment income to average net assets... 5.70%(3) 3.92%(3)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation........... 3.75%(3) 3.60%(3)
Portfolio Turnover Rate............................... 13.50%(4) 13.50%(4)
Net Assets, end of period (000's omitted)............. $450 $1,260
(1) From May 6, 1994 (commencement of operations) to June 30, 1994.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
</TABLE>
Page 9
<TABLE>
<CAPTION>
CONNECTICUT 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 1993(2) 1994
-------- ------ ----- ----- ----- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $11.00 $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.89 $12.26
------ ------ ------ ------ ----- ----- ----- ------- -----
INVESTMENT OPERATIONS:
Investment income-net................. .76 .81 .80 .77 .72 .71 .68 .18 .61
Net realized and unrealized gain
(loss) on investments................ (.28) .38 (.15) .40 .17 .81 (.42) .37 (.43)
------ ------ ------ ------ ----- ----- ----- ------- -----
TOTAL FROM INVESTMENT OPERATIONS.... .48 1.19 .65 1.17 .89 1.52 .26 .55 .18
------ ------ ------ ------ ----- ----- ----- ------- -----
DISTRIBUTIONS:
Dividends from investment income-net.. (.76) (.81) (.80) (.77) (.72) (.71) (.68) (.18) (.61)
Dividends from net realized gain
on investments....................... -- (.05) (.02) -- -- -- (.03) -- (.03)
Dividends from excess net realized
gain on investments -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ----- ----- ----- ------- -----
TOTAL DISTRIBUTIONS................. (.76) (.86) (.82) (.77) (.72) (.71) (.71) (.18) (.64)
------ ------ ------ ------ ----- ----- ----- ------- -----
Net asset value, end of year........ $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $12.26 $11.80
======== ======= ======= ====== ====== ====== ======== ======= ======
TOTAL INVESTMENT RETURN(3)............ 5.00%(4) 11.54% 5.93% 11.10% 8.14% 13.62% 1.92% 16.08%(4) 1.26%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. -- -- -- .21% .52% .69% .80% 1.12%(4) 1.36%
Ratio of net investment income to
average net assets..................... 7.31%(4) 7.24% 7.05% 6.81% 6.30% 5.93% 5.44% 4.57%(4) 4.78%
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% .12%(4) .08%
Portfolio Turnover Rate........... 91.09%(5) 72.52% 12.62% 6.30% 8.53% 24.22% 10.83% 24.22% 10.83%
Net Assets, end of year
(000's omitted)........... $11,641 $ 31,056 $83,206 $183,788 $280,305 $360,020 $364,182 $9,492 $32,246
(1) From May 28, 1987 (commencement of operations) to April 30, 1988.
(2) From January 15, 1993 (commencement of initial offering) to April30, 1993.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
Page 10
<TABLE>
<CAPTION>
FLORIDA 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 1993(2) 1994
---------- ------ ------ ------ ------ ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $12.00 $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.59 $15.01
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net.............. .92 1.02 1.02 .99 .95 .92 .85 .24 .77
Net realized and unrealized gain
(loss) on investments............. .85 .63 (.11) .61 .41 .86 (.51) .42 (.51)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.. 1.77 1.65 .91 1.60 1.36 1.78 .34 .66 .26
DISTRIBUTIONS:
Dividends from investment income-net.. (.92) (1.02) (1.02) (.99) (.95) (.92) (.85) (.24) (.77)
------ ------ ------ ------ ------ ------ ------ ------ ------
Dividends from net realized
gain on investments................ -- -- (.03) (.02) (.01) (.17) (.04) -- (.04)
Dividends from excess net realized
gain on investments............... -- -- -- -- -- -- (.04) -- (.04)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS........ (.92) (1.02) (1.05) (1.01) (.96) (1.09) (.93) (.24) (.85)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year... $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $15.01 $14.42
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)..... 16.24%(4) 13.32% 6.83% 12.40% 10.09% 12.84% 2.14% 15.60%(4) 1.54%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets......... -- -- -- .21% .52% .69% .80% 1.12%(4) 1.34%
Ratio of net investment income
to average net assets...... 7.76%(4) 7.26% 7.24% 7.11% 6.65% 6.21% 5.61% 4.87%(4) 4.91%
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% .12%(4) .09%
Portfolio Turnover Rate.......... 31.25%(5) 17.16% 27.69% .28% 20.99% 33.18% 20.84% 33.18% 20.84%
Net Assets, end of year
(000's omitted)........... $1,493 $15,061 $67,416 $177,927 $245,474 $299,775 $289,791 $5,916 $22,476
(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>
Page 11
<TABLE>
<CAPTION>
GEORGIA SERIES
-------------------------------------------------------
CLASS A SHARES CLASS B SHARES
------------------------------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
---------------------- ------------------------
PER SHARE DATA: 1993(1) 1994 1993(2) 1994
--------- -------- ------- ------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.... $12.50 $13.27 $12.71 $13.27
-------- -------- ------- ------
INVESTMENT OPERATIONS:
Investment income-net................. .51 .73 .20 .67
Net realized and unrealized gain
(loss) on investments............... .77 (.58) .56 (.58)
-------- -------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS... 1.28 .15 .76 .09
-------- -------- ------- ------
DISTRIBUTIONS:
Dividends from investment income-net... (.51) (.73) (.20) (.67)
-------- -------- ------- ------
Net asset value, end of year........... $13.27 $12.69 $13.27 $12.69
======= ======= ======= ======
TOTAL INVESTMENT RETURN(3)................. 15.91%(4) .97% 20.66%(4) .46%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. -- .07% .50%(4) .58%
Ratio of net investment income to
average net assets...................... 5.55%(4) 5.41% 4.60%(4) 4.85%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation.. 1.46%(4) 1.02% 1.37%(4) 1.02%
Portfolio Turnover Rate............... 37.79%(5) 6.76% 37.79%(5) 6.76%
Net Assets, end of year (000's omitted).. $7,304 $10,058 $6,319 $16,243
(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>
Page 12
<TABLE>
<CAPTION>
MARYLAND 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 1993(2) 1994
----------- -------- ------- ------ -------- ------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $12.50 $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.64 $13.02
------ ------ ------ ------ ------ ------ ------ ------- ------
INVESTMENT OPERATIONS:
Investment income-net............... .80 .87 .86 .85 .79 .76 .73 .20 .65
Net realized and unrealized gain
(loss) on investments.............. (1.12) .34 (.09) .53 .35 .68 (.53) .38 (.53)
------ ------ ------ ------ ------ ------ ------ ------- ------
TOTAL FROM INVESTMENT OPERATIONS... (.32) 1.21 .77 1.38 1.14 1.44 .20 .58 .12
------ ------ ------ ------ ------ ------ ------ ------- ------
DISTRIBUTIONS:
Dividends from investment income-net.. (.80) (.87) (.86) (.85) (.79) (.76) (.73) (.20) (.65)
Dividends from net realized gain
on investments....................... -- -- (.02) (.01) (.05) (.09) (.03) -- (.03)
Dividends from excess net realized
gain on investments................. -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------- ------
TOTAL DISTRIBUTIONS................. (.80) (.87) (.88) (.86) (.84) (.85) (.76) (.20) (.68)
------ ------ ------ ------ ------ ------ ------ ------- ------
Net asset value, end of year... $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $13.02 $12.46
====== ====== ====== ====== ====== ====== ====== ======= =======
TOTAL INVESTMENT RETURN(3)... (2.50%)(4) 11.05% 6.69% 12.24% 9.68% 11.93% 1.33% 15.74%(4) .75%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets........... -- -- -- .21% .53% .69% .80% 1.09%(4) 1.37%
Ratio of net investment income
to average net assets....... 7.44%(4) 7.26% 7.12% 6.98% 6.40% 5.93% 5.51% 4.55%(4) 4.82%
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% .12%(4) .08%
Portfolio Turnover Rate........... 75.21%(5) 8.67% 30.03% 1.45% 16.21% 17.92% 10.27% 17.92% 10.27%
Net Assets, end of year
(000's omitted)................. $4,353 $24,383 $85,794 $179,959 $254,240 $337,307 $335,518 $5,931 $30,527
(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>
Page 13
<TABLE>
<CAPTION>
MASSACHUSETTS 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 1993(2) 1994
--------- ------- ------ ------- ------ ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $11.50 $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.79 $12.13
-------- ------- ------ ------ ------- ------- ------- -------- ------
INVESTMENT OPERATIONS:
Investment income-net............... .76 .83 .82 .79 .75 .73 .71 .19 .64
Net realized and unrealized gain
(loss) on investments.............. (.96) .38 (.23) .37 .36 .73 (.44) .34 (.45)
-------- ------- ------ ------ ------- ------- ------- -------- ------
TOTAL FROM INVESTMENT OPERATIONS... (.20) 1.21 .59 1.16 1.11 1.46 .27 .53 .19
-------- ------- ------ ------ ------- ------- ------- -------- ------
DISTRIBUTIONS:
Dividends from investment income-net.. (.76) (.83) (.82) (.79) (.75) (.73) (.71) (.19) (.64)
Dividends from net realized gain
on investments...................... -- -- -- (.01) -- (.01) (.05) -- (.05)
Dividends from excess net realized
gain on investments................. -- -- -- -- -- -- -- -- --
-------- ------- ------ ------ ------- ------- ------- -------- ------
TOTAL DISTRIBUTIONS................ (.76) (.83) (.82) (.80) (.75) (.74) (.76) (.19) (.69)
-------- ------- ------ ------ ------- ------- ------- -------- ------
Net asset value, end of year... $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $12.13 $11.63
====== ======= ====== ====== ====== ====== ====== ======= ======
TOTAL INVESTMENT RETURN(3)....... (1.67%)(4) 11.91% 5.49% 11.23% 10.32% 13.14% 2.08% 15.56%(4) 1.44%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.................... -- -- -- .19% .55% .69% .82% 1.15%(4) 1.36%
Ratio of net investment income to
average net assets............ 7.63%(4) 7.58% 7.40% 7.21% 6.65% 6.16% 5.80% 4.92%(4) 5.18%
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% .13%(4) .10%
Portfolio Turnover Rate............. 36.11%(5) 17.76% 28.44% 47.07% 24.75% 11.36% 12.04% 11.36% 12.04%
Net Assets, end of year
(000's omitted)................... $5,174 $21,578 $43,375 $57,328 $66,873 $79,701 $76,865 $1,066 $3,702
(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>
Page 14
<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 1993(2) 1994
------------ ------- ------- ------- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $13.00 $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.20 $15.64
-------- ------- ------- ------ ------ ------ ------ ------- --------
NVESTMENT OPERATIONS:
Investment income-net............... 1.00 1.07 1.05 1.01 .95 .92 .89 .24 .80
Net realized and unrealized gain
(loss) on investments.............. .45 .65 (.27) .54 .46 .98 (.30) .44 (.29)
-------- ------- ------- ------ ------ ------ ------ ------- --------
TOTAL FROM INVESTMENT OPERATIONS.. 1.45 1.72 .78 1.55 1.41 1.90 .59 .68 .51
-------- ------- ------- ------ ------ ------ ------ ------- --------
DISTRIBUTIONS:
Dividends from investment income-net.. (1.00) (1.07) (1.05) (1.01) (.95) (.92) (.89) (.24) (.80)
Dividends from net realized gain
on investments....................... -- -- (.03) -- -- (.13) (.08) -- (.08)
-------- ------- ------- ------ ------ ------ ------ ------- --------
TOTAL DISTRIBUTIONS.................. (1.00) (1.07) (1.08) (1.01) (.95) (1.05) (.97) (.24) (.88)
-------- ------- ------- ------ ------ ------ ------ ------- --------
Net asset value, end of year.......... $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.64 $15.27
====== ====== ======= ====== ====== ======= ====== ====== =======
TOTAL INVESTMENT RETURN(3).............. 12.32%(4) 13.25% 5.59% 11.61% 10.12% 13.25% 3.65% 15.50%(4) 3.11%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. -- -- -- .20% .53% .69% .81% 1.18%(4) 1.38%
Ratio of net investment income to
average net assets...................... 7.97%(4) 7.49% 7.23% 7.07% 6.47% 6.01% 5.56% 4.85%(4) 4.88%
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% .14%(4) .09%
Portfolio Turnover Rate................. 48.80%(5) 32.72% 20.23% 27.31% 21.42% 14.99% 19.96% 14.99% 19.96%
Net Assets, end of year
(000's omitted)........................ $1,671 $8,548 $56,699 $111,696 $145,159 $184,138 $187,405 $3,581 $13,861
(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>
Page 15
<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 1993(2) 1994
-------- ------ ------ ------ ------- ------ ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $13.50 $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.86 $15.32
------- ------- ------- ------ ------ ------- ------ ------- -------
INVESTMENT OPERATIONS:
Investment income-net................ .97 1.07 1.04 1.02 .96 .92 .87 .24 .78
Net realized and unrealized
gain (loss) on investments.......... (.13) .55 (.13) .56 .36 .77 (.53) .46 (.52)
------- ------- ------- ------ ------ ------- ------ ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .84 1.62 .91 1.58 1.32 1.69 .34 .70 .26
------- ------- ------- ------ ------ ------- ------ ------- -------
DISTRIBUTIONS:
Dividends from investment income-net.. (.97) (1.07) (1.04) (1.02) (.96) (.92) (.87) (.24) (.78)
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) (.24) (.84)
------- ------- ------- ------ ------ ------- ------ ------- -------
Net asset value, end of year......... $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $15.32 $14.74
====== ====== ====== ====== ======= ====== ====== ====== =======
TOTAL INVESTMENT RETURN(3)............. 7.01%(4) 12.57% 6.67% 11.89% 9.45% 11.96% 2.08% 16.32%(4) 1.55%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.......................... -- -- -- .20% .53% .69% .80% 1.16%(4) 1.38%
Ratio of net investment income
to average net assets............... 7.79%(4) 7.66% 7.25% 7.19% 6.53% 6.13% 5.61% 4.83%(4) 4.91%
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% .14%(4) .09%
Portfolio Turnover Rate.............. 70.26%(5) 31.64% 23.48% 14.04% 12.32% 23.42% 12.21% 23.42% 12.21%
Net Assets, end of year
(000's omitted)........... $4,331 $13,019 $46,428 $85,066 $122,782 $148,765 $155,657 $4,633 $21,004
(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>
Page 16
<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 1993(2) 1994
-------- ------- ------ ---------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......... $12.00 $12.39 $13.40 $12.90 $13.39
------- ------- ------- -------- --------
INVESTMENT OPERATIONS:
Investment income-net....................... .62 .78 .74 .20 .66
Net realized and unrealized gain
(loss) on investments...................... .39 1.02 (.67) .49 (.67)
------- ------- ------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS........... 1.01 1.80 .07 .69 (.01)
------- ------- ------- -------- --------
DISTRIBUTIONS:
Dividends from investment income-net........ (.62) (.78) (.74) (.20) (.66)
Dividends from net realized gain on investments... -- (.01) -- -- --
------- ------- ------- -------- --------
TOTAL DISTRIBUTIONS.............................. (.62) (.79) (.74) (.20) (.66)
------- ------- ------- -------- --------
Net asset value, end of year................. $12.39 $13.40 $12.73 $13.39 $12.72
======= ====== ====== ====== =======
TOTAL INVESTMENT RETURN(3)..................... 11.36%(4) 14.97% .29% 18.53%(4) (.27%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets....... -- .29% .44% .79%(4) 1.00%
Ratio of net investment income to average net assets.. 6.35%(4) 5.94% 5.38% 4.47%(4) 4.78%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation........ 1.14%(4) .76% .50% .56%(4) .48%
Portfolio Turnover Rate......................... 15.01%(5) 5.76% 11.62% 5.76% 11.62%
Net Assets, end of year (000's omitted)......... $26,387 $56,284 $68,074 $13,145 $38,968
(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>
Page 17
<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 1993(2) 1994
------- ------ ------ ------ ------ ------ ----- -------- -------
<S> <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 $12.69 $13.09
------- ------ ------ ------ ------ ------ ------ ------ -------
INVESTMENT OPERATIONS:
Investment income-net............. .80 .89 .88 .86 .80 .77 .74 .20 .66
Net realized and unrealized gain
(loss) on investments............. (3.32) .48 (.08) .46 .36 .81 (.36) .40 (.35)
------- ------- ------- ------- ------ ------ -------- ------ --------
TOTAL FROM INVESTMENT OPERATIONS.. (2.52) 1.37 .80 1.32 1.16 1.58 .38 .60 .31
------- ------ ------ ------ ------ ------ ------ ------ -------
DISTRIBUTIONS:
Dividends from investment income-net.. (.80) (.89) (.88) (.86) (.80) (.77) (.74) (.20) (.66)
Dividends from net realized
gain on investments............... -- -- (.04) -- (.01) (.07) (.03) -- (.03)
------- ------ ------ ------ ------ ------ ------ ------ -------
TOTAL DISTRIBUTIONS............... (.80) (.89) (.92) (.86) (.81) (.84) (.77) (.20) (.69)
------- ------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of year....... $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $13.09 $12.71
======= ====== ====== ====== ====== ====== ====== ======= =======
TOTAL INVESTMENT RETURN(3)......... (18.49%)(4) 12.72% 6.95% 11.84% 9.97% 13.24% 2.78% 16.36%(4) 2.24%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets............... -- -- -- .21% .52% .70% .81% 1.17%(4) 1.38%
Ratio of net investment income
to average net assets........... 7.79%(4) 7.57% 7.30% 7.20% 6.53% 6.03% 5.57% 4.62%(4) 4.89%
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% .13%(4) .10%
Portfolio Turnover Rate.......... 11.10%(5) 14.49% 14.58% 3.00% 13.68% 6.08% 7.73% 6.08% 7.73%
Net Assets, end of
(000's omitted).............. $8,043 $31,420 $92,864 $176,223 $243,074 $295,564 $293,706 $8,482 $27,657
(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>
Page 18
<TABLE>
<CAPTION>
OREGON SERIES
--------------------------------
CLASS A SHARES CLASS B SHARES
--------------------------------
PERIOD ENDED JUNE 30, 1994
PER SHARE DATA: (UNAUDITED)(1)
<S> <C> <C>
Net asset value, beginning of period.......... $12.50 $12.50
------- -------
INVESTMENT OPERATIONS:
Investment income-net......................... .12 .11
Net unrealized gain on investments............ .11 .11
------- -------
TOTAL FROM INVESTMENT OPERATIONS........... .23 .22
------- -------
DISTRIBUTIONS:
Dividends from investment income-net........... (.12) (.11)
------- -------
Net asset value, end of period ................. $12.61 $12.61
======= =======
TOTAL INVESTMENT RETURN(2)........................... 12.19%(3) 11.73%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.......... -- .50%(3)
Ratio of net investment income to average net assets.. 6.01%(3) 5.71%(3)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation............ 10.03%(3) 10.86%(3)
Portfolio Turnover Rate.................................. -- --
Net Assets, end of period (000's omitted)............. $375 $262
(1) From May 6, 1994 (commencement of operations) to June 30, 1994.
(2) Exclusive of sales load.
(3) Annualized.
</TABLE>
Page 19
<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 1993(2) 1994
------- ------ ------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $15.00 $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.10 $16.60
------ ------- ------ ------ ------ ------- ------- -------- -------
INVESTMENT OPERATIONS:
Investment income-net.............. .85 1.13 1.13 1.12 1.06 1.02 .95 .26 .85
Net realized and unrealized gain
(loss) on investments............. (.77) .55 (.08) .55 .56 .99 (.57) .50 (.56)
------ ------- ------ ------ ------ ------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .08 1.68 1.05 1.67 1.62 2.01 .38 .76 .29
------ ------- ------ ------ ------ ------- ------- -------- -------
DISTRIBUTIONS:
Dividends from investment income-net.. (.85) (1.13) (1.13) (1.12) (1.06) (1.02) (.95) (.26) (.85)
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) (.26) (.88)
------ ------- ------ ------ ------ ------- ------- -------- -------
Net asset value, end of year........ $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.60 $16.01
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)........... .87%(4) 12.21% 7.20% 11.74% 10.97% 13.19% 2.17% 16.39%(4) 1.65%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets........................ -- -- -- .22% .56% .69% .81% 1.14%(4) 1.38%
Ratio of net investment income
to average net assets............ 7.08%(4) 7.46% 7.38% 7.32% 6.75% 6.24% 5.61% 4.90%(4) 4.95%
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% .15%(4) .10%
Portfolio Turnover Rate............. 67.48%(5) 25.10% 59.15% 25.74% 38.97% 8.64% 7.21% 8.64% 7.21%
Net Assets, end of year
(000's omitted)............. $2,870 $12,083 $51,418 $113,439 $158,437 $220,920 $235,619 $14,631 $59,057
(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>
Page 20
<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 1993(2) 1994
------- ------ ------- ------- ------ -------- ------ -------- -------
<S> <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 $20.52 $21.23
------- ------- ------- ------ ------- ------- ------ ------- -------
INVESTMENT OPERATIONS:
Investment income-net.............. 1.33 1.45 1.44 1.40 1.36 1.29 1.25 .33 1.13
Net realized and unrealized gain
(loss) on investments............. 2.39 .75 (.05) .67 .69 1.37 (.66) .71 (.66)
------- ------- ------- ------ ------- ------- ------ ------- -------
TOTAL FROM INVESTMENT OPERATIONS... 3.72 2.20 1.39 2.07 2.05 2.66 .59 1.04 .47
------- ------- ------- ------ ------- ------- ------ ------- -------
DISTRIBUTIONS:
Dividends from investment income-net.. (1.33) (1.45) (1.44) (1.40) (1.36) (1.29) (1.25) (.33) (1.13)
Dividends from net realized gain
on investments....................... -- -- (.01) -- (.05) (.03) (.13) -- (.13)
Dividends from excess net realized
gain on investments.................. -- -- -- -- -- -- (.03) -- (.03)
------- ------- ------- ------ ------- ------- ------ ------- -------
TOTAL DISTRIBUTIONS................ (1.33) (1.45) (1.45) (1.40) (1.41) (1.32) (1.41) (.33) (1.29)
------- ------- ------- ------ ------- ------- ------ ------- -------
Net asset value, end of year..... $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $21.23 $20.41
======= ======= ======= ======= ====== ====== ======= ======= =======
TOTAL INVESTMENT RETURN(3)...... 26.23%(4) 12.79% 7.55% 11.54% 10.97% 13.80% 2.62% 17.60%(4) 2.05%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets............. -- -- -- -- .15% .36% .39% .82%(4) .94%
atio of net investment income to
average net assets............. 7.94%(4) 7.90% 7.50% 7.29% 6.78% 6.18% 5.78% 4.81%(4) 5.15%
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% .49%(4) .54%
Portfolio Turnover Rate............. 47.85%(5) 6.84% 2.62% 1.95% 7.49% 14.94% 9.68% 14.94% 9.68%
Net Assets, end of year
(000's omitted).......... $1,553 $2,902 $5,642 $15,139 $37,208 $72,037 $76,277 $6,373 $15,878
(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>
Page 21
<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 1993(2) 1994
--------- ------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $15.00 $15.50 $16.80 $16.25 $16.80
------- -------- ------- -------- -------
INVESTMENT OPERATIONS:
Investment income-net................... .78 1.00 .97 .26 .88
Net realized and unrealized gain
(loss) on investments.................. .50 1.31 (.75) .55 (.75)
------- -------- ------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS...... 1.28 2.31 .22 .81 .13
------- -------- ------- -------- -------
DISTRIBUTIONS:
Dividends from investment income-net....... (.78) (1.00) (.97) (.26) (.88)
Dividends from net realized gain on investments.. -- (.01) (.01) -- (.01)
Dividends from excess net realized
gain on investments............................. -- -- (.02) -- (.02)
------- -------- ------- -------- -------
TOTAL DISTRIBUTIONS.......................... (.78) (1.01) (1.00) (.26) (.91)
------- -------- ------- -------- -------
Net asset value, end of year..................... $15.50 $16.80 $16.02 $16.80 $16.02
======= ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3).......................... 11.54%(4) 15.32% 1.10% 17.22%(4) .54%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........... -- .27% .46% .83%(4) 1.01%
Ratio of net investment income to
average net assets............................. 6.42%(4) 6.02% 5.64% 4.62%(4) 5.02%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation..... 1.22%(4) .76% .55% .54%(4) .54%
Portfolio Turnover Rate......................... 5.96%(5) 9.32% 30.69% 9.32% 30.69%
Net Assets, end of year (000's omitted)......... $23,096 $55,627 $65,279 $8,402 $25,254
(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 (except
with respect to the Colorado and Oregon Series) is contained in the
Fund's annual report. Further information about the Colorado Series'
and the Oregon Series' performance will be contained in the Fund's
annual report for the fiscal year ending April 30, 1995, which will
be available approximately the end of June 1995. The Fund's annual
report 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 two 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 Class A and
Class B share of a Series 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
Page 22
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.
You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee and CDSC
on Class B shares prior to conversion 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. In
this regard, generally, Class B shares may be more appropriate for
investors who invest less than $100,000 in Fund shares. 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 shares may exceed the initial sales charge on
Class A shares during the life of the investment. Generally, Class A shares
may be more appropriate for investors who invest $250,000 or more 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.
Page 23
MUNICIPAL OBLIGATIONS
Debt securities the interest from which is, in the opinion of
bond counsel to the issuer, exempt from Federal income tax ("Municipal
Obligations") generally include debt obligations issued to obtain funds
for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal Obligations
are classified as general obligation bonds, revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general
taxing power. Tax exempt industrial development bonds, in most cases,
are revenue bonds that do not carry the pledge of the credit of the issuing
municipality, but generally are guaranteed by the corporate entity on
whose behalf they are issued. Notes are short-term instruments which
are obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal Obligations include municipal lease/purchase
agreements which are similar to installment purchase contracts for property or
equipment issued by municipalities. Municipal Obligations bear fixed,
floating or variable rates of interest, which are determined in some
instances by formulas under which the Municipal Obligation's interest
rate will change directly or inversely to changes in interest rates or an
index, or multiples thereof, in many cases subject to a maximum and
minimum. Certain Municipal Obligations are subject to redemption at a
date earlier than their stated maturity pursuant to call options, which
may be separated from the related Municipal Obligation and purchased
and sold separately.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that at least 80% of
the value of each Series' net assets (except when maintaining a
temporary defensive position) will be invested in Municipal Obligations
and at least 65% of the value of each Series' net assets (except when
maintaining a temporary defensive position) will be invested in bonds
and debentures. 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 the lowest
rating assigned by such rating organizations and indicates that the
Municipal Obligation is in default and interest and/or repayment of
principal is in arrears. See "Risk Factors - Lower Rated Bonds" below
for a further discussion of certain
Page 24
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. 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, which
may change daily without penalty, pursuant to direct arrangements
between such Series, as lender, and the borrower. The interest rates on these
obligations fluctuate from time to time. Frequently, such obligations
are secured by letters of credit or other credit support arrangements
provided by banks. Use of letters of credit or other credit support
arrangements will not adversely affect the tax exempt status of these
obligations. 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. 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. No Series
will invest more than 15% of the value of its net assets in floating or
variable rate demand obligations as to which the Series cannot exercise
the demand feature on not more than seven days' notice if there is no
secondary market available for these obligations, and in other illiquid
securities.
Each Series may purchase from financial institutions
participation interests in Municipal Obligations (such as industrial
development bonds and municipal lease/purchase agree-
Page 25
ments). 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, the participation interest 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. No Series will invest
more than 15% of the value of its net assets in participation interests
that do not have this demand feature if there is no secondary market
available for these instruments, and in other illiquid securities.
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
Page 26
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 that
the Fund deems representative of their value, the value of the Series'
net assets could be adversely affected. However, if a substantial
market of qualified institutional buyers develops pursuant to Rule 144A under
the Securities Act of 1933, as amended, for certain of these securities
held by the Series, 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 Dreyfus Corporation to
monitor carefully each Series' 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, a Series' investing in such securities may have
the effect of increasing the level of illiquidity in such Series'
portfolio during such period.
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-bear-
Page 27
ing 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. Options
and futures transactions involve so-called "derivative securities."
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 high-
Page 28
er 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 and 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 and 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
Page 29
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.
In addition, to the extent a Series is engaging in a futures
transaction as a hedging device, due to 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
in that, for example, losses on the portfolio securities may be in excess
of gains on the futures contract or losses on the futures contract may
be in excess of gains on the portfolio securities that were the subject of
the hedge. In futures contracts based on indexes, 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 market movements are not as
anticipated when the hedge is established.
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 CONTRACTS
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 and 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.
Page 30
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.
If a Series has hedged against the possibility of an increase
in interest rates adversely affecting the value of securities held in the
Series' portfolio and rates decrease instead, such Series will lose part
or all of the benefit of the increased value of securities which it has
hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Series has insufficient cash, it
may have to sell securities to meet daily variation margin requirements
at a time when it may be disadvantageous to do so. These sales of
securities may, but will not necessarily, be at increased prices which
reflect the decline in 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. Until the security is
replaced, the Series is required to pay to the lender amounts equal to
any interest which accrues during the period of the loan. To borrow the
security, the Series also may be required to pay a premium, which
would increase the cost of the security sold. The proceeds of the short sale
will be retained by the broker, to the extent necessary to meet margin
requirements, until the short position is closed out.
Until the Series replaces the borrowed security in connection
with a short sale, the Series 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.
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. This
Page 31
result is the opposite of what one would expect from a cash
purchase of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any
premium or amount in lieu of interest the Series may be required to pay
in connection with a short sale.
The Fund anticipates that the frequency of short sales will
vary substantially in different periods, and it does not intend that any
specified portion of a Series' assets, as a matter of practice, will be
invested in short sales. However, 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. The
proceeds of the short sale will be held by a broker until the settlement
date at which time the Series delivers the security to close the short
position. The Series receives the net proceeds from the short sale. 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.
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 libilities (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; 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.
Page 32
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each Series may (i) pledge, hypothecate, mortgage or
otherwise encumber its assets, but only to secure permitted borrowings;
and (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
Arizona local governmental entities are subject to certain
limitations on their ability to assess taxes and levies which could
affect their ability to meet their respective financial obligations.
Arizona's economy has been adversely affected by problems in the real
estate sector and current and proposed reductions in Federal military
expenditures are expected to cause additional difficulties with Arizona's
economy.
COLORADO SERIES
Since 1985, Colorado's economy has been 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. Recovery began in 1987 and is
gradually gaining momentum. Employment in the service and trade
industries represents approximately 50% of the State work force.
Colorado's manufacturing sector, which is concentrated in defense-
related production and employs approximately 9% of the work force, is expected
to lose jobs over the next few quarters as sluggish domestic demand and
slackening defense orders take a toll.
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
Page 33
through 1987, 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 estimated that the State ended the
1993 fiscal year with a General Fund operating surplus of $3.1 million. The
Comptroller, however, estimated the cumulative projected deficit under GAAP
for the fiscal year ended June 30, 1993 to have been approximately $494.6
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. Moody's and Fitch currently rate Connecticut's
bonds Aa and AA +, respectively.
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 1992-93 total General Revenue and Working
Capital Funds available are estimated to have been $12.282 billion,
which resulted in estimated unencumbered reserves of $429.4 million at the
end of fiscal 1992-93. The General Revenue and Working Capital Funds
ended the 1991-92 fiscal year with unencumbered reserves of $185 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
of $428 million in 1989. 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 recorded $413 million
operating deficit for fiscal 1990, which reduced reserves to $55
million. As projections were made of continued weakness in economically
sensitive taxes, a $359 million shortfall was expected for fiscal 1991. The
projected imbalance was corrected through reductions in expenditures,
adjustments to capital, use of reserves and other one-time measures
which raised the State's general fund reserves to the fiscal 1990 level.
During fiscal 1992, Georgia's revenue plus General Fund reserve approximately
equalled appropriations. Revenue estimates for fiscal 1993 indicate
that revenue plus the General Fund reserve equalled appropriations for that
year.
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
Page 34
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 1993 budget was enacted, it was estimated that the General
Fund surplus on a budgetary basis at June 30, 1993, would be
approximately $10 million. As of May 19, 1993, it was estimated that
the General Fund surplus on a budgetary basis at June 30, 1993, would be
$500,000. When the 1994 budget was enacted, it was estimated that
the General Fund surplus on a budgetary basis at June 30, 1994 would be
approximately $76 million, including $50 million mandated to be
appropriated in the 1994 session of the General Assembly to the
Revenue Stabilization Account of the State Reserve Fund.
MASSACHUSETTS SERIES
Massachusetts' economic difficulties and fiscal problems may
affect Massachusetts Municipal Obligations in the Series' portfolio. The
persistence of serious financial difficulties could adversely affect the
market values and marketability of, or result in default in payment on,
outstanding State Municipal Obligations. Massachusetts' expenditures
for State programs and services in each of the fiscal years 1987 through
1991 have exceeded each year's current revenues. In addition, Massachusetts'
tax revenues during this period repeatedly failed to meet official
forecasts. For the budgeted funds, operating losses in fiscal 1987 and
1988 were covered largely by drawing on fund balances from prior
fiscal years. Massachusetts' operating losses in fiscal 1989 and 1990, which
totalled $672.5 million and $1.251 billion, respectively, were covered
primarily through deficit borrowings. Massachusetts ended fiscal 1991
with an operating deficit of $21.2 million, but with positive closing
fund balances of $237.1 million, after applying the opening fund
balances created from the proceeds of the fiscal 1990 deficit borrowing. No
deficit borrowing was required to close out fiscal 1991. Massachusetts
ended fiscal 1992 with revenues and other sources exceeding expenditures
and other uses by $312.3 million and with positive fund balances of
approximately $549.4 million. Fiscal 1993 is estimated to have ended
with a fund balance of approximately $230 million.
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 stood at 16.6% during the last quarter of 1982 and averaged 8.8% in
1992.
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. The fiscal year l990 budget, however,
resulted in a year-end deficit of approximately $310 million. In 1991,
the State was forced to enact major initiatives to close a $1.847
billion budget gap in the State's 1991 budget which resulted in a year-end
cumulative deficit of approximately $170 million. This cumulative
deficit was eliminated as of the fiscal year ended September 30, 1992.
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 as of 1991. 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
Page 35
of a downturn in the State's economy resulting from the national recession.
Recently, real growth has been slow due to the current national recession,
although the effect of such recession has been less severe on Minnesota's
economy than it has been on the national 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 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 22% of gross
agricultural income.
The North Carolina Constitution requires a balanced budget.
In May 1991, the State revised its revenue estimates to reflect a $729
million revenue shortfall for the fiscal year ending June 30, 1991. In
conjunction with the new revenue estimates, the Governor ordered a
variety of budget balancing measures, including a hiring freeze on most
State positions, a freeze on certain capital projects and a general
reduction in expenditures by State agencies. Pursuant to this action, the
budget for the fiscal year 1990-91 was balanced. Through January
1992, the State realized revenues at or slightly above amounts projected and
required to support the budget for the fiscal year 1991-92.
OHIO SERIES
Nonmanufacturing industries now employ more than
three-fourths 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 1994 fiscal year, the Ohio Office of Budget and Management
projects positive $106.6 million and $314.6 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 acceleration of the
economy through 1994 with jobs increasing at 3.0% per year, and
personal income growing at an annual rate of 7.1%. 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.
Forest products are forecast to decline, but the other major areas
should be stable or improving. Despite the expectation of improving conditions,
growth is likely to remain subdued as the timber industry adjusts to
the new Federal forest plan and State and local governments downsize in
response to budget cuts.
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.
Page 36
Pennsylvania's approved budget for fiscal 1993 authorized
$14.046 billion of spending, an increase of less than .25% over total
appropriations for fiscal 1992. The small increase in expenditures
resulted from constraints on revenues as a result of a personal tax rate
reduction effective July 1, 1992, a low rate of economic growth, higher
tax refund reserves against adverse decisions in pending litigation, and
line item vetoes by the Governor. Through March 1993, revenue
collections were approximately .7% above estimates. Pennsylvania's approved
budget for fiscal 1994 calls for no new taxes and an increase in expenditures
over fiscal 1993 of approximately 5%, primarily for education and
welfare.
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. A recurrence of such economic or financial difficulties could
result in defaults or declines in the market values or marketability of
various State Municipal Obligations in which the Series may invest,
which could adversely affect the interest income to the Series. In fiscal
years 1989, 1990, 1991 and 1992, Texas' General Revenue Fund ended with
cash surpluses of $298 million, $768 million, $712.8 million and $609.2
million, respectively.
VIRGINIA SERIES
Virginia's economy is strongly influenced by Federal
government installations and the growth of suburban communities around
Washington, D.C. With Northern Virginia a part of the Washington, D.C.
metropolitan area and Hampton Roads the home of the nation's largest
concentration of military installations, the Federal government has a
greater impact on Virginia relative to its size than any other state
except Alaska and Hawaii. Manufacturing is also an important segment
of the State's economy. The manufacturing industry accounts for over 15%
of total nonagricultural employment and ranks fourth behind services,
wholesale and retail trade, and government (Federal, state and local) in
the number of jobs it provides.
Virginia operates on a two-year budget. As a result of an
ailing economy and reduced tax collections, Virginia predicted a budget
shortfall for the two years ended June 30, 1992.
LOWER RATED BONDS
You should carefully consider the relative risks of investing
in the higher yielding (and, therefore, higher risk) debt securities in
which each Series may invest up to 30% of the value of its net assets.
These are securities such as those rated Ba by Moody's or BB by S&P or
Fitch or as low as the lowest rating assigned by Moody's, S&P or Fitch.
They generally are not meant for short-term investing and may be
subject to certain risks with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher rated fixed-income
securities. 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
Page 37
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.
Page 38
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. As of June 30, 1994, The Dreyfus Corporation
managed or administered approximately $71 billion in assets for more than 1.9
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 investment off-
Page 39
icer 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 investment officer 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 investment officer 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 investment officer for each of the Michigan Series,
the Minnesota Series and the Ohio Series is Joseph P. Darcy, who 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 investment officers are identified under "Management of
the Fund" 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 security analysts.
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, 1994, the Fund paid The
Dreyfus Corporation a management fee at the effective annual rate set
forth below with respect to each Series (except the Colorado and
Oregon Series which had not commenced operations) pursuant to undertakings
in effect:
EFFECTIVE ANNUAL RATE
AS A PERCENTAGE OF
SERIES AVERAGE DAILY NET ASSETS
------------ ---------------------------------------------
Arizona 0
Connecticut .46 of 1%
Florida .45 of 1%
Georgia 0
Maryland .45 of 1%
Massachusetts .44 of 1%
Michigan .44 of 1%
Minnesota .44 of 1%
North Carolina .06 of 1%
Ohio .43 of 1%
Pennsylvania .44 of 1%
Texas 0
Virginia 0
For the period May 6, 1994 (commencement of operations of each of the
Colorado and Oregon Series) through June 30, 1994, (unaudited), no
management fee was paid by the Fund with respect to the Colorado Series or
Oregon Series pursuant to undertakings by The Dreyfus Corporation.
Page 40
The Dreyfus Corporation may pay Dreyfus Service Corporation
for shareholder and distribution services from The Dreyfus
Corporation's own assets, including past profits but not including the
management fee paid by the Fund. Dreyfus Service Corporation may use part
or all of such payments to pay Service Agents in respect of these services.
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, 110 Washington Street, New York, New York
10286, is the Fund's Custodian.
HOW TO BUY FUND SHARES
The Fund's distributor is Dreyfus Service Corporation, a
wholly-owned subsidiary of The Dreyfus Corporation, located at 200
Park Avenue, New York, New York 10166. The shares it distributes are not
deposits or obligations of The Dreyfus Security Savings Bank, F.S.B. and
therefore are not insured by the Federal Deposit Insurance Corporation.
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 Dreyfus Service Corporation. 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 whether the
purchase is for Class A or Class B shares. 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:
Page 41
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
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
Page 42
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 Dreyfus Service Corporation 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 Dreyfus Service Corporation 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
</TABLE>
There is no initial sales charge on purchases of $1,000,000
or more of Class A shares. However, if you purchase Class A shares
without an initial sales charge as part of an investment of at least
$1,000,000 and redeem those shares within two years after purchase, a
CDSC of 1.00% will be imposed at the time of redemption. The terms
contained in the section of the Fund's Prospectus entitled "How to Redeem
Fund Shares -- Contingent Deferred Sales Charge -- Class B" (other than
the amount of the CDSC and its time periods) are applicable to the Class
A shares subject to a CDSC. Letter of Intent and Right of Accumulation
apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with Dreyfus Service Corporation 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 employ-
Page 43
ee benefit plan or other program, or for their spouses or minor children at net
asset value, provided that they have furnished Dreyfus Service Corporation 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.
In fiscal 1994, Dreyfus Service Corporation retained $806,651
from sales loads on Class A shares (except the Colorado and Oregon
Series which had not commenced operations). The dealer reallowance may be
changed from time to time but will remain the same for all dealers.
Dreyfus Service Corporation, 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
(except the Colorado and Oregon Series which had not commenced
operations).
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." Dreyfus
Service Corporation compensates certain Service Agents for selling
Class B shares at the time of purchase from Dreyfus Service Corporation's
own assets. The proceeds of the CDSC and the distribution fee, in part, are
used to defray these expenses. For the fiscal year ended April 30, 1994,
Dreyfus Service Corporation retained $279,522 from the CDSC imposed
on Class B 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 Dreyfus Service Corporation 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
Page 44
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.
EXCHANGE PRIVILEGE
The Exchange Privilege enables clients of certain Service
Agents to purchase, in exchange for Class A or Class B 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 (the "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." In addition to the
limited Exchange and Auto-Exchange Privileges noted herein, Exchange
Account shares are eligible for the Dividend Sweep Privilege and the
Automatic Withdrawal Plan, and may receive redemption proceeds only
by Federal wire or by check. If you desire to use this Privilege, you should
consult your Service Agent or Dreyfus Service Corporation to determine
if it is available and whether any other conditions are imposed on its use.
To use this Privilege, your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in
writing, by wire or by telephone. If you previously 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." 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 from Dreyfus Service Corporation. 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. Telephone exchanges may be made only if the appropriate "YES"
box has been checked on the Account Application, or a separate signed
Shareholder Services Form is on file with the Transfer Agent. 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:
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
Page 45
CDSC will be imposed on Class B shares at the time of an exchange; however,
Class B 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 shares will be calculated
from the date of the initial purchase of the Class B 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 Dreyfus Service
Corporation. 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 Exchange Privilege
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 Class
A or Class B 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 shares at the time of an
exchange; however, Class B 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 shares will be calculated from the date of the initial purchase of
the Class B 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 BUILDER
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
Page 46
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 from Dreyfus Service
Corporation. 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 Dreyfus Service Corporation or your Service Agent.
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 from
Dreyfus Service Corporation. There is a service charge of 50 cents for
each withdrawal check. The
Page 47
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 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 Dreyfus
Service Corporation, 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 Class A or Class B 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 directly through Dreyfus Service Corporation.
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 SUBSE-
Page 48
QUENTLY 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 Dreyfus Service Corporation 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:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE CDSC AS A % OF AMOUNT
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
- ------------------ --------------------------------------------
<S> <C>
First........................................ 3.00
Second....................................... 3.00
Third........................................ 2.00
Fourth....................................... 2.00
Fifth........................................ 1.00
Sixth........................................ 0.00
</TABLE>
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.
Page 49
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.
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 Dreyfus Service Corporation
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, (d) a distribution following retirement
under a tax-deferred retirement plan or upon attaining age 70-1/2 in the case
of an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions by such shareholders as the Securities
and Exchange Commission or its staff may permit. 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 Dreyfus Service Corporation. 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, using the Check Redemption
Privilege with respect to Class A shares, through 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 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
from Dreyfus Service Corporation. The prospectus will contain information
concerning minimum investment requirements and other conditions that
may apply to your purchase.
You may redeem or exchange 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 Privilege or telephone exchange privilege, you
authorize the Transfer Agent to act on telephone instructions from any
person representing
Page 50
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
Page 51
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 only up to
$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, Dreyfus Service Corporation will accept orders
from Selected Dealers with which it 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 Dreyfus Service
Corporation 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 and Class B shares are subject to a Shareholder
Services Plan and only Class B shares 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 Dreyfus
Service Corporation for advertising, marketing and distributing Class B shares
of each Series at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B. Under the Distribution Plan, Dreyfus Service
Corporation may make payments to Service Agents in respect of these
services. Dreyfus Service Corporation determines the amounts to be
paid to Service Agents. Service Agents receive such fees in respect of the
average daily value of the Class B shares owned by their clients. From
time to time, Dreyfus Service Corporation may defer or waive receipt
of fees under the Distribution Plan while retaining the ability to be paid
by the Fund under the Distribution Plan thereafter. The fees payable to
Dreyfus Service Corporation under the Distribution Plan
Page 52
for advertising, marketing and distributing Class B shares and for payments
to Service Agents are payable without regard to actual expenses incurred.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays Dreyfus
Service Corporation for the provision of certain services to the holders
of Class A and Class B shares a fee at the annual rate of .25 of 1% of
the value of the average daily net assets of Class A and Class B. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund
providing reports and other information, and services related to the
maintenance of shareholder accounts. Dreyfus Service Corporation may and
make payments to Service Agents in respect of these services. Dreyfus
Service Corporation 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 or Class B 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 or Class B will be borne
exclusively by such Class. Class B will receive lower per share
dividends than Class A shares because of the higher expenses borne by Class B.
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
Page 53
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.
Page 54
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 (other than
the Colorado and Oregon Series which had not commenced operations)
has qualified for the fiscal year ended April 30, 1994 as a "regulated
investment company" under the Code. It is expected that each of the
Colorado and Oregon Series will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best
interests of such Series' shareholders. Each such 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.
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
Page 55
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 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 derived from other sources are taxable by
Connecticut except that distributions qualifying as capital gains
dividends for Federal income tax purposes may not be taxable by
Connecticut to the extent derived from Connecticut Municipal
Obligations. 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 and that is treated as a
preference item for purposes of the Federal alternative minimum tax is not
subject to the net Connecticut 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.
Page 56
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.
Page 57
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 and 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.
Shares of the North Carolina Series are not subject to the
North Carolina tax on intangible personal property, provided that at
least 80% of the North Carolina Series' investments are North Carolina
Municipal Obligations and the balance of the investments are direct
obliga-
Page 58
tions of the U.S. Government and assuming the Series complies with
certain procedural notification requirements. To the extent that the
investment portfolio of the North Carolina Series does not meet this
test, the portfolio may be partially or wholly subject to the North
Carolina tax on intangible personal property.
To the extent that dividends and 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 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
Page 59
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 and (as to residents of Pittsburgh) from
personal property taxes imposed by the City of Pittsburgh and the School
District of Pittsburgh 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
recently enacted significant changes to its 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 traditional tax on a corporation's capital. The Texas franchise
tax on earned surplus is applicable only to the extent that it exceeds
the franchise tax on capital. 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.
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 based on the corporation's gross
receipts derived from Texas. To the extent dividend and interest payments
are made by a non-Texas entity, such dividends and payments are not
considered to be Texas sourced receipts for franchise tax appointment
purposes.
Dividends and distributions by the Series to corporations
doing business in or incorporated in Texas will not be considered Texas
sourced "gross receipts" for either component of the Texas franchise tax.
Effective with franchise tax reports originally due after January l,
1994 (which are based upon accounting years ending in 1993), other
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
Page 60
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 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 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 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 and Class B 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 Fund's actual total
return for the applicable period. A Series' actual total return for its
first full year of operation cannot be predicted and is therefore likely
to be different from any such annualized computation.
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 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
Page 61
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 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 two classes - Class A and Class B. 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. Holders of Class A and Class B shares will be entitled
to vote on matters submitted to shareholders pertaining to the
Shareholder Services Plan and only holders of Class B shares will be
entitled to vote on matters submitted to shareholders pertaining to the
Distribution Plan.
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
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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.
