PRESIDENT'S LETTER
Dear Shareholder:
As the annual reporting period for the Premier State Municipal Bond Fund,
Massachusetts Series came to a close on April 30, 1994, the net asset value
per share of Class A shares was $11.64, a decrease of approximately $.44 from
the net asset value per share on April 30, 1993, adjusted for capital gain
distributions. The net asset value per share for Class B shares was $11.63, a
decrease of approximately $.45 from the net asset value per share on April
30, 1993, adjusted for capital gain distributions.
During the reporting period, tax exempt dividends of approximately $.71
per share were paid by Class A shares, representing a distribution rate per
share of 5.81%, based on the April 30, 1994 closing maximum offering price,
adjusted for capital gain distributions.
During the reporting period, tax exempt dividends of approximately $.64
per share were paid by Class B shares, representing a distribution rate per
share of 5.51%, based on the April 30, 1994 closing net asset value per
share, adjusted for capital gain distributions.
We are pleased to inform you that all dividends paid from net investment
income were exempt from Federal and State income taxes.*
The Federal Reserve Board's actions to slow the rate of economic growth
slightly, thereby forming a strategy to fight inflation in the future, caused
the stock and bond markets to fall sharply in the first quarter of 1994. The
Federal Reserve can stimulate or rein in the economy by lowering or
increasing short-term interest rates, as it did with quarter point increases
in its target for Federal Funds. The Federal Funds rate is the rate that
banks charge each other for overnight loans and is currently adjusted to
4.0%. It is the main interest rate the Federal Reserve is using to influence
economic activity, and it was increased four times. These increases were the
first in five years, and at the time, the financial markets interpreted these
moves as a sign that the Federal Reserve perceived incipient inflation that
had eluded, or was contrary to, the views of many private economists and
investors.
Federal Reserve officials refuse to say precisely how much higher the
Federal Funds target would have to be to bring down the nation's borrowing
and spending so that the economy will grow at a rate that is considered
neutral. A neutral growth rate is defined as the fastest rate possible
without feeding inflation, and is believed to be the rate of growth equal to
the economy's underlying capacity to produce goods and services. Currently,
most economists think that rate is around 3%. Using unused factories and
unemployed workers, it would be possible to temporarily grow faster the rate
of total productive capacity. However, once the economy is operating at or
near full capacity and full employment, inflation could pick up, demonstrated
by rising prices for finished goods and by companies bidding up wages and
prices for factory goods. The Federal Reserve is concerned with such an
occurrence and is signaling that more increases in short-term rates could be
on the way. If these increases materialize, they should slow economic growth,
as companies and individuals pay more interest on their loans and mortgages
and preempt an inflationary condition as a result.
More immediately for investors, the Federal Reserve's stance means that
those who have been weathering declining markets in the last few months may
not be able to find comfort even if monthly inflation reports continue to
show that current price increases are moderate, as was indicated by the
latest round of figures. In the market, the prices of most Treasury,
corporate and municipal securities have fallen and so have the net asset
values of most fixed-income mutual funds. However, we believe the underlying
fundamentals for municipals remain solid in spite of the potential negative
tone of the overall bond market that could push yields higher. The
overwhelming positive factor for tax exempts is limited new supply. Through
April, gross issuance was 34% below the comparable period last year.
Additionally, in June and July, a large amount of municipal bond investment
will be returned to investors due to calls, refinancings and maturities. If
much of these proceeds is reinvested into the market, it should provide the
market with potential support. If this occurs, we think this can help provide
a setting for municipals to be a strong relative performing sector within the
fixed-income markets.
The Commonwealth of Massachusetts, in spite of the negative effects of
the recession and defense contract downsizing, has benefitted from the
conservative fiscal policies of its well-received governor who has built up a
rather large budget fund balance. Part of this surplus is expected to be used
in this current fiscal year. The Commonwealth remains among the highest in
personal income.
During the first half of its fiscal year, the Series' total return
benefited from the strong performance of the municipal market. Declining
interest rates, an accommodative Federal Reserve Board policy, low price
volatility, and a lackluster economy drove the municipal market to higher
price valuations. However, as the economy began to pick up steam during the
fourth quarter of 1993 and into the new year, a change in Federal Reserve
policy and rising interest rates had a negative impact on the municipal
market.
Last year, when rates were reaching their cyclical lows, we altered our
security selection strategy. Specifically, we elected not to chase the
market, and began to conduct our business somewhat more defensively. While
these actions limited performance during that period in 1993 when rates were
still declining, they positioned the Fund more advantageously for the market
decline which has occurred so far this year.
As we stated in our previous report to shareholders, it was our intention
to adopt a more defensive portfolio posture in order to reduce the volatility
of the portfolio. In response, we reduced the Series' exposure to those bonds
in the portfolio with the longest durations (price sensitivities) while
maintaining the more defensive securities (i.e., pre-refunded bonds), and
started building higher cash reserves. We still believe that a more defensive
stance currently is warranted in view of the heightened degree of uncertainty
about the near-term direction of the economy and inflation. Certainly, recent
moves by the Federal Reserve to hike short-term interest rates provide enough
of an impetus to maintain a cautious stance. The Federal Reserve generally
acts in a series of moves rather than taking a one shot approach.
While we increased our cash reserves, which are invested in tax exempt
cash equivalent securities, in seeking to lessen the impact of rising rates
on the Series, we are reluctant to keep too much cash on hand. Because of the
restrictive investment choices in a State-specific portfolio, we are holding
less cash reserves than we might maintain in a national fund. As mentioned
previously, higher interest rates have severely curtailed the volume of new
municipal securities so we have some concern about the potential periodic
shortage of tax exempts if the financial markets stabilize and investors
increase their level of purchases. Higher tax rates and the large number of
bonds being retired currently lead us to believe that the potential demand
for tax exempt securities is substantial, especially in those States with the
highest tax structures.
We have included a current statement of investments and recent financial
statements for your review. We look forward to serving your investment needs
in the future.
Very truly yours,
(Logo Signature)
Richard J. Moynihan
President
May 24, 1994
New York, N.Y.
*Some income may be subject to the Federal Alternative Minimum Tax for
certain investors.
PERFORMANCE
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN Premier STATE
Municipal Bond Fund,
MASSACHUSETTS SERIES Class A Shares AND THE lehman brothers municipal bond
index
Exhibit A
$17,932
Lehman Brothers
Municipal Bond Index*
$15,731
Premier State Municipal
Bond Fund
Massachusetts Series
(Class A Shares)
In Dollars
*Source: Lehman Brothers
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
CLASS A CLASS B
- --------------------------------------------------------- --------------------------------------------------------
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIODS ENDED 4/30/94 SALES CHARGE SALES CHARGE (4.5%) PERIODS ENDED 4/30/94 REDEMPTION REDEMPTION*
- -------------------- ----------- ------------------ -------------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
1 Year 2.08% (2.51)% 1 Year 1.44% (1.44)%
5 Year 8.37 7.39 From Inception (1/15/93) 4.64 2.36
From Inception (5/28/87) 7.47 6.76
</TABLE>
Past performance is not predictive of future performance. Share price and
investment return fluctuate and share price may be more or less than original
cost upon redemption.
The above graph compares a $10,000 investment made in Class A shares of
Premier State Municipal Bond Fund, Massachusetts Series on 5/28/87 (Inception
Date) to a $10,000 investment made in the Lehman Brothers Municipal Bond
Index on that date. For comparative purposes the value of the Index on
5/31/87 is used as the beginning value on 5/28/87. All dividends and capital
gain distributions are reinvested. Performance for Class B shares will differ
from the results shown above due to difference in charges and expenses
charged to that class.
The Series invests primarily in Massachusetts municipal securities and its
performance shown in the graph takes into account the maximum initial sales
charge on Class A shares and all other applicable fees and expenses. Unlike
the Series, the Lehman Brothers Municipal Bond Index is an unmanaged total
return performance benchmark for the long-term, investment grade tax exempt
bond market, calculated by using municipal bonds selected to be
representative of the market. The Index does not take into account charges,
fees and other expenses. Further information relating to Series performance,
including expense reimbursements, if applicable, is contained in the
Condensed Financial Information section of the Prospectus and elsewhere in
this report.
*Maximum contingent deferred sales charge for Class B shares is 3% and is
reduced to 0% after five years.
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS
APRIL 30, 1994
PRINCIPAL
MUNICIPAL BONDS--100.0% AMOUNT VALUE
------------ ------------
<S> <C> <C>
MASSACHUSETTS--90.5%
Boston, Revenue, Refunding (Boston City Hospital) 5.75%, 2/15/2023 (Insured; FHA) $ 1,500,000 $ 1,354,185
Boston Industrial Development Financing Authority, Sewer Facility Revenue
(Harbor Electric Energy Co. Project) 7.375%, 5/15/2015.................. 2,500,000 2,607,950
Boston Water and Sewer Commission, Revenue:
7.875%, 11/1/1996....................................................... 295,000 324,432
7.875%, 11/1/2013....................................................... 605,000 660,370
7.10%, 11/1/2019 (Insured; MBIA, Prerefunded 11/1/1999)(a).............. 1,000,000 1,112,660
Leominster 7.50%, 4/1/2009 (Insured; MBIA).................................. 1,275,000 1,403,800
Lynn Water and Sewer Commission, General Revenue 7.25%, 12/1/2010 (Insured; MBIA) 1,000,000 1,127,920
Massachusetts Bay Transportation Authority:
7.625%, 3/1/2009 (Insured; FSA)......................................... 1,000,000 1,114,540
7.75%, 3/1/2011 (Insured; FSA).......................................... 1,000,000 1,118,880
7%, 3/1/2021............................................................ 1,000,000 1,122,310
8.173%, 3/1/2021 (b,c).................................................. 2,300,000 1,840,000
Massachusetts College Building Authority, Project Revenue
7.80%, 5/1/2016 (Insured; MBIA)......................................... 1,000,000 1,109,970
Massachusetts Commonwealth:
7.25%, 3/1/2000 (Insured; FGIC)......................................... 650,000 726,980
7.25%, 3/1/2009 (Insured; FGIC, Prerefunded 3/1/2000)(a)................ 350,000 391,073
7%, 8/1/2012............................................................ 1,850,000 1,962,831
Massachusetts Education Loan Authority, Education Loan Revenue
7.75%, 1/1/2008 (Insured; MBIA)......................................... 1,375,000 1,435,211
Massachusetts Health and Educational Facilities Authority, Revenue:
(Berkshire Health Systems):
7.50%, 10/1/2008 (Insured; MBIA)...................................... 1,000,000 1,100,280
6.75%, 10/1/2019 (Insured; MBIA)...................................... 1,750,000 1,779,855
(Brigham and Womens Hospital) 6.75%, 7/1/2024........................... 1,000,000 1,023,180
(Capital Asset Program) 7.30%, 10/1/2018 (Insured; MBIA)................ 3,750,000 4,129,387
(Harvard University) 6.50%, 12/1/2007................................... 750,000 787,807
(Lahey Clinic Medical Center) 7.625%, 7/1/2018
(Insured; MBIA, Prerefunded 7/1/1998)(a).............................. 1,000,000 1,117,940
(Medical Center of Central Massachusetts) 7.10%, 7/1/2021............... 1,000,000 1,045,050
(New England Deaconess Hospital) 6.875%, 4/1/2022....................... 6,000,000 6,144,600
(Refunding - Milton Hospital) 7%, 7/1/2016 (Insured; MBIA).............. 2,050,000 2,186,099
(Salem Hospital) 7.25%, 7/1/2009 (Insured; MBIA)........................ 370,000 393,658
(South Shore Hospital) 7.50%, 7/1/2020 (Insured; MBIA, Prerefunded 7/1/2000)(a) 2,000,000 2,270,280
(Tufts University) 8.25%, 8/15/2018 (Insured; FGIC) (b)................. 2,000,000 1,758,800
(University Hospital) 7.25%, 7/1/2019 (Insured; MBIA)................... 2,750,000 2,986,748
(Winchester Hospital) 8.125%, 7/1/2014 (Prerefunded 7/1/1995)(a)........ 1,040,000 1,122,878
Massachusetts Housing Finance Agency, Housing Revenue:
Multi-Family Residential 7.80%, 8/1/2022 (Insured; FHA)................. 1,500,000 1,517,880
Residential:
6.25%, 11/15/2012 (Collateralized; FNMA).............................. 1,600,000 1,582,640
8.50%, 8/1/2020....................................................... 1,225,000 1,282,759
8.40%, 8/1/2021....................................................... 500,000 516,270
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1994
PRINCIPAL
MUNICIPAL BONDS (CONTINUED) AMOUNT VALUE
------------ ------------
MASSACHUSETTS (CONTINUED)
Massachusetts Housing Finance Agency, Housing Revenue (continued):
Single Family:
7.80%, 12/1/2005...................................................... $ 1,000,000 $ 1,036,820
7.90%, 6/1/2014....................................................... 1,000,000 1,054,140
8.10%, 12/1/2021...................................................... 2,400,000 2,585,832
7.95%, 6/1/2023....................................................... 2,000,000 2,089,300
Massachusetts Industrial Finance Agency, Revenue:
(Brandeis University) 6.80%, 10/1/2019 (Insured; MBIA).................. 500,000 514,900
(Brooks School) 5.95%, 7/1/2023......................................... 1,000,000 932,060
(Leonard Morse Hospital) 8%, 10/15/2014 (Prerefunded 10/15/1999)(a)..... 1,000,000 1,154,470
(Provider Lease Program) 8.75%, 7/15/2009............................... 695,000 745,763
(Refunding - Harvard Community Health) 8.125%, 10/1/2017................ 750,000 820,650
Massachusetts Municipal Wheelhouse Electric Co., Power Supply Systems
Revenue:
8.75%, 7/1/2018......................................................... 3,430,000 3,866,639
6.125%, 7/1/2019........................................................ 1,200,000 1,150,188
Massachusetts Port Authority, Special Project Revenue
(Harborside Hyatt) 10%, 3/1/2026........................................ 3,000,000 3,279,990
Massachusetts Water Resources Authority 7.625%, 4/1/2014 (Prerefunded 4/1/2000)(a) 750,000 852,705
New England Education Loan Marketing Corp., Refunding
(Student Loan) 5.70%, 7/1/2005.......................................... 1,000,000 959,240
Somerville Housing Development Corp., Multi-Family Revenue, Refunding
7.50%, 1/1/2024 (Collateralized; FNMA).................................. 1,000,000 1,045,080
University of Lowell Building Authority 7.60%, 11/1/2010 (Insured; FSA)..... 750,000 828,435
U. S. RELATED--9.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 1,500,000 1,517,640
Puerto Rico Commonwealth:
6.80%, 7/1/2021 (Prerefunded 7/1/2002)(a)............................... 1,000,000 1,110,320
Refunding 6%, 7/1/2014.................................................. 2,000,000 1,921,200
Puerto Rico Commonwealth Highway and Transportation Authority, Highway
Revenue:
7.561%, 7/1/2009 (b).................................................... 1,000,000 862,500
7.661%, 7/1/2010 (b).................................................... 1,000,000 847,500
Puerto Rico Electric Power Authority, Power Revenue 8%, 7/1/2008............ 500,000 569,020
Virgin Islands Public Finance Authority, Revenue, Refunding 7.25%, 10/1/2018 1,000,000 1,063,790
-------------
TOTAL INVESTMENTS (cost $79,295,988)........................................ $82,967,405
===========
</TABLE>
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
FGIC Financial Guaranty Insurance Corporation FSA Financial Security Assurance
FHA Federal Housing Administration MBIA Municipal Bond Insurance Association
FNMA Federal National Mortgage Association
</TABLE>
<TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- --------- -------------------- -----------------------
<S> <C> <C> <C>
AAA Aaa AAA 43.2%
AA Aa AA 11.0
A A A 31.8
BBB Baa BBB 6.5
Not Rated Not Rated Not Rated 7.5
------
100.0%
======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the tax-exempt issue and to retire the bonds full at the
earliest refunding date.
(b) Residual Interest security - the interest rate is subject to change
periodically.
(c) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1994, this security amounted to $1,840,000 or 2.3% of net assets.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) At April 30, 1994, the Fund had $27,584,209 (34.2%) of net assets
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
(f) At April 30, 1994, 30.4% of the Fund's net assets are insured by
MBIA.
See notes to financial statements.
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $79,295,988)-see statement...................................... $82,967,405
Interest receivable..................................................... 1,559,770
Receivable for shares of Beneficial Interest subscribed................. 69,192
Prepaid expenses........................................................ 7,164
-----------
84,603,531
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 51,555
Due to Custodian........................................................ 3,934,625
Payable for shares of Beneficial Interest redeemed...................... 27,087
Accrued expenses........................................................ 23,654 4,036,921
--------- ---------
NET ASSETS ................................................................ $80,566,610
===========
REPRESENTED BY:
Paid-in capital......................................................... $76,908,157
Accumulated distributions in excess of net realized gain on investments-Note 1(c) (12,964)
Accumulated net unrealized appreciation on investments-Note 3........... 3,671,417
-----------
NET ASSETS at value......................................................... $80,566,610
===========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 6,605,322
===========
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 318,297
===========
NET ASSET VALUE per share:
Class A Shares
($76,864,652 / 6,605,322 shares)...................................... $11.64
======
Class B Shares
($3,701,958 / 318,297 shares)......................................... $11.63
======
See notes to financial statements.
</TABLE>
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1994
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,612,047
EXPENSES:
Management fee--Note 2(a)............................................. $ 466,331
Shareholder servicing costs-Note 2(c)................................. 265,697
Prospectus and shareholders' reports.................................. 21,198
Distribution fees (Class B shares)-Note 2(b).......................... 13,123
Professional fees..................................................... 11,089
Custodian fees........................................................ 9,068
Registration fees..................................................... 4,727
Trustees' fees and expenses-Note 2(d)................................. 703
Miscellaneous......................................................... 11,393
------------
803,329
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 95,389
------------
TOTAL EXPENSES.................................................. 707,940
----------
INVESTMENT INCOME--NET.......................................... 4,904,107
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments--Note 3................................ $ 38,609
Net unrealized (depreciation) on investments............................ (3,301,993)
------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (3,263,384)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,640,723
==========
See notes to financial statements.
</TABLE>
<TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
---------------------------------
1993 1994
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Investment income--net.................................................. $ 4,556,661 $ 4,904,107
Net realized gain on investments........................................ 537,446 38,609
Net unrealized appreciation (depreciation) on investments for the year.. 4,033,314 (3,301,993)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 9,127,421 1,640,723
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Class A shares........................................................ (4,549,010) (4,768,195)
Class B shares........................................................ (7,651) (135,912)
Net realized gain on investments:
Class A shares........................................................ (56,938) (303,176)
Class B shares........................................................ - (11,985)
Excess net realized gain on investments:
Class A shares........................................................ - (12,471)
Class B shares........................................................ - (493)
------------ ------------
TOTAL DIVIDENDS................................................... (4,613,599) (5,232,232)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 12,873,702 6,515,438
Class B shares........................................................ 1,057,732 2,835,004
Dividends reinvested:
Class A shares........................................................ 2,354,860 2,622,716
Class B shares........................................................ 2,601 68,991
Cost of shares redeemed:
Class A shares........................................................ (6,908,497) (8,594,165)
Class B shares........................................................ (150) (56,768)
------------ ------------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS...... 9,380,248 3,391,216
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 13,894,070 (200,293)
NET ASSETS:
Beginning of year....................................................... 66,872,833 80,766,903
------------ ------------
End of year............................................................. $80,766,903 $80,566,610
============ ===========
</TABLE>
<TABLE>
SHARES
-------------------------------------------------------------------
CLASS A CLASS B
--------------------------------- -----------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
--------------------------------- -----------------------------
1993 1994 1993(1) 1994
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 1,094,206 531,050 87,675 229,412
Shares issued for dividends reinvested. 199,322 214,378 215 5,666
Shares redeemed........................ (586,172) (710,422) (12) (4,659)
-------- -------- -------- ---------
NET INCREASE IN SHARES OUTSTANDING 707,356 35,006 87,878 230,419
========= ========== ========= =========
</TABLE>
* From January 15, 1993 (commencement of initial offering) to April 30, 1993.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from information provided in the Series'
financial statements.
<TABLE>
CLASS A SHARES CLASS B SHARES
------------------------------------------ --------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
------------------------------------------ --------------------------
PER SHARE DATA: 1990 1991 1992 1993 1994 1993(1) 1994
----- ------ ------ ----- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $10.92 $10.69 $11.05 $11.41 $12.13 $11.79 $12.13
----- ----- ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net................ .82 .79 .75 .73 .71 .19 .64
Net realized and unrealized gain (loss)
on investments...................... (.23) .37 .36 .73 (.44) .34 (.45)
----- ----- ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS .59 1.16 1.11 1.46 .27 .53 .19
----- ----- ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income--net. (.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............. (.82) (.80) (.75) (.74) (.76) (.19) (.69)
----- ----- ------ ------ ------ ------ ------
Net asset value, end of year.......... $10.69 $11.05 $11.41 $12.13 $11.64 $12.13 $11.63
====== ====== ====== ====== ======= ======= ======
TOTAL INVESTMENT RETURN (2)............... 5.49% 11.23% 10.32% 13.14% 2.08% 15.56%(3) 1.44%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets -- .19% .55% .69% .82% 1.15%(3) 1.36%
Ratio of net investment income to
average net assets.................. 7.40% 7.21% 6.65% 6.16% 5.80% 4.92%(3) 5.18%
Decrease reflected in above expense ratios due
to undertakings by the Manager...... 1.11% .78% .41% .24% .11% .13%(3) .10%
Portfolio Turnover Rate............... 28.44% 47.07% 24.75% 11.36% 12.04% 11.36% 12.04%
Net Assets, end of year (000's Omitted) $43,375 $57,328 $66,873 $79,701 $76,865 $1,066 $3,702
</TABLE>
(1)From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(2)Exclusive of sales load.
(3)Annualized.
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering fifteen series including the Massachusetts Series (the "Series").
Dreyfus Service Corporation ("Distributor") acts as the distributor of the
Fund's shares. The Distributor is a wholly-owned subsidiary of The Dreyfus
Corporation ("Manager").
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them.
The Series offers both Class A and Class B shares. Class A shares are
subject to a sales charge imposed at the time of purchase and Class B shares
are subject to a contingent deferred sales charge imposed at the time of
redemption on redemptions made within five years of purchase. Other
differences between the two Classes include the services offered to and the
expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices in the judgment of
the Service are readily available and are representative of the bid side of
the market are valued at the mean between the quoted bid prices (as obtained
by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such
securities). Other investments (which constitute a majority of the portfolio
securities) are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of municipal
securities of comparable quality, coupon, maturity and type; indications as
to values from dealers; and general market conditions. Options and financial
futures on municipal and U.S. treasury securities are valued at the last
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market on each
business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and, when appropriate,
discounts on investments, is earned from settlement date and recognized on
the accrual basis. Securities purchased or sold on a when-issued or
delayed-delivery basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such
gain.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Dividends in excess of net realized gains on investment for financial
statement purposes result from current period wash sale loss deferrals and
other losses from security transactions during the year ended April 30, 1994
which are treated for Federal income tax purposes as arising in fiscal 1995.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the provisions available to certain investment
companies, as defined in applicable sections of the Internal Revenue Code,
and to make distributions of income and net realized capital gain sufficient
to relieve it from all, or substantially all, Federal income taxes.
NOTE 2--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the average
daily value of the Series' net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager
had undertaken from May 1, 1993 through January 18, 1994 to reduce the
management fee paid by the Series, to the extent that the Series' aggregate
expenses (excluding certain expenses as described above) exceeded specified
annual percentages of the Series' average daily net assets. The Manager has
currently undertaken from January 19, 1994 through July 1, 1994, to waive
receipt of the management fee payable to it by the Series in excess of an
annual rate of .50 of 1% of the Series' average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to
$95,389 for the year ended April 30, 1994.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
The Distributor retained $14,298 during the year ended April 30, 1994
from commissions earned on sales of the Series' Class A shares.
The Distributor retained $1,595 during the year ended April 30, 1994 from
contingent deferred sales charges imposed upon redemptions of the Series'
Class B shares.
(B) Under the Distribution Plan ("Class B Distribution Plan") adopted
pursuant to Rule 12b-1 under the Act, the Series pays the Distributor at an
annual rate of .50 of 1% of the value of the Series' Class B shares average
daily net assets, for the costs and expenses in connection with advertising,
marketing and distributing the Series' Class B shares. The Distributor may
make payments to one or more Service Agents (a securities dealer, financial
institution, or other industry professional) based on the value of the
Series' Class B shares owned by clients of the Service Agent. During the year
ended April 30, 1994, $13,123 was charged to the Series pursuant to the Class
B Distribution Plan.
(C) Under the Shareholder Services Plan, the Series pays the Distributor,
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A and Class B shares for servicing shareholder accounts. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to Serv
ice Agents in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1994,
$205,407 and $6,562 were charged to the Class A and Class B shares,
respectively, pursuant to the Shareholder Services Plan.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Certain officers and trustees of the Fund are "affiliated persons,"
as defined in the Act, of the Manager and/or the Distributor. Each trustee
who is not an "affiliated person" receives from the Fund an annual fee of
$2,500 and an attendance fee of $250 per meeting.
(E) On December 5, 1993, the Manager entered into an Agreement and Plan
of Merger (the "Merger Agreement") providing for the merger of the Manager
with a subsidiary of Mellon Bank Corporation ("Mellon").
Following the merger, it is planned that the Manager will be a direct
subsidiary of Mellon Bank, N.A. Closing of this merger is subject to a number
of contingencies, including receipt of certain regulatory approvals and
approvals of the stockholders of the Manager and of Mellon. The merger is
expected to occur in mid-1994, but could occur later.
As a result of regulatory requirements and the terms of the Merger
Agreement, the Manager will seek various approvals from the Fund's board and
shareholders before completion of the merger. Shareholder approval will be
solicited by a proxy statement.
NOTE 3--SECURITIES TRANSACTIONS:
Purchases and sales of securities amounted to $16,459,050 and
$10,140,340, respectively, for the year ended April 30, 1994, and consisted
entirely of municipal bonds.
At April 30, 1994, accumulated net unrealized appreciation on investments
was $3,671,417, consisting of $4,929,329 gross unrealized appreciation and
$1,257,912 gross unrealized depreciation.
At April 30, 1994, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
We have audited the accompanying statement of assets and liabilities of
Premier State Municipal Bond Fund, Massachusetts series (one of the Series
constituting the Premier State Municipal Bond Fund), including the statement
of investments, as of April 30, 1994, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and financial highlights for each of
the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1994 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Massachusetts Series at April
30, 1994, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernest and Young Signature Logo)
New York, New York
June 7, 1994
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby makes the following
designations regarding its fiscal year ended April 30, 1994:
- all the dividends paid from investment income-net are
"exempt-interest dividends" (not subject to regular Federal, and for
individuals who are Massachusetts residents, Massachusetts personal
income taxes).
- The portion of the $.0467 per share paid by the Series on
December 8, 1993 representing a long-term capital gain distribution is
$.0267 per share (96.53% of which is not subject to Massachusetts
personal income tax.)
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if
any) and capital gain distributions (if any) paid for the 1994 calendar year
on Form 1099-DIV which will be mailed by January 31, 1995.
PREMIER STATE MUNICIPAL
BOND FUND, MASSACHUSETTS SERIES
144 Glenn Curtiss Boulevard
Uniondale, NY 11556
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
DISTRIBUTOR
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
110 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained in the Prospectus,
which must precede or accompany this report.
Printed in U.S.A. 063/AR944
Annual Report
Premier State
Municipal Bond Fund
Massachusetts Series
April 30, 1994
(Dreyfus Lion Logo)
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
CLASS A SHARES AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
EXHIBIT A:
___________________________________________________
| | | |
| | | PREMIER STATE |
| PERIOD | LEHMAN BROTHERS |MUNICIPAL BOND FUND,|
| | MUNICIPAL |MASSACHUSETTS SERIES|
| | BOND INDEX * | CLASS A |
|-----------|-----------------|--------------------|
| 5/28/87 | 10,000 | 9,551 |
| 4/30/88 | 10,929 | 9,403 |
| 4/30/89 | 11,905 | 10,523 |
| 4/30/90 | 12,763 | 11,100 |
| 4/30/91 | 14,229 | 12,347 |
| 4/30/92 | 15,582 | 13,621 |
| 4/30/93 | 17,553 | 15,411 |
| 4/30/94 | 17,932 | 15,731 |
|--------------------------------------------------|
