File No. 33-10238
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 27 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 27 [X]
(Check appropriate box or boxes.)
PREMIER STATE MUNICIPAL BOND FUND
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on December 9, 1996 pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of its
beneficial interest under the Securities Act of 1933 pursuant to
Section 24(f) of the Investment Company Act of 1940. Registrant's Rule 24f-2
Notice for the fiscal year ended April 30, 1996 was filed on June 26, 1996.
PREMIER STATE MUNICIPAL BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 6
4 General Description of Registrant 29
5 Management of the Fund 35
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 58
7 Purchase of Securities Being Offered 37
8 Redemption or Repurchase 45
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
- ---------
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-1, B-39
13 Investment Objectives and Policies B-2
14 Management of the Fund B-13
15 Control Persons and Principal B-16
Holders of Securities
16 Investment Advisory and Other B-17
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
PREMIER STATE MUNICIPAL BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-31
18 Capital Stock and Other Securities B-31
19 Purchase, Redemption and Pricing B-20, B-25
of Securities Being Offered B-29
20 Tax Status *
21 Underwriters B-20
22 Calculations of Performance Data B-32
23 Financial Statements B-101
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-4
28 Business and Other Connections of C-5
Investment Adviser
29 Principal Underwriters C-10
30 Location of Accounts and Records C-13
31 Management Services C-13
32 Undertakings C-13
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
PREMIER STATE MUNICIPAL BOND FUND
PROSPECTUS ___________, 1996
Premier State Municipal Bond Fund (the "Fund") is an open-end,
non-diversified, management investment company, known as a mutual fund. The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk.
The Fund permits you to invest in any of thirteen separate portfolios
(each, a "Series"): the Connecticut Series, the Florida Series, the Georgia
Series, the Maryland Series, the Massachusetts Series, the Michigan Series,
the Minnesota Series, the New Jersey Series, the North Carolina Series, the
Ohio Series, the Pennsylvania Series, the Texas Series and the Virginia
Series. Each Series seeks to achieve the Fund's investment objective by
investing in Municipal Obligations primarily issued by issuers in the State
after which it is named and believed to be exempt from Federal and, where
applicable, from that State's income tax. It is anticipated that
substantially all dividends paid by each Series will be exempt from Federal
income tax and also, where applicable, will be exempt from the personal
income tax of the State after which the Series is named.
By this Prospectus, each Series is offering three Classes of
shares-Class A, Class B and Class C-which are described herein. See
"Alternative Purchase Methods."
The Fund provides free redemption checks with respect to Class A
shares, which you can use in amounts of $500 or more for cash or to pay
bills. You can purchase or redeem all classes of shares by telephone using
the TELETRANSFER Privilege.
The Dreyfus Corporation serves as the Fund's investment adviser and,
in that capacity, is responsible for determining whether investing in
particular securities is consistent with the Fund's investment objective,
including whether the securities subject the Fund to undue risk.
This Prospectus sets forth concisely information about the Fund that
you should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information dated ___________, 1996,
which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest
to some investors. It has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Securities and
Exchange Commission maintains a Web site (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference, a
nd other information regarding the Fund. For a free copy of the Statement of
Additional Information, write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call 1-800-554-4611. When telephoning, ask
for Operator 144.
Mutual fund shares are not deposits or obligations of, or guaranteed
or endorsed by, any bank, and are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. Mutual fund shares involve certain investment risks, including the
possible loss of principal.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
FEE TABLE.......................................... 3
CONDENSED FINANCIAL INFORMATION.................... 6
ALTERNATIVE PURCHASE METHODS....................... 28
DESCRIPTION OF THE FUND............................ 29
MANAGEMENT OF THE FUND............................. 35
HOW TO BUY SHARES.................................. 37
SHAREHOLDER SERVICES............................... 41
HOW TO REDEEM SHARES............................... 45
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN.... 49
DIVIDENDS, DISTRIBUTIONS AND TAXES................. 49
PERFORMANCE INFORMATION............................ 57
GENERAL INFORMATION................................ 58
APPENDIX........................................... 60
Page 2
<TABLE>
<CAPTION>
FEE TABLE
CONNECTICUT SERIES FLORIDA SERIES
------------------------- -------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.................... .55% .55% .55% .55% .55% .55%
12b-1 Fees......................... None .50% .75% None .50% .75%
Other Expenses..................... .37% .39% .34% .36% .36% .69%
Total Fund Operating Expenses...... .92% 1.44% 1.64% .91% 1.41% 1.99%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 YEAR........................... $ 54 $45/15** $27/17** $ 54 $44/14** $30/20**
3 YEARS.......................... $ 73 $66/46** $52 $ 73 $65/45** $62
5 YEARS.......................... $ 94 $89/79** $89 $ 93 $87/77** $107
10 YEARS......................... $153 $145*** $194 $ 152 $143*** $232
GEORGIA SERIES MARYLAND SERIES
------------------------- -------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .40% .39% .68% .35% .38% .50%
Total Fund Operating Expenses.. .95% 1.44% 1.98% .90% 1.43% 1.80%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 YEAR........................ $ 54 $45/15** $30/20** $ 54 $45/15** $28/18**
3 YEARS....................... $ 74 $66/46** $62 $ 72 $65/45** $ 57
5 YEARS....................... $ 95 $89/79** $107 $ 93 $88/78** $ 97
10 YEARS...................... $156 $147*** $231 $ 151 $144*** $212
*A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
Page 3
<TABLE>
<CAPTION>
FEE TABLE
MASSACHUSETTS SERIES MICHIGAN SERIES
------------------------- -------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .37% .38% .39% .38% .39% .40%
Total Fund Operating Expenses.. .92% 1.43% 1.69% .93% 1.44% 1.70%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 YEAR........................ $ 54 $45/15** $27/17** $ 54 $45/15** $27/17**
3 YEARS....................... $ 73 $65/45** $53 $ 73 $66/46** $54
5 YEARS....................... $ 94 $88/78** $92 $ 94 $89/79** $92
10 YEARS...................... $153$145*** $200 $154 $146*** $201
MINNESOTA SERIES NEW JERSEY SERIES
------------------------- -------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) .None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .35% .38% .12% .35% .35% .35%
Total Fund Operating Expenses.. .90% 1.43% 1.42% .90% 1.40% 1.65%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 Year....................... $ 54 $45/15** $24/14** $ 54 $44/$14** $27/$17**
3 Years...................... $ 72 $65/45** $45 $ 72 $64/$44** $52
5 Years...................... $ 93 $88/78** $78 $ 93 $87/$77** $90
10 Years..................... $ 151 $144*** $170 $151 $142** $195
*A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
Page 4
<TABLE>
<CAPTION>
FEE TABLE
NORTH CAROLINA SERIES OHIO SERIES
------------------------- -------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................. .55% .55% .55% .55% .55% .55%
12b-1 Fees...................... None .50% .75% None .50% .75%
Other Expenses.................. .45% .46% .43% .34% .37% .33%
Total Fund Operating Expenses... 1.00% 1.51% 1.73% .89% 1.42% 1.63%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 Year........................ $ 55 $45/15** $28/18** $ 54 $44/14** $27/17**
3 Years....................... $ 75 $68/48** $54 $ 72 $65/45** $ 51
5 Years....................... $ 98 $92/82** $94 $ 92 $88/78** $ 89
10 Years...................... $ 162 $154*** $204 $ 150 $143*** $193
PENNSYLVANIA SERIES TEXAS SERIES
------------------------- -------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
(as a percentage of offering price) 4.50%. None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 3.00% 1.00% None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees................ .55% .55% .55% .55% .55% .55%
12b-1 Fees..................... None .50% .75% None .50% .75%
Other Expenses................. .37% .38% .40% .37% .38% .46%
Total Fund Operating Expenses.. .92% 1.43% 1.70% .92% 1.43% 1.76%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 Year........................ $ 54 $45/15** $28/18** $ 54 $45/15** $27/17**
3 Years....................... $ 73 $65/45** $55 $ 73 65/45** $54
5 Years....................... $ 94 $88/78** $95 $ 94 $88/78** $92
10 Years...................... $ 153 $145*** $207 $ 153 $145*** $201
*A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
Page 5
<TABLE>
<CAPTION>
VIRGINIA SERIES
-------------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... None* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees..................................... .55% .55% .55%
12b-1 Fees.......................................... None .50% .75%
Other Expenses...................................... .50% .51% .43%
Total Fund Operating Expenses....................... 1.05% 1.56% 1.73%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
CLASS A CLASS B CLASS C
------- ------- -------
1 Year............................................. $ 55 $46/16** $28/18**
3 Years............................................ $ 77 $69/49** $54
5 Years............................................ $ 100 $95/85** $94
10 Years........................................... $ 167 $159*** $204
*A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
The amounts listed in the examples should not be considered as representative
of past or future expenses and actual expenses may be greater or less than
those indicated. Moreover, while the example assumes a 5% annual return, each
Series' actual performance will vary and may result in an actual return
greater or less than 5%.
The purpose of the foregoing tables is to assist you in understanding the
costs and expenses borne by each Series of the Fund, the payment of which
will reduce investors' annual return. Other expenses for the New Jersey
Series and for Class C only for the other Series are based on estimated
amounts for the current fiscal year. Long-term investors in Class B or Class
C could pay more in 12b-1 fees than the economic equivalent of paying a
front-end sales charge. The information in the foregoing tables does not
reflect any fee waivers or expense reimbursement arrangements that may be in
effect. Certain Service Agents (as defined below) may charge their clients
direct fees for effecting transactions in the relevant Series' shares; such
fees are not reflected in the foregoing tables. See "Management of the Fund,"
"How to Buy Shares" and "Distribution Plan and Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst & Young
LLP, the Fund's independent auditors, whose report thereon appears in the
Statement of Additional Information. Further financial data and related notes
are included in the Statement of Additional Information, available upon
request.
Page 6
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 (other
than the New Jersey Series) for each year indicated. This information has
been derived from the Series' financial statements. No financial
information is available for the New Jersey Series which had not
commenced operations as of the date of the financial statements.
<TABLE>
<CAPTION>
CONNECTICUT SERIES
------------------------------------------------------------------------------------------
Class A Shares
------------------------------------------------------------------------------------------
Year Ended April 30,
------------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $11.00 $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.76
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net .76 .81 .80 .77 .72 .71 .68 .67 .66
Net realized and unrealized gain
(loss) on investments (.28) .38 (.15) .40 .17 .81 (.42) (.05) .14
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM
INVESTMENT OPERATIONS .48 1.19 .65 1.17 .89 1.52 .26 .62 .80
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net........ (.76) (.81) (.80) (.77) (.72) (.71) (.68) (.67) (.66)
Dividends from net realized
gain on investments _ (.05) (.02) _ _ _ (.03) _ _
Dividends in excess of net
realized gain on investments _ _ _ _ _ _ _ _ _
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.76) (.86) (.82) (.77) (.72) (.71) (.71) (.67) (.66)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year........ $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.76 $11.90
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 5.00%(3) 11.54% 5.93% 11.10% 8.14% 13.62% 1.92% 5.47% 6.85%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... _ _ _ .21% .52% .69% .80% .89% .92%
Ratio of net investment income to
average net assets. 7.31%(3) 7.24% 7.05% 6.81% 6.30% 5.93% 5.44% 5.77% 5.45%
Decrease reflected in above expense
ratios due to undertakings by The
Dreyfus Corporation(limited to
the expense limitation provision
of the Management Agreement) 1.50%(3) 1.42% 1.10% .75% .41% .21% .09% .01% _
Portfolio Turnover Rate 91.09%(4) 72.52% 12.62% 6.30% 8.53% 24.22% 10.83% 10.48% 28.83%
Net Assets, end of year
(000's omitted).... $11,641 $31,056 $83,206 $183,788 $280,305 $360,020 $364,182 $335,964 $321,559
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 7
<TABLE>
<CAPTION>
CONNECTICUT SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
--------------------------------- --------------------
Year Ended APRIL 30, Year Ended APRIL 30,
--------------------------------- --------------------
1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year.. $11.89 $12.26 $11.80 $11.76 $11.84
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net.............. .18 .61 .61 .60 .40
Net realized and unrealized gain (loss)
on investments...................... .37 (.43) (.04) .13 .05
------- ------- ------- ------- -------
Total from Investment Operations.... .55 .18 .57 .73 .45
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income--net (.18) (.61) (.61) (.60) (.40)
Dividends from net realized gain
on investments...................... _ (.03) _ _ _
------- ------- ------- ------- -------
Total Distributions................. (.18) (.64) (.61) (.60) (.40)
------- ------- ------- ------- -------
Net asset value, end of year........ $12.26 $11.80 $11.76 $11.89 $11.89
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.08%(4) 1.26% 4.99% 6.20% 5.31%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.12%(4) 1.36% 1.41% 1.44% 1.64%(4)
Ratio of net investment income to
average net assets.................. 4.57%(4) 4.78% 5.21% 4.92% 4.31%(4)
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus
Corporation (limited to the expense limitation
provision of the Management Agreement) .12%(4) .08% .01% _ _
Portfolio Turnover Rate............. 24.22% 10.83% 10.48% 28.83% 28.83%
Net Assets, end of year (000's omitted) $9,492 $32,246 $35,425 $38,838 $1,007
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 8
<TABLE>
<CAPTION>
FLORIDA SERIES
------------------------------------------------------------------------------------------
Class A Shares
------------------------------------------------------------------------------------------
Year Ended April 30,
------------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $12.00 $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.51
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .92 1.02 1.02 .99 .95 .92 .85 .81 .79
Net realized and unrealized gain
(loss) on investments .85 .63 (.11) .61 .41 .86 (.51) .12 .17
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... 1.77 1.65 .91 1.60 1.36 1.78 .34 .93 .96
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.92) (1.02) (1.02) (.99) (.95) (.92) (.85) (.81) (.79)
Dividends from net realized
gain on investments _ _ (.03) (.02) (.01) (.17) (.04) (.04) (.20)
Dividends in excess of net
realized gain on investments _ _ _ _ _ _ (.04) _ _
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.92) (1.02) (1.05) (1.01) (.96) (1.09) (.93) (.85) (.99)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.51 $14.48
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 16.24%(3) 13.32% 6.83% 12.40% 10.09% 12.84% 2.14% 6.71% 6.63%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets. _ _ _ .21% .52% .69% .80% .90% .91%
Ratio of net investment income
to average net assets 7.76%(3) 7.26% 7.24% 7.11% 6.65% 6.21% 5.61% 5.67% 5.29%
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation
(limited to the expense
limitation provision of the
Management Agreement) 1.50%(3) 1.50% 1.08% .74% .41% .21% .10% .01% _
Portfolio Turnover Rate 31.25%(4) 17.16% 27.69% .28% 20.99% 33.18% 20.84% 50.62% 54.37%
Net Assets, end of year
(000's omitted).... $1,493 $15,061 $67,416 $177,927 $245,474 $299,775 $289,791 $252,406 $227,478
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 9
<TABLE>
<CAPTION>
FLORIDA SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $14.59 $15.01 $14.42 $14.51 $14.65
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .24 .77 .73 .71 .48
Net realized and unrealized gain (loss)
on investments...................... .42 (.51) .13 .16 .02
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .66 .26 .86 .87 .50
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.24) (.77) (.73) (.71) (.48)
Dividends from net realized gain
on investments...................... _ (.04) (.04) (.20) (.20)
Dividends in excess of net realized gain
on investments...................... _ (.04) _ _ _
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.24) (.85) (.77) (.91) (.68)
------- ------- ------- ------- -------
Net asset value, end of year........ $15.01 $14.42 $14.51 $14.47 $14.47
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.60%(4) 1.54% 6.21% 6.01% 4.69%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.12%(4) 1.34% 1.41% 1.41% 1.99%(4)
Ratio of net investment income to
average net assets.................. 4.87%(4) 4.91% 5.13% 4.77% 4.20%(4)
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus
Corporation (limited to the expense
limitation provision of the
Management Agreement)................. .12%(4) .09% .01% _ _
Portfolio Turnover Rate............. 33.18% 20.84% 50.62% 54.37% 54.37%
Net Assets, end of year (000's omitted) $5,916 $22,476 $25,282 $27,023 $35
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 10
<TABLE>
<CAPTION>
GEORGIA SERIES
-------------------------------------------------------------------------------------------
CLASS C
CLASS A SHARES CLASS B SHARES SHARES
---------------------------------------- ------------------------------------ ----------
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
---------------------------------------- ------------------------------------ ----------
PER SHARE DATA: 1993(1) 1994 1995 1996 1993(2) 1994 1995 1996 1996(3)
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $12.50 $13.27 $12.69 $12.80 $12.71 $13.27 $12.69 $12.80 $12.85
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .51 .73 .73 .66 .20 .67 .66 .59 .38
Net realized and unrealized gain
(loss) on investments .77 (.58) .11 .25 .56 (.58) .11 .26 .20
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS...... 1.28 .15 .84 .91 .76 .09 .77 .85 .58
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net...... (.51) (.73) (.73) (.66) (.20) (.67) (.66) (.59) (.38)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year..... $13.27 $12.69 $12.80 $13.05 $13.27 $12.69 $12.80 $13.06 $13.05
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(4) 15.91%(5) .97% 6.87% 7.14% 20.66%(5) .46% 6.33% 6.69% 6.28%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets _ .07% .25% .74% .50%(5) .58% .75% 1.24% 1.98%(5)
Ratio of net investment income
to average net assets 5.55%(5) 5.41% 5.80% 5.00% 4.60%(5) 4.85% 5.27% 4.46% 3.73%(5)
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision
of the Management
Agreement)...... 1.46%(5) 1.02% .78% .21% 1.37%(5) 1.02% .80% .20% _
Portfolio Turnover Rate 37.79%(6) 6.76% 34.04% 33.09% 37.79%(6) 6.76% 34.04% 33.09% 33.09%
Net Assets, end of year
(000's omitted). $7,304 $10,058 $8,985 $8,346 $6,319 $16,243 $19,429 $20,106 $88
(1)From September 3, 1992 (commencement of operations) to April 30, 1993.
(2)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(3)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(4)Exclusive of sales load.
(5)Annualized.
(6)Not annualized.
</TABLE>
Page 11
<TABLE>
<CAPTION>
MARYLAND SERIES
----------------------------------------------------------------------------------------
Class A Shares
----------------------------------------------------------------------------------------
Year Ended April 30,
----------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $12.50 $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.54
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .80 .87 .86 .85 .79 .76 .73 .70 .67
Net realized and unrealized gain
(loss) on investments (1.12) .34 (.09) .53 .35 .68 (.53) .08 .23
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... (.32) 1.21 .77 1.38 1.14 1.44 .20 .78 .90
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.80) (.87) (.86) (.85) (.79) (.76) (.73) (.70) (.67)
Dividends from net realized
gain on investments _ _ (.02) (.01) (.05) (.09) (.03) _ (.08)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.80) (.87) (.88) (.86) (.84) (.85) (.76) (.70) (.75)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.54 $12.69
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) (2.50%)(3) 11.05% 6.69% 12.24% 9.68% 11.93% 1.33% 6.52% 7.24%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... _ _ _ .21% .53% .69% .80% .90% .90%
Ratio of net investment income
to average net assets 7.44%(3) 7.26% 7.12% 6.98% 6.40% 5.93% 5.51% 5.69% 5.23%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.11% .75% .41% .22% .10% .01% _
Portfolio Turnover Rate 75.21%(4) 8.67% 30.03% 1.45% 16.21% 17.92% 10.27% 35.39% 41.65%
Net Assets, end of year
(000's omitted).... $4,353 $24,383 $85,794 $179,959 $254,240 $337,307 $335,518 $301,834 $283,878
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 12
<TABLE>
<CAPTION>
MARYLAND SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
------- ------- ------- ------- -------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $12.64 $13.02 $12.46 $12.54 $12.67
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .20 .65 .63 .61 .41
Net realized and unrealized gain (loss)
on investments...................... .38 (.53) .08 .23 .10
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .58 .12 .71 .84 .51
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.20) (.65) (.63) (.61) (.41)
Dividends from net realized gain on investments _ (.03) _ (.08) (.08)
Dividends in excess of net realized gain
on investments...................... _ _ _ _ _
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.20) (.68) (.63) (.69) (.49)
------- ------- ------- ------- -------
Net asset value, end of year........ $13.02 $12.46 $12.54 $12.69 $12.69
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.74%(4) .75% 5.94% 6.66% 5.57%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.09%(4) 1.37% 1.44% 1.43% 1.80%(4)
Ratio of net investment income to
average net assets.................. 4.55%(4) 4.82% 5.13% 4.68% 4.59%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of
the Management Agreement)............. .12%(4) .08% .01% _ _
Portfolio Turnover Rate............. 17.92% 10.27% 35.39% 41.65% 41.65%
Net Assets, end of year (000's omitted) $5,931 $30,527 $35,090 $41,179 $27
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 13
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES
----------------------------------------------------------------------------------------
Class A Shares
----------------------------------------------------------------------------------------
Year Ended April 30,
----------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $11.50 $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.53
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .76 .83 .82 .79 .75 .73 .71 .69 .66
Net realized and unrealized gain
(loss) on investments (.96) .38 (.23) .37 .36 .73 (.44) (.06) _
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... (.20) 1.21 .59 1.16 1.11 1.46 .27 .63 .66
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.76) (.83) (.82) (.79) (.75) (.73) (.71) (.69) (.66)
Dividends from net realized
gain on investments _ _ _ (.01) _ (.01) (.05) _ (.03)
Dividends in excess of net
realized gain on investments _ _ _ _ _ _ _ (.05) _
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.76) (.83) (.82) (.80) (.75) (.74) (.76) (.74) (.69)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.53 $11.50
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) (1.67%)(3) 11.91% 5.49% 11.23% 10.32% 13.14% 2.08% 5.72% 5.69%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets. _ _ _ .19% .55% .69% .82% .94% .92%
Ratio of net investment income
to average net assets 7.63%(3) 7.58% 7.40% 7.21% 6.65% 6.16% 5.80% 6.04% 5.57%
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation (limited
to the expense limitation provision
of the Management Agreement) 1.50%(3) 1.48% 1.11% .78% .41% .24% .11% .01% _
Portfolio Turnover Rate 36.11%(4) 17.76% 28.44% 47.07% 24.75% 11.36% 12.04% 13.62% 34.86%
Net Assets, end of year
(000's omitted).... $5,174 $21,578 $43,375 $57,328 $66,873 $79,701 $76,865 $72,731 $68,812
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 14
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
------- ------- ------- ------- -------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $11.79 $12.13 $11.63 $11.52 $11.59
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .19 .64 .63 .60 .40
Net realized and unrealized gain (loss)
on investments...................... .34 (.45) (.06) _ (.08)
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .53 .19 .57 .60 .32
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.19) (.64) (.63) (.60) (.40)
Dividends from net realized gain on investments _ (.05) _ (.03) (.03)
Dividends in excess of net realized gain
on investments...................... _ _ (.05) _ _
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.19) (.69) (.68) (.63) (.43)
------- ------- ------- ------- -------
Net asset value, end of year........ $12.13 $11.63 $11.52 $11.49 $11.48
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.56%(4) 1.44% 5.15% 5.15% 3.76%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.15%(4) 1.36% 1.45% 1.43% 1.69%(4)
Ratio of net investment income to average
net assets 4.92%(4) 5.18% 5.47% 5.03% 4.72%(4)
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation
(limited to the expense limitation provision
of the Management Agreement)............. .13%(4) .10% .01% _ _
Portfolio Turnover Rate............. 11.36% 12.04% 13.62% 34.86% 34.86%
Net Assets, end of year (000's omitted) $1,066 $3,702 $4,220 $5,255 $1
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 15
<TABLE>
<CAPTION>
MICHIGAN SERIES
------------------------------------------------------------------------------------------
Class A Shares
------------------------------------------------------------------------------------------
Year Ended April 30,
------------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $13.00 $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.14
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net 1.00 1.07 1.05 1.01 .95 .92 .89 .85 .83
Net realized and unrealized gain
(loss) on investments .45 .65 (.27) .54 .46 .98 (.30) .11 .20
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... 1.45 1.72 .78 1.55 1.41 1.90 .59 .96 1.03
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (1.00) (1.07) (1.05) (1.01) (.95) (.92) (.89) (.85) (.83)
Dividends from net realized
gain on investments _ _ (.03) _ _ (.13) (.08) (.24) (.19)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.00) (1.07) (1.08) (1.01) (.95) (1.05) (.97) (1.09) (1.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.14 $15.15
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 12.32%(3) 13.25% 5.59% 11.61% 10.12% 13.25% 3.65% 6.65% 6.81%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... _ _ _ .20% .53% .69% .81% .92% .93%
Ratio of net investment income
to average net assets 7.97%(3) 7.49% 7.23% 7.07% 6.47% 6.01% 5.56% 5.66% 5.35%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.16% .79% .42% .25% .11% .01% _
Portfolio Turnover Rate 48.80%(4) 32.72% 20.23% 27.31% 21.42% 14.99% 19.96% 48.30% 56.88%
Net Assets, end of year
(000's omitted).... $1,671 $8,548 $56,699 $111,696 $145,159 $184,138 $187,405 $176,604 $166,538
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 16
<TABLE>
<CAPTION>
MICHIGAN SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
------- ------- ------- ------- -------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $15.20 $15.64 $15.27 $15.13 $15.18
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .24 .80 .77 .75 .50
Net realized and unrealized gain (loss)
on investments...................... .44 (.29) .10 .21 .17
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .68 .51 .87 .96 .67
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.24) (.80) (.77) (.75) (.50)
Dividends from net realized gain on investments _ (.08) (.24) (.19) (.19)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.24) (.88) (1.01) (.94) (.69)
------- ------- ------- ------- -------
Net asset value, end of year........ $15.64 $15.27 $15.13 $15.15 $15.16
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 15.50%(4) 3.11% 6.01% 6.33% 6.12%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.18%(4) 1.38% 1.44% 1.44% 1.70%(4)
Ratio of net investment income to
average net assets.................. 4.85%(4) 4.88% 5.10% 4.82% 4.47%(4)
Decrease reflected in above expense ratios due
to undertakings by The Dreyfus Corporation
(limited to the expense limitation provision of the
Management Agreement)................. .14%(4) .09% .01% _ _
Portfolio Turnover Rate............. 14.99% 19.96% 48.30% 56.88% 56.88%
Net Assets, end of year (000's omitted) $3,581 $13,861 $16,471 $19,031 $133
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 17
<TABLE>
<CAPTION>
MINNESOTA SERIES
-------------------------------------------------------------------------------------------
Class A Shares
-------------------------------------------------------------------------------------------
Year Ended April 30,
-------------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $13.50 $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $14.90
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .97 1.07 1.04 1.02 .96 .92 .87 .83 .82
Net realized and unrealized gain
(loss) on investments (.13) .55 (.13) .56 .36 .77 (.53) .18 .08
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... .84 1.62 .91 1.58 1.32 1.69 .34 1.01 .90
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.97) (1.07) (1.04) (1.02) (.96) (.92) (.87) (.83) (.82)
Dividends from net realized
gain on investments _ _ (.05) (.02) (.01) (.09) (.06) _ _
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.97) (1.07) (1.09) (1.04) (.97) (1.01) (.93) (.83) (.82)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of year........ $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $14.90 $14.98
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 7.01%(3) 12.57% 6.67% 11.89% 9.45% 11.96% 2.08% 7.14% 6.11%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... _ _ _ .20% .53% .69% .80% .90% .90%
Ratio of net investment income
to average net assets 7.79%(3) 7.66% 7.25% 7.19% 6.53% 6.13% 5.61% 5.68% 5.41%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.16% .79% .41% .24% .11% .01% _
Portfolio Turnover Rate 70.26%(4) 31.64% 23.48% 14.04% 12.32% 23.42% 12.21% 51.95% 35.47%
Net Assets, end of year
(000's omitted).... $4,331 $13,019 $46,428 $85,066 $122,782 $148,765 $155,657 $145,444$ 138,058
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 18
<TABLE>
<CAPTION>
MINNESOTA SERIES (CONTINUED)
-----------------------------------------------------------
Class B Shares Class C Shares
----------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------------- ---------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $14.86 $15.32 $14.74 $14.92 $14.96
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .24 .78 .75 .74 .50
Net realized and unrealized gain (loss)
on investments...................... .46 (.52) .18 .09 .05
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .70 .26 .93 .83 .55
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.24) (.78) (.75) (.74) (.50)
Dividends from net realized gain on investments _ (.06) _ _ _
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.24) (.84) (.75) (.74) (.50)
------- ------- ------- ------- -------
Net asset value, end of year........ $15.32 $14.74 $14.92 $15.01 $15.01
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.32%(4) 1.55% 6.57% 5.62% 5.15%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.16%(4) 1.38% 1.44% 1.43% 1.42%(4)
Ratio of net investment income to
average net assets.................. 4.83%(4) 4.91% 5.13% 4.87% 4.00%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. .14%(4) .09% .01% _ _
Portfolio Turnover Rate............. 23.42% 12.21% 51.95% 35.47% 35.47%
Net Assets, end of year (000's omitted) $4,633 $21,004 $23,217 $25,617 $373
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 19
<TABLE>
<CAPTION>
NORTH CAROLINA SERIES
----------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------------------------- ----------------------------- --------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED
APRIL 30,
---------------------------------------------- ------------------------------ ----------
PER SHARE DATA: 1992(1) 1993 1994 1995 1996 1993(2) 1994 1995 1996 1996(3)
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year. $12.00 $12.39 $13.40 $12.73 $12.72 $12.90 $13.39 $12.72 $12.71 $12.76
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net............... .62 .78 .74 .70 .67 .20 .66 .64 .60 .40
Net realized and unrealized gain
(loss) on investments.. .39 1.02 (.67) (.01) .19 .49 (.67) (.01) .19 .14
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.. 1.01 1.80 .07 .69 .86 .69 (.01) .63 .79 .54
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net..(.62) (.78) (.74) (.70) (.67) (.20) (.66) (.64) (.60) (.40)
Dividends from net realized gain
on investments......... _ (.01) _ _ _ _ _ _ _ _
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS............. (.62) (.79) (.74) (.70) (.67) (.20) (.66) (.64) (.60) (.40)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.... $12.39 $13.40 $12.73 $12.72 $12.91 $13.39 $12.72 $12.71 $12.90 $12.90
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(4)....... 11.36%(5) 14.97% .29% 5.70% 6.79% 18.53%(5) (.27%) 5.12% 6.25% 5.92%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................. _ .29% .44% .65% .98% .79%(5) 1.00% 1.18% 1.49% 1.73%(5)
Ratio of net investment income
to average net assets.... 6.35%(5) 5.94% 5.38% 5.63% 5.11% 4.47%(5) 4.78% 5.08% 4.59% 4.31%(5)
Decrease reflected in above
expense ratios due to undertakings
by The Dreyfus Corporation
(limited to the expense
limitation provision of the
Management Agreement).......... 1.14%(5) .76% .50% .31% .02% .56%(5) .48% .30% .02% _
Portfolio Turnover Rate............ 15.01%(6) 5.76% 11.62% 12.02% 47.15% 5.76% 11.62% 12.02% 47.15% 47.15%
Net Assets, end of year
(000's omitted).. $26,387 $56,284 $68,074 $50,205 $47,042 $13,145 $38,968 $42,310 $42,668 $1
(1)From August 1, 1991 (commencement of operations ) to April 30, 1992.
(2)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(3)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(4)Exclusive of sales load.
(5)Annualized.
(6)Not annualized.
</TABLE>
Page 20
<TABLE>
<CAPTION>
OHIO SERIES
----------------------------------------------------------------------------------
Class A Shares
----------------------------------------------------------------------------------
Year Ended April 30,
----------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year... $14.50 $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.62
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .80 .89 .88 .86 .80 .77 .74 .73 .71
Net realized and unrealized gain
(loss) on investments (3.32) .48 (.08) .46 .36 .81 (.36) (.05) .14
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS.......... (2.52) 1.37 .80 1.32 1.16 1.58 .38 .68 .85
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net.......... (.80) (.89) (.88) (.86) (.80) (.77) (.74) (.73) (.71)
Dividends from net realized
gain on investments. _ _ (.04) _ (.01) (.07) (.03) (.03) (.18)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS. (.80) (.89) (.92) (.86) (.81) (.84) (.77) (.76) (.89)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.62 $12.58
====== ====== ====== ====== ====== ====== ====== ====== ------
TOTAL INVESTMENT RETURN(2) (18.49%)(3) 12.72% 6.95% 11.84% 9.97% 13.24% 2.78% 5.63% 6.77%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.......... _ _ _ .21% .52% .70% .81% .92% .89%
Ratio of net investment
income to average net assets 7.79%(3) 7.57% 7.30% 7.20% 6.53% 6.03% 5.57% 5.84% 5.49%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.12% .78% .41% .23% .12% .01% _
Portfolio Turnover Rate 11.10%(4) 14.49% 14.58% 3.00% 13.68% 6.08% 7.73% 39.53% 43.90%
Net Assets, end of year
(000's omitted)..... $8,043 $31,420 $92,864 $176,223 $243,074 $295,564 $293,706 $273,225 $257,639
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 21
<TABLE>
<CAPTION>
OHIO SERIES (CONTINUED)
--------------------------------------------------------------
Class B Shares Class C Shares
------------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
------------------------------------- ---------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $12.69 $13.09 $12.71 $12.63 $12.68
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .20 .66 .66 .64 .43
Net realized and unrealized gain (loss)
on investments...................... .40 (.35) (.05) .14 .09
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .60 .31 .61 .78 .52
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.20) (.66) (.66) (.64) (.43)
Dividends from net realized
gain on investments _ (.03) (.03) (.18) (.18)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.20) (.69) (.69) (.82) (.61)
------- ------- ------- ------- -------
Net asset value, end of year........ $13.09 $12.71 $12.63 $12.59 $12.59
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.36%(4) 2.24% 5.06% 6.19% 5.66%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.17%(4) 1.38% 1.44% 1.42% 1.63%(4)
Ratio of net investment income to
average net assets.................. 4.62%(4) 4.89% 5.29% 4.94% 4.66%(4)
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus Corporation
(limited to the expense limitation
provision of the Management Agreement).... .13%(4) .10% .01% _ _
Portfolio Turnover Rate............. 6.08% 7.73% 39.53% 43.90% 43.90%
Net Assets, end of year (000's omitted) $8,482 $27,657 $32,797 $40,476 $1
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 22
<TABLE>
<CAPTION>
PENNSYLVANIA SERIES
-----------------------------------------------------------------------------
Class A Shares
------------------------------------------------------------------------------
Year Ended April 30,
------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $15.00 $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.12
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net .85 1.13 1.13 1.12 1.06 1.02 .95 .91 .87
Net realized and unrealized gain
(loss) on investments (.77) .55 (.08) .55 .56 .99 (.57) .11 .32
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... .08 1.68 1.05 1.67 1.62 2.01 .38 1.02 1.19
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (.85) (1.13) (1.13) (1.12) (1.06) (1.02) (.95) (.91) (.87)
Dividends from net realized gain
on investments..... _ _ (.02) (.02) (.04) (.11) (.03) _ (.27)
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (.85) (1.13) (1.15) (1.14) (1.10) (1.13) (.98) (.91) (1.14)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.12 $16.17
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) .87%(3) 12.21% 7.20% 11.74% 10.97% 13.19% 2.17% 6.65% 7.46%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... _ _ _ .22% .56% .69% .81% .92% .92%
Ratio of net investment income
to average net assets 7.08%(3) 7.46% 7.38% 7.32% 6.75% 6.24% 5.61% 5.77% 5.28%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.24% .79% .41% .25% .12% .01% _
Portfolio Turnover Rate 67.48%(4) 25.10% 59.15% 25.74% 38.97% 8.64% 7.21% 55.19% 52.69%
Net Assets, end of year
(000's omitted).... $2,870 $12,083 $51,418 $113,439 $158,437 $220,920 $235,619 $219,949 $216,802
(1)From July 30, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 23
<TABLE>
<CAPTION>
PENNSYLVANIA SERIES (CONTINUED)
-----------------------------------------------------------------
Class B Shares Class C Shares
------------------------------------------ ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
------------------------------------------ ---------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $16.10 $16.60 $16.01 $16.11 $16.18
------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .26 .85 .83 .79 .53
Net realized and unrealized gain (loss)
on investments...................... .50 (.56) .10 .32 .25
------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... .76 .29 .93 1.11 .78
------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.26) (.85) (.83) (.79) (.53)
Dividends from net realized
gain on investments _ (.03) _ (.27) (.27)
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.26) (.88) (.83) (1.06) (.80)
------- ------- ------- ------- -------
Net asset value, end of year........ $16.60 $16.01 $16.11 $16.16 $16.16
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 16.39%(4) 1.65% 6.02% 6.92% 6.71%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.14%(4) 1.38% 1.44% 1.43% 1.70%(4)
Ratio of net investment income to
average net assets.................. 4.90%(4) 4.95% 5.22% 4.76% 4.46%(4)
Decrease reflected in above expense
ratios due to undertakings by The
Dreyfus Corporation (limited to the
expense limitation provision of the
Management Agreement)................. .15%(4) .10% .01% _ _
Portfolio Turnover Rate............. 8.64% 7.21% 55.19% 52.69% 52.69%
Net Assets, end of year (000's omitted) $14,631 $59 $70,062 $72,610 $21
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 24
<TABLE>
<CAPTION>
TEXAS SERIES
--------------------------------------------------------------------------------
Class A Shares
--------------------------------------------------------------------------------
Year Ended April 30,
--------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.. $15.50 $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.69
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net 1.33 1.45 1.44 1.40 1.36 1.29 1.25 1.22 1.20
Net realized and unrealized gain
(loss) on investments 2.39 .75 (.05) .67 .69 1.37 (.66) .28 .45
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS......... 3.72 2.20 1.39 2.07 2.05 2.66 .59 1.50 1.65
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net......... (1.33) (1.45) (1.44) (1.40) (1.36) (1.29) (1.25) (1.22) (1.20)
Dividends from net realized gain
on investments..... _ _ (.01) _ (.05) (.03) (.13) _ (.30)
Dividends in excess of net realized
gain on investments _ _ _ _ _ _ (.03) _ _
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.33) (1.45) (1.45) (1.40) (1.41) (1.32) (1.41) (1.22) (1.50)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.69 $20.84
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 26.23%(3) 12.79% 7.55% 11.54% 10.97% 13.80% 2.62% 7.63% 8.06%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... _ _ _ _ .15% .36% .39% .37% .37%
Ratio of net investment income to
average net assets. 7.94%(3) 7.90% 7.50% 7.29% 6.78% 6.18% 5.78% 6.01% 5.64%
Decrease reflected in above
expense ratios due to
undertakings by The Dreyfus
Corporation (limited to the
expense limitation provision of
the Management Agreement) 1.50%(3) 1.50% 1.50% 1.27% .88% .62% .55% .55% .55%
Portfolio Turnover Rate 47.85%(4) 6.84% 2.62% 1.95% 7.49% 14.94% 9.68% 38.68% 49.24%
Net Assets, end of year
(000's omitted).... $1,553 $2,902 $5,642 $15,139 $37,208 $72,037 $76,277 $68,103 $62,864
(1)From May 28, 1987 (commencement of operations) to April 30, 1988.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
Page 25
<TABLE>
<CAPTION>
TEXAS SERIES (CONTINUED)
--------------------------------------------------------------
Class B Shares Class C Shares
-------------------------------------- ---------------------
Year Ended APRIL 30, Year Ended APRIL 30,
-------------------------------------- ---------------------
PER SHARE DATA: 1993(1) 1994 1995 1996 1996(2)
------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $20.52 $21.23 $20.41 $20.69 $20.78
------- ------ ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............... .33 1.13 1.10 1.09 .73
Net realized and unrealized gain (loss)
on investments...................... .71 (.66) .28 .45 .35
------- ------ ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS.... 1.04 .47 1.38 1.54 1.08
------- ------ ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net (.33) (1.13) (1.10) (1.09) (.73)
Dividends from net realized gain on investments _ (.13) _ (.30) (.30)
Dividends in excess of net realized gain
on investments...................... _ (.03) _ _ _
------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS................. (.33) (1.29) (1.10) (1.39) (1.03)
------- ------- ------- ------- -------
Net asset value, end of year........ $21.23 $20.41 $20.69 $20.84 $20.83
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3)............ 17.60%(4) 2.05% 7.05% 7.51% 7.29%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .82%(4) .94% .89% .88% 1.18%(4)
Ratio of net investment income to
average net assets.................. 4.81%(4) 5.15% 5.46% 5.13% 4.77%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. .49%(4) .54% .55% .55% .58%(4)
Portfolio Turnover Rate............. 14.94% 9.68% 38.68% 49.24% 49.24%
Net Assets, end of year (000's omitted) $6,373 $15,878 $16,818 $17,461 $1
(1)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
Page 26
<TABLE>
<CAPTION>
VIRGINIA SERIES
----------------------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------------------------- ----------------------------- --------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED
APRIL 30,
---------------------------------------------- ------------------------------ ----------
PER SHARE DATA: 1992(1) 1993 1994 1995 1996 1993(2) 1994 1995 1996 1996(3)
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $15.00 $15.50 $16.80 $16.02 $16.03 $16.25 $16.80 $16.02 $16.03 $16.17
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
INVESTMENT OPERATIONS:
Investment income-net............ .78 1.00 .97 .94 .93 .26 .88 .85 .84 .57
Net realized and unrealized gain
(loss) on investments.. .50 1.31 (.75) .04 .24 .55 (.75) .04 .24 .09
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
TOTAL FROM INVESTMENT OPERATIONS.... 1.28 2.31 .22 .98 1.17 .81 .13 .89 1.08 .66
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
DISTRIBUTIONS:
Dividends from investment
income-net... (.78) (1.00) (.97) (.94) (.93) (.26) (.88) (.85) (.84) (.57)
Dividends from net realized
gain on investments......... _ (.01) (.01) (.03) _ _ (.01) _ _ _
Dividends in excess of net
realized gain on investments. _ _ (.02) _ _ _ (.02) (.03) _ _
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
TOTAL DISTRIBUTIONS............ (.78) (1.01) (1.00) (.97) (.93) (.26) (.91) (.88) (.84) (.57)
------ ------ ------ ------ ------ ------ ------ ------ ----- ------
Net asset value, end of year..... $15.50 $16.80 $16.02 $16.03 $16.27 $16.80 $16.02 $16.03 $16.27 $16.26
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(4)........ 11.54%(5) 15.32% 1.10% 6.39% 7.32% 17.22%(5) .54% 5.83% 6.77% 5.64%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets......... _ .27% .46% .39% .50% .83%(5) 1.01% .90% 1.01% 1.21%(5)
Ratio of net investment income
to average net assets.... 6.42%(5) 6.02% 5.64% 5.93% 5.58% 4.62%(5) 5.02% 5.40% 5.06% 4.55%(5)
Decrease reflected in above
expense ratios due to
undertakings by The
Dreyfus Corporation
(limited to the expense
limitation provision of
the Management Agreement)..... 1.22%(5) .76% .55% .55% .55% .54%(5) .54% .55% .55% .52%(5)
Portfolio Turnover Rate.......... 5.96%(6) 9.32% 30.69% 21.60% 50.06% 9.32% 30.69% 21.60% 50.06% 50.06%
Net Assets, end of year
(000's omitted).......... $23,096 $55,627 $65,279 $62,428 $61,149 $8,402 $25,254 $28,813 $33,120 $166
(1)From August 1, 1991 (commencement of operations) to April 30, 1992.
(2)From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(3)From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(4)Exclusive of sales load.
(5)Annualized.
(6)Not annualized.
</TABLE>
Page 27
Further information about each such Series' performance is contained in
the Fund's annual report, which may be obtained without charge by writing
to the address or calling the number set forth on the cover page of this
Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you three methods of purchasing each Series'
shares; you may choose the Class of shares that best suits your needs,
given the amount of your purchase, the length of time you expect to hold
your shares and any other relevant circumstances. Each Series' share
represents an identical pro rata interest in the Series' investment
portfolio.
As to each Series, Class A shares are sold at net asset value
per share plus a maximum initial sales charge of 4.50% of the public
offering price imposed at the time of purchase. The initial sales charge
may be reduced or waived for certain purchases. See "How to Buy Shares -
Class A Shares." These shares are subject to an annual service fee at the
rate of .25 of 1% of the value of the average daily net assets of Class
A. See "Distribution Plan and Shareholder Services Plan - Shareholder
Services Plan."
As to each Series, Class B shares are sold at net asset value
per share with no initial sales charge at the time of purchase; as a
result, the entire purchase price is immediately invested in the Fund.
Class B shares are subject to a maximum 3% contingent deferred sales
charge ("CDSC"), which is assessed only if you redeem Class B shares
within the first five years of their purchase. See "How to Buy Shares -
Class B Shares" and "How to Redeem Shares - Contingent Deferred Sales
Charge - Class B Shares." These shares also are subject to an annual
service fee at the rate of .25 of 1% of the value of the average daily net
assets of Class B. In addition, Class B shares are subject to an annual
distribution fee at the rate of .50 of 1% of the value of the average
daily net assets of Class B. See "Distribution Plan and Shareholder
Services Plan." The distribution fee paid by Class B will cause such
Class to have a higher expense ratio and to pay lower dividends than
Class A. Approximately six years after the date of purchase, Class B
shares of a Series automatically will convert to Class A shares of such
Series, based on the relative net asset values for shares of each such
Class, and will no longer be subject to the distribution fee. Class B
shares that have been acquired through the reinvestment of dividends and
distributions will be converted on a pro rata basis together with other
Class B shares, in the proportion that a shareholder's Class B shares
converting to Class A shares bears to the total Class B shares not
acquired through the reinvestment of dividends and distributions.
As to each Series, Class C shares are sold at net asset value
per share with no initial sales charge at the time of purchase; as a
result, the entire purchase price is immediately invested in the Series.
Class C shares are subject to a 1% CDSC, which is assessed only if you
redeem Class C shares within one year of purchase. See "How to Buy Shares
-- Class C Shares" and "How to Redeem Shares -- Contingent Deferred Sales
Charge -- Class C Shares." These shares also are subject to an annual
service fee at the rate of .25 of 1%, and an annual distribution fee at
the rate of .75 of 1%, of the value of the average daily net assets of
Class C. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class C will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A.
The decision as to which Class of shares is more beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C shares would be less than the initial sales
charge on Class A shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution fees on Class B or Class C shares may exceed the initial
sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any
conversion rights
Page 28
of the Classes in the context of your own investment
time frame. For example, while Class C shares have a shorter CDSC period
than Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing distribution fee. Thus, Class B
shares may be more attractive than Class C shares to investors with
long-term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares,
and for investors who invest between $250,000 and $999,999 in Fund shares
with long-term investment outlooks. Class A shares will not be
appropriate for investors who invest less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize current income
exempt from Federal income tax and, where applicable, from State income
taxes for residents of the States of Connecticut, Florida, Georgia,
Maryland, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina,
Ohio, Pennsylvania, Texas and Virginia, without undue risk. To accomplish
the Fund's investment objective, each Series invests primarily in the
debt securities of the State after which it is named, such State's
political subdivisions, authorities and corporations, the interest from
which is, in the opinion of bond counsel to the issuer, exempt from
Federal and such State's personal income taxes (collectively, "State
Municipal Obligations" or when the context so requires, "Connecticut
Municipal Obligations," "Florida Municipal Obligations," "Georgia
Municipal Obligations," "Maryland Municipal Obligations," etc.). To the
extent acceptable State Municipal Obligations are at any time unavailable
for investment, such Series will invest temporarily in other debt
securities the interest from which is, in the opinion of bond counsel to
the issuer, exempt from Federal income tax. Each Series' investment
objective cannot be changed without approval by the holders of a majority
(as defined in the Investment Company Act of 1940, as amended (the "1940
Act")) of such Series' outstanding voting shares. There can be no
assurance that the Series' investment objective will be achieved. When
used herein, the term "State" refers to the State after which a Series is
named.
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.
Page 29
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that at least 80% of
the value of each Series' net assets (except when maintaining a temporary
defensive position) will be invested in Municipal Obligations and at
least 65% of the value of each Series' net assets (except when
maintaining a temporary defensive position) will be invested in bonds,
debentures and other debt instruments. At least 65% of the value of each
Series' net assets will be invested in Municipal Obligations issued by
issuers in such State, as defined above, and the remainder may be
invested in securities that are not State Municipal Obligations and
therefore may be subject to State income taxes. See "Investment
Considerations and Risks - Investing in State Municipal Obligations"
below, and "Dividends, Distributions and Taxes."
At least 70% of the value of each Series' net assets must
consist of Municipal Obligations which, in the case of bonds, are rated
no lower than Baa by Moody's Investors Service, Inc. ("Moody's") or BBB
by Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc. ("S&P"), or Fitch Investors Service, L.P. ("Fitch"). Each
Series may invest up to 30% of the value of its net assets in Municipal
Obligations which, in the case of bonds, are rated lower than Baa by
Moody's and BBB by S&P and Fitch and as low as the lowest rating assigned
by Moody's, S&P or Fitch. Each Series may invest in short-term Municipal
Obligations which are rated in the two highest rating categories by
Moody's, S&P or Fitch. See "Appendix B" in the Statement of Additional
Information. Municipal Obligations rated Baa by Moody's or BBB by S&P or
Fitch are considered investment grade obligations; those rated Baa by
Moody's are considered medium grade obligations which lack outstanding
investment characteristics and have speculative characteristics while
those rated BBB by S&P and Fitch are regarded as having an adequate
capacity to pay principal and interest. Investments rated Ba or lower by
Moody's and BB or lower by S&P and Fitch ordinarily provide higher yields
but involve greater risk because of their speculative characteristics.
Each Series may invest in Municipal Obligations rated C by Moody's or D
by S&P or Fitch, which is the lowest rating assigned by such rating
organizations and indicates that the Municipal Obligation is in default
and interest and/or repayment of principal is in arrears. See "Investment
Considerations and Risks - Lower Rated Bonds" below for a further
discussion of certain risks. Each Series also may invest in securities
which, while not rated, are determined by The Dreyfus Corporation to be
of comparable quality to the rated securities in which the Series may
invest; for purposes of the 70% requirement described in this paragraph,
such unrated securities shall be deemed to have the rating so determined.
Each Series also may invest in Taxable Investments of the quality
described under "Appendix-Certain Portfolio Securities-Taxable
Investments." Under normal market conditions, the weighted average
maturity of each Series' portfolio is expected to exceed ten years.
From time to time, a Series may invest more than 25% of the
value of its total assets in industrial development bonds which, although
issued by industrial development authorities, may be backed only by the
assets and revenues of the non-governmental users. Interest on Municipal
Obligations (including certain industrial development bonds) which are
specified private activity bonds, as defined in the Internal Revenue Code
of 1986, as amended (the "Code"), issued after August 7, 1986, while
exempt from Federal income tax, is a preference item for the purpose of
the alternative minimum tax. Where a regulated investment company
receives such interest, a proportionate share of any exempt-interest
dividend paid by the investment company may be treated as such a
preference item to shareholders. Each Series may invest without
limitation in such Municipal Obligations if The Dreyfus Corporation
determines that their purchase is consistent with the Fund's investment
objective.
Each Series' annual portfolio turnover rate is not expected
to exceed 100%. Each Series may engage in various investment techniques,
such as options and futures transactions, lending portfolio securities
and short-selling. Use of certain of these techniques may give rise to
taxable income. For a discussion of the investment techniques and their
related risks, see
Page 30
"Investment Considerations and Risks," "Appendix-Investment Techniques"
and "Dividends, Distributions and Taxes" below and "Investment Objective
and Management Policies - Management Policies" in the Statement of
Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments
which promise a stable stream of income, the prices of such securities
are inversely affected by changes in interest rates and, therefore, are
subject to the risk of market price fluctuations. Certain securities that
may be purchased by each Series of the Fund, such as those with interest
rates that fluctuate directly or indirectly based upon multiples of a
stated index, are designed to be highly sensitive to changes in interest
rates and can subject the holders thereof to extreme reductions of yield
and possibly loss of principal. The values of fixed-income securities
also may be affected by changes in the credit rating or financial
condition of the issuing entities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances
deemed relevant in determining whether to hold the security. Each Series'
net asset value generally will not be stable and should fluctuate based
upon changes in the value of the Fund's portfolio securities. Securities
in which the Series invests may earn a higher level of current income
than certain shorter-term or higher quality securities which generally
have greater liquidity, less market risk and less fluctuation in market
value.
INVESTING IN STATE MUNICIPAL OBLIGATIONS -- You should consider
carefully the special risks inherent in the purchase of shares of each
Series resulting from its purchase of the respective State's Municipal
Obligations. Certain of the States have experienced financial
difficulties, the recurrence of which could result in defaults or
declines in the market values of various Municipal Obligations in which
such Series invests. If there should be a default or other financial
crisis relating to a State or an agency or municipality thereof, the
market value and marketability of outstanding State Municipal Obligations
in a Series' portfolio and the interest income to the Series could be
adversely affected. You should obtain and review a copy of the Statement
of Additional Information which more fully sets forth these and other
risk factors.
CONNECTICUT SERIES -- Connecticut's economy relies in part on
activities that may be adversely affected by cyclical change, and recent
declines in defense spending have had a significant impact on
unemployment levels. Although the State recorded General Fund surpluses
in the fiscal years 1985 through 1987, and 1992 through 1995, Connecticut
reported deficits from its General Fund operations for the fiscal years
1988 through 1991. Together with the deficit carried forward from the
State's 1990 fiscal year, the total General Fund deficit for the 1991
fiscal year was $965.7 million. The total deficit was funded by the
issuance of General Obligation Economic Recovery Notes. Moreover, as of
June 30, 1995, the General Fund had a cumulative deficit under GAAP of
$576.9 million. As a result of the recurring budgetary problems, S&P
downgraded the State's general obligation bonds from AA+ to AA in April
1990 and to AA- in September 1991. Fitch downgraded the State's general
obligation bonds from AA+ to AA in March 1995. Moody's currently rates
Connecticut's bonds Aa.
FLORIDA SERIES -- The Florida Constitution and Statutes mandate that
the State budget as a whole, and each separate fund within the State
budget, be kept in balance from currently available revenues each fiscal
year. Florida's Constitution permits issuance of Florida Municipal
Obligations pledging the full faith and credit of the State, with a vote
of the electors, to finance or refinance fixed capital outlay projects
authorized by the Legislature, provided that the outstanding principal
does not exceed 50% of the total tax revenues of the State for the two
preceding years. Florida's Constitution also provides that the
Legislature shall appropriate monies sufficient to pay debt service on
State bonds pledging the full faith and credit of the State as the same
becomes due. All State tax revenues, other than trust funds dedicated by
Florida's Constitution for other purposes, would be available for such an
appropriation, if required. Revenue bonds may be issued by the State or
its agencies without a vote of Florida's
Page 31
electors only to finance or refinance the cost of State fixed capital
outlay projects which may be payable solely from funds derived directly
from sources other than State tax revenues. Fiscal year 1994-95 total
General Revenue and Working Capital Funds available are estimated to have
been $15.635 billion, which resulted in estimated unencumbered reserves
of $319.5 million at the end of fiscal 1994-95. The General Revenue and
Working Capital Funds ended the 1993-94 fiscal year with unencumbered
reserves of $351.8 million.
GEORGIA SERIES -- Georgia's Constitution limits appropriation of
funds for any given fiscal year to the sum of the amount of
unappropriated surplus expected to have accrued at the beginning of the
fiscal year and the amount not greater than the total receipts
anticipated, less refunds, as estimated. The State Constitution provides
for supplementary appropriations in accordance with its provisions as
well. Georgia's economy grew rapidly in the 1980's resulting in a general
fund reserve. As a result of a slowdown in the State's economy in the
early 1990's, the general fund reserve was effectively eliminated.
Beginning in fiscal 1993, however, revenues once again began to exceed
appropriations. The State's revenue shortfall reserve at the end of
fiscal 1995 was approximately $288 million. Revenues are estimated to
slightly exceed expenditures for fiscal 1996.
MARYLAND SERIES -- The public indebtedness of the State of Maryland
and its instrumentalities is divided into three basic types: general
obligation bonds for capital improvements and for various State-sponsored
projects to the payment of which the State ad valorem property tax is
exclusively pledged; limited, special obligation bonds issued by the
Maryland Department of Transportation for transportation purposes,
payable primarily from specific, fixed-rate excise taxes and other
revenues related mainly to highway use; and obligations issued by certain
authorities payable solely from specific non-tax, enterprise fund
revenues for which the State has no liability and has given no moral
obligation assurance.
Since at least the end of the Civil War, the State has paid
the principal of and interest on its general obligation bonds when due.
There is no general debt limit imposed by the State Constitution or
public general laws, but the Constitution does require the annual
operating budget to be in balance with estimated revenues. When the
fiscal year 1996 budget was enacted, it was estimated that the General
Fund surplus on a budgetary basis at June 30, 1996, would be
approximately $7.8 million. As of February, 1996, it was estimated that
the General Fund surplus on a budgetary basis at June 30, 1996, will be
$1 million. When the 1997 budget was submitted by the Governor to the
General Assembly, it was estimated that the General Fund surplus on a
budgetary basis at June 30, 1997 would be approximately $500 thousand,
and that the balance in the Revenue Stabilization Account of the State
Reserve Fund would be $538 million.
MASSACHUSETTS SERIES -- Massachusetts' economic and fiscal
difficulties of recent years appear to have abated. While the
Commonwealth's expenditures for state programs and services in each of
the fiscal years 1987 through 1991 exceeded each year's current revenues,
Massachusetts ended each of the fiscal years 1991 through 1996 with a
positive fiscal balance in its general operating funds.
MICHIGAN SERIES -- Michigan's economy has been undergoing certain
basic changes in its underlying structure. These changes reflect a
diversifying economy which is less reliant on the automobile industry. As
a result, it is anticipated that the State's economy in the future will
be less susceptible to cyclical swings and more resilient when national
downturns occur. The principal sectors of Michigan's diversifying economy
are manufacturing of durable goods (including automobile and office
equipment manufacturing), tourism and agriculture. Michigan's
unemployment rate averaged 9.9% in 1985 and averaged 5.3% in 1995.
Michigan's Annual Financial Reports for the fiscal years
ended September 30, 1987, 1988 and 1989 showed positive balances in the
State's general cash position representing an improvement from the
negative cash position of 1982. Michigan ended fiscal years 1989-90 and
1990-91 with negative balances of $310 million and $169 million,
respectively. This cumulative
Page 32
deficit was eliminated as of the fiscal year ended September 30, 1992.
Michigan ended fiscal years 1992-93, 1993-94 and 1994 -95 with surpluses
of approximately $308 million, $460 million and 67.4 million respectively.
MINNESOTA SERIES -- The structure of Minnesota's economy parallels
the structure of the United States' economy as a whole when viewed at a
highly aggregated level of detail. Diversity and a significant natural
resource base are two important characteristics of the State's economy.
However, the State of Minnesota experienced financial difficulties in the
early 1980s because of a downturn in the State's economy resulting from
the national recession. More recently, real growth has been equal to or
greater than national growth.
There can be no assurance that the financial problems
referred to or similar future problems will not affect the market value
or marketability of the Minnesota Municipal Obligations or the ability of
the issuer thereof to pay interest or principal thereon.
NEW JERSEY SERIES -- Although New Jersey enjoyed a period of economic
growth with unemployment levels below the national average during the
mid-1980s, its economy slowed down well before the onset of the national
recession in July 1990. Reflecting the economic downturn, the State's
unemployment rate rose from a low of 3.6% in the first quarter of 1989 to
a recessionary peak of 9.3% during 1992. As a result of New Jersey's
fiscal weakness, in July 1991, S&P lowered its rating of the State's
general obligation debt from AAA to AA+.
NORTH CAROLINA SERIES -- The economic profile of the State of North
Carolina consists of a combination of agriculture, industry and tourism,
with agriculture as the basic element in the economy. Tobacco production
is the leading source of agricultural income in the State, accounting for
20% of gross agricultural income. The poultry and pork industries also
are significant sources of gross agricultural income.
The North Carolina Constitution requires a balanced budget.
While North Carolina's Governor lacks the power to veto budget or other
legislative actions, the Governor does have the power as ex office
Director of the Budget, after first making adequate provision for the
prompt payment of the principal of and interest on bonds and notes of the
State according to their terms, to reduce all appropriations for a
particular fiscal period on a pro rata basis to prevent an overdraft or
deficit for such fiscal period. The Governor also may take less drastic
action to reduce expenditures to maintain a balanced budget before the
need for across the board appropriations reductions arises.
OHIO SERIES -- Nonmanufacturing industries now employ more than 78.9%
of all payroll employees in Ohio. However, due to the continued
importance of manufacturing industries (including auto-related
manufacturing), economic activity in Ohio tends to be more cyclical than
in some other states and in the nation as a whole. Although Ohio's
economy has improved since the 1980-82 national recession, the State
experienced an economic slow-down during its 1990-91 fiscal year,
consistent with national economic conditions during that period. For
Ohio's fiscal year ended June 30, 1996, the Ohio Office of Budget and
Management reported positive $781.3 million and $1,138.5 million ending
fund and cash balances, respectively. Each of the foregoing factors could
have an effect on the market for issuers generally or may have the effect
of impairing the ability of issuers to pay interest on, or repay
principal of, Ohio Municipal Obligations.
PENNSYLVANIA SERIES -- Pennsylvania has been historically identified
as a heavy industry state although that reputation has recently changed
as the coal, steel and railroad industries declined. A more diversified
economy has developed in Pennsylvania as a long-term shift in jobs,
investment and workers away from the northeast part of the nation took
place. The major new sources of growth are in the service sector,
including trade, medical and health services, education and financial
institutions. Pennsylvania is highly urbanized, with approximately 50% of
the Commonwealth's total population contained in the metropolitan areas
which include the cities of Philadelphia and Pittsburgh. The
Commonwealth's adopted fiscal 1996-97
Page 33
General Fund budget provided for no new taxes. As of June 30, 1996, the
General Fund had a surplus of $69.8 million or 0.4% above the official
estimate for the prior fiscal year.
TEXAS SERIES -- Economically and financially the State of Texas
suffered during the 1980s significant damage from the continued depressed
price of oil and gas and the overbuilding in the real estate market. The
decline in oil prices, particularly since 1986, and the recession that
followed have had a severe effect on the Texas banking and savings and
loan industries, resulting in a number of closings among banks and
savings and loans through the early 1990s. In recent years, the State's
overall financial situation has improved significantly, as Texas'
economic growth has been outpacing that of the United States as a whole.
In fiscal years 1991, 1992, 1993, 1994 and 1995, Texas' General Revenue
Fund ended with cash surpluses of $1.005 billion, $615 million, $1.630
billion, $2.225 billion and $2.101 billion,respectively.
VIRGINIA SERIES -- Because of Northern Virginia, with its proximity
to Washington, D.C., and Hampton Roads, which has the nation's largest
concentration of military installations, the Federal government has a
greater impact on Virginia relative to its size than any states other
than Alaska and Hawaii. Virginia's economy has continued to grow over the
last decade, and while per capita income has grown both faster and slower
than the U.S. average from year to year during that period, per capita
income continues to be above the national average. Virginia's unreserved
General Fund balances have continued to grow in recent years from a low
in 1991. The Virginia Constitution requires a balanced budget and, since
1993, the funding of a Revenue Stabilization Fund. Current debt levels
are well below limits established by the Constitution.
INVESTING IN MUNICIPAL OBLIGATIONS -- Each Series may invest more
than 25% of the value of its total assets in Municipal Obligations which
are related in such a way that an economic, business or political
development or change affecting one such security also would affect the
other securities; for example, securities the interest upon which is paid
from revenues of similar types of projects. As a result, each Series may
be subject to greater risk as compared to a fund that does not follow
this practice.
Certain municipal lease/purchase obligations in which the
Series may invest may contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease payments in future
years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease/purchase obligations are secured by
the leased property, disposition of the leased property in the event of
foreclosure might prove difficult. In evaluating the credit quality of a
municipal lease/purchase obligation that is unrated, The Dreyfus
Corporation will consider, on an ongoing basis, a number of factors
including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Certain provisions in the Code relating to the issuance of
Municipal Obligations may reduce the volume of Municipal Obligations
qualifying for Federal tax exemption. One effect of these provisions
could be to increase the cost of the Municipal Obligations available for
purchase by the Series and thus reduce the available yield. Shareholders
should consult their tax advisers concerning the effect of these
provisions on an investment in a Series. Proposals that may restrict or
eliminate the income tax exemption for interest on Municipal Obligations
may be introduced in the future. If any such proposal were enacted that
would reduce the availability of Municipal Obligations for investment by
the Fund so as to adversely affect Fund shareholders, the Fund would
reevaluate its investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration.
If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a
permissible Taxable Investment within the applicable limits set forth
herein.
ZERO COUPON SECURITIES -- Federal income tax law requires the holder
of a zero coupon security or of certain pay-in-kind bonds to accrue
income with respect to these securities prior to the receipt of cash
payments. To maintain its qualification as a regulated investment company,
and avoid liability for Federal income taxes, a Series may be required to
distribute such
Page 34
income accrued with respect to these securities and may have to dispose
of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
LOWER RATED BONDS -- Each Series may invest up to 30% of its net
assets in higher yielding (and, therefore, higher risk) debt securities
(commonly known as junk bonds), such as those rated Ba by Moody's or BB
by S&P or Fitch or as low as the lowest rating assigned by Moody's, S&P
or Fitch. They may be subject to certain risks with respect to the
issuing entity and to greater market fluctuations than certain lower
yielding, higher rated fixed-income securities. The retail secondary
market for these securities may be less liquid than that of higher rated
securities; adverse market conditions could make it difficult at times
for the Fund to sell certain securities or could result in lower prices
than those used in calculating the Series' net asset value. See "Appendix
- Certain Portfolio Securities - Ratings."
USE OF DERIVATIVES _ Each Series may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an
underlying asset, index or interest rate. The Derivatives the Series may
use include options and futures. While Derivatives can be used
effectively in furtherance of a Series' investment objective, under
certain market conditions, they can increase the volatility of the
Series' net asset value, can decrease the liquidity of the Series'
portfolio and make more difficult the accurate pricing of the Series'
portfolio. See "Appendix-Investment Techniques-Use of Derivatives" below
and "Investment Objective and Management Policies-Management
Policies-Derivatives" in the Statement of Additional Information.
NON-DIVERSIFIED STATUS -- The classification of the Fund as a
"non-diversified" investment company means that the proportion of each
Series' assets that may be invested in the securities of a single issuer
is not limited by the 1940 Act. A "diversified" investment company is
required by the 1940 Act generally, with respect to 75% of its total
assets, to invest not more than 5% of such assets in the securities of
a single issuer. Since a relatively high percentage of a Series' assets
may be invested in the securities of a limited number of issuers, the
Series' portfolio may be more sensitive to changes in the market value of
a single issuer. However, to meet Federal tax requirements, at the close
of each quarter the Series may not have more than 25% of its total assets
invested in any one issuer and, with respect to 50% of total assets, not
more than 5% of its total assets invested in any one issuer. These
limitations do not apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are
made independently from those of other investment companies advised by
The Dreyfus Corporation. If, however, such other investment companies
desire to invest in, or dispose of, the same securities as the Fund,
available investments or opportunities for sales will be allocated
equitably to each investment company. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by
the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park
Avenue, New York, New York 10166, was formed in 1947 and serves as the
Fund's investment adviser. The Dreyfus Corporation is a wholly-owned
subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of
Mellon Bank Corporation ("Mellon"). As of June 28, 1996, The Dreyfus
Corporation managed or administered approximately $79 billion in assets
for more than 1.7 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Fund, subject to the authority of the Fund's
Page 35
Board in accordance with Massachusetts law. The primary portfolio manager
for each of the Florida Series and the Georgia Series is Stephen C. Kris,
who has held that position since February 1996 with respect to the Florida
Series and September 1992 with respect to the Georgia Series, and has been
employed by The Dreyfus Corporation since February 1988. The primary
portfolio manager for each of the Connecticut Series, the Massachusetts
Series, the North Carolina Series and the Virginia Series is Samuel J.
Weinstock, who has held that position with respect to the Connecticut
Series and the Massachusetts Series since August 1987 and with respect to
the North Carolina Series and Virginia Series since August 1991, and has
been employed by The Dreyfus Corporation since March 1987. The primary
portfolio manager for each of the Maryland Series, the Pennsylvania
Series and the Texas Series is Douglas J. Gaylor, who has held that
position since January 1996 and has been employed by The Dreyfus
Corporation since January 1996. Prior to joining The Dreyfus Corporation,
Mr. Gaylor was a Municipal Portfolio Manager at PNC Bank since 1993 and
from 1989 to September 1993 was a Municipal Portfolio Manager at
Wilmington Trust Company. The primary portfolio manager for each of the
Michigan Series, the Minnesota Series and the Ohio Series is Joseph P.
Darcy, who has held that position and has been employed by The Dreyfus
Corporation since May 1994. For more than five years prior to joining The
Dreyfus Corporation, Mr. Darcy was a Vice President and Portfolio Manager
for Merrill Lynch Asset Management. The primary portfolio manager for the
New Jersey Series is ________________, who has held that position since
the Series' inception and has been employed by The Dreyfus Corporation
since ___________. The Fund's other portfolio managers are identified in
the Statement of Additional Information. The Dreyfus Corporation also
provides research services for the Fund and for other funds advised by
The Dreyfus Corporation through a professional staff of portfolio
managers and securities analysts.
Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Bank
Holding Company Act of 1956, as amended. Mellon provides a comprehensive
range of financial products and services in domestic and selected
international markets. Mellon is among the twenty-five largest bank
holding companies in the United States based on total assets. Mellon's
principal wholly-owned subsidiaries are Mellon Bank, N.A., Mellon Bank
(DE) National Association, Mellon Bank (MD), The Boston Company, Inc.,
AFCO Credit Corporation and a number of companies known as Mellon
Financial Services Corporations. Through its subsidiaries, including The
Dreyfus Corporation, Mellon managed more than $237 billion in assets as
of March 31, 1996, including approximately $83 billion in proprietary
mutual fund assets. As of March 31, 1996, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $886 billion in assets including
approximately $61 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has
agreed to pay The Dreyfus Corporation a monthly fee at the annual rate of
.55 of 1% of the value of each Series' average daily net assets. From
time to time, The Dreyfus Corporation may waive receipt of its fees
and/or voluntarily assume certain expenses of a Series which would have
the effect of lowering the expense ratio of that Series and increasing
yield to investors. The Fund will not pay The Dreyfus Corporation at a
later time for any amounts it may waive, nor will the Fund reimburse The
Dreyfus Corporation for any amounts it may assume.
For the fiscal year ended April 30, 1996, the Fund paid The
Dreyfus Corporation a management fee at the effective annual rate set
forth below with respect to each individual Series pursuant to
undertakings in effect:
Page 36
EFFECTIVE ANNUAL RATE
AS A PERCENTAGE OF
SERIES AVERAGE DAILY NET ASSETS
-------------------- -----------------------------
Connecticut .55 of 1%
Florida .55 of 1%
Georgia .35 of 1%
Maryland .55 of 1%
Massachusetts .55 of 1%
Michigan .55 of 1%
Minnesota .55 of 1%
North Carolina .53 of 1%
Ohio .55 of 1%
Pennsylvania .55 of 1%
Texas .0
Virginia .0
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus
Corporation may consider, among other things, the receipt of research
services and/or the sale of shares of the Fund or other funds managed,
advised or administered by The Dreyfus Corporation as factors in the
selection of broker-dealers to execute portfolio transactions for the
Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service
Agents in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund
Services, Inc. (the "Distributor"), located at 60 State Street, Boston,
Massachusetts 02109. The Distributor' ultimate parent is Boston
Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus
Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation,
P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's
Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The Bank
of New York, 90 Washington Street, New York, New York 10286, is the
Fund's Custodian.
HOW TO BUY SHARES
GENERAL -- Class A shares, Class B shares and Class C shares may be
purchased only by clients of certain financial institutions (which may
include banks), securities dealers ("Selected Dealers") and other
industry professionals (collectively, "Service Agents"), except that
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members
of the Fund's Board, or the spouse or minor child of any of the foregoing
may purchase Class A shares directly through the Distributor. Subsequent
purchases may be sent directly to the Transfer Agent or your Service
Agent.
When purchasing Fund shares, you must specify which Class is
being purchased. Share certificates are issued only upon your written
request. No certificates are issued for fractional shares. It is not
recommended that the Fund be used as a vehicle for Keogh, IRA or other
qualified retirement plans. The Fund reserves the right to reject any
purchase order.
Service Agents may receive different levels of compensation
for selling different Classes of shares. Management understands that some
Service Agents may impose certain conditions on
Page 37
their clients which are different from those described in this Prospectus,
and, to the extent permitted by applicable regulatory authority, may
charge their clients direct fees which would be in addition to any amounts
which might be received under the Distribution Plan or Shareholder
Services Plan. You should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment must be
accompanied by the Account Application. The Fund reserves the right to
vary the initial and subsequent investment minimum requirements at any
time.
You may purchase Fund shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier State Municipal Bond Fund," and should specify the Series in
which you are investing. Payments to open new accounts which are mailed
should be sent to Premier State Municipal Bond Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587, together with your Account
Application indicating which Class of shares is being purchased. For
subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to Premier State
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
Neither initial nor subsequent investments should be made by third party
check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or in any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to The Bank of New York as
shown below, for purchase of Fund shares in your name:
DDA #8900119489/Premier State Municipal Bond Fund/Connecticut Series
DDA #8900119381/Premier State Municipal Bond Fund/Florida Series
DDA #8900117087/Premier State Municipal Bond Fund/Georgia Series
DDA #8900119403/Premier State Municipal Bond Fund/Maryland Series
DDA #8900119470/Premier State Municipal Bond Fund/Massachusetts Series
DDA #8900119411/Premier State Municipal Bond Fund/Michigan Series
DDA #8900119438/Premier State Municipal Bond Fund/Minnesota Series
DDA #__________/Premier State Municipal Bond Fund/New Jersey Series
DDA #8900208635/Premier State Municipal Bond Fund/North Carolina Series
DDA #8900119446/Premier State Municipal Bond Fund/Ohio Series
DDA #8900119454/Premier State Municipal Bond Fund/Pennsylvania Series
DDA #8900119462/Premier State Municipal Bond Fund/Texas Series
DDA #8900208678/Premier State Municipal Bond Fund/Virginia Series
The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be included
instead), account registration and dealer number, if applicable. If your
initial purchase of Fund shares is by wire, please call 1-800-645-6561
after completing your wire payment to obtain your Fund account number.
Please include your Fund account number on the Account Application and
promptly mail the Account Application to the Fund, as no redemptions will
be permitted until the Account Application is received. You may obtain
further information about remitting funds in this manner from your bank.
All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if
any check used for investment in your account does not clear. The Fund
makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Fund shares also may be purchased through Dreyfus-AUTOMATIC
Asset BuilderRegistration Mark and the Government Direct Deposit
Privilege described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be
aware, however, that periodic investment plans do not guarantee a profit
and will not protect an investor against loss in a declining market.
Page 38
Subsequent investments also may be made by electronic
transfer of funds from an account maintained in a bank or other domestic
financial institution that is an Automated Clearing House member. You
must direct the institution to transmit immediately available funds
through the Automated Clearing House to The Bank of New York with
instructions to credit your Fund account. The instructions must specify
your Fund account registration and your Fund account number PRECEDED BY
THE DIGITS "1111."
Each Series' shares are sold on a continuous basis. Net asset
value per share is determined as of the close of trading on the floor of
the New York Stock Exchange (currently, 4:00 p.m., New York time), on
each day the New York Stock Exchange is open for business. For purposes
of determining net asset value, options and futures contracts will be
valued 15 minutes after the close of trading on the floor of the New York
Stock Exchange. Net asset value per share of each Class is computed by
dividing the value of the net assets of each Series represented by such
Class (i.e., the value of its assets less liabilities) by the total
number of shares of such Class outstanding. Each Series' investments are
valued by an independent pricing service approved by the Fund's Board and
are valued at fair value as determined by the pricing service. The
pricing service's procedures are reviewed under the general supervision
of the Fund's Board. For further information regarding the methods
employed in valuing the Series' investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
If an order is received by the Transfer Agent by the close of
trading on the floor of the New York Stock Exchange (currently, 4:00
p.m., New York time) on any business day, Fund shares will be purchased
at the public offering price determined as of the close of trading on the
floor of the New York Stock Exchange on that day. Otherwise, Fund shares
will be purchased at the public offering price determined as of the close
of trading on the floor of the New York Stock Exchange on the next
business day, except where shares are purchased through a dealer as
provided below.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the New York Stock Exchange on a
business day and transmitted to the Distributor or its designee by the
close of its business day (normally 5:15 p.m., New York time) will be
based on the public offering price per share determined as of the close
of trading on the floor of the New York Stock Exchange on that day.
Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day. For certain institutions that have entered
into agreements with the Distributor, payment for the purchase of Fund
shares may be transmitted, and must be received by the Transfer Agent,
within three business days after the order is placed. If such payment is
not received within three business days after the order is placed, the
order may be cancelled and the institution could be held liable for
resulting fees and/or losses.
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Distributions and
Taxes" and the Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
CLASS A SHARES -- The public offering price for Class A
shares is the net asset value per share of that Class plus a sales load
as shown below:
Page 39
<TABLE>
<CAPTION>
SALES LOAD
---------------------------------------
AS A % OF AS A % OF DEALERS' REALLOWANCE
OFFERING PRICE NET ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION PER SHARE PER SHARE OFFERING PRICE
--------------------------- ---------------- ----------------- ------------------------
<S> <C> <C> <C>
Less than $50,000...... 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more..... -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of
Class A shares purchased without an initial sales charge as part of an
investment of at least $1,000,000 and redeemed within one year of
purchase. The terms contained in the section of the Prospectus entitled
"How to Redeem Shares -- Contingent Deferred Sales Charge" (other than
the amount of the CDSC and time periods) are applicable to the Class A
shares subject to a CDSC. Letter of Intent and Right of Accumulation
apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or financial institution with respect to the sale of
Fund shares) may purchase Class A shares for themselves, directly or
pursuant to an employee benefit plan or other program, or for their
spouses or minor children at net asset value, provided that they have
furnished the Distributor with such information as it may request from
time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible
to purchase Class A shares at net asset value. In addition, Class A
shares are offered at net asset value to full-time or part-time employees
of The Dreyfus Corporation or any of its affiliates or subsidiaries,
directors of The Dreyfus Corporation, Board members of a fund advised by
The Dreyfus Corporation, including members of the Fund's Board, or the
spouse or minor child of any of the foregoing.
Class A shares also may be purchased at net asset value
without a sales load through certain broker-dealers and other financial
institutions which have entered into an agreement with the Distributor,
which includes a requirement that such shares be sold for the benefit of
clients participating in a "wrap account" or a similar program under
which such clients pay a fee to such broker-dealer or other financial
institution.
Class A shares also may be purchased at net asset value,
subject to appropriate documentation, through a broker-dealer or other
financial institution with the proceeds from the redemption of shares of
a registered open-end management investment company not managed by The
Dreyfus Corporation or its affiliates. The purchase of Class A shares of
the Fund must be made within 60 days of such redemption and the
shareholder must have either (i) paid an initial sales charge or a
contingent deferred sales charge or (ii) been obligated to pay at any
time during the holding period, but did not actually pay on redemption, a
deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value,
subject to appropriate documentation, by (i) qualified separate accounts
maintained by an insurance company pursuant to the laws of any State or
territory of the United States, (ii) a State, county or city or
instrumentality thereof, (iii) a charitable organization (as defined in
Section 501(c) (3) of the Internal Revenue Code of 1986, as amended (the
"Code") investing $50,000 or more in Fund shares, and (iv) a charitable
remainder trust (as defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to
Page 40
dealers that sell shares of funds advised by The Dreyfus Corporation which
are sold with a sales load, such as Class A shares. In some instances,
these incentives may be offered only to certain dealers who have sold or
may sell significant amounts of such shares.
CLASS B SHARES -- The public offering price for Class B shares is the
net asset value per share of that Class. No initial sales charge is
imposed at the time of purchase. A CDSC is imposed, however, on certain
redemptions of Class B shares as described under "How to Redeem Shares."
The Distributor compensates certain Service Agents for selling Class B
and Class C shares at the time of purchase from the Distributor's own
assets. The proceeds of the CDSC and the distribution fee, in part, are
used to defray these expenses.
CLASS C SHARES -- The public offering price for Class C shares is the
net asset value per share of that Class. No initial sales charge is
imposed at the time of purchase. A CDSC is imposed, however, on
redemptions of Class C shares made within the first year of purchase. See
"Class B Shares" above and "How to Redeem Shares."
RIGHT OF ACCUMULATION -- CLASS A SHARES -- Reduced sales loads apply
to any purchase of Class A shares, shares of other funds in the Premier
Family of Funds, shares of certain other funds advised by The Dreyfus
Corporation which are sold with a sales load and shares acquired by a
previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined in the Statement
of Additional Information, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased
and still hold Class A shares of the Fund, or of any other Eligible Fund
or combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A shares of the Fund or an Eligible Fund
having a current value of $20,000, the sales load applicable to the
subsequent purchase would be reduced to 4% of the offering price. All
present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the
sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of purchase
you or your Service Agent must notify the Distributor if orders are made
by wire, or the Transfer Agent if orders are made by mail. The reduced
sales load is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE -- You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an
Automated Clearing House member may be so designated. The Fund may modify
or terminate this Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of shares by calling 1-800-645-6561 or,
if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Service Agents and some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus. You should consult your Service
Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for a Class of a Series, shares
of the same Class of one of the other Series, or of the same Class in
certain other funds managed or administered by The Dreyfus Corporation,
to the extent such shares are offered for sale in your state of residence.
Page 41
These funds have different investment objectives which may be of interest
to you. You also may exchange your Fund shares that are subject to a CDSC
for shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares
so purchased will be held in a special account created solely for this
purpose ("Exchange Account"). Exchanges of shares from an Exchange Account
only can be made into certain other funds managed or administered by The
Dreyfus Corporation. No CDSC is charged when an investor exchanges into an
Exchange Account; however, the applicable CDSC will be imposed when shares
are redeemed from an Exchange Account or other applicable Fund account.
Upon redemption, the applicable CDSC will be calculated without regard to
the time such shares were held in an Exchange Account. See "How to Redeem
Shares." Redemption proceeds for Exchange Account Shares are paid by
Federal wire or check only. Exchange Account shares also are eligible for
the Auto-Exchange Privilege, Dividend Sweep and the Automatic Withdrawal
Plan. To use this service, you should consult your Service Agent or call
1-800-645-6561 to determine if it is available and whether any other
conditions are imposed on its use.
To request an exchange, your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing
or by telephone. Before any exchange, you must obtain and should review a
copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained by calling 1-800-645-6561.
Except in the case of personal retirement plans, the shares being
exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the
fund into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application,
indicating that you specifically refuse this Privilege. The Telephone
Exchange Privilege may be established for an existing account by written
request, signed by all shareholders on the account, by a separate signed
Shareholder Services Form, available by calling 1-800-645-6561, or, by
oral request from any of the authorized signatories on the account, by
calling 1-800-645-6561. If you have established the Telephone Exchange
Privilege, you may telephone exchange instructions (including over The
Dreyfus TouchRegistration Mark automated telephone system) by calling
1-800-645-6561. If you are calling from overseas, call 516-794-5452.
See "How to Redeem Shares - Procedures." Upon an exchange into a new
account, the following shareholder services and privileges, as applicable
and where available, will be automatically carried over to the fund into
which the exchange is being made: Telephone Exchange Privilege, Check
Redemption Privilege, TELETRANSFER Privilege, and the dividend/capital
gain distribution option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined net asset
value; however, a sales load may be charged with respect to exchanges of
Class A shares into funds sold with a sales load. No CDSC will be imposed
on Class B or Class C shares at the time of an exchange; however, Class B
or Class C shares acquired through an exchange will be subject on
redemption to the higher CDSC applicable to the exchanged or acquired
shares. The CDSC applicable on redemption of the acquired Class B or
Class C shares will be calculated from the date of the initial purchase
of the Class B or Class C shares exchanged, as the case may be. If you
are exchanging Class A shares into a fund that charges a sales load, you
may qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares you are exchanging were: (a)
purchased with a sales load, (b) acquired by a previous exchange from
shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing
categories of shares. To qualify, at the time of the exchange your
Service Agent must notify the Distributor. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Shareholder Services" in the Statement of Additional
Information. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserves the right, upon not
less than 60
Page 42
days' written notice, to charge shareholders a nominal fee
in accordance with rules promulgated by the Securities and Exchange
Commission. The Fund reserves the right to reject any exchange request in
whole or in part. The availability of Fund Exchanges may be modified or
terminated at any time upon notice to shareholders. See "Dividends,
Distributions and Taxes."
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis) in exchange for shares
of a Series, in shares of the same Class of one of the other Series, or
the same Class of other funds in the Premier Family of Funds or certain
other funds in the Dreyfus Family of Funds of which you are a
shareholder. The amount you designate, which can be expressed either in
terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth of the month
according to the schedule you have selected. Shares will be exchanged at
the then-current net asset value; however, a sales load may be charged
with respect to exchanges of Class A shares into funds sold with a sales
load. No CDSC will be imposed on Class B or Class C shares at the time of
an exchange; however, Class B or Class C shares acquired through an
exchange will be subject on redemption to the higher CDSC applicable to
the exchanged or acquired shares. The CDSC applicable on redemption of
the acquired Class B or Class C shares will be calculated from the date
of the initial purchase of the Class B or Class C shares exchanged, as
the case may be. See "Shareholder Services" in the Statement of
Additional Information. The right to exercise this Privilege may be
modified or cancelled by the Fund or the Transfer Agent. You may modify
or cancel your exercise of this Privilege at any time by mailing written
notification to Premier State Municipal Bond Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. The Fund may charge a service fee
for the use of this Privilege. No such fee currently is contemplated. For
more information concerning this Privilege and the funds in the Premier
Family of Funds or the Dreyfus Family of Funds eligible to participate in
this Privilege, or to obtain an Auto-Exchange Authorization Form, please
call toll free 1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. At your
option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on
either the first or fifteenth day, or twice a month, on both days. Only
an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish a
Dreyfus-AUTOMATIC Asset Builder account, you must file an authorization
form with the Transfer Agent. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may cancel your participation in this
Privilege or change the amount of purchase at any time by mailing written
notification to Premier State Municipal Bond Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into
your Fund account. You may deposit as much of such payments as you elect.
To enroll in Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained by calling 1-800-645-6561. Death or legal
Page 43
incapacity will terminate your participation in this Privilege. You may
elect at any time to terminate your participation by notifying in writing
the appropriate Federal agency. Further, the Fund may terminate your
participation upon 30 days' notice to you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same class of another fund in the Premier Family of Funds
or the Dreyfus Family of Funds of which you are a shareholder. Shares of
the other fund will be purchased at the then-current net asset value;
however, a sales load may be charged with respect to investments in
shares of a fund sold with a sales load. If you are investing in a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load. If you are
investing in a fund or class that charges a CDSC, the shares purchased
will be subject on redemption to the CDSC, if any, applicable to the
purchased shares. See "Shareholder Services" in the Statement of
Additional Information. Dividend ACH permits you to transfer
electronically dividends or dividends and capital gain distributions, if
any, from the Fund to a designated bank account. Only an account
maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for
this service.
For more information concerning these privileges, or to
request a Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these privileges by mailing written notification to
Premier State Municipal Bond Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. To select a new fund after cancellation, you must
submit a new Dividend Options Form. Enrollment in or cancellation of
these privileges is effective three business days following receipt.
These privileges are available only for existing accounts and may not be
used to open new accounts. Minimum subsequent investments do not apply
for Dividend Sweep. The Fund may modify or terminate these privileges at
any time or charge a service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. The Automatic Withdrawal Plan may be ended at any time by
you, the Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
Class B or Class C shares withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently
with withdrawals of Class A shares generally are undesirable.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form, which can be obtained by
calling 1-800-645-6561, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased in a
13-month period pursuant to the terms and conditions set forth in the
Letter of Intent. A minimum initial purchase of $5,000 is required. To
compute the applicable sales load, the offering price of shares you hold
(on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above
may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase at the end of 13 months. If total purchases
are
Page 44
less than the amount specified, you will be requested to remit an
amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of Class A shares held in escrow to realize
the difference. Signing a Letter of Intent does not bind you to purchase,
or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class
A shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current net asset value plus the applicable sales load in effect at
the time such Letter of Intent was executed.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time.
Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Fund will
redeem the shares at the next determined net asset value as described
below. If you hold Fund shares of more than one Class, any request for
redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares
of the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you
or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC)
when shares are redeemed. Service Agents or other institutions may charge
their clients a nominal fee for effecting redemptions of Fund shares. Any
certificates representing shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or
less than their original cost, depending upon the Series' then-current
net asset value.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption
request in proper form, except as provided by the rules of the Securities
and Exchange Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY
CHECK, BY THE TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET
BUILDERRegistration Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REQUEST TO THE
TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU
PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK, TELETRANSFER
PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO
EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET
BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT,
OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT
TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU
WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP.
Fund shares will not be redeemed until the Transfer Agent has received
your Account Application.
The Fund reserves the right to redeem your account at its
option upon not less than 30 days' written notice if your account's net
asset value is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE
CLASS B SHARES -- A CDSC payable to the Distributor is imposed on any
redemption of Class B shares of a Series which reduces the current net
asset value of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares
of such Series held by you at the time of redemption. No CDSC will be
imposed to the extent that the net asset value of the Class B shares
redeemed does not
Page 45
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. During the second
year after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset value
had appreciated to $12 per share, the value of the investor's shares
would be $1,260 (105 shares at $12 per share). The CDSC would not be
applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 3%
(the applicable rate in the second year after purchase) for a total CDSC
of $7.20.
CLASS C SHARES -- A CDSC of 1% payable to the Distributor is imposed
on any redemption of Class C shares within one year of the date of
purchase. The basis for calculating the payment of any such CDSC will be
the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge -- Class B Shares" above.
WAIVER OF CDSC -- The CDSC applicable to Class B and Class C may be
waived in connection with (a) redemptions made within one year after the
death or disability, as defined in Section 72(m)(7) of the Code, of the
shareholder, (b) redemptions by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the
employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor exceeds $1,000,000, (c) redemptions as a result of a
combination of any
Page 46
investment company with the relevant Series by merger, acquisition of
assets or otherwise, and (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 70-1/2 in the case of
an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code. If the Fund's Board determines to discontinue the waiver of
the CDSC, the disclosure in the Fund's Prospectus will be revised
appropriately. Any Fund shares subject to a CDSC which were purchased
prior to the termination of such waiver will have the CDSC waived as
provided in the Fund's Prospectus at the time of the purchase of
such shares.
To qualify for a waiver of the CDSC, at the time of
redemption you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation
of your entitlement.
PROCEDURES
You may redeem shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the Check Redemption Privilege with respect to Class A
shares only, or the TELETRANSFER Privilege. If you are a client of a
Selected Dealer, you may redeem shares through the Selected Dealer. If
you have given your Service Agent authority to instruct the Transfer
Agent to redeem shares and to credit the proceeds of such redemptions to
a designated account at your Service Agent, you may redeem shares only in
this manner and in accordance with the regular redemption procedure
described below. If you wish to use the other redemption methods
described below, you must arrange with your Service Agent for delivery of
the required application(s) to the Transfer Agent. Other redemption
procedures may be in effect for clients of certain Service Agents. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate
any redemption Privilege at any time or charge a service fee upon notice
to shareholders. No such fee currently is contemplated. Shares for which
certificates have been issued are not eligible for the Check Redemption
or TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked
the appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select the TELETRANSFER
redemption privilege or telephone exchange privilege (which is granted
automatically unless you refuse it), you authorize the Transfer Agent to
act on telephone instructions (including over The Dreyfus
TouchRegistration Mark automated telephone system) from any person
representing himself or herself to be you, or a representative of your
Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you
may experience difficulty in contacting the Transfer Agent by telephone
to request a redemption or exchange of Series shares. In such cases, you
should consider using the other redemption procedures described herein.
Use of these other redemption procedures may result in your redemption
request being processed at a later time than it would have been if
telephone redemption had been used. During the delay, the Series' net
asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may
redeem shares by written request mailed to Premier State Municipal Bond
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. Redemption
requests must be signed by each shareholder, including
Page 47
each owner of a joint account, and each signature must be guaranteed.
The Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from
domestic banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
If you have any questions with respect to signature guarantees, please
contact your Service Agent or call the telephone number listed on the
cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE -- CLASS A SHARES -- You may write
Redemption Checks drawn on your Fund account. Redemption Checks may be
made payable to the order of any person in the amount of $500 or more.
Potential fluctuations in the net asset value of the Class A shares
should be considered in determining the amount of the check. Redemption
Checks should not be used to close your account. Redemption Checks are
free, but the Transfer Agent will impose a fee for stopping payment of a
Redemption Check upon your request or if the Transfer Agent cannot honor
the Redemption Check due to insufficient funds or other valid reason. You
should date your Redemption Checks with the current date when you write
them. Please do not postdate your Redemption Checks. If you do the
Transfer Agent will honor, upon presentment, even if presented before the
date of the check, all postdated Redemption Checks which are dated within
six months of presentment for payment, if they are otherwise in good
order. This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding
on redemptions (See "Dividends, Distributions and Taxes"). Any Redemption
Check written on an account which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent.
TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your
Fund account and your bank account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House member
may be designated. Redemption proceeds will be on deposit in your account
at an Automated Clearing House member bank ordinarily two days after
receipt of the redemption request or, at your request, paid by check
(maximum $150,000 per day) and mailed to your address. Holders of jointly
registered Fund or bank accounts may redeem through the TELETRANSFER
Privilege for transfer to their bank account not more than $250,000
within any 30-day period.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of shares by calling 1-800-645-6561 or,
if you are calling from overseas, call 516-794-5252.
REDEMPTION THROUGH A SELECTED DEALER -- If you are a customer of a
Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the New York Stock Exchange (currently 4:00 p.m., New York
time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of
trading on the floor of the New York Stock Exchange, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited
to your account with the Selected Dealer. See "How to Buy Shares" for a
discussion of additional conditions or fees that may be imposed upon
redemption.
In addition, the Distributor or its designee will accept
orders from Selected Dealers with which the Distributor has sales
agreements for the repurchase of shares held by shareholders. Repurchase
orders received by dealers by the close of trading on the floor of the
New York
Page 48
Stock Exchange on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally
5:15 p.m., New York time) are effected at the price determined as of the
close of trading on the floor of the New York Stock Exchange on that day.
Otherwise, the shares will be redeemed at the next determined net asset
value. It is the responsibility of the dealer to transmit orders on a
timely basis. The dealer may charge the shareholder a fee for executing
the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.
REINVESTMENT PRIVILEGE -- CLASS A SHARES
Upon written request, you may reinvest up to the number of
Class A shares you have redeemed, within 30 days of redemption, at the
then-prevailing net asset value without a sales load, or reinstate your
account for the purpose of exercising the Exchange Privilege. The
Reinvestment Privilege may be exercised only once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class B and Class C shares are subject to a Distribution Plan
and Class A, Class B and Class C shares are subject to a Shareholder
Services Plan.
DISTRIBUTION PLAN -- Under the Distribution Plan, adopted pursuant to
Rule 12b-1 under the 1940 Act, the Fund pays the Distributor for
distributing the Fund's Class B and Class C shares of each Series at an
annual rate of .50 of 1% of the value of the average daily net assets of
Class B and .75 of 1% of the value of the average daily net assets of
Class C.
SHAREHOLDER SERVICES PLAN -- Under the Shareholder Services Plan, the
Fund pays the Distributor for the provision of certain services to the
holders of Class A, Class B and Class C shares a fee at the annual rate
of .25 of 1% of the value of the average daily net assets of each such
Class. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding
the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. The Distributor may
make payments to Service Agents in respect of these services. The
Distributor determines the amounts to be paid to Service Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS -- Under the Code, each Series of the
Fund is treated as a separate entity for purposes of qualification and
taxation as a regulated investment company. Each Series of the Fund
ordinarily declares dividends from its net investment income on each day
the New York Stock Exchange is open for business. Fund shares begin
earning income dividends on the day immediately available funds ("Federal
Funds" (monies of member banks within the Federal Reserve System which
are held on deposit at a Federal Reserve Bank)) are received by the
Transfer Agent in written or telegraphic form. If a purchase order is not
accompanied by remittance in Federal Funds, there may be a delay between
the time the purchase order becomes effective and the time the shares
purchased start earning dividends. If your payment is not made in Federal
Funds, it must be converted into Federal Funds. This usually occurs
within one business day of receipt of a bank wire and within two business
days of receipt of a check drawn on a member bank of the Federal Reserve
System. Checks drawn on banks which are not members of the Federal
Reserve System may take considerably longer to convert into Federal
Funds.
Dividends usually are paid on the last calendar day of each
month and are automatically reinvested in additional shares of the Series
and the same Class from which they were paid at net asset value without a
sales load or, at your option, paid in cash. Each Series' earnings for
Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. If you redeem all shares in your account at any
time during the month, all dividends to which you are entitled will be
paid to you along with the proceeds of the redemption. If you are an
omnibus accountholder and indicate in a partial redemption request that a
portion of any
Page 49
accrued dividends to which such account is entitled belongs to an
underlying account-holder who has redeemed all shares in his or her
account, such portion of the accrued dividends will be paid to you
along with the proceeds of the redemption. Distributions by each
Series from its net realized securities gains, if any, generally are
declared and paid once a year, but the Series may make distributions on a
more frequent basis to comply with distribution requirements of the Code,
in all events in a manner consistent with the provisions of the 1940 Act.
No Series will make distributions from its net realized securities gains
unless capital loss carryovers, if any, have been utilized or have
expired. You may choose whether to receive dividends and distributions in
cash or to reinvest in additional shares of the Series and the same Class
from which they were paid at net asset value. All expenses are accrued
daily and deducted before declaration of dividends to investors. Dividends
paid by each Class will be calculated at the same time and in the same
manner and will be of the same amount, except that the expenses
attributable solely to a particular Class will be borne exclusively by
such Class. Class B and Class C shares will receive lower per share
dividends than Class A shares because of the higher expenses borne by the
relevant Class. See "Fee Table."
FEDERAL TAX TREATMENT -- Except for dividends from Taxable
Investments, the Fund anticipates that substantially all dividends paid
by a Series from net investment income will not be subject to Federal
income tax. Dividends derived from Taxable Investments, together with
distributions from any net realized short-term securities gains and all
or a portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Fund are subject to Federal
income tax as ordinary income whether received in cash or reinvested in
additional shares. Distributions from net realized long-term securities
gains of a Series generally are subject to Federal income tax as
long-term capital gains if you are a citizen or resident of the United
States. Dividends and distributions attributable to income or gain
derived from securities transactions and from the use of certain of the
investment techniques described under "Appendix _ Investment Techniques,"
will be subject to Federal income tax. No dividend paid by any Series
will qualify for the dividends received deduction allowable to certain
U.S. corporations. The Code provides that the net capital gain of an
individual generally will not be subject to Federal income tax at a rate
in excess of 28%. Under the Code, interest on indebtedness incurred or
continued to purchase or carry shares of any Series which is deemed to
relate to exempt-interest dividends is not deductible.
Although all or a substantial portion of the dividends paid
by each Series may be excluded by shareholders of the Series from their
gross income for Federal income tax purposes, each Series may purchase
specified private activity bonds, the interest from which may be (i) a
preference item for purposes of the alternative minimum tax, (ii) a
component of the "adjusted current earnings" preference item for purposes
of the corporate alternative minimum tax as well as a component in
computing the corporate environmental tax or (iii) a factor in
determining the extent to which a shareholder's Social Security benefits
are taxable. If a Series purchases such securities, the portion of the
Series' dividends related thereto will not necessarily be tax exempt to
an investor who is subject to the alternative minimum tax and/or tax on
Social Security benefits and may cause an investor to be subject to such
taxes.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares of a Series if you exchange your
Class A shares for shares of another Series or fund advised or
administered by The Dreyfus Corporation within 91 days of purchase and
such other Series or other fund reduces or eliminates its otherwise
applicable sales load charge for the purpose of the exchange. In this
case, the amount of your sales load charge for Class A shares, up to the
amount of the reduction of the sales load charge on the exchange, is not
included in the basis of your Class A shares for purposes of computing
gain or loss on the exchange, and instead is added to the basis of the
other Series or fund shares received on the exchange.
Page 50
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
Notice as to the tax status of your dividends and
distributions will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and distributions from securities gains, if any, paid during
the year. These statements set forth the dollar amount of income exempt
from Federal tax and the dollar amount, if any, subject to Federal tax.
These dollar amounts will vary depending on the size and length of time
of your investment in a Series. If a Series pays dividends derived from
taxable income, it intends to designate as taxable the same percentage of
the day's dividends as the actual taxable income earned on that day bears
to total income earned on that day. Thus, the percentage of the dividend
designated as taxable, if any, may vary from day to day.
Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of taxable
dividends, distributions from net realized securities gains and the
proceeds of any redemption, regardless of the extent to which gain or
loss may be realized, paid to a shareholder if such shareholder fails to
certify either that the TIN furnished in connection with opening an
account is correct, or that such shareholder has not received notice from
the IRS of being subject to backup withholding as a result of a failure
to properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect
or if a shareholder has failed to properly report taxable dividend and
interest income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account, and may be
claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that each Series (other than
the New Jersey Series which had not commenced operations) has qualified
for the fiscal year ended April 30, 1996 as a "regulated investment
company" under the Code. Each such Series intends to continue to so
qualify, if such qualification is in the best interests of its
shareholders. It is expected that the New Jersey Series will qualify as a
"regulated investment company" under the Code so long as 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
Page 51
named may be a preference item for such State's alternative minimum tax
(where imposed). Finally, you should be aware that State and local taxes,
other than those described above, may apply to the dividends,
distributions or shares of a Series.
The paragraphs below discuss the State tax treatment of
dividends and distributions by each Series to residents of the State
after which the Series is named. Investors should consult their own tax
advisers regarding specific questions as to Federal, State and local
taxes.
CONNECTICUT SERIES -- Dividends by the Series that qualify as
exempt-interest dividends for Federal income tax purposes are not subject
to the Connecticut income tax imposed on individuals, trusts and estates,
to the extent that such dividends are derived from income received by the
Series as interest from Connecticut Municipal Obligations or obligations
the interest with respect to which Connecticut is prohibited by Federal
law from taxing. Dividends that qualify as capital gain dividends for
Federal income tax purposes are not subject to the Connecticut income tax
to the extent they are derived from Connecticut Municipal Obligations.
Dividends derived from other sources are subject to the Connecticut
income tax. In the case of a shareholder subject to the Connecticut income
tax and required to pay the Federal alternative minimum tax, the portion
of exempt-interest dividends paid by the Series that is derived from
income received by the Series as interest from Connecticut Municipal
Obligations or obligations the interest with respect to which Connecticut
is prohibited by Federal law from taxing is not subject to the net
Connecticut minimum tax even though treated as a preference item for
purposes of the Federal alternative minimum tax.
Dividends qualifying as exempt-interest dividends for Federal
income tax purposes that are distributed by the Series to entities taxed
as corporations under the Connecticut corporation business tax are not
exempt from that tax.
The shares of the Series are not subject to property taxation
by the State of Connecticut or its political subdivisions.
FLORIDA SERIES -- Dividends or distributions by the Fund to a Florida
individual resident are not taxable by Florida. However, Florida imposes
an intangible personal property tax on shares of the Series owned by a
Florida resident on January 1 of each year unless such shares qualify for
an exemption from the tax.
Dividends qualifying as exempt-interest dividends for Federal
income tax purposes as well as other Federally taxable dividends and
distributions that are distributed by the Series to entities taxed as
corporations under Florida law may not be exempt from the Florida
corporate income tax.
The Fund has received a Technical Assistance Advisement from
the State of Florida, Department of Revenue, to the effect that Florida
Series' shares owned by a Florida resident will be exempt from the
intangible personal property tax so long as the Series' portfolio
includes only assets, such as notes, bonds, and other obligations issued
by the State of Florida or its municipalities, counties, and other taxing
districts, the United States Government, and its agencies, Puerto Rico,
Guam, and the U.S. Virgin Islands, and other assets which are exempt from
that tax.
GEORGIA SERIES -- Dividends and distributions by the Georgia Series
to a Georgia resident that are attributable to interest on Georgia
Municipal Obligations or direct obligations of the United States and its
territories and possessions are not subject to the State of Georgia
income tax. Dividends or other distributions by the Series which are
attributable to other sources, including all distributions that qualify
as capital gains dividends for Federal income tax purposes, are subject
to the State of Georgia income tax at the applicable rate.
The Georgia intangibles tax previously imposed upon certain
intangible personal property has been repealed, effective as of January
1, 1996. Accordingly, shares of the Georgia Series will not be subject to
an intangibles tax in Georgia.
MARYLAND SERIES -- Dividends and distributions by the Series to a
Maryland resident (including individuals, corporations, estates or trusts
who are subject to Maryland state and local
Page 52
income tax) will not be subject to income tax in Maryland to the extent
that such dividends or distributions (a) qualify, for Federal income tax
purposes, as exempt-interest dividends of a regulated investment company
and are attributable to (i) interest on Maryland Municipal Obligations or
(ii) interest on obligations of the United States or an authority,
commission, instrumentality, possession or territory of the United States,
or (b) are attributable to gain realized by the Series from the sale or
exchange of Maryland Municipal Obligations or obligations of the United
States or an authority, commission or instrumentality thereof. To the
extent that distributions by the Series are attributable to sources other
than those described above, such as (x) interest on obligations issued by
states other than Maryland or (y) income from repurchase agreements, such
distributions will not be exempt from Maryland state and local income
taxes. In addition, any gain realized by a shareholder upon a redemption
or exchange of Series shares will be subject to Maryland taxation.
Maryland presently includes in taxable net income items of
tax preferences as defined in the Code. Interest paid on certain private
activity bonds constitutes a tax preference. Accordingly, subject to a
threshold amount, 50% of any distributions by the Series attributable to
such private activity bonds will not be exempt from Maryland state and
local income taxes. Interest on indebtedness incurred (directly or
indirectly) by a shareholder of the Series to purchase or carry shares of
the Series will not be deductible for Maryland state and local income tax
purposes to the extent such interest is allocable to exempt-interest
dividends.
In the event the Series fails to qualify as a regulated
investment company, the Series would be subject to corporate Maryland
income tax and distributions generally would be taxable as ordinary
income to the shareholders.
Individuals will not be subject to personal property tax on
their shares of the Maryland Series.
MASSACHUSETTS SERIES -- Dividends by the Series to a Massachusetts
resident are not subject to the Massachusetts personal income tax to the
extent that the dividends are attributable to income received by the
Series from Massachusetts Municipal Obligations or direct U.S. Government
obligations, and are properly designated as such. Distributions of
capital gain dividends by the Series to a Massachusetts resident are not
subject to the Massachusetts personal income tax to the extent such
distributions are attributable to gain from the sale of certain
Massachusetts Municipal Obligations the gain from which is exempt from
the Massachusetts personal income tax, and the distributions are properly
designated as such. Dividends or distributions by the Series to a
Massachusetts resident that are attributable to most other sources are
subject to the Massachusetts personal income tax. In addition,
distributions from the Series may be included in the net income measure
of the corporate excise tax for corporate shareholders who are subject to
the Massachusetts corporate excise tax. The Series believes that
distributions from net realized long-term securities gains that are
taxable by Massachusetts are reportable as long-term capital gains,
irrespective of how long the resident has held shares in the Series. In
1994, the Massachusetts personal income tax statute was modified to
provide for graduated rates of tax (with some exceptions) on long-term
capital gains based on the length of time the asset has been held since
January 1, 1995. There is as yet no official guidance concerning the
treatment under the revised statute of mutual fund shareholders that
receive capital gain distributions. However, the state Department of
Revenue has released "working" draft regulations providing that the
holding period of the mutual fund (rather than that of its shareholders)
will be determinative for purposes of applying the revised statute to
shareholders that receive capital gain distributions, so long as the
mutual fund separately designates each portion of such distributions in a
notice provided to shareholders within 30 days of year-end. A challenge
to the new law is currently pending before the Massachusetts Supreme
Judicial Court. Shareholders should consult their tax advisers with
respect to the Massachusetts personal income tax treatment of capital
gain distributions from the Series.
The shares of the Series are not subject to property taxation
by Massachusetts or its political subdivisions.
Page 53
MICHIGAN SERIES -- Dividends by the Series to a Michigan resident
individual are not subject to the Michigan personal income tax and are
excluded from the taxable income base of the Michigan intangibles tax to
the extent that the dividends are attributable to income received by the
Series as interest from the Series' investment in Michigan Municipal
Obligations, obligations of U.S. possessions, as well as direct U.S.
Government obligations. Dividends or distributions by the Series to a
Michigan resident that are attributable to most other sources are subject
to both the Michigan personal income tax and are included in the taxable
income base of the Michigan intangibles tax.
For Michigan personal income and intangibles tax purposes,
the proportionate share of dividends from the Series' net investment
income from other than Michigan Municipal Obligations and from
distributions from any short-term or long-term capital gains will be
included in Michigan taxable income and will be included in the taxable
income base of the Michigan intangibles tax, except that dividends from
net investment income or distributions from capital gains reinvested in
Series' shares are exempt from such tax. Additionally, for Michigan
personal income tax purposes, any gain or loss realized when the
shareholder sells or exchanges Series' shares will be included in
Michigan taxable income.
Persons engaging in business activities in Michigan may be
subject to the Michigan Single Business Tax and should consult their tax
advisers with respect to the application of such tax in connection with
an investment in the Series.
MINNESOTA SERIES -- Dividends paid by the Series to a Minnesota
resident are not subject to the Minnesota personal income tax to the
extent that the dividends are attributable to income received by the
Series as interest from Minnesota Municipal Obligations, provided such
attributable dividends represent 95% or more of the exempt-interest
dividends that are paid by the Series. Moreover, dividends paid by the
Series to a Minnesota resident are not subject to the Minnesota personal
income tax to the extent that the dividends are attributable to income
received by the Series as interest from a Series' investment in direct
U.S. Government obligations. Dividends and distributions by the Series to
a Minnesota resident that are attributable to most other sources are
subject to the Minnesota personal income tax. Dividends and distributions
from the Series will be included in the determination of taxable net
income of corporate shareholders who are subject to Minnesota income
(franchise) taxes. In addition, dividends attributable to interest
received by the Series that is a preference item for Federal income tax
purposes, whether or not such interest is from a Minnesota Municipal
Obligation, may be subject to the Minnesota alternative minimum tax.
The shares of the Series are not subject to property taxation
by Minnesota or its political subdivisions.
NEW JERSEY SERIES -- The New Jersey Series intends to be a "qualified
investment fund" within the meaning of the New Jersey gross income tax.
The primary criteria for constituting a "qualified investment fund" are
that (i) the Series is an investment company registered with the
Securities and Exchange Commission which, for the calendar year in which
the dividends and distributions (if any) are paid, has no investments
other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items, including receivables, and financial
options, futures and forward contracts, or other similar financial
instruments relating to interest-bearing obligations, obligations issued
at a discount or bond indices related thereto and (ii) at the close of
each quarter of the taxable year, the Series has not less than 80% of the
aggregate principal amount of all of its investments, excluding financial
options, futures and forward contracts, or other similar financial
instruments, related to interest-bearing obligations, obligations issued
at a discount or bond indices related thereto, cash and cash items, which
cash items shall include receivables, in New Jersey Municipal
Obligations, including obligations of Puerto Rico, the Virgin Islands
Page 54
and other territories and possessions of the United States and certain
other specified securities exempt from Federal and New Jersey income
taxes. Additionally, a qualified investment fund must comply with certain
continuing reporting requirements.
If the New Jersey Series qualifies as a qualified investment
fund and the Series complies with its reporting obligations, (a)
dividends and distributions by the New Jersey Series to a New Jersey
resident individual shareholder will not be subject to New Jersey gross
income tax to the extent that the dividends and distributions are
attributable to income earned by the Series as interest on or gain from
New Jersey Municipal Obligations, and (b) gain from the sale of New
Jersey Series shares by a New Jersey resident individual shareholder will
not be subject to the New Jersey gross income tax. Shares of the New
Jersey Series are not subject to property taxation by New Jersey or its
political subdivisions. To the extent that you are subject to state and
local taxes outside of New Jersey, dividends and distributions earned by
an investment in the New Jersey Series may represent taxable income.
NORTH CAROLINA SERIES -- Dividends paid by the North Carolina Series
to a North Carolina resident that are attributable to interest on North
Carolina Municipal Obligations or direct U.S. Government obligations are
not subject to the North Carolina income tax. Dividends or distributions
attributable to gain realized by the Series from the sale or exchange of
certain North Carolina Municipal Obligations issued before July 1, 1995
will not be included in the North Carolina taxable income of a resident
individual, trust or estate. Other dividends or distributions which are
attributable to net realized securities gains and most other sources are
subject to the North Carolina income tax at the applicable rate. Gain
realized by a North Carolina resident shareholder from the sale or
exchange of an interest held in the North Carolina Series also will be
subject to the North Carolina income tax at the applicable rate.
The North Carolina intangibles tax previously imposed upon
certain intangible personal property has been repealed, effective as of
January 1, 1995. Accordingly, shares of the North Carolina Series will
not be subject to an intangibles tax in North Carolina.
To the extent that dividends or distributions from the North
Carolina Series increase the surplus of a corporate shareholder required
to file a North Carolina franchise tax return, such increase in the
surplus will be subject to the North Carolina franchise tax.
OHIO SERIES -- Dividends paid by the Series to an Ohio resident, or
to a corporation subject to the Ohio Corporation Franchise Tax, are not
subject to Ohio state and local income taxes or the net income basis of
the Ohio Corporation Franchise Tax to the extent that such dividends are
attributable to income received by the Series as interest from Ohio
Municipal Obligations and direct obligations of the United States,
certain Federal agencies and certain U.S. territories. Dividends or
distributions paid by the Series to an Ohio resident, or to a corporation
subject to the Ohio Corporation Franchise Tax, that are attributable to
most other sources are subject to Ohio state and local income taxes and
are includable in the net income basis of the Ohio Corporation Franchise
Tax. The shares of the Series are not subject to property taxation by the
State of Ohio or its political subdivisions, except when held by a
"dealer in intangibles" (generally, a person in the lending or brokerage
business), a decedent's estate, an Ohio insurance company, or a
corporation taxed on the net worth basis of the Ohio Corporation
Franchise Tax.
PENNSYLVANIA SERIES -- Dividends by the Series will not be subject to
the Pennsylvania personal income tax to the extent that the dividends are
attributable to interest received by the Series from its investments in
Pennsylvania Municipal Obligations and U.S. Government obligations,
including obligations issued by U.S. possessions. Dividends by the Series
will not be subject to the Philadelphia School District investment income
tax to the extent that the dividends are attributable to interest
received by the Series from its investments in Pennsylvania Municipal
Obligations and U.S. obligations, including obligations issued by U.S.
possessions. Dividends or distributions by the Series to a Pennsylvania
resident that are attributable to most other sources
Page 55
may be subject to the Pennsylvania personal income tax and (for residents
of Philadelphia) to the Philadelphia School District investment net
income tax.
Dividends paid by the Series which are considered
"exempt-interest dividends" for Federal income tax purposes are not
subject to the Pennsylvania Corporate Net Income Tax, but other dividends
or distributions paid by the Series may be subject to that tax. An
additional deduction from Pennsylvania taxable income is permitted for
dividends or distributions paid by the Series attributable to interest
received by the Series from its investments in Pennsylvania Municipal
Obligations and U.S. Government obligations to the extent included in
Federal taxable income, but such a deduction is reduced by any interest
on indebtedness incurred to carry the securities and other expenses
incurred in the production of such interest income, including expenses
deducted on the Federal income tax return that would not have been
allowed under the Code if the interest were exempt from Federal income
tax. It is the current position of the Department of Revenue of the
Commonwealth of Pennsylvania that Series shares are considered exempt
assets (with a pro rata exclusion based on the value of the Series
attributable to its investments in Pennsylvania Municipal Obligations and
U.S. Government obligations, including obligations issued by U.S.
possessions) for purposes of determining a corporation's capital stock
value subject to the Pennsylvania Capital Stock/Franchise Tax.
Shares of the Series are exempt from Pennsylvania county
personal property taxes to the extent that the portfolio of the Series
consists of Pennsylvania Municipal Obligations and U.S. Government
obligations, including obligations issued by U.S. possessions.
TEXAS SERIES -- All dividends and distributions by the Series to
Texas resident individuals are not subject to taxation by Texas. However,
Texas enacted significant changes to its corporate franchise tax law for
reporting years beginning January 1, 1992 and thereafter. These changes
include the imposition of a tax measured by earned surplus, in addition
to the previously existing tax on a corporation's capital. The earned
surplus component of the Texas franchise tax is applicable only to the
extent that it exceeds the taxable capital component of the franchise
tax. For Texas franchise tax purposes, earned surplus is computed by
reference to Federal taxable income. Thus, any amounts subject to Federal
income tax that are payable by the Series to corporations doing business
in or incorporated in Texas generally will be included in the earned
surplus component of the Texas franchise tax, to the extent such earned
surplus is apportioned to Texas. Dividends and other distributions not
subject to Federal income tax generally will be excluded from the
calculation of the earned surplus component of the franchise tax.
Both the capital tax and earned surplus tax components of the
Texas franchise tax are computed by reference to the portion of the
corporation's capital or earned surplus, respectively, based on the
corporation's gross receipts derived from Texas. To the extent dividend
and interest payments are made by a corporation not incorporated in
Texas, or another type of entity not legally domiciled in Texas, such
dividends and payments are not considered to be Texas sourced receipts
for franchise tax apportionment purposes.
Effective with franchise tax reports originally due after
January l, 1994 (which are based upon accounting years ending in 1993),
other taxable distributions from the Series to corporations doing
business in or incorporated in Texas (such as the proceeds resulting from
net gain upon the sale of Series bonds) may be allocable to Texas as
Texas sourced gross receipts for the earned surplus component of the
franchise tax if: (l) the activities of the recipient corporation do not
have a sufficient unitary connection with that corporation's other
activities conducted within the state giving rise to the underlying sale
of such assets; and (2) the recipient corporation has its commercial
domicile in Texas.
The shares of the Series are not subject to property taxation
by Texas or its political subdivisions.
VIRGINIA SERIES -- Subject to the provisions discussed below,
dividends paid to shareholders and derived from interest on obligations
of the Commonwealth of Virginia or of any
Page 56
political subdivision or instrumentality of the Commonwealth or derived
from interest or dividends on obligations of the United States excludable
from Virginia taxable income under the laws of the United States, which
obligations are issued in the exercise of the borrowing power of the
Commonwealth or the United States and are backed by the full faith and
credit of the Commonwealth or the United States, will be exempt from
Virginia income tax. Dividends paid to shareholders by the Series and
derived from interest on debt obligations of certain territories and
possessions of the United States (those issued by Puerto Rico, the Virgin
Islands and Guam) will be exempt from Virginia income tax. To the extent
any portion of the dividends are derived from interest on debt obligations
other than those described above, such portion will be subject to Virginia
income tax even though it may be excludable from gross income for Federal
income tax purposes.
Generally, dividends distributed to shareholders by the
Series and derived from capital gains will be taxable to the
shareholders. To the extent any portion of the dividends are derived from
taxable interest for Virginia purposes or from net short-term capital
gains, such portion will be taxable to the shareholders as ordinary
income. The character of long-term capital gains realized and distributed
by the Series will flow through to its shareholders regardless of how
long the shareholders have held their shares. Capital gains distributed
to shareholders derived from Virginia obligations issued pursuant to
special Virginia enabling legislation that provides a specific exemption
for such gains will be exempt from Virginia income tax. Generally,
interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund will not be deductible for Virginia income tax
purposes.
As a regulated investment company, the Series may distribute
dividends that are exempt from Virginia income tax to its shareholders if
the Series satisfies all requirements for conduit treatment under Federal
law and, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consists of obligations the interest on
which is exempt from taxation under Federal law. If the Series fails to
qualify, no part of its dividends will be exempt from Virginia income
tax.
When taxable income of a regulated investment company is
commingled with exempt income, all distributions of the income are
presumed taxable to the shareholders unless the portion of income that is
exempt from Virginia income tax can be determined with reasonable
certainty and substantiated. Generally, this determination must be made
for each distribution to each shareholder. The Virginia Department of
Taxation has adopted a policy, however, of allowing shareholders to
exclude from Virginia taxable income the exempt portion of distributions
from a regulated investment company even though the shareholders receive
distributions monthly but receive reports substantiating the exempt
portion of such distributions at less frequent intervals. Accordingly, if
the Series receives taxable income, the Series must determine the portion
of income that is exempt from Virginia income tax and provide such
information to the shareholders in accordance with the foregoing so that
the shareholders may exclude from Virginia taxable income the exempt
portion of the distribution from the Series.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of
shares may be calculated on several bases, including current yield, tax
equivalent yield, average annual total return and/or total return.
These total return figures reflect changes in the price of
the shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the measuring period were
reinvested in shares of the same Class. These figures also take into
account any applicable service and distribution fees. As a result, at any
given time, the performance of Class B and Class C should be expected to
be lower than that of Class A. Performance for each Class will be
calculated separately.
Page 57
Current yield refers to each Series' annualized net
investment income per share over a 30-day period, expressed as a
percentage of the maximum offering price per share in the case of Class A
or the net asset value in the case of Class B or Class C at the end of
the period. For purposes of calculating current yield, the amount of net
investment income per share during that 30-day period, computed in
accordance with regulatory requirements, is compounded by assuming that
it is reinvested at a constant rate over a six-month period. An identical
result is then assumed to have occurred during a second six-month period
which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of each
Series' current yield may reflect absorbed expenses pursuant to any
undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax
yield which, after being taxed at a stated rate, would be equivalent to a
stated current yield calculated as described above.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in a Series of the
Fund was purchased with an initial payment of $1,000 and that the
investment was redeemed at the end of a stated period of time, after
giving effect to the reinvestment of dividends and distributions during
the period. The return is expressed as a percentage rate which, if
applied on a compounded annual basis, would result in the redeemable
value of the investment at the end of the period. Advertisements of each
Series' performance will include each Series' average annual total return
for one, five and ten year periods, or for shorter periods depending upon
the length of time during which each Series has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the
net asset value (maximum offering price in the case of Class A) per share
at the beginning of the period. Advertisements may include the percentage
rate of total return or may include the value of a hypothetical
investment at the end of the period which assumes the application of the
percentage rate of total return. Total return also may be calculated by
using the net asset value per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the
period for Class A shares or without giving effect to any applicable CDSC
at the end of the period for Class B or Class C shares. Calculations
based on the net asset value per share do not reflect the deduction of
the applicable sales charge on Class A shares which, if reflected, would
reduce the performance quoted.
Performance will vary from time to time and past results are
not necessarily representative of future results. Investors should
remember that performance is a function of portfolio management in
selecting the type and quality of portfolio securities and is affected by
operating expenses. Performance information, such as that described
above, may not provide a basis for comparison with other investments or
other investment companies using a different method of calculating
performance.
Comparative performance information may be used from time to
time in advertising the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman
Brothers Municipal Bond Index, Morningstar, Inc. and other industry
publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust
under the laws of the Commonwealth of Massachusetts pursuant to an
Agreement and Declaration of Trust (the "Trust Agreement") dated
September 19, 1986. Prior to July 2, 1990, the Fund's name was Premier
State Tax Exempt Bond Fund. The Fund is authorized to issue an unlimited
number of shares of beneficial interest, par value $.001 per share. The
Fund's shares are classified into three classes - Class A, Class B and
Class C. Each share has one vote and shareholders will vote in the
aggregate and not by class except as otherwise required by law or when
class voting is per-
Page 58
mitted by the Fund's Board. Only holders of Class B or Class C shares, as
the case may be, will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or
executed by the Fund or a Trustee. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of
any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund
itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by
the Fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Fund. The Fund intends to
conduct its operations in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Fund. As
discussed under "Management of the Fund" in the Statement of Additional
Information, the Fund ordinarily will not hold shareholder meetings;
however, shareholders under certain circumstances may have the right to
call a meeting of shareholders for the purpose of voting to remove
Trustees.
The Fund is a "series fund," which is a mutual fund divided
into separate portfolios, each of which is treated as a separate entity
for certain matters under the 1940 Act, and for other purposes. A
shareholder of one Series is not deemed to be a shareholder of any other
Series. For certain matters Fund shareholders vote together as a group;
as to others they vote separately by Series.
To date, the Trustees have authorized the creation of
thirteen Series of shares. All consideration received by the Fund for
shares of one of the Series and all assets in which such consideration is
invested, will belong to that Series (subject only to the rights of
creditors of the Fund) and will be subject to the liabilities related
thereto. The income attributable to, and the expenses of, one Series
would be treated separately from those of the other Series. The Fund has
the ability to create, from time to time, new series without shareholder
approval.
The Transfer Agent maintains a record of your ownership and
sends you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144.
Page 59
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- Each Series is permitted to borrow to the extent
permitted under the 1940 Act, which permits an investment company to
borrow in an amount up to 331/3% of the value of its total assets. Each
Series currently intends to borrow money only for temporary or emergency
(not leveraging) purposes in an amount up to 15% of the value of its
total assets (including the amount borrowed) valued at the lesser of cost
or market, less liabilities (not including the amount borrowed) at the
time the borrowing is made. While borrowings exceed 5% of the value of a
Series' total assets, such Series will not make any additional
investments.
SHORT-SELLING -- Each Series may make short sales of securities. In
these transactions, a Series sells a security it does not own in
anticipation of a decline in the market value of that security. To
complete the transaction, the Series must borrow the security to make
delivery to the buyer. The Series is obligated to replace the security
borrowed by purchasing it at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Series, which would result in a loss or gain,
respectively.
Securities will not be sold short if, after effect is given
to any such short sale, the total market value of all securities sold
short would exceed 25% of the value of a Series' net assets. A Series may
not sell short the securities of any single issuer listed on a national
securities exchange to the extent of more than 5% of the value of such
Series' net assets. A Series may not make a short sale which results in
the Series having sold short in the aggregate more than 5% of the
outstanding securities of any class of an issuer.
Each Series also may make short sales "against the box," in
which such Series enters into a short sale of a security it owns in order
to hedge an unrealized gain on the security. At no time will a Series
have more than 15% of the value of its net assets in deposits on short
sales against the box.
USE OF DERIVATIVES -- Each Series may invest in the types of
Derivatives enumerated under "Description of the Fund -- Investment
Considerations and Risks -- Use of Derivatives." These instruments and
certain related risks are described more specifically under "Investment
Objective and Management Policies -- Management Policies -- Derivatives"
in the Statement of Additional Information.
Derivatives may entail investment exposures that are greater
than their cost would suggest, meaning that a small investment in
Derivatives could have a large potential impact on the Series'
performance.
If a Series invests in Derivatives at inappropriate times or
judges the market conditions incorrectly, such investments may lower the
Series' return or result in a loss. A Series also could experience losses
if its Derivatives were poorly correlated with its other investments, or
if it were unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or suddenly can
become, illiquid. Changes in liquidity may result in significant, rapid
and unpredictable changes in the prices for Derivatives.
Although neither the Fund nor any Series is a commodity pool,
Derivatives subject the Fund to the rules of the Commodity Futures
Trading Commission which limit the extent to which a Series can invest in
certain Derivatives. Each Series may invest in futures contracts and
options with respect thereto for hedging purposes without limit. However,
no Series may invest in such contracts and options for other purposes if
the sum of the amount of initial margin deposits and premiums paid for
unexpired options with respect to such contracts, other than bona fide
hedging purposes, exceed 5% of the liquidation value of the Series'
assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case
of
Page 60
an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5% limitation.
Each Series may invest up to 5% of its assets, represented by
the premium paid, in the purchase of call and put options. Each Series may
write (i.e., sell) covered call and put option contracts to the extent of
20% of the value of its net assets at the time such option contracts are
written. When required by the Securities and Exchange Commission, a Series
will set aside permissible liquid assets in a segregated account to cover
its obligations relating to its transactions in Derivatives. To maintain
this required cover, the Series may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate
a Derivative position at a reasonable price.
LENDING PORTFOLIO SECURITIES -- Each Series may lend securities from
its portfolio to brokers, dealers and other financial institutions
needing to borrow securities to complete certain transactions. The Series
continues to be entitled to payments in amounts equal to the interest or
other distributions payable on the loaned securities which affords the
Series an opportunity to earn interest on the amount of the loan and on
the loaned securities' collateral. Loans of portfolio securities may not
exceed 331/3 % of the value of such Series' total assets, and the Series
will receive collateral consisting of cash, U. S. Government securities
or irrevocable letters of credit which will be maintained at all times in
an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable at any time upon specified
notice. The Series might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its
agreement with the Series.
FORWARD COMMITMENTS -- Each Series may purchase Municipal Obligations
and other securities on a forward commitment or when-issued basis, which
means delivery and payment take place a number of days after the date of
the commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed when
the Fund enters into the commitment, but the Fund does not make payment
until it receives delivery from the counterparty. The Fund will commit to
purchase such securities only with the intention of actually acquiring
the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. A segregated account of the
Fund consisting of permissible liquid assets at least equal at all times
to the amount of the commitments will be established and maintained at
the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS -- Each Series may purchase floating
and variable rate demand notes and bonds, which are tax exempt
obligations ordinarily having stated maturities in excess of one year,
but which permit the holder to demand payment of principal at any time or
at specified intervals. Variable rate demand notes include master demand
notes which are obligations that permit the Series to invest fluctuating
amounts at varying rates of interest, pursuant to direct arrangements
between the Series, as lender, and the borrower. These obligations permit
daily changes in the amount borrowed. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations,
although they are redeemable at face value, plus accrued interest.
Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Each obligation purchased will meet the quality criteria
established for the purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS -- Each Series may purchase from
financial institutions participation interests in Municipal Obligations
(such as industrial development
Page 61
bonds and municipal lease/purchase agreements). A participation interest
gives the Series an undivided interest in the Municipal Obligation in the
proportion that the Series' participation interest bears to the total
principal amount of the Municipal Obligation. These instruments may have
fixed, floating or variable rates of interest. If the participation
interest is unrated, it will be backed by an irrevocable letter of credit
or guarantee of a bank that the Series' Board has determined meets the
prescribed quality standards for banks set forth below, or the payment
obligation otherwise will be collateralized by U.S. Government securities.
For certain participation interests, the Series will have the right to
demand payment, on not more than seven days' notice, for all or any part
of the Series' participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, each Series intends to exercise
its right to demand payment only upon a default under the terms of the
Municipal Obligation, as needed to provide liquidity to meet redemptions,
or to maintain or improve the quality of its investment portfolio.
TENDER OPTION BONDS -- Each Series may purchase tender option bonds. A
tender option bond is a Municipal Obligation (generally held pursuant to
a custodial arrangement) having a relatively long maturity and bearing
interest at a fixed rate substantially higher than prevailing short-term
tax exempt rates, that has been coupled with the agreement of a third
party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the
option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees
equal to the difference between the Municipal Obligation's fixed coupon
rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities,
coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the
prevailing short-term tax exempt rate. The Dreyfus Corporation, on behalf
of the Fund, will consider on an ongoing basis the creditworthiness of
the issuer of the underlying Municipal Obligations, of any custodian and
of the third party provider of the tender option. In certain instances
and for certain tender option bonds, the option may be terminable in the
event of a default in payment of principal or interest on the underlying
Municipal Obligations and for other reasons.
CUSTODIAL RECEIPTS -- Each Series may purchase custodial receipts
representing the right to receive certain future principal and interest
payments on Municipal Obligations which underlie the custodial receipts.
A number of different arrangements are possible. In a typical custodial
receipt arrangement, an issuer or a third party owner of Municipal
Obligations deposits such obligations with a custodian in exchange for
two classes of custodial receipts. The two classes have different
characteristics, but, in each case, payments on the two classes are based
on payments received on the underlying Municipal Obligations. One class
has the characteristics of a typical auction rate security, where at
specified intervals its interest rate is adjusted, and ownership changes,
based on an auction mechanism. This class's interest rate generally is
expected to be below the coupon rate of the underlying Municipal
Obligations and generally is at a level comparable to that of a Municipal
Obligation of similar quality and having a maturity equal to the period
between interest rate adjustments. The second class bears interest at a
rate that exceeds the interest rate typically borne by a security of
comparable quality and maturity; this rate also is adjusted, but in this
case inversely to changes in the rate of interest of the first class. If
the interest rate on the first class exceeds the coupon rate of the
underlying Municipal Obligations, its interest rate will exceed the rate
paid on the second class. In no event will the aggregate interest paid
with respect to the two classes exceed the interest paid by the underlying
Municipal Obligations. The value of the second class and similar
securities
Page 62
should be expected to fluctuate more than the value of a Municipal
Obligation of comparable quality and maturity and their purchase by a
Series should increase the volatility of its net asset value and, thus,
its price per share. These custodial receipts are sold in private
placements. Each Series also may purchase directly from issuers, and not
in a private placement, Municipal Obligations having characteristics
similar to custodial receipts. These securities may be issued as part of
a multi-class offering and the interest rate on certain classes may be
subject to a cap or floor.
STAND-BY COMMITMENTS -- The Fund may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. Under a
stand-by commitment, the Fund obligates a broker, dealer or bank to
repurchase, at the Fund's option, specified securities at a specified
price and, in this respect, stand-by commitments are comparable to put
options. The exercise of a stand-by commitment, therefore, is subject to
the ability of the seller to make payment on demand. The Fund will
acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
The Fund may pay for stand-by commitments if such action is deemed
necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with stand-by commitments will be
taxable. Each Series also may acquire call options on specific Municipal
Obligations. A Series generally would purchase these call options to
protect the Series from the issuer of the related Municipal Obligation
redeeming, or other holder of the call option from calling away, the
Municipal Obligation before maturity. The sale by the Series of a call
option that it owns on a specific Municipal Obligation could result in
the receipt of taxable income by the Series.
ZERO COUPON SECURITIES -- Each Series may invest in zero coupon
securities which are debt securities issued or sold at a discount from
their face value which do not entitle the holder to any periodic payment
of interest prior to maturity or a specified redemption date (or cash
payment date). The amount of the discount varies depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and perceived credit quality of the issuer.
Zero coupon securities also may take the form of debt securities that
have been stripped of their unmatured interest coupons, the coupons
themselves and receipts or certificates representing interests in such
stripped debt obligations and coupons. The market prices of zero coupon
securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a
greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
ILLIQUID SECURITIES -- Each Series may invest up to 15% of the value
of its net assets in securities as to which a liquid trading market does
not exist, provided such investments are consistent with the Fund's
investment objective. Such securities may include securities that are not
readily marketable, such as certain securities that are subject to legal
or contractual restrictions on resale, and repurchase agreements
providing for settlement in more than seven days after notice. As to
these securities, the Series is subject to a risk that should the Series
desire to sell them when a ready buyer is not available at a price the
Fund deems representative of their value, the value of the Series' net
assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other
than for temporary defensive purposes (but not to exceed 20% of the value
of a Series' net assets) or for temporary defensive purposes, each Series
may invest in taxable short-term investments ("Taxable Investments")
consisting of: notes of issuers having, at the time of purchase, a
quality rating within the two highest grades of Moody's, S&P or Fitch;
Page 63
obligations of the U.S. Government, its agencies or instrumentalities;
commercial paper rated not lower than P-1 by Moody's, A-1 by S&P or F-1
by Fitch; certificates of deposit of U.S. domestic banks, including
foreign branches of domestic banks, with assets of one billion dollars or
more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the foregoing.
Dividends paid by a Series that are attributable to income earned by the
Series from Taxable Investments will be taxable to investors. See
"Dividends, Distributions and Taxes." Except for temporary defensive
purposes, at no time will more than 20% of the value of a Series' net
assets be invested in Taxable Investments. When a Series has adopted a
temporary defensive position, including when acceptable State Municipal
Obligations are unavailable for investment by a Series, in excess of 35%
of a Series' net assets may be invested in securities that are not exempt
from Federal and, where applicable, State personal income taxes. Under
normal market conditions, each Series anticipates that not more than 5%
of the value of its total assets will be invested in any one category of
Taxable Investments. Taxable Investments are more fully described in the
Statement of Additional Information, to which reference hereby is made.
RATINGS -- Bonds rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate. Bonds
rated BB by S&P are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term
vulnerability to default than other speculative grade debt, they face
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments. Bonds rated BB by Fitch are
considered speculative and the payment of principal and interest may be
affected at any time by adverse economic changes. Bonds rated C by Moody's
are regarded as having extremely poor prospects of ever attaining any real
investment standing. Bonds rated D by S&P are in default and the payment
of interest and/or repayment of principal is in arrears. Bonds rated DDD,
DD or D by Fitch are in actual or imminent default, are extremely
speculative and should be valued on the basis of their ultimate recovery
value in liquidation or reorganization of the issuer; DDD represents the
highest potential for recovery of such bonds; and D represents the lowest
potential for recovery. Such bonds, though high yielding, are
characterized by great risk. See "Appendix B" in the Statement of
Additional Information for a general description of Moody's, S&P and
Fitch ratings of Municipal Obligations.
The ratings of Moody's, S&P and Fitch represent their
opinions as to the quality of the Municipal Obligations which they
undertake to rate. It should be emphasized, however, that ratings are
relative and subjective and, although ratings may be useful in evaluating
the safety of interest and principal payments, they do not evaluate the
market value risk of these bonds. Therefore, although these ratings may
be an initial criterion for selection of portfolio investments, The
Dreyfus Corporation also will evaluate these securities and the ability
of the issuers of such securities to pay interest and principal.
The Fund's ability to achieve its investment objective may be more
dependent on The Dreyfus Corporation's credit analysis than might be
the case for a series that invested in higher rated securities.
Page 64
The average distribution of investments (at value) in
Municipal Obligations by ratings for the fiscal year ended April 30,
1996, computed on a monthly basis, for each Series indicated was as
follows:
<TABLE>
<CAPTION>
OHIO PENNSYLVANIA
FITCH OR MOODY'S OR S & P SERIES SERIES
------------- ------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
AAA Aaa AAA 38.8% 43.1%
AA Aa AA 8.3 9.1
A A A 23.4 13.6
BBB Baa BBB 18.3 19.8
BB Ba BB 6.7 .8
F-1 MIG1/P-1 SP-1/A-1 1.0 1.8
Not Rated Not Rated Not Rated 3.5(1) 11.8(2)
-------- --------
100.0% 100.0%
-------- --------
-------- --------
</TABLE>
(1) Included under the Not Rated category are securities
comprising 3.5% of the Ohio Series' market value which, while not rated,
have been determined by The Dreyfus Corporation to be of comparable
quality to securities in the following rating categories: Aaa/AAA (1.1%),
A/A (.3%), Baa/BBB (1.8%) and B (.3%).
(2) Included under the Not Rated category are securities
comprising 11.8% of the Pennsylvania Series' market value which, while
not rated, have been determined by The Dreyfus Corporation to be of
comparable quality to securities in the following rating categories:
Aaa/AAA (.9%), A/A (1.7%), Baa/BBB (4.0%), Ba/BB (3.1%) and B (2.1%).
The actual distribution of the Series' investments by ratings
on any given date will vary. In addition, the distribution of the Series'
investments by ratings as set forth above should not be considered as
representative of the Series' future portfolio composition.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND IN THE SERIES' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER
OF THE SERIES' SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
SERIES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
PSTEBP010397
Page 65
PREMIER STATE MUNICIPAL BOND FUND
CLASS A AND CLASS B AND CLASS C SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
___________, 1996
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Premier State Municipal Bond Fund (the "Fund"), dated ___________, 1996, as
it may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies................B-2
Management of the Fund......................................B-13
Management Agreement........................................B-17
Purchase of Shares..........................................B-20
Distribution Plan and Shareholder Services Plan.............B-23
Redemption of Shares........................................B-25
Shareholder Services........................................B-26
Determination of Net Asset Value............................B-29
Dividends, Distributions and Taxes..........................B-30
Portfolio Transactions......................................B-31
Performance Information.....................................B-32
Information About the Fund..................................B-39
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors.......................B-39
Appendix A..................................................B-41
Appendix B..................................................B-92
Financial Statements........................................B-101
Report of Independent Auditors..............................B-112
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the Fund"
and "Appendix."
Portfolio Securities
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended April 30,
1996, computed on a monthly basis, for each Series (other than the New Jersey
Series which had not commenced operations) was as follows:
<TABLE>
Fitch Investors Moody's Investors Standard & Poor's
Service, L.P. Service, Inc. Ratings Group Connecticut Florida Georgia
("Fitch") or ("Moody's") or ("S&P") Series Series Series
- -------------- ------------------- ----------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
AAA Aaa AAA 32.4% 42.8% 43.3%
AA Aa AA 33.8 14.8 39.6
A A A 14.3 5.8 13.4
BBB Baa BBB 12.0 15.0 2.3
BB Ba BB - 4.1 .8
F-1 MIG 1/P-1 SP-1/A-1 .3 1.8 -
Not Rated Not Rated Not Rated 7.2 1 15.7 2 .6 3
-------- ------- -----
100.0% 100.0% 100.0%
====== ====== =======
Maryland Massachusetts Michigan
Fitch or Moody's or S&P Series Series Series
- ----- -------- -----
AAA Aaa AAA 28.8% 44.6% 45.7%
AA Aa AA 38.5 9.1 18.9
A A A 21.0 27.6 14.9
BBB Baa BBB 3.9 10.2 10.8
BB Ba BB- - - -
F-1 MIG 1/P-1 SP-1/A-1 .5 .9 1.0
Not Rated Not Rated Not Rated 7.3 4 7.6 5 8.7 6
100.0% 100.0% 100.0%
______________
1 Included in the Not Rated category are securities comprising 7.2% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: Aaa/AAA (.3%), Baa/BBB (6.7%) and Ba/BB (.2%).
2 Included in the Not Rated category are securities comprising 15.7% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: A/A (.3%) and Baa/BBB (15.4%).
3 Included in the Not Rated category are securities comprising .6% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: F-1/MIG 1, P-1/SP-1, A-1 (.6%)
4 Included in the Not Rated category are securities comprising 7.3% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: Baa/BBB (6.3%), B (.8%) and F-1/MIG1, P-1/SP-1, A-1 (.2%).
5 Included in the Not Rated category are securities comprising 7.6% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: A/A (.9%) and Baa/BBB (6.7%).
6 Included in the Not Rated category are securities comprising 8.7% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: Aaa/AAA (2.8%), A/A (.9%), Baa/BBB (3.5%) and Ba/BB (1.5%).
</TABLE>
<TABLE>
North
Minnesota Carolina Ohio
Fitch or Moody's or S&P Series Series Series
- ----- ------- --- ------- ----- -----
<S> <C> <C> <C> <C> <C>
AAA Aaa AAA 50.3% 31.4% 38.8%
AA Aa AA 21.3 22.7 8.3
A A A 13.3 30.4 23.4
BBB Baa BBB 10.3 13.8 18.3
BB Ba BB - - 6.7
F-1 MIG 1/P-1 SP-1/A-1 1.1 - 1.0
Not Rated Not Rated Not Rated 3.7 7 1.7 8 3.5 9
------- ------- -------
100.0% 100.0% 100.0%
====== ======= =======
Pennsylvania Texas Virginia
Fitch or Moody's or S&P Series Series Series
AAA Aaa AAA 43.1% 44.1% 32.4%
AA Aa AA 9.1 25.0 25.5
A A A 13.6 9.7 26.3
BBB Baa BBB 19.8 16.4 13.1
BB Ba BB .8 - -
F-1 MIG 1/P-1 SP-1/A-1 1.8 1.7 1.0
Not Rated Not Rated Not Rated 11.8 10 3.1 11 1.7 12
------- -------- -------
100.0% 100.0% 100.0%
======= ======== ========
- --------------
7 Included in the Not Rated category are securities comprising 3.7% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: Aaa/AAA (.3%), Aa/AA (.1%) and Baa/BBB (3.3%).
8 Included in the Not Rated category are securities comprising 1.7% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: BBB (1.7%).
9 Included in the Not Rated category are securities comprising 3.5% of the
Ohio Series' market value which, while not rated, have been determined by
the Manager to be of comparable quality to securities in the following
rating categories: Aaa/AAA (1.1%), A/A (.3%), Baa/BBB (1.8%) and B (.3%).
10 Included in the Not Rated category are securities comprising 11.8% of
the Pennsylvania Series' market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities in the
following rating categories: Aaa/AAA (.9%), A/A (1.7%), Baa/BBB (4.0%),
Ba/BB (3.1%) and B (2.1%).
11 Included in the Not Rated category are securities comprising 3.1% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: Aaa/AAA (.7%) and Baa/BBB (2.4%).
12 Included in the Not Rated category are securities comprising 1.7% of the
Series' market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: Baa/BBB (1.7%).
</TABLE>
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public
facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other
public purposes for which Municipal Obligations may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses and lending such funds to other public institutions and
facilities. In addition, certain types of industrial development bonds
are issued by or on behalf of public authorities to obtain funds to
provide for the construction, equipment, repair or improvement of
privately operated housing facilities, sports facilities, convention or
trade show facilities, airport, mass transit, industrial, port or
parking facilities, air or water pollution control facilities and
certain local facilities for water supply, gas, electricity, or sewage
or solid waste disposal; the interest paid on such obligations may be
exempt from Federal income tax, although current tax laws place
substantial limitations on the size of such issues. Such obligations
are considered to be Municipal Obligations if the interest paid thereon
qualifies as exempt from Federal income tax in the opinion of bond
counsel to the issuer. There are, of course, variations in the security
of Municipal Obligations, both within a particular classification and
between classifications.
Floating and variable rate demand obligations are tax exempt
obligations ordinarily having stated maturities in excess of one year,
but which permit the holder to demand payment of principal at any time,
or at specified intervals. The issuer of such obligations ordinarily
has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus
accrued interest upon a specified number of days' notice to the holders
thereof. The interest rate on a floating rate demand obligation is
based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest
rate on a variable rate demand obligation is adjusted automatically at
specified intervals.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money
market factors, conditions in the Municipal Obligations market, size of
a particular offering, maturity of the obligation, and rating of the
issue. The imposition of the Fund's management fee, as well as other
operating expenses, including fees paid under the Fund's Shareholder
Services Plan with respect to Class A, Class B and Class C shares, and
the Distribution Plan, with respect to Class B and Class C shares only,
will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality
for which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is
appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might
prove difficult. The staff of the Securities and Exchange Commission
currently considers certain lease obligations to be illiquid.
Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully
each Series' investment in such securities with particular regard to (1)
the frequency of trades and quotes for the lease obligation; (2) the
number of dealers willing to purchase or sell the lease obligation and
the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the lease obligation; (4) the nature of
the marketplace trades including the time needed to dispose of the lease
obligation, the method of soliciting offers and the mechanics of
transfer; and
(5) such other factors concerning the trading market for the lease
obligation as the Manager may deem relevant. In addition, in evaluating
the liquidity and credit quality of a lease obligation that is unrated,
the Fund's Board has directed the Manager to consider (a) whether the
lease can be cancelled; (b) what assurance there is that the assets
represented by the lease can be sold; (c) the strength of the lessee's
general credit (e.g., its debt, administrative, economic, and financial
characteristics); (d) the likelihood that the municipality will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of nonappropriation");
(e) the legal recourse in the event of failure to appropriate; and (f)
such other factors concerning credit quality as the Manager may deem
relevant. No Series will invest more than 15% of the value of its net
assets in lease obligations that are illiquid and in other illiquid
securities. See "Investment Restriction No. 6" below.
A Series will purchase tender option bonds only when the Fund is
satisfied that the custodial and tender option arrangements, including
the fee payment arrangements, will not adversely affect the tax exempt
status of the underlying Municipal Obligations and that payment of any
tender fees will not have the effect of creating taxable income for the
Series. Based on the tender option bond agreement, the Fund expects to
be able to value the tender option bond at par; however, the value of
the instrument will be monitored to assure that it is valued at fair
value.
Ratings of Municipal Obligations. Subsequent to its purchase by
the Fund, an issue of rated Municipal Obligations may cease to be rated
or its rating may be reduced below the minimum required for purchase by
the Fund. Neither event will require the sale of such Municipal
Obligations by the Fund, but the Manager will consider such event in
determining whether the Fund should continue to hold the Municipal
Obligations. To the extent that the ratings given by Moody's, S&P or
Fitch for Municipal Obligations may change as a result of changes in
such organizations or their rating systems, the Fund will attempt to use
comparable ratings as standards for its investments in accordance with
the investment policies contained in the Fund's Prospectus and this
Statement of Additional Information. The ratings of Moody's, S&P and
Fitch represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute
standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Manager also will
evaluate these securities.
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities
purchased by the Fund pursuant to Rule 144A under the Securities Act of
1933, as amended, the Fund intends to treat such securities as liquid
securities in accordance with procedures approved by the Fund's Board.
Because it is not possible to predict with assurance how the market for
restricted securities pursuant to Rule 144A will develop, the Fund's
Board has directed the Manager to monitor carefully the Fund's
investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to
Rule 144A, the Fund's investing in such securities may have the effect
of increasing the level of illiquidity in its portfolio during such
period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times
of issuance. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities are supported by the full faith and
credit of the U.S. Treasury; others by the right of the issuer to borrow
from the U.S. Treasury; others by discretionary authority of the U.S.
Government to purchase certain obligations of the agency or
instrumentality; and others only by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable
rates of interest. While the U.S. Government provides financial support
to such U.S. Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it is not so
obligated by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing
the obligation of a bank to repay funds deposited with it for a
specified period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than
seven days) at a stated interest rate. Investments in time deposits
generally are limited to London branches of domestic banks that have
total assets in excess of one billion dollars. Time deposits which may
be held by the Fund will not benefit from insurance from the Bank
Insurance Fund or the Savings Association Insurance Fund administered by
the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These
instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. Other short-term
bank obligations may include uninsured, direct obligations bearing
fixed, floating or variable interest rates.
In a repurchase agreement, the Fund buys and the seller agrees to
repurchase a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines the
yield during the purchaser's holding period, while the seller's
obligation to repurchase is secured by the value of the underlying
security. The Fund's custodian or sub-custodian will have custody of,
and will hold in a segregated account, securities acquired by the Series
under a repurchase agreement. Repurchase agreements are considered by
the staff of the Securities and Exchange Commission to be loans by the
Series. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, each Series will enter into repurchase agreements
only with domestic banks with total assets in excess of $1 billion, or
primary government securities dealers reporting to the Federal Reserve
Bank of New York, with respect to securities of the type in which such
Series may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should
decrease below resale price. Repurchase agreements could involve risks
in the event of a default or insolvency of the other party to the
agreement, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities.
Management Policies
Short-Selling. Until the Fund closes its short position or
replaces the borrowed security, it will (a) maintain a segregated
account, containing permissible liquid assets, at such a level that the
amount deposited in the account plus the amount deposited with the
broker as collateral always equals the current value of the securities
sold short; or (b) otherwise cover its short position.
Lending Portfolio Securities. In connection with its securities
lending transactions, each Series may return to the borrower or a third
party which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are
loaned: (1) the Series must receive at least 100% cash collateral from
the borrower; (2) the borrower must increase such collateral whenever
the market value of the securities rises above the level of such
collateral; (3) the Series must be able to terminate the loan at any
time; (4) the Series must receive reasonable interest on the loan, as
well as any interest or other distributions payable on the loaned
securities, and any increase in market value; and (5) the Series may pay
only reasonable custodian fees in connection with the loan.
Derivatives. Each Series may invest in Derivatives (as defined in
the Fund's Prospectus) for a variety of reasons, including to hedge
certain market risks, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain. Derivatives
may provide a cheaper, quicker or more specifically focused way for the
Series to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees
of risk, depending upon the characteristics of the particular Derivative
and the portfolio as a whole. Derivatives permit each Series to
increase or decrease the level of risk, or change the character of the
risk, to which its portfolio is exposed in much the same way as the
Series can increase or decrease the level of risk, or change the
character of the risk, of its portfolio by making investments in
specific securities.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by
the clearing agency which is the issuer or counterparty to such
Derivatives. This guarantee usually is supported by a daily payment
system (i.e., variation margin requirements) operated by the clearing
agency in order to reduce overall credit risk. As a result, unless the
clearing agency defaults, there is relatively little counterparty credit
risk associated with Derivatives purchased on an exchange. By contrast,
no clearing agency guarantees over-the-counter Derivatives. Therefore,
each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in
the same manner as it would review the credit quality of a security to
be purchased by the Series. Over-the-counter Derivatives are less
liquid than exchange-traded Derivatives since the other party to the
transaction may be the only investor with sufficient understanding of
the Derivative to be interested in bidding for it.
Futures Transactions--In General. Each Series may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade.
Engaging in these transactions involves risk of loss to the Series which
could adversely affect the value of the Fund's net assets. Although the
Series intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a
liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading
day. Once the daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit or trading may
be suspended for specified periods during the trading day. Futures
contract prices could move to the limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting the Series to substantial
losses.
Successful use of futures by each Series also is subject to the
Manager's ability to predict correctly movements in the direction of the
relevant market, and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures
contract. For example, if the Series uses futures to hedge against the
possibility of a decline in the market value of securities held in its
portfolio and the prices of such securities instead increase, the Series
will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in
its futures positions. Furthermore, if in such circumstances the Series
has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. The Series may have to sell such
securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the
Securities and Exchange Commission, the Series may be required to
segregate permissible liquid assets in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of
limiting the Series' ability otherwise to invest those assets.
Specific Futures Transactions. Each Series may purchase and sell
interest rate futures contracts. An interest rate future obligates the
Series to purchase or sell an amount of a specific debt security at a
future date at a specific price.
Options--In General. Each Series may purchase and write (i.e., sell)
call or put options with respect to interest rate futures contracts. A
call option gives the purchaser of the option the right to buy, and
obligates the writer to sell, the underlying security or securities at
the exercise price at any time during the option period, or at a
specific date. Conversely, a put option gives the purchaser of the
option the right to sell, and obligates the writer to buy, the
underlying security or securities at the exercise price at any time
during the option period, or at a specific date.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise
covers the transaction by segregating cash or other securities. A put
option written by the Fund is covered when, among other things, cash or
liquid securities having a value equal to or greater than the exercise
price of the option are placed in a segregated account with the Fund's
custodian to fulfill the obligation undertaken. The principal reason
for writing covered call and put options is to realize, through the
receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing
covered call or put options which it retains whether or not the option
is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no
such secondary market may exist. A liquid secondary market in an option
may cease to exist for a variety of reasons. In the past, for example,
higher than anticipated trading activity or order flow, or other
unforeseen events, at times have rendered certain of the clearing
facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There
can be no assurance that similar events, or events that may otherwise
interfere with the timely execution of customers' orders, will not
recur. In such event, it might not be possible to effect closing
transactions in particular options. If, as a covered call option
writer, the Fund is unable to effect a closing purchase transaction in
the secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security
upon exercise or it otherwise covers its position.
Successful use by the Fund of options will be subject to the
Manager's ability to predict correctly movements in interest rates. To
the extent the Manager's predictions are incorrect, the Fund may incur
losses.
Futures Developments. Each Series may take advantage of
opportunities in the area of options and futures contracts and options
on futures contracts and any other Derivatives which are not presently
contemplated for use by the Series or which are not currently available
but which may be developed, to the extent such opportunities are both
consistent with the Fund's investment objective and legally permissible
for the Series. Before entering into such transactions or making any
such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to
changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise)
based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may
expose the Series to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued
basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when a Series is fully or almost fully
invested may result in greater potential fluctuation in the value of
such Series' net assets and its net asset value per share.
Investment Considerations and Risks
Lower Rated Bonds. Each Series is permitted to invest in
securities rated Ba or lower by Moody's or BB or lower by S&P or Fitch
and as low as the lowest rating assigned by Moody's, S&P or Fitch. Such
bonds, though higher yielding, are characterized by risk. See
"Description of the Fund--Investment Considerations and Risks--Lower
Rated Bonds" in the Prospectus for a discussion of certain risks and
"Appendix B" in this Statement of Additional Information for a general
description of Moody's, S&P and Fitch ratings of Municipal Obligations.
Although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
bonds. The Fund will rely on the Manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these
bonds tend to be more sensitive to economic conditions than are higher
rated securities. These bonds generally are considered by S&P, Moody's
and Fitch to be predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities
in the higher rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. To
the extent a secondary trading market for these bonds does exist, it
generally is not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet the Series' liquidity needs or
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market
for certain securities also may make it more difficult for the Fund to
obtain accurate market quotations for purposes of valuing a Series'
portfolio and calculating such Series' net asset value. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of these securities. In
such cases, judgment may play a greater role in valuation because less
reliable objective data may be available.
These bonds may be particularly susceptible to economic downturns.
It is likely that any economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value
of such securities. In addition, it is likely that any such economic
downturn could adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon and increase the
incidence of default for such securities.
The Fund may acquire these bonds during any initial offering. Such
securities may involve special risks because they are new issues. The
Fund has no arrangement with any persons concerning the acquisition of
such securities, and the Manager will review carefully the credit and
other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon bonds and pay-in-kind bonds in which
each Series may invest up to 5% of its net assets. Zero coupon
securities and pay-in-kind or delayed interest bonds carry an additional
risk in that, unlike bonds which pay interest throughout the period to
maturity, the Series will realize no cash until the cash payment date
unless a portion of such securities are sold and, if the issuer
defaults, the Series may obtain no return at all on its investment. See
"Dividends, Distributions and Taxes."
Investing in State Municipal Obligations. Investors should review
the information in "Appendix A," which provides a brief summary of
special investment considerations and risk factors relating to investing
in State Municipal Obligations.
Investment Restrictions
The Fund has adopted the following investment restrictions (except
as otherwise noted) as fundamental policies which will apply to each
Series. These restrictions cannot be changed as to a Series without
approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of such Series'
outstanding voting shares. Investment restrictions numbered 3 and 6 are
not fundamental policies and may be changed as to a Series by a vote of
a majority of the Fund's Board members at any time. No Series may:
1. Purchase securities other than Municipal Obligations and
Taxable Investments as those terms are defined above and in the
Prospectus and those arising out of transactions in futures and options.
2. Borrow money, except to the extent permitted under the 1940
Act (which currently limits borrowing to no more than 33-1/3% of the
value of the Series' total assets). Transactions in futures and options
and the entry into short sales transactions do not involve any borrowing
for purposes of this restriction.
3. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except to the extent necessary to secure permitted borrowings.
The deposit of assets in escrow in connection with the writing of
covered put and call options and the purchase of securities on a
when-issued or delayed-delivery basis and collateral arrangements with
respect to initial or variation margin for futures contracts and options
on futures contracts or indices will not be deemed to be pledges of
assets.
4. Purchase securities on margin, but may make margin deposits in
connection with transactions in futures, including those related to
indices, and options on futures or indices.
5. Underwrite the securities of other issuers, except that the
Series may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own portfolio to
take advantage of the lower purchase price available, and except to the
extent the Series may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
6. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are
illiquid (which securities could include participation interests that
are not subject to the demand feature described in the Fund's Prospectus
and floating and variable rate demand obligations as to which the Fund
cannot exercise the demand feature described in the Fund's Prospectus on
not more than seven days' notice if there is no secondary market), if,
in the aggregate, more than 15% of the value of the Series' net assets
would be so invested.
7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests, but this shall not prevent the Fund from investing in
Municipal Obligations secured by real estate or interests therein, or
prevent the Fund from purchasing and selling futures contracts,
including those related to indices, and options on futures contracts or
indices.
8. Make loans to others except through the purchase of qualified
debt obligations and the entry into repurchase agreements referred to
above and in the Fund's Prospectus; however, the Fund may lend each
Series' portfolio securities in an amount not to exceed
33-1/3% of the value of the Series' total assets. Any loans of
portfolio securities will be made according to guidelines established by
the Securities and Exchange Commission and the Fund's Board.
9. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
10. Invest in companies for the purpose of exercising control.
11. Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or acquisition
of assets.
For purposes of Investment Restriction No. 9, industrial
development bonds, where the payment of principal and interest is the
ultimate responsibility of companies within the same industry, are
grouped together as an "industry."
If a percentage restriction is adhered to at the time of
investment, a later increase in percentage resulting from a change in
values or assets will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of Series shares in
certain states. Should the Fund determine that a commitment is no
longer in the best interests of a Series and its shareholders, the Fund
reserves the right to revoke the commitment by terminating the sale of
such Series in the state involved.
In addition, although not fundamental policies, the Pennsylvania
Series may vary its portfolio investments only to (i) eliminate unsafe
investments and investments not consistent with the preservation of
capital or the tax status of investments of the Pennsylvania Series;
(ii) honor redemption orders, meet anticipated redemption requirements
and negate gains from discount purchases; (iii) reinvest the earnings
from securities in like securities; or (iv) defray ordinarily
administrative expenses.
While not a fundamental policy, the Texas Series will not invest in
real estate limited partnerships.
MANAGEMENT OF THE FUND
Board members of the Fund, together with information as to their
principal business occupations during at least the last five years, are
shown below. Each Board member who is deemed to be an "interested
person" of the Fund (as defined in the 1940 Act) is indicated by an
asterisk.
Board Members of the Fund
CLIFFORD L. ALEXANDER, JR., Board Member. President of Alexander &
Associates, Inc., a management consulting firm. From 1977 to 1981,
Mr. Alexander served as Secretary of the Army and Chairman of the
Board of the Panama Canal Company, and from 1975 to 1977, he was a
member of the Washington, D.C. law firm of Verner, Liipfert,
Bernhard, McPherson and Alexander. He is a director of American
Home Products Corporation, The Dun & Bradstreet Corporation, MCI
Communications Corporation, Mutual of America Life Insurance
Company and TLC Beatrice International Holdings, Inc. He is 61
years old and his address is 400 C Street, N.E., Washington, D.C.
20002.
PEGGY C. DAVIS, Board Member. Shad Professor of Law, New York
University School of Law. Professor Davis has been a member of the
New York University law faculty since 1983. Prior to that time,
she served for three years as a judge in the courts of New York
State; was engaged for eight years in the practice of law, working
in both corporate and non-profit sectors; and served for two years
as a criminal justice administrator in the government of the City
of New York. She writes and teaches in the fields of evidence,
constitutional theory, family law, social sciences and the law,
legal process and professional methodology and training. She is 53
years old and her address is c/o New York University School of Law,
249 Sullivan Street, New York, New York 10012.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995,
Chairman of the Board for various funds in the Dreyfus Family of
Funds. He is Chairman of the Board of Noel Group, Inc., a venture
capital company; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway,
Inc., a manufacturer and marketer of industrial threads, specialty
yarns, home furnishings and fabrics, Curtis Industries, Inc., a
nationwide distributor of security products, chemicals and
automotive and other hardware, and Staffing Resources, Inc. For
more than five years prior to January 1995, he was President, a
director and, until August 1994, Chief Operating Officer of the
Manager and Executive Vice President and a director of Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager, and
until August 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation.
He is 52 years old and his address is 200 Park Avenue, New York,
New York 10166.
ERNEST KAFKA, Board Member. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents.
Since 1981, he has served as an Instructor at the New York
Psychoanalytic Institute and, prior thereto, held other teaching
positions. He is Associate Clinical Professor of Psychiatry at
Cornell Medical School. For more than the past five years, Dr.
Kafka has held numerous administrative positions and has published
many articles on subjects in the field of psychoanalysis. He is 63
years old and his address is 23 East 92nd Street, New York, New
York 10128.
SAUL B. KLAMAN, Board Member. Chairman and Chief Executive Officer of
SBK Associates, which provides research and consulting services to
financial institutions. Dr. Klaman was President of the National
Association of Mutual Savings Banks until November 1983, President
of the National Council of Savings Institutions until June 1985,
Vice Chairman of Golembe Associates and BEI Golembe, Inc. until
1989 and Chairman Emeritus of BEI Golembe, Inc. until November
1992. He also served as an Economist to the Board of Governors of
the Federal Reserve System and on several Presidential Commissions,
and has held numerous consulting and advisory positions in the
fields of economics and housing finance. He is 76 years old and
his address is 431-B Dedham Street, The Gables, Newton Center,
Massachusetts 02159.
NATHAN LEVENTHAL, Board Member. President of Lincoln Center for the
Performing Arts, Inc. Mr. Leventhal was Deputy Mayor for
Operations of New York City from September 1979 to March 1984 and
Commissioner of the Department of Housing Preservation and
Development of New York City from February 1978 to September 1979.
Mr. Leventhal was an associate and then a member of the New York
law firm of Poletti Freidin Prashker Feldman and Gartner from 1974
to 1978. He was Commissioner of Rent and Housing Maintenance for
New York City from 1972 to 1973. Mr. Leventhal also serves as
Chairman of Citizens Union, an organization which strives to reform
and modernize City and State government. He is 53 years old and
his address is 70 Lincoln Center Plaza, New York, New York 10023-
6583.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Board members of the Fund who are not "interested persons" of the Fund,
as defined in the 1940 Act, will be selected and nominated by the Board
members who are not "interested persons" of the Fund.
Ordinarily meetings of shareholders for the purpose of electing
Board members will not be held unless and until such time as less than a
majority of the Board members holding office have been elected by
shareholders at which time the Board members then in office will call a
shareholders' meeting for the election of Board members. Under the 1940
Act, shareholders of record of not less than two-thirds of the
outstanding shares of the Fund may remove a Board member through a
declaration in writing or by vote cast in person or by proxy at a
meeting called for that purpose. The Board members are required to call
a meeting of shareholders for the purpose of voting upon the question of
removal of any such Board member when requested in writing to do so by
the shareholders of record of not less than 10% of the Fund's
outstanding shares.
The Fund typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of
the Board receives an additional 25% of such compensation. Emeritus
Board members are entitled to receive an annual retainer and a per
meeting fee of one-half the amount paid to them as Board members. The
aggregate amount of compensation paid to each Board member by the Fund
for the fiscal year ended April 30, 1996, and, by all other funds in the
Dreyfus Family of Funds for which such person is a Board member (the
number of which is set forth in parenthesis next to each Board member's
total compensation) for the year ended December 31, 1995, were as
follows:
<TABLE>
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
- --------------- ------------------- ----------------
<S> <C> <C>
Clifford L. Alexander, Jr. $3,750 $ 94,386 (17)
Peggy C. Davis $3,750 $ 81,636 (15)
Joseph S. DiMartino $4,688 $448,618 (94)
Ernest Kafka $3,750 $ 81,136 (15)
Saul B. Klaman $3,750 $ 81,886 (15)
Nathan Leventhal $3,750 $ 81,636 (15)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $9,329 for all Board members as a group.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she
served as Vice President and Controller, and later as Senior Vice
President, of The Boston Company Advisors, Inc. She is 38 years
old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an Associate at Ropes & Gray. He is 32 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President
and Manager of Treasury Services and Administration of Funds
Distributor, Inc. and an officer of other investment companies
advised or administered by the Manager. From September 1989 to
July 1994, she was an Assistant Vice President and Client Manager
for The Boston Company, Inc. She is 32 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior
Vice President, Treasurer and Chief Financial Officer of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From July 1988 to August 1994, he was
employed by The Boston Company, Inc. where he held various
management positions in the Corporate Finance and Treasury areas.
He is 34 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor and an officer of other
investment companies advised or administered by the Manager. She
is 26 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor
of Treasury Services and Administration of Funds Distributor, Inc.
and an officer of other investment companies advised or
administered by the Manager. From April 1993 to January 1995, he
was a Senior Fund Accountant for Investors Bank & Trust Company.
From December 1991 to March 1993, he was employed as a Fund
Accountant at The Boston Company, Inc. He is 27 years old.
RICHARD W. INGRAM, Vice President and Assistant Secretary. Senior Vice
President and Director of Client Services and Treasury Operations
of Funds Distributor, Inc. and an officer of other investment
companies advised or administered by the Manager. From March 1994
to November 1995, he was Vice President and Division Manager for
First Data Investor Services Group. From 1989 to 1994, Mr. Ingram
was Vice President, Assistant Treasurer and Tax Director - Mutual
Funds of The Boston Company, Inc. He is 40 years old.
The address of all officers of the Fund is 200 Park Avenue, New
York, New York 10166.
The Fund's Board members and officers, as a group, owned less than
1% of the Fund's shares of beneficial interest outstanding on October 22
1996.
As of October 22, 1996, the following persons owned 5% or more of
the outstanding shares of beneficial interest of the Fund; Class A:
Connecticut Series - Merrill Lynch Pierce Fenner & Smith, Inc.,
Jacksonville, FL - 8.7%; Florida Series - Merrill Lynch Pierce Fenner &
Smith, Inc., Jacksonville, FL - 5.3%; Georgia Series - BHC Securities,
Philadelphia, PA - 14.8%; Alicia B. Nichols - 5.3%; Maryland Series -
Stephens Inc., Little Rock, AR - 5.7%; Mighigan Series - Merrill Lynch
Pierce Fenner & Smith, Inc., Jacksonville FL - 7.5%; North Carolina
Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 6.4%;
Ohio Series - BHC Securities, Philadelphia, PA - 6.2%; Pennsylvania
Series - Mary Alice Morrissey & James D. Morrissey, Huntingdon Valley,
PA - 5.5%; Virginia Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 5.8%. Class B: Connecticut Series - Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL - 7.2%; Florida Series - Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL - 8.0%; Rose S. Miller,
Margot L. Coffin & Richard Miller, Boca Raton, FL - 5.0%; Georgia Series
- - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 16.1%;
Maryland Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL
- - 6.3%; Michigan Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 9.6%; Virginia Series - Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL - 7.4%. Class C: Connecticut Series - US
Clearing Corp, New York, NY - 20.7%; Paul L. Lutson, Stratford, CT -
9.4%; US Clearing Corp, New York, NY - 8.4%; US Clearing Corp, New York,
NY - 6.8%; U.S. Clearing Corp., New York, NY - 5.9%; Louis A. Deyorio
and Lillian F. Deyorio, Colchester, CT - 5.5%; Florida Series - Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL - 62.8%; PaineWebber for
the benefit of the Erick Stern Revocable Living Trust, Fort Lee, NJ -
26.5%; Frederick Carleten & Helen Carleten, Boynton Beach, Fl - 8.8;
Georgia Series - BHC Securities, Inc. - Philadelphia, PA - 61.4%; Selvin
L. Smith, Jr., Atlanta, GA - 17.5%; Merrill Lynch Pierce Fenner & Smith,
Inc. - 10.0%; Elton Roberts, Marietta GA - 9.9%; Maryland Series -
Charles R. Brenner & Louise M. Brenner, Severna Park, MD - 60.8%;
PaineWebber for the benefit of Adela Rotsztain, Potomac, MD - 36.8%;
Massachusetts Series - Premier Mutual Fund Services, Boston, MA - 100%;
Michigan Series - Merrill Lynch Pierce Fenner & Smith, Inc.,
Jacksonville, FL - 52.9%; Murvale L. Huston & Catherine Ann Huston,
Saint Clair, MI - 23.6%; Lee O. Newport & Alice B. Newport, Constantine,
MI - 7.4%; Richard D. Snyder & Carole G. Snyder, Kalamazoo, MI 7.1%;
Violet V. Webber, Waterford, MI - 6.6%; Minnesota Series - John D. Floyd
& Becky S. Floyd, Apple Valley, MN - 80.2%; Lawrence McConnell,
Chatfield, MN - 19.5%; North Carolina Series - William L. Crowe & C.
Elizabeth Crowe, Cary, NC - 90.2%; Premier Mutual Fund Services, Inc.
Boston, MA - 9.8; Ohio Series - Max Weisbrod & Sylvia Weisbrod, Canton,
OH - 90.2%; Merrill Lynch Pierce Fenner & Smith, Inc., Jacksonville, FL
- - 8.8%; Pennsylvania Series - Charles R. Weikert & Mary Jane Weikert,
Fairfield, PA - 65.0%; Robert Hoffman & Dorothy Hoffman, Norristown, PA
- - 18.8%; Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 12.8%;
Texas Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL -
98.5%; Virginia Series - US Clearing Corp, New York, NY - 29.2%;
Stephens Inc., Little Rock, AR - 22.1%; Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL - 21.9%; Stephens Inc., Little Rock, AR - 19.9%.
A shareholder who beneficially owned, directly or indirectly, 25% or
more of a Series' voting securities may be deemed to be a "control
person" (as defined in the 1940 Act) of that Series.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") with the Fund dated August 24, 1994. As to
each Series, the Agreement is subject to annual approval by (i) the
Fund's Board or (ii) vote of a majority (as defined in the 1940 Act) of
the outstanding voting securities of such Series, provided that in
either event the continuance also is approved by a majority of the Board
members who are not "interested persons" (as defined in the 1940 Act) of
the Fund or the Manager, by vote cast in person at a meeting called for
the purpose of voting on such approval. The Agreement was last approved
by the Fund's Board, including a majority of the Board members who are
not "interested persons" of any party to the Agreement, at a meeting
held on _______, 1996. Shareholders of each Series (other than the New
Jersey Series which had not commenced operations) approved the Agreement
on August 3, 1994. The Agreement is terminable without penalty, as to
each Series, on 60 days' notice, by the Fund's Board or by vote of the
holders of a majority of such Series' shares, or, on not less than 90
days' notice, by the Manager. The Agreement will terminate
automatically, as to the relevant Series, in the event of its assignment
(as defined in the Act).
The following persons are officers and/or directors of the Manager:
W. Keith Smith, Chairman of the Board; Christopher M. Condron,
President, Chief Executive Officer, Chief Operating Officer and a
director; Stephen E. Canter, Vice Chairman, Chief Investment Officer and
a director; Lawrence S. Kash, Vice Chairman-Distribution and a director;
Philip L. Toia, Vice Chairman-Operations and Administration and a
director; William T. Sandalls, Jr., Senior Vice President and Chief
Financial Officer; Elie M. Genadry, Vice President-Institutional Sales;
William F. Glavin, Jr., Vice President-Corporate Development; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Patrice M.
Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig,
Vice President-Human Resources; Jeffrey N. Nachman, Vice President-
Mutual Fund Accounting; Andrew S. Wasser, Vice President-Information
Systems; Elvira Oslapas, Assistant Secretary; and Mandell L. Berman,
Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M.
Smerling, directors.
The Manager manages each Series' portfolio of investments in
accordance with the stated policies of such Series, subject to the
approval of the Fund's Board. The Manager is responsible for investment
decisions, and provides the Fund with portfolio managers who are
authorized by the Board to execute purchases and sales of securities.
The Fund's portfolio managers are Joseph P. Darcy, A. Paul Disdier,
Douglas J. Gaylor, Karen M. Hand, Stephen C. Kris, Richard J. Moynihan,
Jill C. Shaffro, L. Lawrence Troutman, Samuel J. Weinstock and Monica S.
Wieboldt. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who
provide research services for the Fund as well as for other funds
advised by the Manager. All purchases and sales are reported for the
Board's review at the meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to
time deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include, without limitation, the following:
taxes, interest, loan commitment fees, interest and distributions on
securities sold short, brokerage fees and commissions, if any, fees of
Board members who are not officers, directors, employees or holders of
5% or more of the outstanding voting securities of the Manager,
Securities and Exchange Commission fees and state Blue Sky qualification
fees, advisory fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining the Fund's existence,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of preparing and printing
prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, costs of
shareholders' reports and meetings, and any extraordinary expenses. In
addition, shares of each Class are subject to an annual service fee and
Class B and Class C shares are subject to an annual distribution fee.
See "Distribution Plan and Shareholder Services Plan." Expenses
attributable to a particular Series are charged against the assets of
that Series; other expenses of the Fund are allocated among the Series
on the basis determined by the Board, including, but not limited to,
proportionately in relation to the net assets of each Series.
As compensation for the Manager's services, the Fund has agreed to
pay the Manager a monthly management fee at the annual rate of .55 of 1%
of the value of each Series' average daily net assets. For the fiscal
years ended April 30, 1994, 1995 and 1996, the management fee payable,
the reduction in such amount and the net fees paid to the Manager by
each Series (other than the New Jersey Series which had not commenced
operations) was as set forth below:
<TABLE>
Series Management Fee Payable Reduction in Fee
- ------ ----------------------- ---------------
1994 1995 1996 1994 1995 1996
---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Connecticut $2,222,426 $2,082,924 $2,045,864 $378,489 $ 35,533 $ -
Florida 1,811,102 1,599,553 1,504,679 328,323 27,718 -
Georgia 120,183 149,119 160,860 120,183 149,119 59,898
Maryland 2,079,227 1,901,194 1,852,002 375,233 32,614 -
Massachusetts 466,331 426,673 423,126 95,389 7,190 -
Michigan 1,124,896 1,074,186 1,067,900 219,841 18,112 -
Minnesota 952,683 943,548 924,716 184,360 15,888 -
North Carolina 533,032 535,236 517,799 475,442 297,996 20,032
Ohio 1,811,687 1,707,720 1,684,215 386,259 28,783 -
Pennsylvania 1,544,000 1,589,232 1,600,235 317,330 26,631 -
Texas 503,485 485,593 464,591 503,485 485,593 464,591
Virginia 464,237 496,788 522,229 464,237 496,788 522,229
Series Net Fee Paid
- ----- -------------
1994 1995 1996
----- ----- -------
Connecticut $1,843,937 $2,047,391 $2,045,864
Florida 1,482,779 1,571,835 1,504,679
Georgia -0- -0- 100,962
Maryland 1,703,994 1,868,580 1,852,002
Massachusetts 370,942 419,483 423,126
Michigan 905,055 1,056,074 1,067,900
Minnesota 768,323 927,660 924,716
North Carolina 57,590 237,240 497,767
Ohio 1,425,428 1,678,937 1,684,215
Pennsylvania 1,226,670 1,562,601 1,600,235
Texas -0- -0- -0-
Virginia -0- -0- -0-
</TABLE>
The Manager has agreed that if in any fiscal year the aggregate
expenses of each Series, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the
management fee, exceed the expense limitation of any state having
jurisdiction over such Series, the Fund may deduct from the payment to
be made to the Manager under the Agreement, or the Manager will bear,
such excess expense to the extent required by state law. Such deduction
of payment, if any, will be estimated daily, and reconciled and effected
or paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Series' net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor
on a best efforts basis pursuant to an agreement which is renewable
annually. The Distributor also acts as distributor for the other funds
in the Premier Family of Funds, for the funds in the Dreyfus Family of
Funds and for certain other investment companies. In some states,
certain financial institutions effecting transactions in Fund shares may
be required to register as dealers pursuant to state law.
For the fiscal year ended April 30, 1996, the Distributor retained
the following amounts from sales loads in the respect to Class A, and
from contingent deferred sales charges ("CDSC") with respect to Class B,
of each Series (other than the New Jersey Series which had not commenced
operations):
Series Class A Class B
- --------- --------- ----------
Connecticut $25,153 $ 57,412
Florida 21,041 62,568
Georgia 1,369 36,034
Maryland 24,087 63,161
Massachusetts 6,837 3,841
Michigan 16,807 34,324
Minnesota 13,055 43,202
North Carolina 5,070 72,256
Ohio 23,198 52,134
Pennsylvania 21,816 133,577
Texas 4,008 25,002
Virginia 10,873 38,249
For the period from August 15, 1995 (commencement of offering of
Class C shares) through April 30, 1996, no amount was retained by the
Distributor from CDSC on Class C shares of the Series.
Using Federal Funds. Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), or the Fund may
attempt to notify the investor upon receipt of checks drawn on banks
that are not members of the Federal Reserve System as to the possible
delay in conversion into Federal Funds and may attempt to arrange for a
better means of transmitting the money. If the investor is a customer
of a securities dealer ("Selected Dealer") and his order to purchase
Fund shares is paid for other than in Federal Funds, the Selected
Dealer, acting on behalf of its customer, will complete the conversion
into, or itself advance, Federal Funds generally on the business day
following receipt of the customer order. The order is effective only
when so converted and received by the Transfer Agent. An order for the
purchase of Fund shares placed by an investor with sufficient Federal
Funds or a cash balance in his brokerage account with a Selected Dealer
will become effective on the day that the order, including Federal
Funds, is received by the Transfer Agent.
Sales Loads--Class A. The scale of sales loads applies to
purchases of Class A shares made by any "purchaser," which term includes
an individual and/or spouse purchasing securities for his, her or their
own account or for the account of any minor children, or a trustee or
other fiduciary purchasing securities for a single trust estate or a
single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under
Section 401 of the Internal Revenue Code of 1986, as amended (the
"Code")), although more than one beneficiary is involved; or a group of
accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other
program (including accounts established pursuant to Sections 403(b),
408(k), and 457 of the Code); or an organized group which has been in
existence for more than six months, provided that it is not organized
for the purpose of buying redeemable securities of a registered
investment company and provided that the purchases are made through a
central administration or a single dealer, or by other means which
result in economy of sales effort or expense.
Set forth below is an example of the method of computing the
offering price of each Series' Class A shares. The examples assume a
purchase of Class A shares of the Series aggregating less than $50,000
subject to the schedule of sales charges set forth in the Fund's
Prospectus at a price based upon the net asset value of the Series'
Class A shares on April 30, 1996 (other than the New Jersey Series whose
price is based upon the initial offering price).
Connecticut Florida Georgia Maryland
Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share...... $11.90 $14.48 $13.05 $12.69
Sales load for individual sales
of shares aggregating less than
$50,000 - 4.5% of offering price
(approximately 4.7% of net asset
value per share) .56 .68 .61 .60
Offering price to public $12.46 $15.16 $13.66 $13.29
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
New North
Massachusetts Michigan Minnesota Jersey Carolina
Series Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share.... $11.50 $15.15 $14.98 $12.50 $12.91
Sales load for individual sales of shares
aggregating less than $50,000 - 4.5%
of offering price
(approximately 4.7% of net asset
value per share) .54 .71 .70 .59 .61
Offering price to public $12.04 $15.86 $15.68 $13.09 $13.52
Ohio Pennsylvania Texas Virginia
Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share... $12.58 $16.17 $20.84 $16.27
Sales load for individual sales of shares
aggregating less than $50,000 - 4.5%
of offering price
(approximately 4.7% of net asset
value per share) .59 .76 .98 .77
Offering price to public $13.17 $16.93 $21.82 $17.04
</TABLE>
TeleTransfer Privilege. TeleTransfer purchase orders may be made
at any time. Purchase orders received by 4:00 p.m., New York time, on
any business day the Transfer Agent and the New York Stock Exchange are
open for business will be credited to the shareholder's Fund account on
the next bank business day following such purchase order. Purchase
orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following
such purchase order. To qualify to use the TeleTransfer Privilege, the
initial payment for the purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated
on the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed.
See "Redemption of Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application
during the calendar year the account is closed or during the following
calendar year, provided the information on the old Account Application
is still applicable.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholder Services Plan."
Class B and Class C shares only are subject to a Distribution Plan
and Class A, Class B and Class C shares are subject to a Shareholder
Services Plan.
Distribution Plan. Rule 12b-1 (the "Rule") adopted by the
Securities and Exchange Commission under the 1940 Act provides, among
other things, that an investment company may bear expenses of
distributing its shares only pursuant to a plan adopted in accordance
with the Rule. The Fund's Board has adopted such a plan (the
"Distribution Plan") with respect to the Class B and Class C shares of
each Series, pursuant to which the Fund pays the Distributor for
distributing the relevant Class of shares. The Fund's Board believes
that there is a reasonable likelihood that the Distribution Plan will
benefit the Fund and the holders of each Series' relevant Class of
shares.
A quarterly report of the amounts expended under the Distribution
Plan, and the purposes for which such expenditures were incurred, must
be made to the Fund's Board for its review. In addition, the
Distribution Plan provides that it may not be amended to increase
materially the costs which holders of Class B or Class C shares may bear
for distribution pursuant to the Distribution Plan without such
shareholders' approval and that other material amendments of the
Distribution Plan must be approved by the Fund's Board, and by the Board
members who are not "interested persons" (as defined in the 1940 Act) of
the Fund and have no direct or indirect financial interest in the
operation of the Distribution Plan or in any agreements entered into in
connection with the Distribution Plan, by vote cast in person at a
meeting called for the purpose of considering such amendments. The
Distribution Plan is subject to annual approval by such vote of the
Board members cast in person at a meeting called for the purpose of
voting on the Distribution Plan. The Distribution Plan was last so
approved by the Board members at a meeting held on _______, 1996 and by
the Fund's shareholders on August 3, 1994. As to each such Class, the
Distribution Plan may be terminated at any time by vote of a majority of
the Board members who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Distribution Plan,
or by vote of the holders of a majority of the outstanding shares of
such Class.
For the fiscal year ended April 30, 1996, each Series (other than
the New Jersey Series which had not commenced operations) paid the
Distributor the following amounts with respect to Class B shares and
Class C shares under the Distribution Plan:
Amount Charged Amount Charged
Series Class B Class C
- -------- ----------- ---------------
Connecticut $ 190,357 $ 1,225
Florida 134,640 61
Georgia 101,671 100
Maryland 194,067 35
Massachusetts 24,276 6
Michigan 92,044 295
Minnesota 123,137 544
North Carolina 217,316 5
Ohio 184,668 6
Pennsylvania 362,739 9
Texas 87,651 6
Virginia 157,606 276
Shareholder Services Plan. The Fund has adopted a Shareholder
Services Plan, pursuant to which the Fund pays the Distributor for the
provision of certain services to the holders of Class A, Class B and
Class C shares. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of such shareholder
accounts. Under the Shareholder Services Plan, the Distributor may make
payments to certain financial institutions (which may include banks),
Selected Dealers and other financial industry professionals
(collectively "Service Agents") in respect to these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were
incurred, must be made to the Fund's Board for its review. In addition,
the Shareholder Services Plan provides that material amendments must be
approved by the Fund's Board, and by the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund and have
no direct or indirect financial interest in the operation of the
Shareholder Services Plan or in any agreements entered into in
connection with the Shareholder Services Plan by vote cast in person at
a meeting called for the purpose of considering such amendments. The
Shareholder Services Plan is subject to annual approval by such vote of
the Board members cast in person at a meeting called for the purpose of
voting on the Shareholder Services Plan. The Shareholder Services Plan
was last so approved _______, 1996. As to each Series, the Shareholder
Services Plan is terminable at any time by vote of a majority of the
Board members who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Shareholder Services
Plan or in any agreements entered into in connection with the
Shareholder Services Plan.
For the fiscal year ended April 30, 1996, each Series (other than
the New Jersey Series which had not commenced operations) paid the
Distributor the following amounts with respect to Class A, Class B and
Class C under the Shareholder Services Plan:
Series Class A Class B Class C
Connecticut $834,351 $ 95,178 $409
Florida 616,605 67,320 20
Georgia 22,250 50,835 33
Maryland 744,774 97,033 12
Massachusetts 180,190 12,138 2
Michigan 439,289 46,022 98
Minnesota 358,575 61,568 182
North Carolina 126,703 108,658 2
Ohio 673,216 92,334 2
Pennsylvania 546,007 181,369 3
Texas 167,350 43,826 2
Virginia 158,482 78,803 92
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Shares."
Check Redemption Privilege - Class A Shares. An investor may
indicate on the Account Application, Shareholder Services Form or by
later written request that the Fund provide Redemption Checks ("Checks")
with respect to Class A shares, drawn on the investor's Fund account.
Checks will be sent only to the registered owner(s) of the account and
only to the address of record. The Account Application, Shareholder
Services Form or later written request must be manually signed by the
registered owner(s). Checks may be made payable to the order of any
person in an amount of $500 or more. When a Check is presented to the
Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of full and fractional
Class A shares in the investor's account to cover the amount of the
Check. Dividends are earned until the Check clears. After clearance, a
copy of the Check will be returned to the investor. Investors generally
will be subject to the same rules and regulations that apply to checking
accounts, although the election of this Privilege creates only a shareholder-
transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the Class A
shares in the investor's account, the Check will be returned marked
insufficient funds. Checks should not be used to close an account.
TeleTransfer Privilege. Investors should be aware that if they
have selected the TeleTransfer Privilege, any request for a TeleTransfer
transaction will be effected through the Automated Clearing House
("ACH") system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an
ACH member bank ordinarily two business days after receipt of the
redemption request. See "Purchase of Shares--TeleTransfer Privilege."
Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder,
including each owner of a joint account, and each signature must be
guaranteed. Signatures on endorsed certificates submitted for
redemption also must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in
proper form generally will be accepted from domestic banks, brokers,
dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations, as
well as from participants in the New York Stock Exchange Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP"), and the Stock Exchanges Medallion Program. Guarantees must
be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer
Agent may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification.
Redemption Commitment. The Fund has committed itself to pay in
cash all redemption requests by any shareholder of record of a Series,
limited in amount during any 90-day period to the lesser of $250,000 or
1% of the value of such Series' net assets at the beginning of such
period. Such commitment is irrevocable without the prior approval of
the Securities and Exchange Commission. In the case of requests for
redemption in excess of such amount, the Fund's Board reserves the right
to make payments in whole or in part in securities (which may include
non-marketable securities) or other assets in case of an emergency or
any time a cash distribution would impair the liquidity of the Series to
the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the Series' portfolio
is valued. If the recipient sold such securities, brokerage charges
might be incurred.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period when
the New York Stock Exchange is closed (other than customary weekend and
holiday closings), (b) when trading in the markets the Fund ordinarily
utilizes is restricted, or when an emergency exists as determined by the
Securities and Exchange Commission so that disposal of the Fund's
investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's
shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Fund Exchanges. Class A, Class B and Class C shares of the Fund
may be exchanged for shares of the respective Class of certain other
funds advised or administered by the Manager. Shares of the same Class
of such other funds purchased by exchange will be purchased on the basis
of relative net asset value per share as follows:
A. Class A shares of funds purchased without a sales load
may be exchanged for Class A shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales
load may be exchanged without a sales load for Class A shares
of other funds sold without a sales load.
C. Class A shares of funds purchased with a sales load,
Class A shares of funds acquired by a previous exchange from
Class A shares purchased with a sales load, and additional
Class A shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to
herein as "Purchased Shares") may be exchanged for Class A
shares of other funds sold with a sales load (referred to
herein as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales
load that could have been imposed in connection with the
Purchased Shares (at the time the Purchased Shares were
acquired), without giving effect to any reduced loads, the
difference will be deducted.
D. Class B or Class C shares of any fund may be exchanged
for the same Class of shares of other funds without a sales
load. Class B or Class C shares of any fund exchanged for the
same Class of shares of another fund will be subject to the
higher applicable CDSC of the two exchanged funds and, for
purposes of calculating CDSC rates and conversion periods,
will be deemed to have been held since the date the shares
being exchanged were initially purchased.
To accomplish an exchange under item C above, an investor's Service
Agent must notify the Transfer Agent of the investor's prior ownership
of such Class A shares and the investor's account number.
To request an exchange, the investor's Service Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent
in writing or by telephone. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless the
investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this privilege. By
using the Telephone Exchange Privilege, the investor authorizes the
Transfer Agent to act on telephonic instructions (including over The
Dreyfus Touchr automated telephone system) from any person representing
himself or herself to be a representative of the investor's Service
Agent, and reasonably believed by the Transfer Agent to be genuine.
Telephone exchanges may be subject to limitations as to the amount
involved or the number of telephone exchanges permitted. Shares issued
in certificate form are not eligible for telephone exchange.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment being required for shares of the same Class of the fund into
which the exchange is being made. For Dreyfus-sponsored Keogh Plans,
IRAs and IRAs set up under a Simplified Employee Pension Plan ("SEP-
IRAs") with only one participant, the minimum initial investment is
$750. To exchange shares held in corporate plans, 403(b)(7) Plans and
SEP-IRAs with more than one participant, the minimum initial investment
is $100 if the plan has at least $2,500 invested among shares of the
same Class of the funds in the Dreyfus Family of Funds. To exchange
shares held in personal retirement plans, the shares exchanged must have
a current value of at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for Class A, Class B or Class C
shares of a Series, shares of the same Class of one of the other Series
or another fund in the Premier Family of Funds or the Dreyfus Family of
Funds. This Privilege is available only for existing accounts. Shares
will be exchanged on the basis of relative net asset value as described
above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days
following notification by the investor. An investor will be notified if
his account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's account will fall to zero unless
additional investments are made in excess of the designated amount prior
to the next Auto-Exchange transaction. Shares held under IRA and other
retirement plans are eligible for this Privilege. Exchanges of IRA
shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect
to all other retirement accounts, exchanges may be made only among those
accounts.
Fund Exchanges and the Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the series or fund
being acquired may legally be sold. Shares may be exchanged only
between accounts having identical names and other identifying
designations.
Shareholder Services Forms and prospectuses of the other funds may
be obtained by calling 1-800-645-6561. The Fund reserves the right to
reject any exchange request in whole or in part. The Fund Exchanges
service or the Auto-Exchange Privilege may be modified or terminated at
any time upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits
an investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or
quarterly basis. Withdrawal payments are the proceeds from sales of
Fund shares, not the yield on the shares. If withdrawal payments exceed
reinvested dividends and distributions, the investor's shares will be
reduced and eventually may be depleted. Automatic Withdrawal may be
terminated at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan. Class B or Class C shares
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC.
Dividend Sweep. Dividend Sweep allows investors to invest
automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of the same Class of
another fund in the Premier Family of Funds or the Dreyfus Family of
Funds of which the investor is a shareholder. Shares of the same Class
of other funds purchased pursuant to this privilege will be purchased on
the basis of relative net asset value per share as follows:
A. Dividends and distributions paid with respect to Class A
shares by a fund may be invested without imposition of a sales
load in Class A shares of other funds that are offered without
a sales load.
B. Dividends and distributions paid with respect to Class A
shares by a fund which does not charge a sales load may be
invested in Class A shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Dividends and distributions paid with respect to Class A
shares by a fund which charges a sales load may be invested in
Class A shares of other funds sold with a sales load (referred
to herein as "Offered Shares"), provided that, if the sales
load applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid with respect to Class B
or Class C shares by a fund may be invested without imposition
of any applicable CDSC in the same Class of shares of other
funds and the relevant Class of shares of such other funds
will be subject on redemption to any applicable CDSC.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Buy Shares."
Valuation of Portfolio Securities. Each Series' investments are
valued each business day by an independent pricing service (the
"Service") approved by the Fund's Board. When, in the judgment of the
Service, quoted bid prices for investments are readily available and are
representative of the bid side of the market, these investments are
valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such
securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or
prices of municipal bonds of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market
conditions. The Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Fund's officers under the
general supervision of the Fund's Board. Expenses and fees, including
the management fee (reduced by the expense limitation, if any) and, fees
pursuant to the Shareholder Services Plan, with respect to Class A,
Class B and Class C shares, and fees pursuant to the Distribution Plan,
with respect to Class B and Class C shares only, are accrued daily and
are taken into account for the purpose of determining the net asset
value of the relevant Class of each Series' shares. Because of the
difference in operating expenses incurred by each Class, the per share
net asset value of each Class will differ.
New York Stock Exchange Closings. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Dividends, Distributions and Taxes."
Management believes that each Series (other than the New Jersey
Series which had not commenced operations) qualified for the fiscal year
ended April 30, 1996 as a "regulated investment company" under the Code.
It is expected that the New Jersey Series will qualify as a "registered
investment company" under the Code. Each Series intends to continue to
so qualify, if such qualification is in the best interests of its
shareholders. As a regulated investment company, a Series will pay no
Federal income tax on net investment income and net realized capital
gains to the extent that such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. To
qualify as a regulated investment company, a Series must distribute to
its shareholders at least 90% of its net income (consisting of net
investment income from tax exempt obligations and taxable obligations,
if any, and net short-term capital gains), must derive less than 30% of
its annual gross income from gain on the sale of securities held for
less than three months, and must meet certain asset diversification and
other requirements. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies
by any government agency.
The Code provides that if a shareholder has not held his shares for
more than six months (or such shorter period as the Internal Revenue
Service may prescribe by regulation) and has received an exempt-interest
dividend with respect to such shares, any loss incurred on the sale of
such shares will be disallowed to the extent of the exempt-interest
dividend received. In addition, any dividend or distribution paid
shortly after an investor's purchase may have the effect of reducing the
net asset value of his shares below the cost of his investment. Such a
distribution would be a return on investment in an economic sense
although taxable as stated under "Dividends, Distributions and Taxes" in
the Prospectus.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain or loss. However, all or a portion of
any gain realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income under Section 1276 of
the Code. In addition, all or a portion of any gain realized from
engaging in "conversion transactions" may be treated as ordinary income
under Section 1258 of the Code. "Conversion transactions" are defined
to include certain forward, futures, option and "straddle" transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by a Series
from certain financial futures and options transactions will be treated
as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. Gain or loss will arise upon exercise or lapse of such futures or
options as well as from closing transactions. In addition, any such
futures or options remaining unexercised at the end of a Series' taxable
year will be treated as sold for their then fair market value, resulting
in additional gain or loss to a Series characterized in the manner
described above.
Offsetting positions held by a Series involving certain futures
contracts or options transactions may be considered, for tax purposes,
to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the
Code, which, in certain circumstances, overrides or modifies the
provisions of Section 1256 of the Code. As such, all or a portion of
any short- or long-term capital gain from certain "straddle" and/or
conversion transactions may be recharacterized to ordinary income.
If a Series were treated as entering into "straddles" by reason of
its engaging in certain futures contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures
or options transactions comprising a part of such "straddles" were
governed by Section 1256 of the Code. A Series may make one or more
elections with respect to "mixed straddles." Depending on which
election is made, if any, the results to a Series may differ. If no
election is made to the extent the "straddle" rules apply to positions
established by a Series, losses realized by a Series will be deferred to
the extent of unrealized gain in the offsetting position. Moreover, as
a result of the "straddle" and the conversion transaction rules,
short-term capital losses on "straddle" positions may be recharacterized
as long-term capital losses, and long-term capital gains may be treated
as short-term capital gains or ordinary income.
Investment by a Series in securities issued at a discount or
providing for deferred interest or for payment of interest in the form
of additional obligations could, under special tax rules, affect the
amount, timing and character of distributions to shareholders. For
example, a Series could be required to take into account annually a
portion of the discount (or deemed discount) at which such securities
were issued and to distribute such portion in order to maintain its
qualification as a regulated investment company. In such case, a Series
may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these
distribution requirements.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to
parties acting as either principal or agent. Newly-issued securities
ordinarily are purchased directly from the issuer or from an
underwriter; other purchases and sales usually are placed with those
dealers from which it appears that the best price or execution will be
obtained. Usually no brokerage commissions, as such, are paid by the
Fund for such purchases and sales, although the price paid usually
includes an undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter, and purchases of
after-market securities from dealers ordinarily are executed at a price
between the bid and asked price. No brokerage commissions have been
paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by the
Manager in advising the Fund. Although it is not possible to place a dollar
value on these services, it is the opinion of the Manager that the receipt
and study of such services should not reduce the overall expenses of its
research department.
Each Series anticipates that its annual portfolio turnover rate
generally will not exceed 100%, but the turnover rate will not be a limiting
factor when each Series deems it desirable to sell or purchase securities.
Therefore, depending upon market conditions, each Series' annual portfolio
turnover rate may exceed 100% in particular years.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
No performance information is available for the New Jersey Series which
had not commenced operations as of April 30, 1996.
The current yield for the 30-day period ended April 30, 1996, for Class
A, Class B and Class C of each Series was as follows:
Current Net of Absorbed
Series Yield Expenses(1)
Class A:
Connecticut 4.99 -
Florida 4.96 -
Georgia 4.67 -
Maryland 4.94 -
Massachusetts 4.91 -
Michigan 4.90 -
Minnesota 4.70 -
North Carolina 4.92 -
Ohio 4.87 -
Pennsylvania 5.00 -
Texas 5.37 4.84
Virginia 5.32 4.79
____________________________
(1) This column sets forth current yield had expenses not been absorbed.
Current Net of Absorbed
Series Yield Expenses(1)
Class B:
Connecticut 4.71 -
Florida 4.69 -
Georgia 4.39 -
Maryland 4.63 -
Massachusetts 4.61 -
Michigan 4.61 -
Minnesota 4.40 -
North Carolina 4.62 -
Ohio 4.57 -
Pennsylvania 4.73 -
Texas 5.09 4.54
Virginia 5.05 4.50
Current Net of Absorbed
Series Yield Expenses(1)
Class C:
Connecticut 4.44 -
Florida 4.40 -
Georgia 4.11 -
Maryland 4.47 -
Massachusetts 4.37 -
Michigan 4.29 -
Minnesota 4.17 -
North Carolina 4.37 -
Ohio 4.32 -
Pennsylvania 4.41 -
Texas 4.80 4.25
Virginia 4.76 4.21
____________________________
(1) This column sets forth current yield had expenses not been absorbed.
Current yield is computed pursuant to a formula which operates as follows:
The amount of each Series' expenses accrued for the 30-day period (net of
reimbursements) is subtracted from the amount of the dividends and interest
earned (computed in accordance with regulatory requirements) by the Series
during the period. That result is then divided by the product of: (a) the
average daily number of shares outstanding during the period that were
entitled to receive dividends, and (b) the maximum offering price per share
in the case of Class A or the net asset value per share in the case of Class
B or Class C on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is raised to the
6th power, after which 1 is subtracted. The current yield is then arrived at
by multiplying the result by 2.
Based upon the 1996 combined (except where noted) Federal and applicable
State tax rate specified below, the tax equivalent yield for the 30-day
period ended April 30, 1996 for Class A, Class B and Class C of each Series
was as follows:
Tax Equivalent Net of Absorbed
Series Tax Rate Yield Expenses(1)
Class A:
Connecticut 42.32 8.65 -
Florida(2) 39.60 8.21 -
Georgia 43.22 8.22 -
Maryland 44.13 8.84 -
Massachusetts 46.85 9.24 -
Michigan 42.26 8.49 -
Minnesota 44.73 8.50 -
North Carolina 44.28 8.83 -
Ohio 44.13 8.72 -
Pennsylvania 41.29 8.52 -
Texas(2) 39.60 8.89 8.01
Virginia 43.07 9.34 8.41
Class B:
Connecticut 42.32 8.17 -
Florida(2) 39.60 7.76 -
Georgia 43.22 7.73 -
Maryland 44.13 8.29 -
Massachusetts 46.85 8.67 -
Michigan 42.26 7.98 -
Minnesota 44.73 7.96 -
North Carolina 44.28 8.29 -
Ohio 44.13 8.18 -
Pennsylvania 41.29 8.06 -
Texas(2) 39.60 8.43 7.52
Virginia 43.07 8.87 7.90
___________________________
(1) This column sets forth tax equivalent yield had expenses not been
absorbed.
(2) Federal tax rate only. No state personal income tax imposed during
1996.
Tax Equivalent Net of Absorbed
Series Tax Rate Yield Expenses(1)
Class C:
Connecticut 42.32 7.70 -
Florida(2) 39.60 7.28 -
Georgia 43.22 7.24 -
Maryland 44.13 8.00 -
Massachusetts 46.85 8.22 -
Michigan 42.26 7.43 -
Minnesota 44.73 7.54 -
North Carolina 44.28 7.84 -
Ohio 44.13 7.73 -
Pennsylvania 41.29 7.51 -
Texas(2) 39.60 7.95 7.04
Virginia 43.07 8.36 7.40
_________________________
(1) This column sets forth tax equivalent yield had expenses not been
absorbed.
(2) Federal tax rate only. No state personal income tax imposed during
1996.
Tax equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax-exempt by 1 minus a stated
tax rate and adding the quotient to that portion, if any, of the yield of the
Series that is not tax-exempt.
The tax equivalent yield noted above represents the application of the
highest marginal personal tax rates currently in effect. For Federal
personal income tax purposes, a 39.60% tax rate has been used. The tax
equivalent figure, however, does not include the potential effect of any
local (including, but not limited to, county, district or city) taxes,
including applicable surcharges. In addition, there may be pending
legislation which could affect such stated tax rates or yields. Each
investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant tax
equivalent yield.
The average annual total return for the periods indicated for Class A of
each Series was as follows:
1-year period 5-year period 8.926-year period
Series ended April 30, 1996 ended April 30, 1996 ended April 30, 1996
Connecticut 2.08 6.15 7.14
Florida 1.85 6.63 9.00
Georgia 2.34 5.571 -
Maryland 2.42 6.30 6.56
Massachusetts 0.96 6.34 6.52
Michigan 2.02 7.05 8.62
Minnesota 1.34 6.32 7.73
North Carolina 1.98 6.492 -
Ohio 1.99 6.62 4.95
Pennsylvania 2.63 7.02 7.613
Texas 3.22 7.55 10.42
Virginia 2.46 7.032 -
____________________________
(1) For the 3.658 year period ended April 30, 1996.
(2) For the 4.748 year period ended April 30, 1996.
(3) For the 8.753 year period ended April 30, 1996.
The average annual total return since inception and for the periods
indicated for Class B of each Series was as follows:
1-year period 3.290-year period
Series ended April 30, 1996 ended April 30, 1996
Connecticut 3.20 4.66
Florida 3.02 5.03
Georgia 3.69 5.37
Maryland 3.66 4.90
Massachusetts 2.16 4.41
Michigan 3.33 5.56
Minnesota 2.62 5.08
North Carolina 3.25 4.45
Ohio 3.20 5.02
Pennsylvania 3.92 5.35
Texas 4.50 6.08
Virginia 3.76 4.96
The average annual total return since inception for Class C of each
Series was as follows:
.710 years
Series ended April 30, 1996
Connecticut 3.94
Florida 3.33
Georgia 4.92
Maryland 4.21
Massachusetts 2.39
Michigan 4.76
Minnesota 3.78
North Carolina 4.56
Ohio 4.31
Pennsylvania 5.36
Texas 5.95
Virginia 4.28
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value (maximum
offering price in the case of Class A) per share with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number of
years in the period) and subtracting 1 from the result. A Class' average
annual total return figures calculated in accordance with such formula assume
that in the case of Class A the maximum sales load has been deducted from the
hypothetical initial investment at the time of purchase or in the case of
Class B or Class C the maximum applicable CDSC has been paid upon redemption
at the end of the period.
The total return for the period May 28, 1987 through April 30, 1996
(except where indicated) for Class A of each Series was as follows:
Based on MaximumBased on Net Asset
Series Offering Price Value per Share
Connecticut 85.12 93.87
Florida 115.80 126.05
Georgia(1) 21.95 27.70
Maryland 76.25 84.58
Massachusetts 75.76 84.02
Michigan 109.18 118.98
Minnesota 94.30 103.51
North Carolina(2) 34.82 41.23
Ohio 53.98 61.18
Pennsylvania(3) 89.98 98.97
Texas 142.16 153.56
Virginia(2) 38.11 44.63
____________________________
(1) For the period from September 3, 1992 (commencement of operations)
through April 30, 1996.
(2) For the period from August 1, 1991 (commencement of operations) through
April 30, 1996.
(3) For the period from July 30, 1987 (commencement of operations) through
April 30, 1996.
The total return for the period January 15, 1993 to April 30, 1996 for
Class B of each Series was as follows:
Series Based on Net Asset Based on
Class B: Value per Share Maximum CDSC
Connecticut 18.17 16.17
Florida 19.52 17.53
Georgia 20.79 18.79
Maryland 19.04 17.04
Massachusetts 17.22 15.27
Michigan 21.46 19.47
Minnesota 19.71 17.71
North Carolina 17.39 15.39
Ohio 19.48 17.50
Pennsylvania 20.70 18.70
Texas 23.44 21.44
Virginia 19.27 17.27
The total return for the period August 15, 1995 to April 30, 1996 for Class C
of each Series was as follows:
Series Based on Net Asset Based on
Class C: Value per Share Maximum CDSC
Connecticut 3.78 2.78
Florida 3.34 2.35
Georgia 4.47 3.47
Maryland 3.97 2.97
Massachusetts 2.68 1.69
Michigan 4.36 3.36
Minnesota 3.67 2.67
North Carolina 4.22 3.22
Ohio 4.03 3.04
Pennsylvania 4.78 3.78
Texas 5.19 4.19
Virginia 4.02 3.02
Total return is calculated by subtracting the amount of the Series' net
asset value (maximum offering price in the case of Class A) per share at the
beginning of a stated period from the net asset value per share at the end of
the period (after giving effect to the reinvestment of dividends and
distributions during the period and any applicable CDSC), and dividing the
result by the net asset value (maximum offering price in the case of Class A)
per share at the beginning of the period. Total return also may be
calculated based on the net asset value per share at the beginning of the
period for Class A shares or without giving effect to any applicable CDSC at
the end of the period for Class B or Class C shares. In such cases, the
calculation would not reflect the deduction of the sales load with respect to
Class A shares or any applicable CDSC with respect to Class B or Class C
shares which, if reflected, would reduce the performance quoted.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and not as representative of the Fund's
past or future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or events,
including those relating to actual or proposed tax legislation. Advertising
materials for the Fund also may refer to statistical or other information
concerning trends relating to investment companies, as compiled by industry
associations such as the Investment Company Institute. From time to time,
advertising materials for the Fund, also may refer to Morningstar ratings and
related analyses supporting such ratings.
The Fund may compare its performance, directly as well as against
inflation, with that of other instruments, such as short-term Treasury bills
(which are direct obligations of the U.S. Government), FDIC-insured bank
money market accounts and FDIC-insured fixed-rate certificates of deposit.
In addition, advertising for the Fund may indicate that investors may
consider diversifying their investment portfolios in order to seek protection
of the value of their assets against inflation.
From time to time, advertising materials for the Fund may include
biographical information relating to its portfolio managers and may refer to,
or include commentary by a portfolio manager relating to an investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Series share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Series' shares have no preemptive or subscription rights and are freely
transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
The Manager's legislative efforts led to the 1976 Congressional
Amendment to the Code permitting an incorporated mutual fund to pass through
tax exempt income to its shareholders. The Manager offered to the public the
first incorporated tax exempt fund and currently manages or administers over
twenty-five billion dollars in tax exempt assets.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-of-
pocket expenses. For the period December 1, 1995 (effective date of transfer
agency agreement) through April 30, 1996, the Fund paid the Transfer Agent
$428,901.
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Fund's custodian.
Neither the Transfer Agent nor The Bank of New York has any part in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
RISK FACTORS -- INVESTING
IN STATE MUNICIPAL OBLIGATIONS
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based primarily on information
drawn from official statements relating to securities offerings of the
relevant State available as of the date of this Statement of Additional
Information. While the Fund has not independently verified this information,
it has no reason to believe that such information is not correct in all
material respects.
Connecticut Series............................B-41
Florida Series................................B-43
Georgia Series................................B-48
Maryland Series...............................B-51
Massachusetts Series..........................B-53
Michigan Series...............................B-55
Minnesota Series..............................B-59
New Jersey Series.............................B-64
North Carolina Series.........................B-66
Ohio Series...................................B-71
Pennsylvania Series.......................... B-76
Texas Series..................................B-83
Virginia Series...............................B-88
Connecticut Series
Connecticut's economy is diverse, with manufacturing, services and trade
accounting for approximately 70% of total non-agricultural employment. The
State's manufacturing industry is diversified, but from 1970 to 1994
manufacturing employment declined 35.4%, while non-manufacturing employment
increased 66.3%, particularly in the service, trade and finance categories,
resulting in an increase of 28.8% in total growth in non-agricultural
sectors. Defense-related business plays an important role in the Connecticut
economy, and economic activity has been affected by the volume of defense
contracts awarded to Connecticut firms. In recent years, the Federal
government has reduced the amount of defense-related spending and the largest
defense-related employers in the State have announced substantial labor force
reductions. The future effect of these and other industrial labor force
reductions on the Connecticut economy cannot be predicted at this time.
Connecticut has a high level of personal income. According to Bureau of
Economic Analysis figures, personal income of State residents for calendar
year 1994 was $95.1 billion, a 3.3% increase over the previous year. Total
personal income in the State increased 18.0% from 1989 to 1994 and 11.6% from
1991 to 1994. According to U.S. Department of Commerce projections, the
State is expected to continue to rank among the highest in State per capita
income. For 1994, the estimated rate of unemployment (on a seasonably
adjusted basis) in the State was 5.6%.
While the State's General Fund ended fiscal 1984-85, 1985-86 and 1986-87
with operating surpluses of approximately $365.5 million, $250.1 million and
$365.2 million, respectively, the State recorded operating deficits of $115.6
million, $28.0 million, $259.5 million and $808.5 million for fiscal 1987-88,
1988-89, 1989-90 and 1990-91, respectively. Together with the deficit
carried forward from fiscal 1989-90, the total deficit for the fiscal year
1990-91 was $965.7 million. The total deficit amount was funded by the
issuance of General Obligation Economic Recovery Notes in late 1991. As of
April 4, 1996, $311,055,000 of such Notes remained outstanding. The
Comptroller's annual report for the fiscal year ended June 30, 1992 reflected
a General Fund operating surplus of $110.2 million, which surplus was used to
retire $110.1 million of the State's Economic Recovery Notes. The
Comptroller's annual report for the fiscal year ended June 30, 1993 reflected
a General Fund operating surplus of $113.5 million. The Comptroller's annual
report for the fiscal year ended June 30, 1994 reflected a General Fund
operating surplus of $19.7 million. The Comptroller's annual report for the
fiscal year ended June 30, 1995 reflected a General Fund operating surplus of
$80.5 million, which was transferred to the Budget Reserve Fund.
Since 1988, the Comptroller's annual report has reported results on the
basis of both the modified cash basis required by State law and the modified
accrual basis used for GAAP financial reporting. On a GAAP basis the
cumulative deficit was $576.9 million for fiscal 1994-95. The modified cash
basis of accounting used for statutory financial reporting and the modified
accrual basis used for GAAP financial reporting are different and, as a
result, often produce varying financial results, primarily because of
differences in the recognition of revenues and expenditures.
The State finances its operations primarily through the General Fund.
All tax and most non-tax revenues of the State, except for motor fuels taxes
and other transportation related taxes, fees and revenues, are paid into, and
substantially all expenditures pursuant to legislative appropriations are
made out of, the General Fund. The State derives over 70% of its revenues
from taxes. Miscellaneous fees, receipts, transfers and Federal grants
account for most of the other State revenue. The Sales and Use Taxes, the
corporation business tax and the recently enacted broad based personal income
tax are the major revenue raising taxes. For fiscal 1995-96 and 1996-97, the
adopted budget anticipates General Fund expenditures of $9.055 billion and
$9.201 billion, respectively, and General Fund revenues of $8.988 billion and
$9.203 billion, respectively.
On November 3, 1992, Connecticut voters approved a constitutional
amendment which requires a balanced budget for each year and imposes a cap on
the growth of expenditures. The General Assembly is required by the
constitutional amendment to adopt by three-fifths vote certain spending cap
definitions. The statutory spending cap limits the growth of expenditures to
either (1) the rolling five-year average annual growth in personal income, or
(2) the increase in the consumer price index for urban consumers during the
preceding twelve-month period, whichever is greater. Expenditures for the
payment of bonds, notes and other evidences of indebtedness are excluded from
the constitutional and statutory definitions of general budget expenditures.
To preclude shifting expenditures out of the General Fund to other funds, the
spending cap applies to all appropriated funds combined.
The State has no constitutional or other organic limit on its power to
issue obligations or incur indebtedness other than that it may only borrow
for public purposes. There are no reported court decisions relating to State
bonded indebtedness other than two cases validating the legislative
determination of the public purpose for improving employment opportunities
and related activities. The State Constitution has never contained
provisions requiring submission of the questions of incurring indebtedness to
a public referendum. Therefore, the authorization and issuance of State
debt, including the purpose, amount and nature thereof, the method and manner
of the incurrence of such debt, the maturity and terms of repayment thereof,
and other related matters are statutory.
The State has established a program of temporary note issuances to cover
periodic cash flow requirements. The maximum volume of cash flow borrowing
is determined based upon the State's actual cash needs on a daily basis. The
State, as of April 17, 1990, commenced a program permitting the issuance of
up to $539 million of General Obligation Temporary Notes (the "April 1990
Program"). Under the April 1990 Program, the State may issue notes during a
five-year period concluding in April of 1995. Additionally, a separate $200
million temporary note program commenced as of April 30, 1991 and concluded
on October 31, 1991. There are currently no notes outstanding under either
program.
As of April 4, 1996, the General Assembly has empowered, pursuant to
bonds acts in effect, the State Bond Commission to authorize general
obligation bonds in the amount of $10,534,394,000. As of April 4, 1996, the
State Bond Commission has authorized $9,381,215,000 in such bonds and the
balance of $1,153,179,000 was available for authorization. From such total
authorizations of $9,381,215,000, bonds in the aggregate of $8,237,794,000
have been issued and the balance of $1,143,421,000 remained authorized but
unissued as of April 4, 1996.
General obligation bonds issued by Connecticut municipalities are
payable primarily from ad valorem taxes on property subject to taxation by
the municipality. Certain Connecticut municipalities have experienced severe
fiscal difficulties and have reported operating and accumulated deficits in
recent years. The most notable of these is the City of Bridgeport.
S&P, Moody's and Fitch rate Connecticut's municipal bonds AA-, Aa and
AA, respectively.
Florida Series
Revenues and Expenditures. Financial operations of the State of Florida
covering all receipts and expenditures are maintained through the use of
three funds: General Revenue Fund, Trust Funds and Working Capital Fund.
The General Revenue Fund receives the majority of State tax revenues. The
Trust Funds consist of monies received by the State which under law or trust
agreement are segregated for a purpose authorized by law. Revenues in the
General Revenue Fund which are in excess of the amount needed to meet
appropriations may be transferred to the Working Capital Fund. Beginning in
1993-94, the Florida Constitution requires that the State establish a Budget
Stabilization Fund. This fund is to contain a balance of at least 1% of the
previous year's net General Revenue collections in 1994-95, 2% in 1995-96, 3%
in 1996-97, 4% in 1997-98 and 5% in 1998-99 and thereafter. These moneys can
be only spent for the purpose of covering revenue shortfalls and for
emergency purposes as defined by general law. Implementing legislation
establishing this fund was enacted during the 1994 Session of the Florida
legislature.
In November of 1994, Florida voters approved an amendment to the Florida
Constitution which set forth limitations on revenue collections by the State.
With certain exceptions, State revenues collected for any fiscal year are
limited to State revenues allowed under the amendment for the prior fiscal
year plus an adjustment for growth.
As used in the amendment, "growth" means an amount equal to the average
annual rate of growth in Florida personal income over the most recent twenty
quarters times the State revenues allowed under the amendment for the prior
fiscal year. For the 1995-1996 fiscal year, the State revenues allowed under
the amendment for the prior fiscal year shall equal the State revenues
collected for the 1994-1995 fiscal year. Florida personal income will be
determined by the Legislature, from information available from the United
States Department of Commerce or its successor on the first day of February
prior to the beginning of the fiscal year. State revenues collected for any
fiscal year in excess of this limitation will be transferred to the Budget
Stabilization Fund until the fund reaches the maximum balance specified
above, and thereafter shall be refunded to taxpayers as provided by general
law. State revenues allowed under the amendment for any fiscal year may be
increased by a two-thirds vote of the membership of each house of the Florida
Legislature.
For purposes of the amendment "State revenues" means taxes, fees,
licenses, and charges for services imposed by the Legislature on individuals,
businesses, or agencies outside State government. However, "State revenues"
does not include: revenues that are necessary to meet the requirements set
forth in documents authorizing the issuance of bonds by the State; revenues
that are used to provide matching funds for the federal Medicaid program with
the exception of the revenues used to support the Public Medical Assistance
Trust Fund or its successor program and with the exception of State matching
funds used to fund elective expansions made after July 1, 1994; proceeds from
the State Lottery returned as prizes; receipts of the Florida Hurricane
Catastrophe Fund; balances carried forward from prior fiscal years; taxes,
licenses, fees and charges for services imposed by local, regional, or school
district governing bodies; or revenue from taxes, licenses, fees and charges
for services required to be imposed by any amendment or revision to the
Constitution after July 1, 1994. An adjustment to the revenue limitation
will be made by general law to reflect the fiscal impact of transfers of
responsibility for the funding of governmental functions between the State
and other levels of government.
The amendment became effective January 1, 1995.
The Florida Constitution and Statutes mandate that the State budget as a
whole, and each separate fund within the State budget, be kept in balance
from currently available revenues each State fiscal year.
Florida ended fiscal years 1993-94 and 1994-95 with General Revenue plus
Working Capital Funds unencumbered reserves of approximately $351.8 million
and $319.5 million, respectively. Estimated fiscal year 1995-96 General
Revenue plus Working Capital Funds available total $14.99 billion. Total
effective appropriations for the 1995-96 fiscal year are estimated at $14.85
billion, resulting in estimated unencumbered reserves of $140.0 million at
the end of the fiscal year.
In fiscal year 1994-95, the State derived approximately 61% of its total
direct revenues from the General Revenue Fund, Trust Funds and Working
Capital Fund from State taxes. Federal grants and other special revenues
accounted for the remaining revenues. Major sources of tax revenues to the
General Revenue Fund are the sales and use tax, corporate income tax, and
beverage tax, which amounted to 61%, 6% and 3%, respectively, of total
General Revenue Fund receipts.
State expenditures are categorized for budget and appropriation purposes
by type of fund and spending unit, which are further subdivided by line item.
In fiscal year 1993-94, expenditures from the General Revenue Fund for
education, health and welfare and public safety amounted to approximately
48.9%, 31.6% and 13%, respectively, of total General Revenues.
Sales and Use Tax. The greatest single source of tax receipts in
Florida is the sales and use tax. The sales tax is 6% of the sales price of
tangible property sold at retail in the State. The use tax is 6% of the cost
price of tangible personal property when the same is not sold but is used, or
stored for use, in the State. The use tax also applies to the use in the
State of tangible personal property purchased outside Florida which would
have been subject to the sales tax if purchased from a Florida dealer. Less
than 10% of the sales tax is designated for local governments and is
distributed to the respective counties in which it is collected for use by
such counties and municipalities therein. In addition to this distribution,
local governments may (by referendum) assess a .5% or 1% discretionary sales
surtax within their county. Proceeds from this local option sales tax are
earmarked for funding local infrastructure programs and acquiring land for
public recreation or conservation or protection of natural resources. In
addition, non-consolidated counties with populations in excess of 800,000 may
levy a local option sales tax to fund indigent health care. This tax rate
may not exceed .5% and the combined levy of the indigent health care surtax
and the infrastructure surtax described above may not exceed 1%.
Furthermore, charter counties which adopted a charter prior to June 1, 1976,
and each county with a consolidated county/municipal government, may (by
referendum) assess up to a 1% discretionary sales surtax within their county.
Proceeds from this tax are earmarked for the development, construction,
maintenance and operation of a fixed guideway rapid transit system or may be
remitted to an expressway or transportation authority for use on country
roads and bridges, for a bus system, or to service bonds financing roads and
bridges. The two taxes, sales and use, stand as complements to each other,
and taken together provide a uniform tax upon either the sale at retail or
the use of all tangible personal property irrespective of where it may have
been purchased. This tax also includes a levy on the following: (i) rentals
of tangible personal property, transient lodging and non-residential real
property; (ii) admissions to places of amusements, most sports and recreation
events; (iii) utilities, except those used in homes; and (iv) restaurant
meals. Exemptions include: groceries; medicines; hospital rooms and meals;
fuels used to produce electricity; purchases by religious, charitable and
educational nonprofit institutions; most professional, insurance and personal
service transactions; apartments used as permanent dwellings; the trade-in
value of motor vehicles; and residential utilities.
All receipts of the sales and use tax, with the exception of the tax on
gasoline and special fuels, are credited to either the General Revenue Fund,
the Solid Waste Management Trust Fund, or countries and cities. For the
State fiscal year which ended June 30, 1994, receipts from this source were
$10.505 billion, an increase of 11.4% from fiscal year 1992-93.
Motor Fuel Tax. The second largest source of State tax receipts is the
tax on motor fuels. Preliminary data show collections from this source in
the State fiscal year ended June 30, 1994, were $1.416 billion. However,
these revenues are almost entirely dedicated trust funds for specific
purposes and are not included in the State General Revenue Fund.
State and local taxes on motor fuels (gasoline and special fuel) include
several distinct fuel taxes: (i) the State sales tax on motor fuels, levied
at 6% of the average retail price per gallon of fuel, not to fall below 6.9
cents per gallon; (ii) the State excise tax of four cents per gallon of motor
fuel, proceeds distributed to local governments; (iii) the State
Comprehensive Enhanced Transportation System (SCETS) tax, which is levied at
a rate in each county equal to two-thirds of the sum of the county's local
option motor fuel taxes; and (iv) local option motor fuel taxes, which may
range between one cent to seven cents per gallon.
Alcoholic Beverage Tax. Florida's alcoholic beverage tax is an excise
tax on beer, wine, and liquor. This tax is one of the State's major tax
sources, with revenues totalling $559.3 million in State fiscal year ended
June 30, 1994. Alcoholic beverage receipts declined from the previous year's
total. The revenues collected from this tax are deposited into the State's
General Revenue Fund.
The 1990 Legislature established a surcharge on alcoholic beverages.
This cargo is levied on alcoholic beverages sold for consumption on premises.
The surcharge is at ten cents per ounce of liquor, ten cents per four ounces
of wine, four cents per twelve ounces of beer. Most of these proceeds are
deposited into the General Revenue Fund. In fiscal 1993-94 a total of $95.1
million was collected.
Corporate Income Tax. Pursuant to an amendment to the State
Constitution, the State Legislature adopted, effective January 1, 1972, the
"Florida Income Tax Code" imposing a tax upon the net income of corporations,
organizations, associations and other artificial entities for the privilege
of conducting business, deriving income or existing within the State. This
tax does not apply to natural persons who engage in a trade or business or
profession under their own or any fictitious name, whether individually as
proprietorships or in partnerships with others, estates of decedents or
incompetents, or testamentary trusts.
The tax is imposed in an amount equal to 5.5% of the taxpayer's net
corporate income for the taxable year, less a $5,000 exemption, as defined in
such Code. Net income is defined by the Code as that share of a taxpayer's
adjusted Federal income for such year which is apportioned to the State of
Florida. Apportionment is by weighted factors of sales (50%), property (25%)
and payroll (25%). All business income is apportioned and non-business
income is allocated to a single jurisdiction, usually the State of commercial
domicile.
All receipts of the corporate income tax are credited to the General
Revenue Fund. For the fiscal year ended June 30, 1995, receipts from this
source were $1.267 billion, an increase of 3% from fiscal year 1993-94.
Documentary Stamp Tax. Deeds and other documents relating to a realty
are taxed at 70 cents per $100 of consideration, while corporate shares,
bonds, certificates of indebtedness, promissory notes, wage assignments and
retail charge accounts are taxed at 35 cents per $100 of consideration.
Documentary stamp tax collections totalled $699.7 million during fiscal year
1994-95, posting a 10% decrease from the previous fiscal year. The General
Revenue Fund receives approximately 62% of documentary stamp tax collections.
Gross Receipts Tax. Effective July 1, 1992, the tax rate was increased
from 2.25% to 2.5% of the gross receipts of electric, natural gas and
telecommunications services. All gross receipts utilities collections are
credited to the Public Education Capital Outlay and Debt Service Trust Fund.
In fiscal year 1994-95, gross receipts utilities tax collections totalled
$511.9 million, an increase of 9% over the previous fiscal year.
Intangible Personal Property Tax. This tax is levied on two distinct
bases: (i) stocks, bonds, including bonds secured by Florida realty, notes,
government leaseholds, interests in limited partnerships registered with the
SEC, and other miscellaneous intangible personal property not secured by
liens on Florida realty are taxed annually at a rate of 2 mills, (ii)
mortgages and other obligations secured by liens on Florida realty, taxed
with a non-recurring 2 mill tax.
Of the tax proceeds, 33.5% is distributed to the Municipal Revenue
Sharing Trust Fund. The remainder is distributed to the General Reserve
Fund.
Fiscal year 1994-95 total intangible personal property tax collections
were $1.055 billion, a 1% increase over the prior year.
Severance Taxes. The severance tax includes the taxation of oil, gas
and sulfur production and a tax on the severance of primarily phosphate rock
and other solid minerals. Total collections from severance taxes totalled
$56.5 million during fiscal year 1994-95, up 3% from the previous fiscal
year.
Lottery. The 1987 Legislature created the Department of the Lottery to
operate the State Lottery and setting forth the allocation of the revenues.
Of the revenues generated by the Lottery, 50% is to be returned to the public
as prizes; at least 38% is to be deposited in the Educational Enhancement
Trust Fund (for public education); and no more than 12% can be spent on the
administrative cost of operating the lottery.
Fiscal year 1994-95 produced ticket sales of $2.7 billion of which
education received approximately $1.1 billion.
Georgia Series
Georgia's economy grew rapidly in the 1980s, resulting in a general fund
reserve. As a result of a slowdown in the State's economy in the early
1990's, the general fund reserve was effectively eliminated.
Beginning in fiscal 1993, however, revenues once again began to exceed
appropriations. The State's revenue shortfall reserve at the end of Fiscal
1995 was approximately $288 million. Revenues are estimated to slightly
exceed expenditures for Fiscal 1996.
Georgia's unemployment rate was 4.5% for 1996 (January- April annualized
rate), which is a decrease of 0.3% over the State's 1995 annual average
unemployment rate. The largest sectors of Georgia's economy are wholesale
and retail trade, services, manufacturing and government. Per capita income
levels are less than the U.S. average (92.9% of the U.S. average in 1993),
but Georgia's average annual growth rate of per capita income has exceeded
that of the United States as a whole since 1960.
Constitutional Provisions. Georgia's Constitution limits the
appropriation of funds for any given fiscal year to the sum of the amount of
unappropriated surplus expected to have accrued at the beginning of the
fiscal year and the amount not greater than the total receipts anticipated,
less refunds, as estimated. The State Constitution provides for
supplementary appropriations in accordance with its provisions as well.
Georgia may incur public debt to supply a temporary deficit due to a
delay in collecting the taxes of that fiscal year. Such debt may not exceed,
in the aggregate, 5% of the total revenue receipts, less refunds, in the
fiscal year immediately preceding the year in which such debt is incurred.
The debt incurred is to be repaid on or before the last day of the fiscal
year in which it is incurred out of taxes levied for that fiscal year. No
such debt may be incurred in any fiscal year under this provision if there is
then outstanding unpaid debt from any previous fiscal year which was incurred
to supply a temporary deficit. No such debt has been incurred under this
provision since its inception.
The State Constitution also provides that the State may incur public
debt for three types of public purposes: (1) debt to "repel invasion,
suppress insurrection, and defend the State in time of war;" (2) general
obligation debt and (3) guaranteed revenue debt. General obligation debt may
be incurred to acquire, construct, develop, extend, enlarge or improve land,
waters, property, highways, buildings, structures, equipment or facilities of
the State, its agencies, departments, institutions and certain State
Authorities, to provide educational facilities for county and independent
school systems, to provide public library facilities for county and
independent school systems, counties, municipalities, and boards of trustees
of public libraries or boards of trustees of public library systems, and to
make loans to counties, municipal corporations, political subdivisions, local
authorities and other local government entities for water and sewerage
facilities or systems. Guaranteed revenue debt may be incurred by
guaranteeing the payment of certain revenue obligations issued by an
instrumentality of the State as set forth in its Constitution.
Georgia may not incur debt at any time when the highest aggregate annual
debt service requirements for the then current year or any subsequent year
for outstanding general obligation debt and guaranteed revenue debt,
including the proposed debt, and the highest aggregate annual payments for
the then current year or any subsequent fiscal year of the State under
certain contracts then in force, exceed 10% of the total revenue receipts,
less refunds, of the State treasury in the fiscal year immediately preceding
the year in which any such debt is to be incurred. No general obligation
debt may be incurred at any time when the term of the debt is in excess of 25
years.
The State Constitution also provides that Georgia counties,
municipalities, and other political subdivisions may not incur debt
(including debt incurred on behalf of any special district) in excess of 10%
of the assessed value of all taxable property within such county,
municipality, or political subdivision. However, a separate provision of the
State Constitution permits certain long-term, intergovernmental contracts for
services and facilities. The Georgia Supreme Court has held that certain
categories of intergovernmental contracts give rise to payment obligations
which are not "debts" subject to the 10% debt limitation. It is possible
that the intergovernmental contracts clause could be used by local
governments to justify entering into transactions which increase their
financial obligations, and such transactions could result in increasing the
credit risk associated with debt obligations issued by such governmental
units.
Revenues and Expenditures. Georgia's major revenue sources are its
sales tax and its income tax. The State also receives revenues from its motor
fuels tax, from miscellaneous fees and sales, from other taxes (such as the
intangibles tax, alcohol taxes, inheritance tax, and license taxes), and from
the State lottery. Unaudited information from the Georgia Revenue Department
indicates that revenues from these sources increased 8% in fiscal year 1995
from fiscal year 1994, and that these revenue sources generated the following
percentages of total Georgia State revenue in fiscal year 1995:
Sales Tax 34.04%
Income Tax 43.78%
Motor Fuels Tax 5.06%
Lottery 3.97%
Other Taxes 13.15%
TOTAL 100.0%
State expenditures are classified by major policy category for budgetary
purposes. In the fiscal year 1996 operating budget, Georgia expenditures for
educational development, human resources, protection of persons and property,
and transportation amounted to 52.2%, 25.6%, 9.0%, and 4.3%, respectively, of
total budgeted expenditures. Debt service for issued obligations accounts
for 3.9% of total budgeted expenditures for fiscal year 1996, and is
projected to account for 3.7% of total budgeted expenditures in fiscal year
1997.
For fiscal years ended June 30, 1975 through June 30, 1997, the
aggregate general obligation debt and guaranteed revenue debt authorized by
the State General Assembly are $7.9 billion and $193 million, respectively.
The aggregate amount of general obligation debt and guaranteed revenue debt
actually issued by the State, as of May 31, 1996, is $8.1 billion. The total
outstanding principal amount of indebtedness of the State as of May 31, 1996
is $4.9 billion. Of this outstanding debt, 28.8% is due and payable on or
before January 1, 2001 and 56.8% is due and payable on or before January 1,
2006.
Significant Contingent Liabilities. The State from time to time is
named as a party in certain lawsuits, which may or may not have a material
adverse impact on the financial position of the State if decided in a manner
adverse to the State's interests. Certain of such lawsuits which could have
a significant impact on the State's financial position are summarized below.
Age International, Inc. v. State (two cases) and Age International, Inc.
v. Miller. Three suits (two for refund and one for declaratory and
injunctive relief) have been filed against the State of Georgia by
out-of-state producers of alcoholic beverages. The first suit for refund
seeks $96 million dollars in refunds of alcohol taxes imposed under Georgia's
post-Bacchus (see previous note) statute, O.C.G.A. 3-4-60. These claims
constitute 99% of all such taxes paid during the 3 years preceding these
claims. In addition, the claimants have filed a second suit for refund for
an additional $23 million dollars for later time periods. These two cases
encompass all known or anticipated claims for refund of such type within the
apparently applicable statutes of limitations for the years in question,
i.e., 1989 through January 1993. The two Age refund cases are still pending
in the state trial court. The Age declaratory/injunctive relief case was
dismissed by the District Court. That dismissal was affirmed by the Eleventh
Circuit Court of Appeals.
Board of Public Education for Savannah/Chatham County v. State of
Georgia. This case is based on the local school board's claim that the State
is obligated to finance the major portion of the costs of its desegregation
program. The Savannah Board originally requested restitution in the amount
of approximately $30,000,000, but the Federal District Court set forth a
formula which would require a State payment in the amount of approximately
$8,900,000 computed through June 30, 1994. Plaintiffs, dissatisfied with the
apportionment of desegregation costs between State and county, and an adverse
ruling on the State funding formula for transportation costs, appealed to the
Eleventh Circuit Court of Appeals. The State has filed a responsive
cross-appeal on the ground that there is no basis for any liability.
Subsequently, the parties agreed to a settlement, which has been approved by
the Court. The settlement calls for the State to pay the amount awarded to
the Plaintiff and to offer an option regarding future funding methodology for
pupil transportation. Because interest was accruing in the settlement, in
March, 1995, the State paid the Plaintiffs $8,925,000 in partial satisfaction
of the settlement agreement. The final settlement figure has yet to be
calculated, due to costs which accrued during the pendency of the settlement
proposal. Those cost calculations will be finalized in the next several
months but are not expected to exceed a total of $10,000,000, including the
money already paid.
DeKalb County v. State of Georgia. A similar complaint has been filed
by DeKalb County. The Plaintiffs sought approximately $67,500,000 in
restitution. The Federal District court ruled that the State's funding
formula for pupil transportation (which the District Court in the
Savannah/Chatham County case upheld) was contrary to State law. This ruling
would require a State payment of a state law funding entitlement in the
amount of approximately $34,000,000 computed through June 30, 1994. Motions
to reconsider and amend the Court's judgment were filed by both parties. The
State's motion was granted, in part, which reduced the required State payment
to approximately $28,000,000. Notices of appeal to the Eleventh Circuit
Court of appeals have been filed. There are approximately five other school
districts which might file similar claims.
Leslie K. Johnson v. Collins. Plaintiff in this case has filed suit in
federal district court and in the State Superior Court of Chatham County.
Plaintiff challenges the constitutionality of Georgia's transfer fee provided
by O.C.G.A. 40-3-21.1 (often referred to as "impact fee") by asserting that
the fee violates the commerce clause, due process, equal protection and
privilege and immunities provisions of the constitution. Plaintiff seeks to
prohibit the State from further collections and to require the State to
return to her and those similarly situated all fees previously collected. A
similar lawsuit has also been filed in the Superior Court of Fulton County
(Mueller v. Collins). From May of 1992 to February 15, 1995, the State has
collected $20,006,834.72. The State continues to collect approximately
$500,000 to $600,000 per month.
Daniel W. Tedder v. Marcus E. Collins, Sr., Cobb County Superior Court,
Civil Action No. 931553028. Class action challenging the validity of a
Georgia Department of Revenue Regulation issued in July of 1992, which
resulted in enforcement of sales tax collections on sales of used
transportation equipment, most notably sales of used cars where neither party
is engaged in the regular sale of used cars. The trial court declared the
regulation invalid. Approximately $30,000,000 of tax on such sales was
collected before the regulation was rescinded and collections ceased.
Accordingly, refund claims of up to $30,000,000 plus interest, could be
sought. Approximately $21,900,000 in refunds have been paid.
Buskirk and Estill v. State of Georgia, et al.. On September 1, 1994,
plaintiffs in this case filed a civil action in the Superior Court of Fulton
County, Georgia (No. E-31547) on behalf of all "classified employees of the
State of Georgia or its agencies and departments during all or part of fiscal
year 1992 through 1995 who were eligible to receive within grade pay
increases and who would have received same were it not for a freeze of within
grade pay increases." The trial court granted the State's motion to dismiss
and for summary judgement, which completely resolved the case in the State's
favor. Plaintiffs have filed a notice of appeal to the Georgia Supreme
Court. If the plaintiffs prevail, the parties will conduct separate
discovery on the issue of damages. The State believes that it has good and
adequate defenses to the claims made, but, should the plaintiffs prevail in
every aspect of their claims, the liability of the State in this matter could
be as much as $295,000,000, based on best estimates currently available.
Maryland Series
The State's total expenditures for the fiscal years ending June 30,
1993, 1994 and 1995 were $11.786 billion, $12.351 billion and $13.528
billion, respectively. As of February 14, 1996, it was estimated that total
expenditures for fiscal year 1996 would be $14.611 billion. The State's
General Fund, representing approximately 54% - 60% of each year's total
budget, had an unreserved deficit of $56 million in fiscal year 1992 and
unreserved surpluses of $11 million, $60 million and $132.5 million in fiscal
years 1993, 1994 and 1995, respectively. The Governor of Maryland reduced
fiscal year 1993 appropriations by approximately $56 million to offset the
fiscal year 1992 deficit. The State Constitution mandates a balanced budget.
In April 1995, the General Assembly approved the $14.429 billion 1996
fiscal year budget. The Budget includes $2.8 billion in aid to local
governments (reflecting a $161 million increase in funding over 1995 that
provides for substantial increase in education, health and police aid), and
134.1 million in general fund deficiency appropriations for fiscal year 1995,
of which $60 million is a legislatively mandated appropriation to the Revenue
Stabilization Account of the State Reserve Fund. The Revenue Stabilization
Account was established in 1986 to retain State revenues for future needs and
to reduce the need for future tax increases. The 1996 Budget does not
include any proposed expenditures dependent on additional revenue from new or
broad-based taxes. When the 1996 Budget was enacted, it was estimated that
the general fund surplus on a budgetary basis at June 30, 1996, would be
approximately $7.8 million. As of February 14, 1996, it is estimated that
the general fund surplus on a budgetary basis at June 30, 1996, will be $1
million. At its December 12, 1995 meeting, the Board of Revenue Estimates
lowered the estimate of fiscal year 1996 revenues by $92 million. The
Governor has proposed a plan to address this shortfall by reducing general
fund appropriations by $26 million and by obtaining additional money for the
general Fund from appropriate sources (including use of the 1995 surplus and
from a transfer from the Revenue Stabilization Account).
In January 1996, the Governor submitted his proposed 1997 Fiscal Year
Budget to the General Assembly. The Budget includes $2.9 billion in aid to
local governments (reflecting a $121.5 million increase over 1996 that
provides substantial increases in education, health and police aid), and $77
million in general fund deficiency appropriations for fiscal year 1996. As
of February 14, 1996, it is estimated that the general fund surplus on a
budgetary basis at June 30, 1997 will be $500 thousand and that the balance
in the Revenue Stabilization Account of the State Reserve Fund also at June
30, 1997 will be $538 million.
The public indebtedness of Maryland and its instrumentalities is divided
into three basic types. The State issues general obligation bonds for
capital improvements and for various State-sponsored projects. The
Department of Transportation of Maryland issues limited special obligations
bonds for transportation purposes payable primarily from specific, fixed-rate
excise taxes and other revenues related mainly to highway use. Certain
authorities issue obligations solely from specific non-tax enterprise fund
revenues and for which the State has no liability and has given no moral
obligation assurance.
At least since the end of the Civil War, the State has paid the
principal of and interest on its general obligation bonds when due. There is
no general debt limit imposed by the State Constitution or public general
laws. Although the State has the authority to make short-term borrowings in
anticipation of taxes and other receipts up to a maximum of $100 million, the
State in the past has not issued short-term tax anticipation and bond
anticipation notes, or made any other similar short-term borrowings for cash
flow purposes.
As of July 1996, the State's general obligation bonds were rated "Aaa"
by Moody's and "AAA" by S&P and Fitch.
The Maryland Department of Transportation issues Consolidated
Transportation Bonds, which are payable out of specific excise taxes, motor
vehicle taxes and corporate income taxes, and from the general revenues of
the Department. Issued to finance highway, port, transit, rail or aviation
facilities, as of July 1996, these bonds were rated "Aa" by Moody's and "AA"
by S&P and Fitch. The Maryland Transportation Authority, an entity of the
Department issues its own revenue bonds for transportation facilities, which
are payable from certain highway, bridge and tunnel tolls. These bonds were
rated "A1" by Moody's and "A+" by S&P as of July 1996.
According to recent available ratings, general obligation bonds of
Montgomery County (abutting Washington, D.C.) are rated "Aaa" by Moody's and
"AAA" by S&P. Prince George's County, also in the Washington, D.C. suburbs,
issues general obligation bonds rated "Aa" by Moody's and "AA" by S&P, while
Baltimore County, a separate political subdivision surrounding the City of
Baltimore, issues general obligation bonds rated "Aaa" by Moody's and "AAA"
by S&P. The City of Baltimore's general obligation bonds are rated "A1" by
Moody's and "A" by S&P. The other counties in Maryland which are rated by
Moody's all have general obligation bond ratings of "A" or better from
Moody's, except for Allegheny County, the bonds of which are rated "Baa" by
Moody's. The Washington Suburban Sanitary district, a bi-county agency
providing water and sewerage services in Montgomery and Prince George's
Counties, issues general obligation bonds rated "Aa1" by Moody's and "AA" by
S&P as of July 1996. Additionally, some of the large municipal corporations
in Maryland (such as the cities of Rockville and Annapolis) have issued
general obligation bonds. There can be no assurance that any of the
foregoing ratings will continue.
Massachusetts Series
The economy of the Commonwealth of Massachusetts is experiencing a
recovery following a slowdown that began in mid-1988. Massachusetts had
benefitted from an annual job growth rate of approximately 2% since the early
1980s, but by 1989 employment started to decline. Between 1988 and 1992,
total employment in Massachusetts declined 10.7%. In 1993, 1994 and 1995,
however, total employment increased by 1.6%, 2.2% and 2.4%, respectively.
Employment levels increased in all sectors except manufacturing. Between
1990 and 1992, the Commonwealth's unemployment rate was considerably higher
than the national average, however, unemployment rates in Massachusetts since
1993 have declined faster than the national average (6.9% compared to 6.8% in
1993) and the employment rate in Massachusetts in 1994 and 1995 was slightly
below the national average (6.0% compared to 6.1% for 1994 and 5.4% compared
with 5.6% for 1995).
While the Commonwealth's expenditures for State programs and services in
each of the fiscal years 1987 through 1991 exceeded each year's current
revenues, Massachusetts ended each of the fiscal years 1991 to 1996 with a
positive closing fund balance in its budgeted operating funds.
In recent years, health care related costs have risen dramatically in
Massachusetts and across the nation and the increase in the State's Medicaid
and group health insurance costs reflects this trend. In fiscal 1993,
Medicaid was the largest item in Massachusetts' budget and has been one of
the fastest growing budget items, although the rate of increase has abated in
recent years. During fiscal years 1989, 1990, 1991 and 1992, Medicaid
expenditures were $1.83 billion, $2.12 billion, $2.77 billion and $2.82
billion, respectively, representing an average annual increase of 15.4%.
Expenditures for fiscal 1993 were $3.15 billion, an 11.8% increase over
fiscal 1992. Medicaid expenses in fiscal 1994 were $3.31 billion and in
fiscal 1995 $3.398 billion. The average annual growth from fiscal 1991 to
fiscal 1995 was 5.4% compared with approximately 17% between fiscal 1987 and
fiscal 1991.
Massachusetts' pension costs have risen dramatically as the State has
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased at an
average annual rate of 8.1% from $703.9 million in fiscal 1991 to $968.8
million in fiscal 1995.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 11.6% from $649.8 million in
fiscal 1989 to $1.23 billion in fiscal 1995. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993 and $1.15 billion
in fiscal 1994. In 1990, legislation was enacted which generally imposes a
10% limit on the total appropriations in any fiscal year that may be expended
for payment of interest and principal on general obligation debt. As of
January 1, 1995, the State had approximately $9,595 billion of long-term
general obligation debt outstanding and short-term direct obligations of the
Commonwealth totalled $264 million.
Certain independent authorities and agencies within the State are
statutorily authorized to issue debt for which Massachusetts is directly, in
whole or in part, or indirectly liable. The State's liabilities are either
in the form of (i) a direct guaranty, (ii) State support through contract
assistance payments for debt service, or (iii) indirect obligations. The
State is indirectly liable for the debt of certain authorities through a
moral obligation to maintain the funding of reserve funds which are pledged
as security for the authorities' debt.
In November 1980, voters in the Commonwealth approved a State-wide tax
limitation initiative petition, commonly known as Proposition 2-1/2, to
constrain levels of property taxation and to limit the charges and fees
imposed on cities and towns by certain government entities, including county
governments. The law is not a constitutional provision and accordingly is
subject to amendment or repeal by the legislature. Proposition 2-1/2 limits
the property taxes which a Massachusetts city or town may assess in any fiscal
year to the lesser of (i) 2.5% of the full and fair cash value of real estate
and personal property therein and (ii) 2.5% over the previous year's levy
limit plus any growth in the tax base from certain new construction and
parcel subdivisions. In addition, Proposition 2-1/2 limits any increase in the
charges and fees assessed by certain governmental entities, including county
governments, on cities and towns to the sum of (i) 2.5% of the total charges
and fees imposed in the preceding fiscal year, and (ii) any increase in
charges for services customarily provided locally or services obtained by the
city or town at its option. The law contains certain override provisions
which require vote approval at a general or special election. Proposition 2-1/2
also limits any annual increase in the total assessments on cities and towns
by any county, district, authority, the Commonwealth, or any other
governmental entity except regional school districts and regional water and
sewer districts whose budgets are approved by _ of their member cities and
towns. During the 1980s, Massachusetts increased payments to the cities,
towns and regional school districts ("Local Aid") to mitigate the impact of
Proposition 2-1/2 on local programs and services. In fiscal 1996, approximately
19.1% of Massachusetts' budget was allocated to Local Aid. Direct Local Aid
dropped from a high of $2.961 billion in fiscal 1989 to $2.727 billion in
fiscal 1994, but increased to $2.976 billion in fiscal 1995 and an estimated
$3.240 billion in fiscal 1996. Recent increases are largely a result of
comprehensive education reform legislation enacted in 1993 that requires
annual increases in state expenditures for education funding, subject to
annual legislative appropriations, above a fiscal 1993 base of approximately
$1.288 billion. Increases of $175 million above the base for fiscal 1994 to
$876 million for fiscal 1997 have been fully funded. Additional increases
are called for in future years.
Many factors affect the financial condition of the Commonwealth and its
cities, towns and public bodies, such as social, environmental, and economic
conditions, many of which are not within the control of such entities. As is
the case with most urban States, the continuation of many of Massachusetts'
programs, particularly its human services programs, is in significant part
dependent upon continuing Federal reimbursements which have been steadily
declining. The loss of grants to Massachusetts and its cities and towns
could further slow economic development. To the extent that such factors may
exist, they could have an adverse effect on economic conditions in
Massachusetts, although what effect, if any, such factors would have on
Massachusetts' Municipal Obligations cannot be predicted.
Michigan Series
General. Recently, the State's economy has been undergoing certain
basic changes in its underlying structure. These changes reflect a
diversifying economy which is less reliant on the automobile industry. As a
result, the State anticipates that its economy in the future will be less
susceptible to cyclical swings and more resilient when national downturns
occur. In 1995, approximately 77% of wage and salary employment was in the
State's non-manufacturing sectors. In 1995, total employment was 4,491,000
with manufacturing wage and salary employment totaling 974,900.
Manufacturing employment remains below the peak employment level of 1,179,600
attained in 1978. Employment in the durable goods manufacturing industries
was 728,600 and non-durable goods employment was 246,400 in the State in
1995. The motor vehicle industry, which is still an important component in
the State's economy, employed 283,700 in 1995. The State's average
unemployment rate for calendar year 1995 was 5.3%.
The State's general obligation bonds are rated Aa by Moody's, AA by S&P
and AA by Fitch. Because most of the State Municipal Obligations are revenue
or general obligations of local government or authorities, rather than
general obligations of the State of Michigan itself, ratings on such State
Municipal Obligations may be different from those given to the State of
Michigan.
State Constitutional Provisions Affecting Revenues and Expenditures.
The State Constitution provides that proposed expenditures and revenues of
any operating fund must be in balance and that any prior year's surplus or
deficit must be included in the succeeding year's budget for that fund.
In 1978, the State Constitution was amended to limit the amount of total
State revenues raised from taxes and certain other sources. State revenues
(excluding Federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed
percentage of State personal income in the prior calendar year or average of
the prior three calendar years, whichever is greater. The percentage is
fixed by the amendment to equal the ratio of the 1978-79 fiscal year revenues
to total calendar 1977 State personal income.
If, in any fiscal year, revenues exceed the revenue limitation by 1% or
more, the entire amount of such excess shall be rebated in the following
fiscal year's personal income tax or single business tax. Any excess of less
than 1% may be transferred to the State's Budget Stabilization Fund. The
State may raise taxes in excess of the limit for emergencies when deemed
necessary by the Governor and two-thirds of the members of each house of the
Legislature.
The State Constitution provides that the proportion of State spending
paid to all units of local government to total State spending may not be
reduced below the proportion in effect in the 1978-79 fiscal year. If such
spending does not meet the required level in a given year, an additional
appropriation for local governmental units is required by the following
fiscal year. Spending for local units met this requirement for fiscal years
1985-86 through 1991-92 and fiscal year 1993-94.
The State has settled litigation with Oakland County, Michigan in which
Oakland County had alleged that the classification of State expenditures for
certain mental health programs as spending for local units was improper. As
part of the settlement, the State agreed to reclassify these expenditures,
beginning in fiscal year 1992-93. As a result, the State determined that in
fiscal year 1992-93 the proportion of State spending from State sources paid
to local units of government was approximately $97 million less than
constitutionally required and an amount at least this large will be
appropriated to the State's local government payment fund in the next budget
submission.
The State Constitution also requires the State to finance any new or
expanded activity of local governments mandated by State law. Any
expenditures required by this provision would be counted as State spending
for local units of government for the purpose of determining compliance with
the provision cited above.
Economic and Fiscal Condition. Legislation requires that the
administration prepare two economic forecasts each year. These are presented
to a Consensus Revenue Estimating Conference in January and May of each year.
The May 1996 forecast is summarized below.
The State's economic forecast for calendar year 1996 projects modest
growth. Real GDP is projected to grow 2.7% in 1996, on a calendar year
basis. Car and light truck sales are expected to total 14.9 million units in
1996.
The forecast assumes moderate inflation, accompanied by steady interest
rates. Ninety-day T-Bill rates are expected to average 5.1 percent for 1996.
The United States' unemployment rate is projected to decline to an average of
5.5 percent for 1996.
The State's forecast for the Michigan economy reflects the above
national outlook. Total wage and salary employment is projected to grow 1.5%
in 1996. This slight growth reflects the ongoing diversification of the
Michigan economy. The unemployment rate is projected to average 6.0% in
1996, continuing the recent trend to Michigan's unemployment rate being near
the national average compared to the 15-year history of having higher
unemployment.
The Governor's Executive Budget for fiscal year 1995-96 was submitted to
the Legislature on February 9, 1995. The fiscal year 1995-96 general fund
general purpose Executive Budget recommendation totaled $8,507.6 million.
The budget was passed by the Legislature in June 1995.
The Governor's Executive Budget for fiscal year 1996-97 was submitted to
the Legislature on February 8, 1996. The fiscal year 1996-97 general
fund/general purpose Executive Budge recommendation totaled $8,246.6 million.
Property Tax Reform Proposals. On August 19, 1993, the Governor signed
into law Act 145, Public Acts of Michigan, 1993 ("Act 145"), a measure which
would have significantly impacted financing of primary and secondary school
operations and which has resulted in additional property tax and school
finance reform legislation. Act 145 would have exempted all property in the
State of Michigan from millage levied for local and intermediate school
districts operating purposes, other than millage levied for community
colleges, effective July 1, 1994. In order to replace local property tax
revenues lost as a result of Act 145, the Michigan Legislature, in December
1993, enacted several statutes which address property tax and school finance
reform.
The property tax and school finance reform measures included a ballot
proposal which was approved by the voters on March 15, 1994. Effective May
1, 1994, the State sales and use tax was increased from 4% to 6%, the State
income tax was decreased from 4.6% to 4.4%, the cigarette tax was increased
from $.25 to $.75 per pack and an additional tax of 16% of the wholesale
price was imposed on certain other tobacco products. A 0.75% real estate
transfer tax became effective January 1, 1995. Beginning in 1994, a State-
wide property tax of 6 mills will be imposed on all real and personal
property currently subject to the general property tax. The ability of
school districts to levy property taxes for school operating purposes has
been partially restored. A school board will, with voter approval, be able
to levy up to the lesser of 18 mills or the number of mills levied in 1993
for school operating purposes, on non-homestead property and non-qualified
agricultural property. The adopted ballot proposal contains additional
provisions regarding the ability of local school districts to levy taxes as
well as a limit on assessment increases for each parcel of property,
beginning in 1995 to the lesser of 5% or the rate of inflation. When
property is subsequently sold, its assessed value will revert to the current
assessment level of 50% of true cash value. Under the adopted ballot
proposal, much of the additional revenue generated by the new taxes will be
dedicated to the State School Aid Fund.
The adopted ballot proposal contains a system of financing local school
operating costs relying upon a foundation allowance amount which may vary by
district based upon historical spending levels. State funding will provide
each school district an amount equal to the difference between their
foundation allowance and the revenues generated by their local property tax
levy. Local school districts will also be entitled to levy supplemental
property taxes to generate additional revenue if their foundation allowance
is less than their historical per pupil expenditures. The adopted proposal
also contains provisions which allow for the levy of a limited number of
enhancement mills on regional and local school district bases.
The adopted ballot proposal shifts significant portions of the cost of
local school operations from local school districts to the State and raises
additional State revenues to fund these additional State expenditures. These
additional revenues will be included within the State's constitutional
revenue limitations and may impact the State's ability to raise additional
revenues in the future.
Budget Stabilization Fund. In 1977, the BSF was established to
accumulate balances during years of significant economic growth which may be
utilized in years when the State's economy experiences cyclical downturns or
unforeseen fiscal emergencies. Calculated on an accrual basis, the
unreserved ending accrued balance of the Budget Stabilization Fund on
September 30, 1994 was $775.5 million. The preliminary unreserved accrued
balance of the Budget Stabilization Fund on September 30, 1995 was $1,003.2
million.
State and State-Related Indebtedness. The State Constitution limits
State general obligation debt to (i) short-term debt for State operating
purposes, (ii) short- and long-term debt for the purpose of making loans to
school districts and (iii) voter-approved long-term debt.
Short-term debt for operating purposes is limited to an amount not in
excess of 15% of undedicated revenues received during the preceding fiscal
year and must be issued only to meet obligations incurred pursuant to
appropriation and repaid during the fiscal year in which incurred. Such debt
does not require voter approval.
Debt incurred by the State for the purpose of making loans to school
districts may be issued in whatever amount required without voter approval.
All other general obligation bonds issued by the State must be approved as to
amount, purpose and method of repayment by a two-thirds vote of each house of
the Legislature and by a majority vote of the public at a general election.
There is no limitation as to number or size of such general obligation
issues.
There are also various State authorities and special purpose agencies
created by the State which issue bonds secured by specific revenues. Such
debt is not a general obligation of the State.
The State has issued outstanding general obligation full faith and
credit bonds and notes for Water Resources, Environmental Protection,
Recreation Program, and School Loan purposes. As of September 30, 1995, the
outstanding principal amount of all State general obligation bonds was $706
million. On February 20, 1996, the State issued $900 million in short-term
general obligation notes in order to meet cash flow requirements. These
notes will mature on September 30, 1996.
As of December 31, 1994, approximately $5.0 billion in principal amount
of "qualified" bonds of local school districts was outstanding. In the past
30 years, the State has been required only once to advance monies from the
State School Bond Loan Fund to make a debt service payment on behalf of a
school district, other than for routine loans. In that case the tax
collections available to the school district for payment of debt service were
escrowed on the due date because of litigation. After the litigation was
completed, the escrowed funds were repaid in full to the State School Bond
Loan Fund.
Minnesota Series
State Government. The State of Minnesota was formally organized as a
territory in 1849 and was admitted to the Union in 1858 as the 32nd state.
Bordered by Canada on the north, Lake Superior and Wisconsin on the east,
Iowa on the south, and North and South Dakota on the west, it is the 12th
largest and 20th most populous state in the Union.
The Minnesota Constitution organizes State government into three
branches: Executive, Legislative and Judicial. The Legislative Branch is
composed of a Senate and a House of Representatives. Fiscal administration
is performed by the Department of Finance under the control and supervision
of the Commissioner of Finance.
State and State-Related Indebtedness. The Minnesota Constitution
authorizes public debt to be incurred for the acquisition and betterment of
public land, buildings and other improvements of a capital nature or for
appropriations or loans to Minnesota state agencies or political subdivisions
for this purpose, as the Legislature by the three-fifths vote of each House
may direct, and to finance the development of agricultural resources of the
State by extending credit on real estate security, as the Legislature may
direct. All such debt is evidenced by the issuance of State of Minnesota
bonds maturing within 20 years of their date of issue, for which the full
faith and credit and taxing powers of the State are irrevocably pledged.
There is no limitation as to the amount or interest rate of such general
obligation issues.
As of May 1, 1996, the outstanding principal amount of all Minnesota
general obligation bonds was approximately $2.109 billion.
The Minnesota Constitution limits Minnesota general obligation debt to
(i) short-term debt for Minnesota operating purposes, (ii) short-term debt
for purpose of making loans to school districts and (iii) voter-approved long-
term debt.
Short-term debt for operating purposes is limited to an amount not in
excess of 15 percent of undedicated revenues received during the preceding
fiscal year and must be issued only to meeting obligations incurred pursuant
to appropriation and repaid during the fiscal year in which incurred. The
May, 1995, end of the first special session cash flow analysis for
Minnesota's Statutory General Fund indicates that Minnesota will have a
positive cash flow balance during the Current Biennium which began on July 1,
1995 and ends June 30, 1997. Minnesota has no short-term debt outstanding
and, therefore, Minnesota does not expect to do any short term borrowing for
cash flow purposes during the Current Biennium. A more recent cash flow
analysis is not available. The Department of Finance is in the process of
developing a new cash flow forecasting model and expects to do its next cash
flow analysis in connection with the November, 1996 revenue and expenditure
forecast.
There are also various Minnesota authorities and special purpose
agencies created by the state which issue bonds secured by specific revenues.
Such debt is not a general obligation of the State of Minnesota.
Constitutional and Statutory Provisions Relating to Minnesota and Local
Funding. Minnesota revenues in Minnesota are generated primarily from
individual income taxes, corporate franchise taxes, sales and use taxes,
insurance gross earnings taxes, estate taxes, motor vehicle excise taxes,
excise taxes on liquor and tobacco, mortgage taxes, deed taxes, legalized
gambling taxes, rental motor vehicle taxes, 900 telephone service taxes,
taconite and iron ore taxes, and health care provider taxes. In addition to
the major taxes described above, other sources of non-dedicated revenue
include minor taxes, 60 percent of Minnesota's lottery net proceeds,
unrestricted grants, fees and charges of Minnesota state agencies and
departments, and investment income. County, municipal and certain special
purpose districts (such as water, flood or mosquito control districts) are
authorized to levy property taxes within specified legislative limits. A
portion of Minnesota's revenues is allocated from state government to other
governmental units within Minnesota such as municipal and county governments,
school districts and state agencies through a complex series of
appropriations and financial aid formulas. This financial interdependency of
the Minnesota state government with other units of government, subject all
levels of government, in varying degrees, to fluctuations in Minnesota's
overall economy.
Minnesota's constitutional prescribed fiscal period is a biennium, and
Minnesota operates on a biennial budget basis with revenues created in the
period in which they are collected and expenditures debited in the period in
which the corresponding liabilities are incurred. The biennium begins on
July 1st of the odd numbered year and runs through June 30th of the next odd
numbered year.
Minnesota's ability to appropriate funds is limited by the Minnesota
Constitution, which directs that Minnesota government shall not in any
biennium appropriate funds in excess of projected tax revenues from all
sources. Minnesota is authorized to levy additional taxes to resolve any
inadvertent shortfalls.
Appropriations for each biennium are enacted during the final
legislative session of the immediately preceding biennium. A revenue
forecast is prepared during the legislative session to provide the
legislature with updated information for the appropriations process. During
each biennium regular forecasts of revenues and expenditures are prepared.
Minnesota's biennial appropriation process relies on revenue forecasting
as the basis for establishing aggregate expenditure levels. Risks are
inherent in the revenue and expenditure forecasts. Assumptions about U.S.
economic activity and federal tax and expenditure policies underlie these
forecasts. Any federal law changes that increases federal income taxes or
reduce federal spending programs may adversely affect these forecasts.
Finally, even if economic and federal tax assumptions are correct, revenue
forecasts are still subject to some normal level of error. The correctness
of revenue forecasts and the strength of Minnesota's overall economy may
restrict future aid or appropriations from Minnesota government to other
units of government.
Prior to the Current Biennium, Minnesota law established a Budget
Reserve and Cash Flow Account in the Accounting General Fund which served two
functions. However, in 1995 the Minnesota Legislature departed the Budget
Reserve and Cash Flow Account into two separate accounts; the Cash Flow
Account and the Budget Reserve Account, each having a different function.
The Cash Flow Account was established in the General Accounting Fund for the
purpose of providing sufficient cash balances to cover monthly revenue and
expenditure imbalances. The use of funds from the Cash Flow Account is
governed by statute. The Cash Flow Account balance is set for the Current
Biennium at $350 million. No provision has been made for increasing the
balance of the Cash Flow Account from increases in forecast revenues over
forecast expenditures. The Budget Reserve Account was established in the
Accounting General Fund for the purpose of reserving funds to cushion the
State from an economic downturn. The use of funds from the Budget Reserve
Account and the allocation of surplus forecast balances to the Budget Reserve
Account are governed by statute. The Budget Reserve Account balance is set
for the Current Biennium at $270 million.
For Fiscal Year 1995, ending June 30, 1995, net revenues received were
$8.984 billion. After total expenditures and net transfers of $8.894
billion, Fiscal Year 1995 ended with an Unrestricted Accounting General Fund
balance of $445 million and an Unreserved Accounting General Fund balance of
$1.021 billion.
For Fiscal Year 1996, ending June 30, 1996, total revenues are estimated
to be approximately $9.237 billion. Total expenditures and transfers are
estimated at $9.363 billion and after deducting a Cash Flow Account
appropriations carry forward of $350 million and Budget Reserve Account carry
forward of $220 million, it is estimated that an Unrestricted Accounting
General Fund balance of $324 million will remain.
For Fiscal Year 1997, ending June 30, 1997, total revenues are estimated
to be approximately $9.215 billion. Total expenditures and transfers are
estimated at $9.488 billion and after deducting a Cash Flow Account
appropriations carry forward of $350 million and Budget Reserve Account carry
forward of $270 million, it is estimated that an Unrestricted Accounting
General Fund balance of $1.025 billion will remain.
In 1992 the Minnesota Legislature established the MinnesotaCarer program
to provide subsidized health care insurance for long term uninsured
Minnesotans, reform individual and small group health insurance regulations,
create a health care analysis unit to collect condition-specific data about
health care practices in order to develop practice parameters for health care
providers, implement certain cost containment measures into the system, and
establish an office of rural health to ensure the health care needs of all
Minnesotans are being met. The program is not part of the Accounting General
Fund. A separate account, called the Health Care Access Fund, has been
established in Minnesota's Special Reserve Fund to account for revenues and
expenditures for the MinnesotaCarer program. Program expenditures are
limited to revenues received in the Health Care Access Fund. Program
revenues are derived from dedication of insurance premiums paid by
individuals, five cents of the state cigarette tax through December 31, 1993,
and permanent taxes including a 2 percent gross revenue tax on hospitals,
health care providers and wholesale drug distributors, a 2 percent use tax on
prescription drugs and a 1 percent gross premium tax on nonprofit health
service plans and HMOs. A previously required transfer from the Health Care
Access Fund to the Accounting General Fund was eliminated after Fiscal year
1995. The purpose of the transfer was to pay for increased costs in the
generally funded Medicaid (MA) and General Assistance Medical Care (GAMC)
programs, due to applicants found ineligible for MinnesotaCarer, but
qualifying for MA or GAMC.
The 1993 Legislature adopted legislation establishing a school district
credit enhancement program. The legislation authorizes and directs the
Commissioner of Finance, under certain circumstances and subject to the
availability of funds, to issue a warrant and authorize the Commissioner of
Children, Families and Learning to pay debt service coming due on school
district tax and state-aid anticipation certificates of indebtedness and
school district general obligation bonds in the event that the school
district notifies the Commissioner of Children, Families and Learning that it
does not have sufficient money in its debt service fund for that purpose, or
the paying agent informs the Commissioner of Children, Families and Learning
that it has not received from the school district timely payment of moneys to
be used to pay debt service. The legislation appropriates annually from the
Accounting General Fund to the Commissioner of Children, Families and
Learning the amount needed to pay any warrants which are issued. The amounts
paid on behalf of any school district are required to be repaid by it with
interest, either through a reduction of subsequent state-aid payments or by
the levy of an ad valorem tax which may be made with the approval of the
Commissioner of Children, Families and Learning. As of April 1, 1996 there
were approximately $1.913 billion principal amount of bonds enrolled in the
program, some of which have been paid. The State has not had to made any
debt service payments on behalf of school districts under the program and
does not expect to make any payments in the future.
The amount of revenue generated by Minnesota's tax structure, because of
the dependence on the income and sales taxes, is sensitive to the status of
the national and local economy. There can be no assurance that the financial
problems referred to or similar future problems will not affect the market
value or marketability of the Minnesota Municipal Obligations or the ability
of the issuers thereof to pay the interest or principal of such obligations.
Minnesota general obligation bonds are rated AAA by Moody's and AA+ by
S&P and AAA by Fitch.
Selected Economic and Demographic Factors. Diversity and a significant
natural resource base are two important characteristics of Minnesota's
economy. Minnesota's economy is being lifted by strong earnings growth in
the service industry, rising housing construction, and job gains which are
slowly firming up to labor market.
When viewed in 1995 at a highly aggregative level of detail, the
structure of Minnesota's economy parallels the structure of the U.S. economy
as a whole. Minnesota employment in ten major industrial sectors was
distributed in approximately the same proportions as national employment. In
all sectors, the share of total Minnesota employment was within two
percentage points of national employment share.
Minnesota's employment in the durable goods industries continues to be
highly concentrated in industries specializing in the manufacturing of
industrial machinery, fabricated metal and instruments. This emphasis is
partially explained by the location in Minnesota of computer-related
equipment manufacturers. Further, manufacturers of food products, wood
products, and printed and published materials joined the high technology
manufacturing group which has lead to significant business expansion in
Minnesota in this decade.
The importance of Minnesota's rich natural resource base for overall
employment is apparent in the employment mix in non-durable goods industries.
In 1995, approximately 29.0 percent of Minnesota's non-durable goods
employment was concentrated in food and kindred industries, and approximately
18.8 percent in paper and allied industries. This compares to approximately
21.7 percent and 8.9 percent, respectively, for comparable sectors in the
national economy. both of these rely heavily on renewable resources in
Minnesota. Over half of Minnesota's acreage is devoted to agricultural
purposes and nearly one-third to forestry. Printing and publishing are also
relatively more important in Minnesota than in the U.S.
Mining is currently a less significant factor in the Minnesota economy
than formerly. Mining employment, primarily in the iron ore or taconite
industry, dropped from 17.3 per thousand in 1979 to 7.9 per thousand in 1995.
It is not expected that mining employment will soon return to 1979 levels.
However, Minnesota retains vast quantities of taconite as well as copper,
nickel, cobalt and peat which may be utilized in the future.
While Minnesota's involvement in the defense industry is limited, as
military procurement cuts continue, Minnesota employers may face challenges
in maintaining employment and sales. More importantly, Minnesota firms
producing electronic components, communication equipment, electrical
equipment, chemicals, plastics, computers and software may face additional
competition from companies converting from military to civilian production.
Job expansion and business start-ups improved remarkably in this decade
with an average rate for new businesses at 2 percent, while business
dissolutions were on the decline.
Finally, despite a state economy that is outperforming the national
economy, the future economic outlook is guarded primarily because the growth
of the health care industry has slowed significantly and the mainframe
computer and airline industries face continued softness.
Minnesota resident population grew from 4,085,000 in 1980 to 4,387 in
1990 or, at an average annual compound rate of .7 percent. In comparison,
U.S. population grew at an annual compound rate of .9 percent during this
period. Minnesota population is currently forecast by the U.S. Department of
Commerce to grow at an annual compound rate of .8 percent through 2005.
Employment and Income Growth in Minnesota. In the period 1980 to 1990,
overall employment growth in Minnesota lagged behind national growth.
However, manufacturing has been a strong sector, with Minnesota employment
outperforming its U.S. counterpart in both the 1980-1990 and 1990-1995
periods.
In spite of the strong manufacturing sector, during the 1980 to 1990
period, total employment in Minnesota increased 17.9 percent as compared to
20.1 percent nationally. Most of Minnesota's slower growth can be associated
with declining agricultural employment and two recessions int he U.S. economy
in the early 1980's which were more severe in Minnesota than nationwide.
Minnesota non-farm employment growth generally kept pace with the nation in
the period after the 1981-82 recession ended in late 1982. In the period
1990 to 1995, non-farm employment growth in Minnesota exceeded national
growth. Minnesota's non-farm employment grew 11.5 percent compared to 6.6
percent nationwide.
Since 1980, Minnesota per capita personal income has been within three
percentage points of national per capita personal income. The state's per
capita income, which is computed by dividing personal income by total
resident population, has generally remained above the national average in
spit of the early 1980's recessions and some difficult years in agriculture.
In 1994, Minnesota per capita personal income was 103.0 percent of its U.S.
counterpart.
Another measure of the vitality of Minnesota's economy is its
unemployment rate. During 1994 and 1995, respectively, Minnesota's monthly
unemployment rate was generally less than the national unemployment rate,
averaging 3.6 percent in 1995, as compared to the national average of 5.2
percent.
New Jersey Series
New Jersey's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural
areas with selective commercial agriculture. New Jersey's principal
manufacturing industries produce chemicals, pharmaceuticals, electrical
equipment and instruments, machinery, services, wholesale and retail trade,
food products, and printing. Other economic activities include services,
wholesale and retail trade, insurance, tourism, petroleum refining and truck
farming.
While New Jersey's economy continued to expand during the late 1980s,
the level of growth slowed considerably after 1987. By the beginning of the
national recession in July 1990 (according to the National Bureau of Economic
Research), construction activity had already been declining in New Jersey for
nearly two years, growth had tapered off markedly in the service sectors and
the long-term downward trend of factory employment had accelerated, partly
because of a leveling off of industrial demand nationally. The onset of
recession caused an acceleration of New Jersey's job losses in construction
and manufacturing, as well as an employment downturn in such previously
growing sectors as wholesale trade, retail trade, finance, utilities and
trucking and warehousing. The net effect was a decline in the State's total
nonfarm wage and salary employment from a peak of 3,689,800 in 1989 to a low
of 3,445,000 in 1992. This loss has been followed by an employment gain of
176,400 from May 1992 to October 1995, a recovery of 67% of the jobs lost
during the recession. In July 1991, S&P lowered the State's general
obligation bond rating from AAA to AA+.
Reflecting the downturn, the rate of unemployment in the State rose from
a low of 3.6% during the first quarter of 1989 to a recessionary peak of 8.4%
during 1992. Since then, the unemployment rate fell to 6.4% during the first
ten months of 1995. Despite an increase reported in December 1995, the
annualized unemployment rate remained 6.4% for the fourth quarter of 1995.
The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Sales and Use Tax collections for Fiscal Year 1996 as
$4.310 billion, a 4.3% increase from Fiscal Year 1995 revenue. The Fiscal
Year 1997 estimate of $4.403 billion, is a 2.2% increase from the Fiscal Year
1996 estimate.
The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Gross Income Tax collections for Fiscal Year 1996 of $4.547
billion, a 0.2% increase from Fiscal Year 1995 revenue. Included in the
Fiscal Year 1995 revenue is a 5% reduction of personal income tax rates
effective January 1, 1994 and a further 10% reduction of personal income tax
rates effective January 1, 1995 (on joint income under $80,000). The
estimate for fiscal year 1997 as shown in the Governor's Fiscal Year 1997
Budget Message of $4.610 billion, is a 1.4% increase from the Fiscal Year
1996 estimate. Included in the Fiscal Year 1996 forecast is the 10%
reduction of personal income tax rates effective January 1, 1995 and a
further 15% reduction of personal income tax rates effective January 1, 1996
(on joint incomes under $80,000).
The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Corporation Business Tax collections for Fiscal Year 1996
of $1.198 billion, a 10.4% increase from Fiscal Year 1995 revenue. Included
in the Corporation Business Tax forecast is a reduction in the Corporation
Business Tax rate from 9.375% to 9.0% of net New Jersey income. The Fiscal
Year 1997 forecast as shown in the Governor's Fiscal 1997 Budget Message of
$1.210 billion, represents a 1.0% increase from the Fiscal Year 1996
estimate.
The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts Other Miscellaneous Taxes Fees and Revenues collections for
Fiscal Year 1996 as $1.514 billion, a decrease from fiscal year 1995 revenue.
The Fiscal Year 1996 revised estimates anticipate that the Legislature
will enact a Tax Amnesty program. It is estimated that a 90-day tax amnesty
will yield $70 million.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur
a deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such appropriation. In
the past when actual revenues have been less than the amount anticipated in
the budget, the Governor has exercised her plenary powers leading to, among
other actions, implementation of a hiring freeze for all State departments
and the discontinuation of programs for which appropriations were budgeted
but not yet spent.
The State appropriated approximately $15.439 billion and $16.109 billion
for Fiscal 1995 and 1996, respectively. Of the $16.109 billion appropriated
in Fiscal Year 1996 from the General Fund, the Property Tax Relief Fund, the
Casino Control Fund, the Casino Revenue Fund and Gubernatorial Elections
Fund, $6.447 billion (40.0%) is appropriated for State aid to local
governments, $3.746 billion (23.3%) is appropriated for grants-in-aid
(payments to individuals or public or private agencies for benefits to which
a recipient is entitled by law or for the provision of service on behalf of
the State), $5.233 billion (32.5%) for Direct State services, $466.3 million
(2.9%) for debt service on State general obligation bonds and $217.1 million
(1.3%) for capital construction.
Should tax revenues be less than the amount anticipated in the Budget
for a fiscal year, the Governor may, pursuant to statutory authority, prevent
any expenditure under any appropriation. The appropriations for Fiscal Year
1996 and for Fiscal year 1997 reflect the amounts contained in the Governor's
Fiscal Year 1997 Budget Message.
The State has made appropriations for principal and interest payments
for general obligation bonds for fiscal years 1993 through 1996 in the
amounts of $444.3 million, $119.9 million, $103.6 million and $466.3 million,
respectively. The Governor's Fiscal Year 1997 Budget Message for Fiscal Year
1997 includes an appropriation in the amount of $463.1 million for principal
and interest payments for general obligations bonds.
North Carolina Series
Economic Characteristics. The economic profile of North Carolina
consists of a combination of industry, agriculture, and tourism.
Non-agricultural wage and salary employment accounted for approximately
3,361,100 jobs in 1994, of which approximately 858,900 were in manufacturing.
According to the North Carolina Employment Security Commission, in November
1994, the State ranked ninth in non-agricultural employment and eighth in
manufacturing employment. During the period from 1980 to 1993, per capita
income in the State grew from $7,999 to $18,702, an increase of 133.8%. The
North Carolina Employment Security Commission estimated the March 1995
seasonally adjusted unemployment rate to be 3.9%, as compared with a national
unemployment rate of 5.5%.
Agriculture is a basic element in North Carolina's economy. Gross
agricultural income in 1993 exceeded $5.3 billion, placing the State tenth in
the nation in gross agricultural income. Tobacco production is the leading
source of agricultural income, accounting for 20% of gross agricultural
income. The poultry industry (chicken, eggs, broilers, and turkeys) provides
nearly 34% of the total agricultural income. The pork industry continues to
expand and North Carolina is now the second largest pork-producing State.
Pork production accounts for 17% of gross agricultural income.
North Carolina's agricultural diversity and a continuing push in
marketing efforts have protected farm income from some of the wide variations
experienced in States where most of the agricultural economy is dependent on
a small number of agricultural commodities. North Carolina is the third most
diversified agricultural State in the nation. In 1993, there were
approximately 59,000 farms in the State. A strong agribusiness sector also
supports farmers with farm inputs (agricultural chemicals and fertilizer,
farm machinery, and building supplies) and processing of commodities produced
by farmers (vegetable canning and cigarette manufacturing). North Carolina's
agricultural industry, including food, fiber and forest, contributes over $42
billion annually to the State's economy.
The labor force has undergone significant changes during recent years.
The State has moved from an agricultural to a service and goods producing
economy. According to the Employment Security Commission, the labor force
has grown from 2,855,200 in 1980 to 3,609,000 in 1994, an increase of 26.4%.
The Travel and Tourism Division of the North Carolina Department of
Commerce has estimated that in excess of $8 billion was spent on tourism in
the State in 1993 (up from slightly less than $7 billion in 1990), two-thirds
of which was derived from out-of-State travelers. The Travel and Tourism
Division estimates approximately 250,000 people were employed in
tourism-related jobs in the State. The State maintains 43 State parks
covering an area of approximately 135,000 acres. State forests cover an area
of approximately 35,355 acres.
Revenue Structure. North Carolina's two major operating funds which
receive revenues and from which monies are expended are the General Fund and
the Highway Fund. The 1989 General Assembly also created the Highway Trust
Fund to provide monies for a major highway construction program for the
State. There are no prohibitions or limitations in the North Carolina
Constitution on the State's power to levy taxes except an income tax rate
limitation of 10% and a prohibition against a capitation or "poll" tax.
A portion of North Carolina's tax revenue is generated from individual
and corporate income taxes, sales and use taxes, highway use tax on certain
motor vehicle rentals, corporate franchise tax, taxes on alcoholic beverages,
tobacco products and soft drinks, inheritance taxes, insurance taxes levied
on insurance companies and other taxes, which revenues are deposited into the
State's General Fund. Additional tax revenue is generated from a motor fuels
tax, highway use tax and motor vehicle license tax, which revenue is
deposited in the Highway Fund and Highway Trust Fund. Additional non-tax
revenue deposited to the General Fund consists of (i) institutional and
departmental receipts which are deposited with the State Treasurer, including
fees, tuition payments, and Federal funds collected by State agencies, (ii)
interest earned by the State Treasurer on investments of General Fund monies,
and (iii) revenues from the judicial branch. Federal aid is an important
source of non-tax revenue for the Highway Fund and Highway Trust Fund.
State Budget. The North Carolina Constitution requires that the total
expenditures of the State for the fiscal period covered by the budget not
exceed the total of receipts during the fiscal period and the surplus
remaining in the State Treasury at the beginning of the period.
The Executive Budget Act, adopted by the General Assembly in 1925, sets
out the procedure by which the State's budget is adopted and administered.
The Act requires the adoption of a balanced budget. North Carolina's
Governor does not have the power to veto budget or other legislative actions;
however, North Carolina General Statute Section 143-25 provides that the
Governor, as ex officio Director of the Budget, "may reduce all of said
appropriations, pro rata when necessary, to prevent an overdraft or deficit
to the fiscal period for which such appropriations are made. The purpose and
policy of this Article is to provide and insure that there shall be no
overdraft or deficit in the General Fund of the State at the end of the
fiscal period, growing out of appropriations for maintenance, and the
Director of the Budget is directed and required to so administer this Article
so as to prevent any such overdraft or deficit. Prior to taking any action
under this section to reduce appropriations pro rata, the Governor may
consult with the Advisory Budget Commission." The Governor may take less
drastic action to reduce expenditures to maintain a balanced budget before
the need for across-the-board appropriations reduction arises.
The 1993 Sessions of the General Assembly reduced departmental operating
requirements $357.6 million in 1994-95 and authorized continuation funding of
$8,603.4 million for 1994-95. The saving reductions were based on
recommendations from the Governor, the Government Performance Audit Committee
and selective savings identified by the General Assembly. After review of
the continuation budget, the General Assembly authorized funding for planned
expansion of existing programs and new initiatives for children, economic
development, education, human services and environmental programs. Expansion
funds of $1,650.4 million for 1994-95 were approved by the 1993 Regular
Session, the 1994 Special Session and the 1994 Regular Session of the General
Assembly. In 1993, the General Assembly appropriated a $66.7 million
transfer to the Savings Reserve Account, in addition to the regularly
scheduled transfer thereto from the credit balance in the General Fund. The
General Assembly authorized $189.4 million for capital improvements spending
and $60 million for repairs and renovations for 1994-95.
With capital projects being financed with bond proceeds and fund
balance, continuation appropriations and expansion items discussed above are
supported with the assistance of a number of new taxes and fees enacted by
the 1991 Session of the General Assembly. These taxes and fees generated an
estimated $665.5 million in 1991-92. Revenues for 1992-93 were estimated to
include an additional $95.6 million as a result of the actions of the 1991
Session of the General Assembly. These taxes and fees combined with a
projected growth of 4.8% for 1994-95 finance the authorized budget by the
1993 Session of the General Assembly.
The Highway Fund revenue collections totalled $982.4 million in fiscal
year 1993-94, $37.8 million above budgeted revenues. Sources of revenue for
the Highway Fund include taxes on the sale of motor fuels as well as
registration and licensing fees for motor vehicles.
The Highway Trust Fund is more dependent on consumption-based revenues,
such as taxes and fees derived from sales of motor fuels and vehicles, than
the Highway Fund, which draws upon more stable sources for its revenue, such
as motor vehicle registration and licensing fees. Collections for the
Highway Trust Fund totaled $643.7 million in 1993-94, $86 million more than
the budgeted amount. Total Highway Trust Fund collections increased
approximately 12.5% in 1993-94 over 1992-93.
The budget is based upon estimated revenues and a multitude of existing
and assumed State and non-State factors, including State and national
economic conditions, international activity and federal government policies
and legislation.
State Indebtedness. The North Carolina Constitution provides in
substance that the State shall not contract a debt, other than refunding
debt, by borrowing money in any biennium and pledge its faith and credit to
the payment thereof for an amount in excess of two-thirds of the amount by
which the outstanding debt of the State was reduced in the preceding biennium
unless the proposed debt is submitted to and approved by the voters at an
election.
The State is authorized by the Constitution to borrow in anticipation of
the collection of taxes due and payable within the current fiscal year to an
amount not exceeding 50% of such taxes. The State has not borrowed in
anticipation of taxes since fiscal year 1959-60.
There are no bonds of the State outstanding which contemplate the
appropriation by the General Assembly of such amount as may be necessary to
make up any deficiency in a debt service reserve. Furthermore, no
legislation has been enacted by the General Assembly which would authorize
the issuance of any such bonds.
Litigation. The following are cases pending in which the State of North
Carolina faces the risk of either a loss of revenue or an unanticipated
expenditure but which, in the opinion of the Department of State Treasurer,
would not materially adversely affect the State of North Carolina's ability
to meet its financial obligations:
1. Leandro, et al. v. State of North Carolina and State Board of
Education. On May 25, 1994, students and boards of education in five
counties in the State filed suit in Superior Court requesting a declaration
that the public education system of North Carolina, including its system of
funding, violates the State constitution by failing to provide adequate or
substantially equal educational opportunities and denying due process of law
and violates various statutes relating to public education. The suit
requests the Court for such other equitable relief, including injunction or
mandamus, as the Court deems proper.
The suit is similar to a number of suits in other states, some of which
resulted in holdings that the respective systems of public education funding
were unconstitutional under the applicable state law. The defendants filed a
motion to dismiss for failure to state a cause of action, which was denied at
the trial court level. An appeal from the decision was taken to the North
Carolina Court of Appeals, which reversed the trial court and granted
defendants motion to dismiss. The plaintiffs have appealed to the North
Carolina Supreme Court, and oral argument is scheduled for September 12,
1996. The North Carolina Attorney General's Office believes that sound legal
arguments support the State's position.
2. Francisco Case. On August 10, 1994, a class action lawsuit was
filed in Wake County Superior Court against the Superintendent of Public
Instruction and the State Board of Education on behalf of a class of parents
and their children who are characterized as limited English proficient. The
complaint alleges that the State has failed to provide funding for the
education of these students and has failed to supervise local school systems
in administering programs for them. The complaint does not allege an amount
in controversy, but asks the Court to order the defendants to fund a
comprehensive program to insure equal educational opportunities for limited
English proficient children. Discovery is underway, but no trial date has
been set. The North Carolina Attorney General's Office believes that sound
legal arguments support the State's position.
3. Bailey case -- State Tax Refunds-State Retirees. State and local
government retirees filed a class action suit in 1990 as a result of the
repeal of the income tax exemptions for state and local government retirement
benefits. The original suit was dismissed after the North Carolina Supreme
Court ruled in 1991 that the plaintiffs had failed to comply with state law
requirements for challenging unconstitutional taxes and the United States
Supreme Court denied review. In 1992, many of the same plaintiffs filed a
new lawsuit alleging essentially the same claims, including breach of
contract, unconstitutional impairment of contract rights by the State in
taxing benefits that were allegedly promised to be tax-exempt and violation
of several state constitutional provisions. The North Carolina Attorney
General's Office estimates that the amount in controversy is approximately
$40-$45 million annually for tax years 1989 through 1992. A decision was
entered in favor of the plaintiffs at the trial court level. The State has
appealed the decision to the North Carolina Supreme Court and oral arguments
are scheduled for September 12, 1996. The North Carolina Attorney General's
Office believes that sound legal arguments support the State's position.
4. Faulkenbury v. Teachers' and State Employees' Retirement System,
Peele v. Teachers' and State Employees' Retirement System and Woodard v.
Local Governmental Employees' Retirement System. Plaintiffs are disability
retirees who brought class actions in state court challenging changes in the
formula for payment of disability retirement benefits and claiming impairment
of contract rights, breach of fiduciary duty, violation of other federal
constitutional rights, and violation of state constitutional and statutory
rights. The State estimates that the cost in damages and higher prospective
benefit payments to plaintiffs and class members would probably amount to $50
million or more in Faulkenbury, $50 million or more in Peele and $15 million
or more in Woodard, all ultimately payable, at least initially, from the
funds of the Retirement Systems. Upon review in Faulkenbury, the North
Carolina Court of Appeals and Supreme Court have held that claims made in
Faulkenbury, substantially similar to those in Peele and Woodard, for breach
of fiduciary duty and violation of federal constitutional rights brought
under the federal Civil Rights Act either do not state a cause of action or
are otherwise barred by the statute of limitations. In 1994 plaintiffs took
voluntary dismissals of their claims for impairment of contract rights in
violation of the United States Constitution and filed new actions in federal
court asserting the same claims along with claims for violation of
constitutional rights in the taxation of retirement benefits. The remaining
State court claims in all cases were heard in the Superior Court of Wake
County and the trial court rendered a decision in favor of the plaintiffs.
The State has appealed the decision to the North Carolina Supreme Court and
oral arguments are scheduled for September 12, 1996. The federal court
actions have been stayed pending the trial in State Court. The Attorney
General's Office believes that sound legal arguments support the State's
position in these cases.
5. Fulton Case. The State's intangible personal property tax levied
on certain shares of stock, as in effect for taxable years ending before
January 1, 1995, was challenged by the plaintiff on grounds that it violates
the United States Constitution Commerce Clause by discriminating against
stock issued by corporations that do all or part of their business outside
the State. The plaintiff in the action is a North Carolina corporation that
does all or part of its business outside the State. The plaintiff sought to
invalidate the tax in its entirety and to recover tax paid on the value of
its shares in other corporations. The North Carolina Court of Appeals
invalidated the taxable percentage deduction and excised it from the statute
beginning with the 1994 tax year. The North Carolina Supreme Court reversed
the Court of Appeals and held that the tax is valid and constitutional. The
plaintiff's petition for review by the United States Supreme Court was
granted, and on February 21, 1996, the United States Supreme Court reversed
the lower courts and invalidated the tax in its entirety. The case is
currently on remand to the North Carolina Supreme Court for determination of
an appropriate remedy. Net collections from the tax for the fiscal year
ended on June 30, 1993 amounted to $120.6 million. The North Carolina
General Assembly has repealed the intangibles tax, effective for taxable
years beginning on or after January 1, 1995.
Ohio Series
State Economy and Budget. Non-manufacturing industries now employ
approximately 78.9% of all payroll workers in the State of Ohio. However,
due to the continued importance of manufacturing industries (including auto-
related manufacturing), economic activity in Ohio, as in many other
industrially developed States, tends to be more cyclical than in some other
States and in the nation as a whole. Agriculture also is an important
segment of the Ohio economy. The financial condition of the State has
fluctuated in a pattern related to national economic conditions, with periods
of prolonged stringency characterizing fiscal years 1980 through 1983.
Additionally, the 1980-82 recession brought with it a substantial increase in
bankruptcies and foreclosures. While the State's economy improved since
1983, the State experienced an economic slowdown in 1990-91, consistent with
the national economic conditions during that period.
The State constitution imposes a duty on the Ohio General Assembly to
"provide for raising revenue, sufficient to defray the expenses of the State,
for each year, and also a sufficient sum to pay the principal and interest as
they become due on the State debt." The State is effectively precluded by
law from ending a fiscal year or a biennium in a "deficit" position. State
borrowing to meet casual deficits or failures in revenues or to meet expenses
not otherwise provided for is limited by the constitution to $750,000.
The State finances most of its operations through the General Revenue
Fund ("GRF") which receives general State revenues not otherwise dedicated
pursuant to certain constitutional and statutory claims on State revenues.
The GRF sources consist primarily of personal income and sales-use taxes.
The GRF ending (June 30) fund balance is reduced during less-favorable
national economic periods and then increases during more favorable economic
periods.
The Office of Budget and Management ("OBM") reported positive $781.3
million and $1,138.5 million ending fund and cash balances, respectively, for
the GRF for fiscal year ended June 30, 1996. In addition, as of June 30,
1996 the Budget Stabilization Fund ("BSF") had a cash balance of $828.3
million.
The GFR appropriations bill for the biennium ending June 30, 1997 was
passed on June 28, 1995 and promptly signed, with selective vetoes, by the
Governor. The act provides for total GRF biennial expenditures of
approximately $33.5 billion, an increase over those for the 1994-95 fiscal
biennium. As reported by OBM, the high ending GRF fund balance for the
fiscal year ended June 30, 1996 guaranteed the availability of funds to
support an income tax reduction for 1996 and a variety of educational
projects for primary and secondary education in the State. Pursuant to a
recently enacted budget corrections bill, the OBM reported that it will be
able to certify a projected $400.0 million income tax cut, or approximately
6.5% reduction in income taxes.
State statutory provisions permit the adjustment of payment schedules
and the use of the Total Operating Fund ("TOF") to manage temporary GRF cash
flow deficiencies. The State has not undertaken external revenue
anticipation borrowing.
TOF includes the total consolidated total cash balances, revenues,
disbursements and transfers of the GRF and several other specified funds.
TOF cash balance at June 30, 1996 was $5.063 billion. These cash balances
are consolidated only for the purpose of meeting cash flow requirements and,
except for the GRF, a positive cash balance must be maintained for each
discrete fund included in the TOF. The GRF is permitted to incur a temporary
cash deficiency by drawing upon the available consolidated cash balance in
the TOF. The amount of that permitted GRF cash deficiency at any time is
limited to 10% of GRF revenues for the then-preceding fiscal year. GRF cash
flow deficiencies occurred in seven months of the fiscal year ended June 30,
1996, the highest being $742.0 million in December 1995.
State Debt. The Ohio Constitution prohibits the incurrence or
assumption of debt by the State without a popular vote except to (i) cover
causal deficits or failures in revenues limited in amount to $750,000 and
(ii) repel invasion, suppress insurrection or defend the State in war.
At various times between 1921 and 1993, the voters of Ohio, by thirteen
specific constitutional amendments, have authorized the incurrence of up to
$6.764 billion in State debt to which taxes or excises were pledged for
payment. As of February 1, 1996, excluding Highway Obligations Bonds
discussed below, $3.405 billion had been issued, of which $2.642 billion had
been retired and approximately $777.9 million (all evidenced by bonds)
remained outstanding. The only such debt still authorized to be incurred is
a portion of the Highway Obligations Bonds and Coal Development Bonds as well
as State general obligation bonds for local government infrastructure
projects, described below and general obligation park bonds.
Approved at the November 1995 election was a constitutional amendment
authorizing additional Highway Obligations Bonds. As of February 1, 1996,
the General Assembly had authorized approximately $1.855 billion of highway
bonds. The amendment authorizes not more than $1.2 billion to be outstanding
at any one time and not more than $220 million to be issued in a fiscal year.
A 1985 constitutional amendment authorized up to $100 million in State
full faith and credit obligations for coal research and development to be
outstanding at any one time. In addition, the General Assembly has
authorized the issuance of $150 million of Coal Development Bonds. As of
February 1, 1996, $95 million of Coal Development Bonds were issued, of which
$45.3 million were outstanding.
A 1987 State constitutional amendment authorized the issuance of $1.2
billion of State full faith and credit obligations for infrastructure
improvements of which no more than $120 million may be issued in any calendar
year. A 1995 constitutional amendment extended this authority by authorizing
an additional $1.2 billion of State full faith and credit obligations to be
issued over ten years. As of February 1, 1996, approximately $960.0 million
of such obligations were issued, of which $805.4 million were outstanding.
A constitutional amendment adopted in 1990 authorizes greater State and
political subdivision participation in the provision of housing for
individuals and families. This supplements the previously constitutionally
authorized for loans-for-lenders and other housing assistance programs,
financed in part with State Revenue Bonds. The amendment authorizes the
General Assembly to provide for State assistance for housing in a variety of
manners. The General Assembly could authorize State borrowing for the
purpose by the issuance of State obligations secured by a pledge of all or a
portion of State revenues or receipts, although the obligations may not be
supported by the State's full faith and credit.
A constitutional amendment approved by the voters in 1993 authorizes
$200.0 million in State general obligation bonds to be outstanding for parks,
recreation and natural resource purposes (no more than $50.0 million to be
issued in any one fiscal year). The General Assembly in the general capital
appropriations act for the 1995-96 capital appropriations biennium authorized
the Commissioners of the Sinking Fund to issue $100.0 million of such
obligations.
A constitutional amendment approved at the November 1994 election
pledges the full faith and credit and taxing power of the State to meeting
certain guarantees under the State's tuition credit program. That program
provides for purchase of tuition credits, for the benefit of State residents,
guaranteed to cover a specified amount when applied to the cost of higher
education tuition. Under the amendment, to secure the tuition guarantees the
General Assembly shall appropriate moneys sufficient to offset any deficiency
that may occur from time to time in the trust fund that provides for the
guarantees and at any time necessary to make payment of the full amount of
any tuition payment or refund required by a tuition payment contract.
As of February 1, 1996, approximately $1.645 billion in Highway
Obligations Bonds had been issued and $457.7 million were outstanding.
Resolutions have been introduced in both houses of the General Assembly
that would submit a constitutional amendment relating to certain other
aspects of the State debt. The amendment would authorize, among other
things, the issuance of general obligation state debt for a variety of
purposes, with debt service on all general obligation State debt and GRF-
supported obligations not to exceed 5% of the preceding fiscal year's GRF
expenditures. It cannot be predicted whether any such amendment will in fact
be submitted, or, if submitted, whether it would be approved by the electors.
In addition, the State constitution authorizes the issuance, for certain
purposes, of State obligations the owners or holders of which are not given
the right to have taxes or excises levied by the General Assembly to pay
principal and interest. Such special obligations include bonds and notes
issued by, among others, the Ohio Public Facilities Commission ("OPFC"), the
Ohio Building Authority ("OBA") and certain obligations issued by the
Treasurer of State. As of February 1, 1996 the OPFC had issued approximately
$3.821 billion for higher education facilities, approximately $2.164 billion
of which were outstanding, $997.535 million for mental health facilities,
approximately $458.7 million of which were outstanding and $184.95 million
for parks and recreation facilities, approximately $110.95 million of which
were outstanding.
A statewide economic development program assists, with loans and loan
guarantees, the financing of facilities for industry, commerce, research and
distribution. The law authorizes the issuance of State bonds and loan
guarantees secured by a pledge of portions of the State profits from liquor
sales. The General Assembly has authorized the issuance of these bonds by
the State Treasurer, with a general maximum of $300 million currently
authorized to be outstanding at any one time (excluding bonds issued to meet
guarantees, but less any amount be which 4% of the unpaid principal amount of
guaranteed loan payments exceeds the funded amount applicable to the
guarantees). The aggregate amount from the liquor profits to be used in any
fiscal year in connection with these bonds (except for bonds issued to meet
guarantees) may not under present law exceed $25 million. The total of
unpaid guaranteed loan amounts and unpaid principal of direct loans may not
exceed $500 million. Of the $147.685 million liquor profits refunding bonds
issued in 1989, $69.284 million is outstanding; the highest future fiscal
year debt service on those bonds, which are payable through 2000, is $18.261
million.
Only a portion of State capital needs can be met by direct GRF
appropriations; therefore, additional State borrowing for capital purposes
has been and will be required. Under present constitutional limitations,
most of that borrowing will be primarily by lease-rental supported
obligations such as those issued by OPFC and OBA.
The general capital appropriations act for the 1995-96 capital
appropriations biennium authorizes additional borrowing. It authorizes
issuance by OPFC of obligations, in addition to those previously authorized
by the General Assembly, in the amounts of $679.2 million for higher
education capital facilities projects (a substantial number of which are
renovations of equipment and improvements to existing facilities), $77.5
million for mental health and retardation facilities projects, and $30.0
million for parks and recreation facilities. It also authorized the OBA to
issue obligations in the amounts of $221.0 million for local jails and
prisons, $48.0 million for Department of Youth Services facilities, $230.3
million for Department of Administrative Services facilities, $42.5 million
for Ohio Arts Facilities Commission facilities, $11.2 million for Department
of Public Safety and $43.95 million for Ohio Department of Transportation
facilities. In addition, the Treasurer of State has been authorized to issue
bonds to finance approximately $138.6 million of capital improvements for
elementary and secondary public school facilities ($68.64 issued). As of
February 1, 1996, the Commissioners of the Sinking Fund had additional
General Assembly authorization to issue $55.0 million of additional Coal
Development Bonds, $209.7 million of Highway Obligation Bonds, and $50.0
million of Natural Resources Bonds.
A State law, originally enacted in 1986 and now amended (the "Rail
Act"), authorizes the Ohio Rail Development Commission (replacing the prior
Ohio High-Speed Rail Authority to issue obligations to finance the cost of
rail service projects within the State, either directly or by loans to other
entities. The Rail Act originally was limited to inter-city passenger
services. The amendments extend the authority to include freight and
commuter service. The Rail Development Commission (or the predecessor
Authority) from time to time has considered financing plan options and the
general possibility of issuing bonds or notes. The Rail Act prohibits,
without express approval by joint resolution of the General Assembly, the
collapse of any escrow of financing proceeds for any purpose other than
payment of the original financing, the substitution of any other security,
and the application of any proceeds to loans or grants. The Rail Act
authorizes the Rail Development Commission, but only with subsequent General
Assembly action, to pledge the faith and credit of the State but not the
State's power to levy and collect taxes (except ad valorem property taxes if
subsequently authorized by the General Assembly) to secure debt service on
any post-escrow obligations and, provided it obtains the annual consent of
the State Controlling Board, to pledge to and use for the payment of debt
service on any such obligations all excises, fees, fines and forfeitures and
other revenues (except highway use receipts) of the State after provision for
the payment of certain other State obligations.
The State and State agencies have issued revenue bonds that are payable
from net revenues of revenue-producing facilities or categories of
facilities, such as those issued by the Ohio Turnpike Commission. Under
interpretations by Ohio courts, those revenue bonds are not "debt" within the
meaning of the constitutional provisions prohibiting the incurrence of debt
without popular vote. The Constitution also authorizes State bonds (issued
by the Ohio Housing Finance Agency) for certain housing purposes; tax moneys
may not be obligated or pledged to those bonds.
The State is a party to various legal proceedings seeking damages or
injunctive relief and generally incidental to its operations. In particular,
litigation contesting the Ohio system of school funding is pending on appeal
in the Ohio Supreme Court.
The outstanding State Bonds issued by the OPFC are rated A + by S&P and
A1 by Moody's. (Certain recent issues or portions of issues of Commission
bonds are the object of municipal bond insurance procured by the original or
subsequent purchasers and bear different ratings.) S&P rates certain of the
State's general obligation bonds AA, with AAA ratings on the State's Highway
Obligations Bonds. The State's general obligation debt is rated as Aa by
Moody's.
State Employees and Retirement Systems. The State has established five
public retirement systems to provide retirement, disability retirement and
survivor benefits. Three cover both State and local employees, one State
employees only and one local government employees only. The Public Employees
Retirement System ("PERS"), the largest of the five, covers both State and
local public employees. The State Teachers Retirement System ("STRS") and
School Employees Retirement System ("SERS") primarily cover school district
employees and public higher education employees. The Highway Patrol
Retirement System ("HPRS") covers State troopers and the Police and Fire
Pension and Disability System ("PFPDS") covers local safety forces.
As of the most recent year reported by the particular system, the
unfunded accrued liabilities of STRS and SERS were $8.043 billion and $3.182
billion, respectively, and the unfunded accrued liabilities of PERS, HPRS and
PFPDS were $4.928 billion, $51.2 million and $1.071 million, respectively.
State Municipalities. Ohio has a mixture of urban and rural population,
with approximately three-quarters urban. There are approximately 943
incorporated cities and villages (populations under 5,000) in the State; six
cities have populations of over 100,000 and nineteen over 50,000. A 1979 act
established procedures for identifying and assisting those few cities and
villages experiencing defined "fiscal emergencies."
A commission composed of State and local officials, and private sector
members experienced in business and finance appointed by the Governor, is to
monitor the fiscal affairs of a municipality facing substantial financial
problems. That act requires the municipality to develop, subject to approval
and monitoring by its commission, a financial plan to eliminate deficits and
cure any defaults and otherwise remedy fiscal emergency conditions, and to
take other actions required under its financial plan. It also provides
enhanced protection for the municipality's bonds and notes and, subject to
the act's stated standards and controls, permits the State to purchase
limited amounts of the municipality's short-term obligations (used only once,
in 1980).
As of 1994, the act has been applied to 11 cities and to 12 villages.
The situations in 9 cities and 10 villages have been resolved and their
commissions terminated. Only the Cities of East Cleveland and Nelsonville
and 2 villages remain under the procedure.
Summary. Many factors affect or could affect the financial condition of
the State and other issuers of debt obligations, many of which are not within
the control of the State or such issuers. There can be no assurance that
such factors and the resulting impact on State and local governmental
finances will not affect adversely the market value of Ohio Municipal
Obligations held in the portfolio of the Fund or the ability of the
respective obligors to make required payments on such obligations.
Pennsylvania Series
General. Pennsylvania historically has been dependent on heavy
industry, although recent declines in the coal, steel and railroad industries
have led to diversification of the Commonwealth's economy. Recent sources of
economic growth in Pennsylvania are in the service sector, including trade,
medical and health services, education and financial institutions.
Agriculture continues to be an important component for the Commonwealth's
economic structure, with nearly one-fourth of the Commonwealth's total land
area devoted to cropland, pasture and farm woodlands.
In 1994, the population of Pennsylvania was 12.1 million people.
According to the U.S. Bureau of the Census, Pennsylvania experienced a slight
increase from the 1985 estimate of 11.8 million. Pennsylvania has a high
proportion of persons 65 or older. The Commonwealth is highly urbanized,
with almost 85% of the 1990 census population residing in metropolitan
statistical areas. The cities of Philadelphia and Pittsburgh, the
Commonwealth's largest metropolitan statistical areas, together comprise
approximately 50% of the Commonwealth's total population.
Pennsylvania's average annual unemployment rate remained below the
national average between 1986 and 1990. Slower economic growth caused the
rate to rise to 6.9% in 1991 and 7.5% in 1992. The resumption of faster
economic growth resulted in a decrease in the Commonwealth's unemployment
rate to 7.0 percent in 1993. Seasonally adjusted data for March 1996 shows
and unemployment rate of 5.6% compared to an unemployment rate of 5.5% for
the United States as a whole.
Financial Accounting. Pennsylvania utilizes the fund method of
accounting and over 150 funds have been established for the purpose of
recording receipts and disbursements, of which the General Fund is the
largest. Most of the operating and administrative expenses are payable from
the General Fund. The Motor License Fund is a special revenue fund that
receives tax and fee revenues relating to motor fuels and vehicles (except
one-half cent per gallon of the liquid fuels tax which is deposited in the
Liquid Fuels Tax Fund for distribution to local municipalities) and all such
revenues are required to be used for highway purposes. Other special revenue
funds have been established to receive specified revenues appropriated to
specific departments, boards and/or commissions. Such funds include the
Game, Fish, Boat, Banking Department, Milk Marketing, State Farm Products
Show, State Racing and State Lottery Funds. The General Fund, all special
revenue funds, the Debt Service Funds and the Capital Project Funds combine
to form the Governmental Fund Types.
Enterprise funds are maintained for departments or programs operated
like private enterprises. The largest of the Enterprise funds is the State
Stores Fund, which is used for the receipts and disbursements of the
Commonwealth's liquor store system. Sale and distribution of all liquor
within Pennsylvania is a government enterprise.
Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary"). Since 1984, the Commonwealth has also prepared
financial statements in accordance with generally accepted accounting
principles ("GAAP"). The GAAP statements have been audited jointly by the
Auditor General of the Commonwealth and an independent public accounting
firm. The Budgetary information is adjusted at fiscal year end to reflect
appropriate accruals for financial reporting in conformity with GAAP. The
Commonwealth maintains a June 30th fiscal year end.
The Constitution of Pennsylvania provides that operating budget
appropriations may not exceed the actual and estimated revenues and available
surplus in the fiscal year for which funds are appropriated. Annual budgets
are enacted for the General Fund and for certain special revenue funds which
represent the majority of expenditures of the Commonwealth.
Revenues and Expenditures. Pennsylvania's Governmental Fund Types
receive over 57% of their revenues from taxes levied by the Commonwealth.
Interest earnings, licenses and fees, lottery ticket sales, liquor store
profits, miscellaneous revenues, augmentations and federal government grants
supply the balance of the receipts to these funds. Revenues not required to
be deposited in another fund are deposited in the General Fund. The major
tax sources for the General Fund are the 6% sales and use tax (34.1% of
General Fund revenues in fiscal 1995), the 2.8% personal income tax (31.3% of
General Fund revenues in fiscal 1995) and the 10.99% corporate net income tax
(11.7% of General Fund revenues in fiscal 1995). Tax and fee proceeds
relating to motor fuels and vehicles are constitutionally dedicated to
highway purposes and are deposited into the Motor License Fund. The major
sources of revenues for the Motor License Fund include the liquid fuels tax
and the oil company franchise tax. That Fund also receives revenues from
fees levied on heavy trucks and from taxes on fuels used for aviation
purposes. These latter revenues are restricted to the repair and
construction of highway bridges and aviation programs, respectively.
Revenues from lottery ticket sales are deposited in the State Lottery Fund
and are reserved by statute for programs to benefit senior citizens.
Pennsylvania's major expenditures include funding for education ($6.7
billion of fiscal 1995 expenditures, $7.0 billion of the fiscal 1996 budget,
and $7.0 billion of the fiscal 1997 budget) and public health and human
services ($12.4 billion of fiscal 1995 expenditures, $13.1 billion of the
fiscal 1996 budget and $12.9 billion of the fiscal 1997 budget).
Governmental Fund Types: Financial Condition/Results of Operations
(GAAP Basis). Financial conditions during fiscal years 1991 through 1995
were distinguished by slow economic growth and a rapid expansion of the costs
of certain governmental programs that together produced a significant stress
on the Commonwealth's budget. These problems were particularly evident
during fiscal years 1990 and 1991 when revenues were significantly below
projections, and expenditures, largely driven by demand for public welfare
services, rose above budgeted amounts. Actions taken during fiscal 1992 to
bring the General Fund back into balance, including tax increases and
expenditure restraints, resulted in a $1.1 billion reduction to the unreserved-
undesignated fund deficit for combined Governmental Fund Types and
a return to a positive fund balance. The fund balance for the Governmental
Fund Types, as restated, has increased during the 1993, 1994 and 1995 fiscal
years. At June 30, 1995, the fund balance totaled $1,927.6 million including
an unreserved-undesignated fund balance of $104.8 million.
General Fund: Financial Condition/Results of Operations.
Five Year Overview (GAAP Basis). For the five year period fiscal 1991
through fiscal 1995, total revenues and other sources rose at a 9.1 percent
average annual rate while total expenditures and other uses grew by 7.4
percent annually. Over two-thirds of the increase in total revenues and
other sources during this period occurred during fiscal 1992 when a $2.7
billion tax increase was enacted to address a fiscal 1991 budget deficit and
to fund increased expenditures for fiscal 1992. For the four year period
fiscal 1992 through fiscal 1995, total revenues and other sources increased
at an annual average of 3.3 percent, less than one-half the rate of increase
for the five year period beginning with fiscal 1991. This slower rate of
growth was due, in part, to tax rate reductions and other tax law revisions
that restrained the growth of tax receipts for fiscal years 1993, 1994 and
1995.
Expenditures and other uses followed a patten similar to that for
revenues, although with smaller growth rates, during the fiscal 1991 through
fiscal 1995 period. Program areas having the largest increase in costs for
the fiscal 1991 to fiscal 1995 period were for protection of persons and
property, due to an expansion of state prisons, and for public heath and
welfare, due to rising caseloads, program utilization and increased prices.
Recently, efforts to restrain the rapid expansion of public health and
welfare program costs have resulted in expenditure increases at or below the
total rate of increase for total expenditures in each fiscal year. For the
period fiscal 1992 through fiscal 1995, public health and welfare costs
increased by an average annual rate of 3.5 percent, well below the 5.2
percent average for total expenditures and other uses during the same period.
Fiscal 1994 Financial Results (GAAP Basis). The fund balance of the
General Fund increased by $194.0 million during the 1994 fiscal year, over
the prior fiscal year balance. The unreserved-undesignated balance increased
by $14.8 million to $79.2 million. Revenues and other sources increased by
1.8 percent over the prior fiscal year while expenditures and other uses
increased by 4.3 percent. Consequently, the operating surplus declined to
$179.4 million for fiscal 1994 from $686.3 million for fiscal 1993.
Fiscal 1994 Financial Results (Budgetary Basis). Commonwealth revenues
during the 1994 fiscal year totaled $15,210.7 million, $38.6 million above
the fiscal year estimate, and 3.9 percent over commonwealth revenues during
the previous fiscal year. The sales tax was an important contributor to the
higher than estimated revenues. The strength of collections from the sales
tax offset the lower than budgeted performance of the personal income tax
which ended the fiscal year $74.4 million below estimate. The shortfall in
the personal income tax was largely due to shortfalls in income not subject
to withholding such as interest, dividends and other income. Tax refunds in
fiscal 1994 were reduced substantially below the amount provided in fiscal
1993. The higher fiscal 1993 amount and the reduced fiscal 1994 amount
occurred because reserves of approximately $160 million were added to fiscal
1993 tax refunds to cover potential payments if the Commonwealth lost
litigation known as Philadelphia Suburban Corp. v. Commonwealth. Those
reserves were carried into fiscal 1994 until the litigation was decided in
the Commonwealth's favor in December 1993 and $147.3 million of those
reserves for tax refunds were released.
Fiscal 1995 Financial Results (GAAP Basis): Revenues and other sources
totaled $23,771.6 million, an increase of $1,135.0 million (0.5 percent) over
the prior fiscal year. The largest increase was $817.9 million in taxes
which represents a 5.6 percent increase over taxes in the prior fiscal year.
Expenditures and other uses rose by $1,364.1 million to $23,821.4 million, an
increase over the prior fiscal year of 6.1 percent. Consequently, an
operating deficit of $49.8 million was recorded for the fiscal year and led
to a decline in fund balance to $688.3 million at June 30, 1995. The fund
balance for June 30, 1994, was restated for the fiscal 1995 financial
statements. That restatement totaled $116.7 million to recognize previously
unreported revenues and expenditures for fiscal 1994. The fund balance for
June 30, 1994, as restated, was $776.3 million.
Fiscal 1995 Financial Results (Budgetary Basis): Commonwealth revenues
for the fiscal year were above estimate and exceeded fiscal year expenditures
and encumbrances. Fiscal 1995 was the fourth consecutive fiscal year the
Commonwealth reported an increase in the fiscal year-end unappropriated
balance. Prior to reserves for transfer to the Tax Stabilization Reserve
Fund, the fiscal 1995 closing unappropriated surplus was $540.0 million, and
increase of $204.2 million over the fiscal 1994 closing unappropriated
surplus prior to transfers.
Commonwealth revenues were $459.4 million, 2.9 percent, above the
estimate of revenues used at the time the budget was enacted. Corporation
taxes contributed $329.4 million of the additional receipts due largely to
higher receipts from the corporate net income tax. The sales and use tax and
miscellaneous revenues also showed strong year-over-year growth that produced
above-estimate revenue collections. Sales and use tax revenues were $5,526.9
million, $12.8 million above the enacted budget estimate and 7.9 percent over
fiscal 1994 collections. Personal income tax receipts for fiscal 1995 were
slightly above the budgeted estimate. Receipts totaled $5,083.2 million,
$5.1 million above the estimate and 4.3 percent over collections for fiscal
1994. The higher than estimated revenues from tax sources were due to faster
economic growth in the national and state economy than had been projected
when the budget was adopted. The higher rate of economic growth for the
nation and the state gave rise to increases in employment, income and sales
higher than expected which translated into above-estimate tax revenues.
Tax revenue refunds were also higher than estimated in the budget. An
acceleration of the tax refund process for corporation taxes, litigation
settlements, and an increase in the personal income tax poverty exemption
contributed to the higher tax refunds.
Funds held in reserve at the end of fiscal 1995 for transfer to the Tax
Stabilization Reserve Fund totaled $111.0 million. The Tax Stabilization
Reserve Fund was anticipated to have an available balance of $182.8 million
at June 30, 1996, representing approximately 1.1 percent of general fund
annual commonwealth revenues.
Fiscal 1996 Budget: The fiscal 1996 budget provided for expenditures
from commonwealth revenues of $16,165.7 million, a 2.7 percent increase over
total appropriations from commonwealth revenues in fiscal 1995. The
appropriations increase for fiscal 1996 is one of the lowest rates in recent
years. Tax changes enacted with the fiscal 1996 budget totaled a net
reduction of $282.9 million, representing an approximate 1.7 percent of base
revenues. The largest dollar value changes were in the corporate net income
tax where the scheduled 1997 reduction of the tax rate to 9.99 percent was
accelerated to the 1995 tax year. Other major components of the tax
reduction include a $12.1 million decrease for the capital stock and
franchise tax from an increase in the basic exemption; $24.7 million from the
repeal of the tax on annuities; and $27.9 million from an acceleration of the
scheduled phase-out of the inheritance tax on transfers of certain property
to a surviving spouse. A 90 day tax amnesty program also was authorized in
the tax bill.
Increases in authorized spending for fiscal 1996 emphasized education.
Appropriations for the basic subsidy for pubic schools were increased $143
million representing a 4.4 percent increase. This increase reversed a four-
year trend of a declining budget share for education. The budget also
contemplated several changes to certain public welfare programs. Estimated
savings are approximately $27 million based on a caseload of approximately
90,000 persons per year.
Commonwealth revenues for fiscal 1996 were $59.8 million (or 0.4
percent) over the official estimate of revenues for the fiscal year. The
fiscal year ending unappropriated surplus (prior to any transfer to the Tax
Stabilization Reserve Fund) was $153.5 million. The increase is primarily
due to the amount of appropriation lapses anticipated in excess of
supplemental appropriation needs and to a lower estimate of tax refunds.
Fiscal 1997 Proposed Budget: In February 1996, the Governor presented
his proposed budget for fiscal 1997. Proposed appropriations from General
Fund commonwealth revenues total $16.2 billion, a slight reduction from the
estimate for fiscal 1996. Revenue receipts are estimated to increase by
$403.9 million, or 2.5 percent, over anticipated receipts for fiscal 1996.
The decline in appropriation authority over the prior fiscal year in the
proposed budget relies on several program changes. The largest changes
proposed are $329 million of cost containment efforts in public health and
welfare programs. Other significant cost restrains include reductions to
appropriations for state-aided colleges and universities and no increases for
state-related colleges and universities. Funds for basic education programs
to local school districts are proposed to increase slightly.
Commonwealth Debt. Current constitutional provisions permit
Pennsylvania to issue the following types of debt: (i) debt to suppress
insurrection or rehabilitate areas affected by disaster, (ii) electorate
approved debt, (iii) debt for capital projects subject to an aggregate debt
limit of 1.75 times the annual average tax revenues of the preceding five
fiscal years, (iv) tax anticipation notes payable in the fiscal year of
issuance. All debt except tax anticipation notes must be amortized in
substantial and regular amounts.
General obligation debt totaled $5,045.4 million at June 30, 1995. Over
the 10-year period ended June 30, 1995, total outstanding general obligation
debt increased at an annual rate of 1.1% and for the five years ended June
30, 1995, at an annual rate of 1.7%. All outstanding general obligation
bonds of the Commonwealth are rated AA- by Standard and Poor's Corporation,
A1 by Moody's Investors Service, and AA- by Fitch Investors Service. The
ratings reflect only the views of the rating agencies.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature
within the fiscal year of issuance. The principal amount issued, when added
to that already outstanding, may not exceed in aggregate 20% of the revenues
estimated to accrue to the appropriate fund in the fiscal year. The
Commonwealth is not permitted to fund deficits between fiscal years with any
form of debt. All year-end deficit balances must be funded within the
succeeding fiscal year's budget. Pennsylvania issued a total of $500.0
million of tax anticipation notes for the account of the General Fund in
fiscal 1996, all of which matured on June 28 1996, and were paid from fiscal
1996 General Fund receipts.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed three
years. Currently, there are no bond anticipation notes outstanding.
State-related Obligations. Certain state-created agencies have
statutory authorization to incur debt for which no legislation providing for
state appropriations to pay debt service thereon is required. The debt of
these agencies is supported by assets of, or revenues derived from, the
various projects financed and the debt of such agencies is not an obligation
of Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations. The following agencies had debt currently
outstanding as of December 3, 1995: Delaware River Joint Toll Bridge
Commission ($55.1 million), Delaware River Port Authority ($185.5 million),
Pennsylvania Economic Development Financing Authority ($1,050.8 million),
Pennsylvania Higher Education Assistance Agency ($1,408.8 million),
Pennsylvania Higher Educational Facilities Authority ($2,115.1 million),
Pennsylvania Industrial Development Authority ($344.8 million), Pennsylvania
Infrastructure Investment Authority ($213.1 million), Pennsylvania Turnpike
Commission ($1,228.7 million), Philadelphia Regional Port Authority ($62.6
million), and the State Public School Building Authority ($316.2 million).
In addition, the Governor is statutorily required to place in the budget of
the Commonwealth an amount sufficient to make up any deficiency in the
capital reserve fund created for, or to avoid default on, bonds issued by the
Pennsylvania Housing Finance Agency ($2,164.8 million of revenue bonds as of
December 31, 1995), and an amount of funds sufficient to alleviate any
deficiency that may arise in the debt service reserve fund for bonds issued
by The Hospitals and Higher Education Facilities Authority of Philadelphia
($1.49 million of the loan principal was outstanding as of December 31,
1995.)
Litigation. Certain litigation is pending against the Commonwealth that
could adversely affect the ability of the Commonwealth to pay debt service on
its obligations, including suits relating to the following matters: (a)
Approximately 3,500 tort suits are pending against the Commonwealth pursuant
to the General Assembly's 1978 approval of a limited waiver of sovereign
immunity which permits recovery of damages for any loss up to $250,000 per
person and $1,000,000 per accident ($27 million was appropriated from the
Motor License Fund for fiscal 1996); (b) The ACLU filed suit in April 1990 in
federal court demanding additional funding for child welfare services (no
estimates of potential liability are available), which the Commonwealth is
seeking to have dismissed based on, among other things, the settlement in a
similar Commonwealth Court action that provided for more funding in fiscal
1991 as well as a commitment to pay to counties $30.0 million over 5 years.
In January 1992, the district court denied the ACLU's motion for class
certification, but that ruling was overturned by the Third Circuit and the
parties have resumed discovery; (c) in 1987, the Supreme Court of
Pennsylvania held that the statutory scheme for county funding of the
judicial system was in conflict with the Pennsylvania Constitution but stayed
judgement pending enactment by the legislature of funding consistent with the
opinion. The legislature has yet to consider legislation implementing the
judgment; (d) in November 1990, the ACLU brought a class action suit on
behalf of the inmates in thirteen Commonwealth correctional institutions
challenging confinement conditions and including a variety of other
allegations. In 1995, the parties agreed to a court monitored settlement and
the Commonwealth paid $1.3 million in attorney fees; (e) Actions have been
filed in both sate and federal court by an association of rural and small
schools and several individual school districts and parents challenging the
constitutionality of the Commonwealth's system for funding local school
districts. The federal case has been stayed pending resolution of the state
case. The trial has not yet bee scheduled, and there is no available
estimate of potential liability; and (f) Several banks have filed suit
against the Commonwealth contesting the constitutionality of a 1989 law
imposing a bank shares tax on banking institutions.
After the Commonwealth Court ruled in favor of the Commonwealth, finding no
constitutional deficiencies, Fidelity Bank, the Commonwealth, and certain
intervenor banks filed Notices of Appeal to the Pennsylvania Supreme Court on
August 5, 1994. Pursuant to a Settlement Agreement, dated as of April 2,
1995, the Commonwealth agreed to enter a credit in favor of Fidelity in the
amount of $4,100,000 in settlement of the constitutional and non-
constitutional issues including interest. Pursuant to a separate Settlement
Agreement, dated as of April 21, 1995, the Commonwealth settled with the
intervening banks, referred to as "New Banks." As part of the settlement,
the commonwealth agreed neither to assesses nor attempt to recoup any new
bank tax credits which had been granted or taken by any of the intervening
banks. Although the described settlements have quantified the Commonwealth's
exposure to Fidelity and the intervening banks, other banks have filed
protective Petitions, and one or more of these banks may seek to raise a new
constitutional challenge in the Commonwealth Court. However, the
Commonwealth Court has previously examined and confirmed the Act's
constitutionality; and (g) on November 11, 1993, the Commonwealth of
Pennsylvania, Department of Transportation and Envirotest/Synterra Partners
("Envirotest"), a partnership, entered into a "Contract for Centralized
Emissions Inspection Facilities." Thereafter, Envirotest acquired certain
land and constructed approximately 85 automobile emissions inspection
facilities throughout various regions of the Commonwealth. By Act of the
General Assembly in October 1994 (Act No. 1994-95), the program was suspended
and the Department of Transportation was prohibited from expending funds to
implement the program. Envirotest sued, and on December 15, 1995, Envirotest
Systems Corporation, Envirotest Partners (successor to Envirotest/Synterra
Partners) and the Commonwealth of Pennsylvania entered into a Settlement
Agreement pursuant to which Envirotest will receive $145 million by
installment payments through 1998.
Philadelphia. The City of Philadelphia is the largest city in the
Commonwealth, with an estimated population of 1,585,577 people according to
the 1990 Census. Philadelphia functions both as a city of the first class
and a county for the purpose of administering various governmental programs.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class cities
in remedying fiscal emergencies was enacted by the General Assembly and
approved by the Governor in June 1991. PICA is designed to provide
assistance through the issuance of funding debt to liquidate budget deficits
and to make factual findings and recommendations to the assisted city
concerning its budgetary and fiscal affairs. An intergovernmental
cooperation agreement between Philadelphia and PICA was approved by City
Council and the PICA Board and signed by the Mayor in January, 1992. At this
time, Philadelphia is operating under a five year fiscal plan approved by
PICA on April 17, 1995, with technical modifications approved in July 1995.
PICA has issued $1,418,680,000 of its Special Tax Revenue Bonds. This
financial assistance has included the refunding of certain general obligation
bonds to fund capital projects and to liquidate the Cumulative General Fund
balance deficit as of June 30, 1992, of $224.9 million. The audited General
Fund balance as of June 30, 1995, showed a surplus of approximately $80.5
million.
Texas Series
General. Beginning in late 1982, the decline of the State's oil and gas
industry, the devaluation of the Mexican peso and the generally soft national
economy combined to cause a significant reduction in the rate of growth of
State revenues. During late 1985 and early 1986, the price of oil fell
dramatically worldwide. This drop in oil prices created a ripple that caused
other sectors of the State's economy, such as real estate, to decline. As a
result of an increase in non-performing loans in the energy and real estate
sectors, major Texas bank holding companies, individual banks and savings and
loans experienced losses or sharp downturns in profitabilities and many
sought Federal assistance from the FDIC.
As a further result of the drastic drop in the price of oil, the
subsequent loss of jobs and the overbuilding in the real estate market, the
State experienced deficits for fiscal years ended August 31, 1986 and 1987 of
$230 million and $744 million, respectively. However, as a result of the
budget trimming and increasing taxes and the improving Texas economy, the
State finished fiscal years 1989, 1990, 1991, 1992, 1993, 1994 and 1995 with
surpluses in the General Revenue Fund of $295 million, $768 million, $1.006.4
billion, $615.3 million, $1.630 billion, $2.239 billion and $2.101 billion,
respectively. Since the early 1990's, the State's economy has rebounded in
several areas and has, to a large extent, significantly improved its
performance since the deep recession of the 1980's.
By December 1990, the Texas unemployment rate had declined to 6.6%. The
unemployment rate, however, began to increase in 1991 and by December 1992
was 7.6%. This increase was merely temporary since by September 1994, the
unemployment rate had declined to just over 6.5% and by September 1995, it
had again declined to 6.1%.
In the overall race for new job growth, Texas has been the national
leader for most of the 1990's. Total employment in Texas has been steadily
improving since 1991. Total non-farm employment stood at 8.02 million as of
July 1995, up 892,000 (12.5%) from July 1990. Over the 12 month period
ending in June 1995, Texas gained 284,800 jobs, an increase of 3.7%. Most of
the new jobs have been in the service sector, which added an estimated
267,712 jobs from 1994 to 1995.
State Debt. Except as specifically authorized, the Texas Constitution
generally prohibits the creation of debt by or on behalf of the State, with
two exceptions: (i) debt created to supply casual deficiencies in revenues
which does not exceed in the aggregate, at any one time, $200,000 and (ii)
debt to repel invasion, suppress insurrection, defend the Sate in war or pay
existing debt. In addition, the State Constitution prohibits the Legislature
from lending the credit of the State to or in aid of any person, including
municipalities, or pledging the credit of the State in any manner for the
payment of the liabilities of any individual, association of individuals,
corporation or municipality. The limitations of the State Constitution do
not prohibit the issuance of revenue bonds. Furthermore, obligations which
are payable from funds expected to be available during the current budget
period, such as tax and revenue anticipation notes issued by the State
Treasurer, do not constitute "debt" within the meaning of the Texas
Constitution. The State may issue short term obligations like Tax and
Revenue Anticipation Notes which must mature and be paid in full during the
biennium in which notes were issued; such obligations are not deemed to be
debt within the meaning of the State constitutional prohibition.
At various times, State voters, by constitutional amendment, have
authorized the issuance of debt by the State, including general obligation
indebtedness for which the full faith and credit and the taxing power of the
State may be pledged. The total amount of general obligation bonds that have
been authorized by the voters is in excess of $11.57 billion. Bond income
during the State's fiscal year ending August 31, 1995 brought an end to the
trend toward increased issuance of nonself-supporting Texas bonds whereby
income from such bonds declined from $656,915,000 for fiscal year 1994 to
$430,293,000. On August 31, 1995, Texas had $3.1 billion in bonds
outstanding which must be paid back from the State's general revenue fund.
This is the same amount of such bonds outstanding at the end of fiscal 1994,
and is up from $2.3 billion in such bonds outstanding at the end of fiscal
1993, $1.8 billion outstanding at the end of fiscal 1992, and $1.5 billion
outstanding at the end of fiscal 1991.
Revenue Sources and Tax Collection. Historically, the primary sources
of the State's revenues have been sales taxes, mineral severance taxes and
Federal grants. Due to the collapse of oil and gas prices and the resulting
enactment of recent State Legislatures of new tax measures, including those
increasing the rates of existing taxes and expanding the tax base and adding
a component of the corporate (franchise) tax measured by income, there has
been a reordering in the relative importance of the State's taxes in terms of
their contribution to the State's revenue in any year. Federal grants are
the State's single largest revenue source, accounting for approximately 29.9%
of total revenue during fiscal year 1995. Sales taxes are the State's second
largest source of revenues (and by far the largest source of tax revenue),
accounting for approximately 29.4% of the State's total revenues during
fiscal year 1995. Licenses, fees and permits, motor fuels taxes and interest
and investment income, accounted for approximately 8.9%, 6.4% and 4.8%,
respectively, of the State's total revenue in fiscal year 1995. The
remainder of the State's revenues are derived primarily from other taxes.
The State has no personal income tax. The State does impose a corporate
franchise tax based on the greater of a corporation's capital or net earned
surplus (i.e.,income), from which it derived approximately 4.1% of total
revenues in fiscal 1995. The corporate franchise tax is, in essence, based
upon net income apportionable to the State, and thus works very much like a
corporate income tax. It is likely to become a larger source of revenues in
future years.
Total net revenues and opening balances for fiscal years 1990, 1991,
1992, 1993, 1994 and 1995 amounted to approximately $23.622 billion, $26.190
billion, $29.647 billion, $33.795 billion, $36.707 billion and $38.682
billion, respectively, while tax collections for the same period amounted to
$12.905 billion, $14.922 billion, $15.849 billion, $17.011 billion, $18.106
billion and $18.859 billion, respectively.
The 75th State Legislative Session convened in January 1995 and before
adjourning passed a budget for the 1996-97 biennium. The 1996-97 budget
provides for appropriations totalling $45.1 billion from general revenue
related funds and $79.9 billion from all fund sources. The 1995-96 biennium
budget increases general revenue funding by 10.9%, which funding from all
funds increased by 12.5%. Funding for education has been increased by $2.3
billion, or 6.9%, while health and human services increased $2.4 billion, or
9.1%.
Limitations on Taxing Powers. The State Constitution prohibits the
State from levying ad valorem taxes on property for general revenue purposes.
Property taxes are levied exclusively by county and local taxing authorities.
There is also a constitutional prohibition on enacting a personal income tax
unless approved by a majority of voters in a referendum.
The State Constitution also limits the rate of growth of appropriations
from tax revenues not dedicated by the Constitution during any biennium to
the estimated rate of growth for the State's economy. The Legislature may
avoid the constitutional limitation if it finds, by a majority vote of both
houses, that an emergency exists. The State Constitution authorizes the
Legislature to provide by law for the implementation of this restriction, and
the Legislature, pursuant to such authorization, has defined the estimated
rate of growth in the State's economy to mean the estimated increase in State
personal income.
Petroleum Production and Mining. The Texas economy and the oil and gas
industry have been intricately linked since the discovery of the Spindletop
Field in southeast Texas in 1901. Dramatic increases in the price of oil in
1973-74 and 1979-81 propelled Texas into a leadership position in national
economic growth. This situation, however, changed rapidly for Texas during
the 1980's. The Texas economy reeled in 1982-83 and again in 1986 as the
price of West Texas Intermediate crude oil declined over 50% from $30 per
barrel in November 1985 to under $12 per barrel in July 1986. During the
oil-patch recession of 1986-87, employment levels declined as the effects of
the downturn in the energy industry rippled through the rest of the economy.
While there have been fluctuations in petroleum production and mining
employment since the recession, the overall trend of that sector in its
importance to the Texas economy has been downward. The number of oil and gas
wells drilled in the state during 1995 (9,299) was less than half the number
drilled in 1986 (18,707). Texas mining employment is currently at its lowest
level since 1977. Oil and gas comprises 95% of Texas employment in the
mining sector. Because of substantial weakness in the oil and gas industry,
mining employment in the State totals approximately 160,400, a decrease of
approximately 14% from July 1990. The shift of drilling activity to other
parts of the world and weak natural gas prices indicate a likely persistent
sluggishness in the industry.
Financial Institutions. The decline in oil prices, particularly since
January 1986, and the recession that followed have had a severe effect on the
banking and savings and loans industries in Texas. In most cases, major Texas
bank holding companies, individual banks and savings and loans have
experienced losses or sharp downturns in profitability due to the increase in
non-performing loans in the energy and real estate sectors. The financial
difficulties also led to a number of closings among banks and savings and
loans. Texas bank failures peaked in 1989, reaching 133 or two-thirds of all
bank closings in the nation. Texas bank failures declined to 103 in 1990, 31
in both 1991 and 1992, and 29 in 1993 (of which 20 were subsidiaries of a
single bank holding company). No Texas banks failed in 1994 or 1995.
The Texas banking industry has made substantial strides toward recovery
during the 1990's. Texas bank profits in 1993, 1994 and 1995 were $2.4
billion, $1.9 billion and $2.3 billion, respectively. Total loans, total
equity capital, and total assets also rose in 1993, 1994 and 1995. Most loan
growth was in consumer real estate, but business lending also showed an
increase. On a discordant note, nonperforming loans increased 26% in 1995.
Many Texas banks and banking organizations have consolidated with a
continuing downward trend in the number of operating banks. Texas had 948
banks at the end of 1995, compared to 991 banks in 1994 and down from 1,125
banks as of the end of 1991. It is anticipated that the number of banking
organizations in the state will continue to drop, although the number of
branch location will rise. Also, in keeping with a nationwide trend, Texas
banks have been shifting a substantial amount of their portfolios away from
loans and into federal securities. The annualized return on assets for Texas
banks in 1995 was 1.16%.
No industry was more severely affected by the decline in Texas real
estate values during the 1980's than the savings and loan industry. At the
end of 1992, assets of private Texas savings and loan associations totaled
$42.9 billion, down from the industry high in 1988 of $112.4 billion in
assets. Further, the number of Texas savings and loans has decreased from 273
in 1984 to only 45 in 1993. However, in terms of profits, after a nearly
flat year in 1991, the State's thrifts have posted healthy earnings from 1992
forward. Texas' savings and loans led the nation in profits for 1993. After
a dip in 1994, Texas savings and loans, benefitting from home refinancing,
increased their earning by 59% in 1995. Texas' savings and loan problems of
recent years has mostly been resolved, with steady progress being made in
increasing capital levels.
Property Values and Taxes. Various State laws place limits upon the
amounts of tax that can be levied upon the property subject to ad valorem
taxes within various taxing units, such as cities, counties and the districts
which have ad valorem taxing powers (including, without limitation, school
and hospital districts). Similarly, the amounts of sales and use taxes which
can be levied and the types of property and services to which sales and use
taxes apply are subject to legal restrictions.
The 1994 total value of taxable property in Texas School Districts (the
most recent information available) amounted to approximately $645 billion in
1994, according to records compiled by the Property Tax Division of the
Office of the Comptroller (derived from school districts in the State). This
$645 billion valuation total included approximately $248.5 billion of
single-family residences (after allowing for exemptions), a strong 7.7%
increase over the $230.7 billion amount for 1993. The value of multi-family
residential property values increased 7.6 percent during the same period. By
way of contrast, the valuation of oil, gas and mineral properties dropped a
dramatic 13.3% during 1993. The value of commercial and industrial real
estate rose more slowly during 1993, increasing at the rates of 0.5% and
1.5%, respectively. The value of vacant lots also declined slightly by about
0.5%.
Litigation. After protracted litigation over property tax in the early
1990's, the Texas Legislature (in February 1993) approved proposed
constitutional amendments that were intended to address the constitutional
deficiencies in the State's system of funding public schools that have been
noted by the courts. At an election held on May 1, 1993, the voters of the
State rejected all of the proposed constitutional amendments.
The legislation was enacted in late May 1993 (Senate Bill 7), which
included provisions concerning the operation of school districts as well as
creating a whole new funding system for public education in the State. This
bill provided for a two-tiered education finance structure, known as the
Foundation School Program. Tier 1 provides that each school district is
entitled to a basic allotment of $2,300.00 per student, financed by ad
valorem taxes of $.86 per $100.00 valuation on property within the district,
with any deficiency to be made up by the State. Tier 2 provides that school
districts may levy additional ad valorem taxes of as much as $.64 per $100.00
valuation. For every cent of the additional tax levy a district undertakes,
the State guarantees a yield of $20.55 per student, regardless of how much
tax revenue is actually collected. Senate Bill 7 also imposes a cap on a
school district's taxable property at a level of $280,000 per student.
School districts with property more valuable than $280,000 per student have
various choices as to how their taxable property may be brought within the
$280,000 cap.
Senate Bill 7 was immediately challenged by numerous groups of
plaintiffs, representing hundreds of school districts, both property-rich and
property-poor, as well as many parents and local officials. After a trial on
the consolidated actions in the case of Edgewood v. Meno, the district court
held that Senate Bill 7 was constitutional, but found that the Legislature
had failed to provide efficiently for facilities. The district court
accordingly denied most of the relief sought by the plaintiffs but ordered by
injunction that no bonds for any school district could be approved,
registered, or guaranteed after September 1, 1995, unless the Legislature had
provided for the efficient funding of educational facilities by that time.
On appeal, the Texas Supreme Court affirmed the constitutionality of the
public school finance system enacted in Senate Bill 7 in all respects. The
Supreme Court modified the district court's judgment to provide that the
relief requested by the plaintiffs was denied in all respects and that the
district court's injunction was vacated. In all other respects, the Supreme
Court affirmed the district court's judgment.
The current governor has made property tax reform one of the
centerpieces of his legislative agenda, with a stated goal of substantially
reducing the state's reliance on school property taxes. There are a number
of public hearings scheduled through Texas during 1996 to address the issue
of the continuing rise of property taxes paid by both individuals and
businesses. It is uncertain at the present time what, if any, changes will
result to the state's tax system as a result of dissatisfaction with the
property tax structure.
Virginia Series
The rate of economic growth in the Commonwealth of Virginia has
increased steadily over the past decade. Per capita income in Virginia has
been consistently above national levels during that time. The services
sector in Virginia generates the largest number of jobs, followed by
wholesale and retail trade, state and local government and manufacturing.
Because of Northern Virginia, with its proximity to Washington, D.C., and
Hampton Roads, which has the nation's largest concentration of military
installations, the Federal government has a greater economic impact on
Virginia relative to its size than any states other than Alaska and Hawaii.
It is unclear what effect the current efforts by the Federal government to
restructure the defense budget will have on long-term economic conditions in
Virginia.
According to statistics published by the U.S. Department of Labor,
Virginia typically has one of the lowest unemployment rates in the nation.
This is generally attributed to the balance among the various sectors
represented in the economy. Virginia is one of twenty states with a right-to-
work law and is generally regarded as having a favorable business climate
marked by few strikes or work stoppages. Virginia is also one of the least
unionized among the industrialized states.
Virginia's state government operates on a two-year budget. The
Constitution vests the ultimate responsibility and authority for levying
taxes and appropriating revenue in the General Assembly, but the Governor has
broad authority to manage the budgetary process. Once an appropriation act
becomes law, revenue collections and expenditures are constantly monitored by
the Governor, assisted by the Secretary of Finance and the Department of
Planning and Budget, to ensure that a balanced budget is maintained. If
projected revenue collections fall below amounts appropriated at any time,
the Governor must reduce expenditures and withhold allotments of
appropriations (other than for debt service and other specified purposes) to
restore balance. An amendment to the Constitution, effective January 1,
1993, established a Revenue Stabilization Fund. This Fund is used to offset
a portion of anticipated shortfalls in revenues in years when appropriations
based on initial forecasts exceed expected revenues in any subsequent
forecast. The Revenue Stabilization Fund consists of an amount not to exceed
10 percent of Virginia's average annual tax revenues derived from taxes on
income and retail sales for the three preceding fiscal years.
General Fund revenues are principally composed of direct taxes. In
recent fiscal years most of the total tax revenues have been derived from
five major taxes imposed by Virginia on individual and fiduciary income,
sales and use, corporate income, public services corporations and premiums of
insurance companies.
In September 1991, the Debt Capacity Advisory Committee was created by
the Governor through an executive order. The committee is charged with
annually estimating the amount of tax-supported debt that may prudently be
authorized consistent with the financial goals, capital needs and policies of
Virginia. The committee reviews the outstanding debt of all agencies,
institutions, boards and authorities of Virginia for which Virginia has
either a direct or indirect pledge of tax revenues or moral obligation.
The Constitution of Virginia prohibits the creation of debt by or on
behalf of Virginia that is backed by Virginia's full faith and credit, except
as provided in Section 9 of Article X. Section 9 of Article X contains
several different provisions for the issuance of general obligation and other
debt, and Virginia is well within its limit for each:
Section 9(a)(2) provides that the General Assembly may incur general
obligation debt to meet certain types of emergencies, subject to limitations
on amount and duration; to meet casual deficits in the revenue or in
anticipation of the collection of revenues of Virginia; and to redeem a
previous debt obligation of Virginia. Total indebtedness issued pursuant to
this Section may not exceed 30 percent of an amount equal to 1.15 times the
annual tax revenues derived from taxes on income and retail sales, as
certified by the auditor of Public Accounts for the preceding fiscal year.
Section 9(b) provided that the General Assembly may authorize the
creation of general obligation debt for capital projects. Such debt is
required to be authorized by an affirmative vote of a majority of each house
of the General Assembly and approved in a statewide election. The
outstanding amount of such debt is limited to an amount equal to 1.15 times
the average annual tax revenues derived from taxes on income and retail
sales, as certified by the Auditor of Public Accounts for the three preceding
fiscal years less the total amount of bonds outstanding. The amount of 9(b)
debt that may be authorized in any single fiscal year is limited to 25
percent of the limit on all 9(b) debt less the amount of 9(b) debt authorized
in the current and prior three fiscal years.
Section 9(c) provides that the General Assembly may authorize the
creation of general obligation debt for revenue-producing capital projects (so-
called "double-barrel" debt). Such debt is required to be authorized by
an affirmative vote of two-thirds of each house of the General Assembly and
approved by the Governor. The Governor must certify before the enactment of
the authorizing legislation and again before the issuance of the debt that
the net revenues pledged are expected to be sufficient to pay principal of
and interest on the debt. The outstanding amount of 9(c) debt is limited to
an amount equal to 1.15 times the average annual tax revenues derived from
taxes on income and retail sales, as certified by the Auditor of Public
Accounts for the three preceding fiscal years. While the debt limits under
Sections 9(b) and 9(c) are each calculated as the same percentage of the same
average tax revenues, these debt limits are separately computed and apply
separately to each type of debt.
Article X further provides in Section 9(d) that the restrictions of
Section 9 are not applicable to any obligation incurred by Virginia or any of
its institutions, agencies or authorities if the full faith and credit of
Virginia is not pledged or committed to the payment of such obligation.
There are currently outstanding various types of such 9(d) revenue bonds.
Certain of these bonds, however, are paid in part or in whole from revenues
received as appropriations by the General Assembly from general tax revenues,
while others are paid solely from revenues of the applicable project. The
debt repayments of the Virginia Public Building Authority, the Virginia Port
Authority, the Virginia College Building Authority Equipment Leasing Program
and The Innovative Technology Authority are supported in large part by
General Fund appropriations.
The Commonwealth Transportation Board is a substantial issuer of bonds
for highway projects. These bonds are secured by and payable from funds
appropriated by the General Assembly from the Transportation Trust Fund for
such purpose. The Transportation Trust Fund was established by the General
Assembly in 1986 as a special non-reverting fund administered and allocated
by the Transportation Board to provide increased funding for constructions,
capital and other needs of state highways, airports, mass transportation and
ports. The Virginia Port Authority has also issued bonds which are secured
by a portion of the Transportation Trust Fund.
Virginia is involved in numerous leases that are subject to
appropriation of funding by the General Assembly. Virginia also finances the
acquisition of certain personal property and equipment through installment
purchase agreements.
Bonds issued by the Virginia Housing Development Authority, the Virginia
Resources Authority and the Virginia Public School Authority are designed to
be self-supporting from their individual loan programs. A portion of the
Virginia Housing Development Authority and Virginia Public School Authority
bonds and all of the Virginia Resources Authority bonds are secured in part
by a moral obligation pledge of Virginia. Should the need arise, Virginia
may consider funding deficiencies in the respective debt service reserves for
such moral obligation debt. To date, none of these authorities has advised
Virginia that any such deficiencies exist.
Local government in Virginia is comprised of 95 counties, 41
incorporated cities, and 188 incorporated towns. Virginia is unique among
the several states in that cities and counties are independent, and their
land areas do not overlap. The largest expenditure by local governments in
Virginia are for education, but local governments also provide other services
such as water and sewer, police and fire protection and recreational
facilities. The Virginia Constitution imposes numerous restrictions on local
indebtedness, affecting both its incurrence and amount.
In Davis v. Michigan (decided March 28, 1989), the United States Supreme
Court ruled unconstitutional states' exempting from state income tax the
retirement benefits paid by the state or local governments without exempting
retirement benefits paid by the Federal government. At that time, Virginia
exempted state and local retirement benefits but not Federal retirement
benefits. At a Special Session held in April 1989, the General Assembly
repealed the exemption of state and local retirement benefits. Following
Davis, at least five suits, some with multiple plaintiffs, for refunds of
Virginia income taxes, were filed by Federal retirees. These suits were
consolidated under the name of Harper v. Virginia Department of Taxation.
In a Special Session, the Virginia General Assembly on July 9, 1994,
passed emerging legislation to provide payments to Federal retirees in
settlement of the retirees' claims as a result of Davis. The settlement
payments are to be made over a five-year period, commencing March 31, 1995.
The total amount of authorized appropriations for the settlement is $340
million (payable to participating retirees in installments of $60 million on
March 31, 1995, and $70 million on each succeeding March 31 through March 31,
1999, subject to appropriation by the General Assembly).
On September 15, 1995, the Virginia Supreme Court rendered its decision
in Harper, reversing the judgement of the trial court, entering final
judgement in favor of the plaintiff retirees who elected not to settle, and
dictating that the amounts unlawfully collected be refunded with statutory
interest. The total cost to Virginia of the settlement and judgment will be
approximately $394.9 million, of which approximately $203.2 million has been
paid.
Most recently, Moody's has rated the long-term general obligations bonds
of Virginia Aaa, and Standard & Poor's has rated such bonds AAA. There can
be no assurance that the economic conditions on which these ratings are based
will continue or that particular bond issues may not be adversely affected by
changes in economic or political conditions.
APPENDIX B
Description of S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA is the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligations Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledge revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligations Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" ratings is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among the
factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the
major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
SP-3
The issuers of these municipal notes exhibit speculative capacity to pay
principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365
days. Issues assigned an A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1
This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
A-3
Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designations.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment charac
teristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefor not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
a rating category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). Such ratings recognize the
difference between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3/VMIG 3
This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access
for refinancing is likely to be less well established.
MIG 4/VMIG 4
This designation denotes adequate quality. Protection commonly regarded
as required of an investment security is present and although not distinctly
or predominantly speculative, there is specific risk.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment
of short-term promissory obligations, and ordinarily will be evidenced by
leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate
reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirements for
relatively high financial leverage. Adequate alternate liquidity is
maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take
into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonable
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should
be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the AAA category covering 13-36 months or the
DDD, DD, or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-
1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
Principal
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_____________ ______________
<S> <C> <C>
CONNECTICUT-79.4%
Connecticut:
6.90%, 3/15/2009 (Prerefunded 3/15/2000) (a)............................ $ 3,000,000 $ 3,298,410
5.50%, 3/15/2010........................................................ 3,000,000 3,007,020
6.875%, 7/15/2010 (Prerefunded 7/15/2000) (a)........................... 7,100,000 7,838,329
6.75%, 3/1/2011 (Prerefunded 3/1/2001) (a).............................. 3,000,000 3,318,540
5.50%, 5/15/2014........................................................ 2,000,000 1,951,920
5.375%, 10/1/2014....................................................... 6,500,000 6,242,795
5.50%, 5/15/2015........................................................ 3,000,000 2,912,100
Special Tax Obligation Revenue (Transportation Infrastructure):
Refunding 5.375%, 9/1/2008............................................ 2,500,000 2,504,275
6.80%, 12/1/2009 (Prerefunded 12/1/1999) (a).......................... 3,000,000 3,283,560
7.125%, 6/1/2010...................................................... 8,400,000 9,676,296
6.75%, 6/1/2011 (Prerefunded 6/1/2003) (a)............................ 8,500,000 9,466,365
Connecticut Clean Water Fund, Revenue:
7%, 1/1/2011 (Prerefunded 1/1/2001) (a)................................. 6,700,000 7,230,975
5.125%, 5/1/2018........................................................ 5,500,000 5,013,855
Connecticut Development Authority, Revenue:
First Mortgage Gross
(Elim Park Baptist Home Inc. Project) 9%, 12/1/2020................... 3,565,000 3,790,130
Health Care:
(Jerome Home Project) 8%, 11/1/2019................................... 1,940,000 2,018,395
(Masonic Charity Foundation of Connecticut) 6.50%, 8/1/2020 (Insured; AMBAC) 4,150,000 4,284,626
Life Care Facilities (Seabury Project):
Refunding 8.75%, 9/1/2006............................................. 1,625,000 1,615,965
10%, 9/1/2021......................................................... 11,175,000 11,805,941
Pollution Control
(Pfizer Inc. Project) 6.55%, 2/15/2013................................ 2,000,000 2,114,540
Water Facilities, Refunding
(Bridgeport Hydraulic Project) 5.60%, 6/1/2028 (Insured; MBIA)........ 2,600,000 2,398,916
Connecticut Health and Educational Facilities Authority, Revenue:
7%, 1/1/2020 (Insured; MBIA)............................................ 3,000,000 3,233,880
(Bridgeport Hospital, Connie Lee) 5.375%, 7/1/2025..................... 2,125,000 1,917,345
(Cherry Brook Nursing Center Project) 6%, 11/1/2022 (Insured; AMBAC).... 4,600,000 4,614,858
(Danbury Hospital) 6.50%, 7/1/2014 (Insured; MBIA)...................... 3,250,000 3,394,138
(Day Kimball Hospital) 5.375%, 7/1/2026 (Insured; FSA).................. 2,000,000 1,825,200
(Greenwich Academy) 5.75%, 3/1/2026 (Insured; FSA)...................... 3,130,000 3,027,962
(Greenwich Hospital) 5.80%, 7/1/2026 (Insured; MBIA).................... 9,365,000 9,110,740
(Hartford University):
6.75%, 7/1/2012....................................................... 3,500,000 3,507,175
8%, 7/1/2018 (Prerefunded 7/1/2003) (a)............................... 3,075,000 3,430,409
6.80%, 7/1/2022....................................................... 8,500,000 8,421,970
(Johnson Evergreen Corp.) 8.50%, 7/1/2022............................... 4,500,000 4,725,630
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ______________
CONNECTICUT (CONTINUED)
Connecticut Health and Educational Facilities Authority, Revenue (continued):
(Lawrence and Memorial Hospital)
7%, 7/1/2020 (Insured; MBIA) (Prerefunded 7/1/2000) (a)............... $ 2,500,000 $ 2,770,975
(Lutheran General Health Care System) 7.375%, 7/1/2019.................. 1,400,000 1,641,066
(Mansfield Nursing Center Project) 6%, 11/1/2022 (Insured; AMBAC)....... 2,700,000 2,708,721
(Middlesex Hospital) 6.25%, 7/1/2022 (Insured; MBIA).................... 2,500,000 2,542,050
(New Britain Memorial Hospital) 7.75%, 7/1/2022......................... 16,000,000 16,851,520
(Norwalk Hospital) 6.25%, 7/1/2022 (Insured; MBIA)...................... 3,600,000 3,681,540
(Nursing Home Program-Noble Horizon) 6%, 11/1/2022 (Insured; AMBAC)..... 1,500,000 1,504,845
(Quinnipiac College):
6%, 7/1/2013.......................................................... 6,545,000 6,077,883
7.75%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 1,000,000 1,116,680
(Refunding- Saint Francis Hospital and Medical Center)
6.20%, 7/1/2022 (Insured; MBIA)....................................... 1,725,000 1,757,430
(Sacred Heart University):
6.50%, 7/1/2016....................................................... 2,000,000 1,985,340
5.80%, 7/1/2023....................................................... 1,700,000 1,472,642
6.625%, 7/1/2026...................................................... 3,000,000 2,953,470
(Saint Raphael Hospital) 6.625%, 7/1/2014 (Insured; AMBAC).............. 2,500,000 2,629,050
(Taft School) 7.375%, 7/1/2020 (Prerefunded 7/1/2000) (a)............... 1,150,000 1,276,236
(William W. Backus Hospital):
6%, 7/1/2012.......................................................... 1,500,000 1,459,800
6.375%, 7/1/2022...................................................... 2,250,000 2,235,578
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
7.20%, 11/15/2008....................................................... 10,280,000 10,648,744
5.60%, 5/15/2014........................................................ 4,000,000 3,816,520
6.45%, 5/15/2022........................................................ 6,000,000 6,023,280
6.70%, 11/15/2022....................................................... 26,000,000 26,523,120
6.75%, 11/15/2023....................................................... 6,000,000 6,192,000
6.05%, 11/15/2025....................................................... 9,065,000 8,809,820
Connecticut Municipal Electric Energy Cooperative, Power Supply System
Revenue,
Refunding:
5%, 1/1/2011 (Insured; MBIA).......................................... 4,660,000 4,344,844
5%, 1/1/2012 (Insured; MBIA).......................................... 2,000,000 1,858,980
5%, 1/1/2013 (Insured; MBIA).......................................... 2,000,000 1,843,400
Eastern Connecticut Resource Recovery Authority, Solid Waste Revenue
(Wheelabrator Lisbon Project):
5.50%, 1/1/2014....................................................... 10,000,000 9,111,900
5.50%, 1/1/2020....................................................... 7,250,000 6,429,518
New Haven
7.40%, 8/15/2011........................................................ 1,500,000 1,623,930
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30,1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
CONNECTICUT (CONTINUED)
South Central Connecticut Regional Water Authority, Water Systems Revenue
5.75%, 8/1/2012 (Insured; FGIC)......................................... $ 6,000,000 $ 6,031,440
Stamford 6.60%, 1/15/2010................................................... 2,750,000 3,078,653
Stratford 7.30%, 3/1/2012 (Prerefunded 3/1/2001) (a)........................ 1,130,000 1,267,826
University of Connecticut 5%, 2/1/2015 (Insured; FGIC)...................... 1,250,000 1,135,825
U. S. RELATED-20.6%
Commonwealth of Puerto Rico 5.40%, 7/1/2025................................. 13,000,000 11,773,710
Puerto Rico:
(Public Improvement):
7.70%, 7/1/2020 (Prerefunded 7/1/2000) (a)............................ 3,000,000 3,409,710
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)............................ 6,000,000 6,732,000
Refunding 5.50%, 7/1/2013 .............................................. 3,000,000 2,852,670
Puerto Rico Aqueduct and Sewer Authority, Revenue 6%, 7/1/2009.............. 7,250,000 7,435,310
Puerto Rico Electric Power Authority, Power Revenue 7%, 7/1/2021
(Prerefunded 7/1/2001) (a).............................................. 6,775,000 7,607,038
Puerto Rico Highway and Transportation Authority, Highway Revenue:
6.673%, 7/1/2010 (b).................................................... 3,200,000 2,872,000
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. 5,000,000 5,561,950
5.25%, 7/1/2020 (Insured; FSA).......................................... 1,750,000 1,596,998
5.50%, 7/1/2026......................................................... 5,000,000 4,597,650
Puerto Rico Industrial Medical and Environmental Pollution Control Facilities
Financing Authority, Revenue (Motorola Inc. Project) 6.75%, 1/1/2014........ 2,000,000 2,168,160
Puerto Rico Ports Authority, Special Facilities Revenue (American Airlines)
6.30%, 6/1/2023......................................................... 2,000,000 2,013,040
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities, Refunding 5.75%, 7/1/2015............................ 8,000,000 7,628,880
University of Puerto Rico, University Revenue:
5.50%, 6/1/2015 (Insured; MBIA)......................................... 5,000,000 4,881,449
5.25%, 6/1/2025 (Insured; MBIA)......................................... 3,400,000 3,136,295
Virgin Islands Public Finance Authority, Revenue, Refunding
7.25%, 10/1/2018........................................................ 2,000,000 2,104,539
_____________
TOTAL INVESTMENTS (cost $360,448,142)....................................... $370,758,285
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation FSA Financial Security Assurance
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ ______________ __________________ ____________________
<S> <C> <C> <C>
AAA Aaa AAA 36.3%
AA Aa AA 28.3
A A A 14.8
BBB Baa BBB 13.2
Not Rated (d) Not Rated (d) Not Rated (d) 7.4
____________
100.0%
============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay prinicpal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse floater security - the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $360,448,142)-see statement..................................... $370,758,285
Interest receivable..................................................... 7,846,808
Receivable for shares of Beneficial Interest subscribed................. 133,395
Prepaid expenses........................................................ 9,644
________________
378,748,132
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 163,199
Due to Distributor...................................................... 90,636
Due to Custodian........................................................ 16,924,558
Payable for shares of Beneficial Interest redeemed...................... 66,590
Accrued expenses........................................................ 99,532 17,344,515
________________ _______________
NET ASSETS ................................................................ $361,403,617
===============
REPRESENTED BY:
Paid-in capital......................................................... $347,570,572
Accumulated undistributed net realized gain on investments.............. 3,522,902
Accumulated net unrealized appreciation on investments-Note 3........... 10,310,143
_______________
NET ASSETS at value......................................................... $361,403,617
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 27,023,443
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,265,372
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 84,734
===============
NET ASSET VALUE per share:
Class A Shares
($321,558,697/ 27,023,443 shares)..................................... $11.90
===============
Class B Shares
($38,837,586 / 3,265,372 shares)...................................... $11.89
===============
Class C Shares
($1,007,334 / 84,734 shares).......................................... $11.89
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $23,749,936
EXPENSES:
Management fee-Note 2(a).............................................. $ 2,045,864
Shareholder servicing costs-Note 2(c)................................. 1,147,331
Distribution fees-Note 2(b)........................................... 191,582
Professional fees..................................................... 56,898
Custodian fees........................................................ 38,166
Prospectus and shareholders' reports.................................. 19,462
Trustees' fees and expenses-Note 2(d)................................. 5,501
Registration fees..................................................... 2,800
Miscellaneous......................................................... 126,118
_______________
TOTAL EXPENSES.................................................... 3,633,722
______________
INVESTMENT INCOME-NET............................................. 20,116,214
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 5,701,419
Net unrealized (depreciation) on investments............................ (1,150,970)
________________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 4,550,449
_______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $24,666,663
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
__________________________________________
1995 1996
__________________ ________________
OPERATIONS:
Investment income-net................................................... $ 21,655,899 $ 20,116,214
Net realized gain (loss) on investments................................. (1,973,798) 5,701,419
Net unrealized (depreciation) on investments for the year............... (287,865) (1,150,970)
__________________ _________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 19,394,236 24,666,663
__________________ _________________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (19,881,887) (18,231,897)
Class B shares........................................................ (1,774,012) (1,877,253)
Class C shares........................................................ - (7,064)
__________________ _________________
TOTAL DIVIDENDS................................................... (21,655,899) (20,116,214)
__________________ _________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 15,947,221 14,645,030
Class B shares........................................................ 5,896,601 5,468,178
Class C shares........................................................ - 1,023,317
Dividends reinvested:
Class A shares........................................................ 11,434,147 10,502,564
Class B shares........................................................ 1,240,658 1,298,271
Class C shares........................................................ - 6,163
Cost of shares redeemed:
Class A shares........................................................ (53,507,884) (43,749,996)
Class B shares........................................................ (3,788,582) (3,727,309)
Class C shares........................................................ - (1,996)
__________________ _________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (22,777,839) (14,535,778)
__________________ _________________
TOTAL (DECREASE) IN NET ASSETS.................................. (25,039,502) (9,985,329)
NET ASSETS:
Beginning of year....................................................... 396,428,448 371,388,946
__________________ _________________
End of year............................................................. $371,388,946 $361,403,617
================== =================
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ _______________________ _______________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ _______________________
1995 1996 1995 1996 1996*
_______________ ____________ __________ __________ _______________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 1,373,091 1,212,141 503,373 453,771 84,387
Shares issued for
dividends reinvested. 983,180 869,313 106,773 107,482 515
Shares redeemed........ (4,637,620) (3,626,051) (329,539) (309,036) (168)
_______________ ____________ __________ __________ _______________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (2,281,349) (1,544,597) 280,607 252,217 84,734
=============== ============ ========== ========== ===============
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Connecticut Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $1,837 during the year ended April 30, 1996 from commissions earned
on sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$190,357 was charged to the Series for the Class B shares and $1,225 was
charged to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$834,351, $95,178 and $409 were charged to Class A, Class B and Class C
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $59,649 for the period
from December 1, 1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $109,381,501 and $106,401,513, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $10,310,143, consisting of $14,959,283 gross unrealized appreciation and
$4,649,140 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Connecticut Series (one of the Series constituting the Premier State
Municipal Bond Fund) as of April 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and financial highlights
for each of the years indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Connecticut Series at April
30, 1996, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernst & Young LLP - Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_______ _______
<S> <C> <C>
FLORIDA-95.7%
Alachua County Health Facilities Authority, Health Facilities Revenue, Refunding
(Santa Fe Healthcare Facilities Project) 7.60%, 11/15/2013.............. $ 3,500,000 $ 3,998,750
Arcadia, Water and Sewer Revenue 7.75%, 12/1/2021........................... 2,190,000 2,352,542
Brevard County Health Facilities Authority, HR
(Holmes Regional Medical Center Project) 5.70%, 10/1/2008............... 4,585,000 4,701,963
Broward County Health Facilities Authority, Revenue, Refunding
(Broward County Nursing Home) 7.50%, 8/15/2020 (LOC; Allied Irish Bank) (a) 1,000,000 1,058,270
Charlotte County, Health Care Facilities Revenue
(Charlotte Community Mental Health Project) 9.25%, 7/1/2020............. 1,635,000 1,795,917
Clay County Housing Finance Authority, SFMR
8.20%, 6/1/2021 (Collateralized; GNMA).................................. 670,000 703,453
Dade County:
Aviation Revenue:
6.55% 10/1/2013 (Insured; MBIA)....................................... 4,225,000 4,434,898
(Miami International Airport) 5.75%, 10/1/2013 (Insured; MBIA)........ 10,000,000 9,950,500
Refunding (Seaport) 5.125%, 10/1/2021 (Insured; MBIA)................... 7,500,000 6,780,225
Water and Sewer Systems Revenue 6.25%, 10/1/2011 (Insured; FGIC)........ 2,115,000 2,288,684
Dade County Health Facilities Authority, HR
(South Shore Hospital and Medical Center) 7.60%, 8/1/2024 (Insured; FHA) 2,345,000 2,528,426
Dade County Housing Finance Authority, Revenue, Refunding:
MFMR (Cutler Meadows Apartment) 6.50%, 7/1/2022 (Insured; FHA).......... 1,785,000 1,804,260
SFMR 6.70%, 4/1/2028 (Collateralized: FNMA & GNMA)...................... 4,500,000 4,540,905
Duval County Housing Finance Authority, SFMR:
7.85%, 12/1/2022 (Collateralized; GNMA)................................. 2,625,000 2,765,464
7.70%, 9/1/2024 (Collateralized; GNMA).................................. 1,460,000 1,534,460
Escambia County Housing Finance Authority, SFMR 7.80%, 4/1/2022............. 1,090,000 1,144,380
Florida, Refunding (Jacksonville Transportation) 5.30%, 7/1/2018............ 2,000,000 1,849,000
Florida Board of Education, Capital Outlay, Refunding:
5.80%, 6/1/2010......................................................... 2,000,000 2,045,080
5%, 6/1/2015............................................................ 10,300,000 9,284,317
5.125%, 6/1/2022........................................................ 4,000,000 3,543,640
Florida Division of Bond Finance Department, General Services Revenues
(Department of Natural Resources-Preservation 2000)
5.75%, 7/1/2013 (Insured; AMBAC)........................................ 7,695,000 7,726,626
Florida Housing Finance Agency:
(Brittany Rosemont Apartments) 7%, 2/1/2035............................. 6,000,000 6,357,360
Multi-Family Housing (Driftwood Terrace Project)
7.65%, 12/20/2031 (Collateralized; GNMA).............................. 3,440,000 3,645,815
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
FLORIDA (CONTINUED)
Florida Housing Finance Agency (continued):
Single Family Mortgage, Refunding 6.65%, 1/1/2024....................... $ 2,415,000 $ 2,445,984
(Turtle Creek Apartment Projects) 6.10%, 5/1/2016 (Insured; AMBAC)...... 1,000,000 1,000,840
Florida Municipal Power Agency, Revenue (All Requirements Power Supply
Project)
5.10%, 10/1/2025 (Insured; AMBAC)....................................... 5,000,000 4,434,800
Florida Turnpike Authority, Turnpike Revenue, Refunding:
5%, 7/1/2013 (Insured; FGIC)............................................ 3,750,000 3,435,788
5%, 7/1/2019 (Insured; FGIC)............................................ 3,000,000 2,666,280
Gainesville, Utility System Revenue, Refunding 5.20%, 10/1/2026............. 5,000,000 4,491,500
Greater Orlando Aviation Authority, Airport Facilities Revenue, Refunding:
5.50%, 10/1/2008 (Insured; AMBAC)....................................... 5,940,000 5,949,207
5.50%, 10/1/2013 (Insured; AMBAC)....................................... 2,750,000 2,648,498
Highlands County Health Facilities Authority, Revenue (Adventist Sunbelt Hospital)
7%, 11/15/2014.......................................................... 1,500,000 1,621,155
Hillsborough, Capital Improvement Program, Revenue, Refunding
5%, 8/1/2015 (Insured; FGIC)............................................ 3,325,000 3,009,690
Hillsborough County, Utility Revenue, Refunding:
6.625%, 8/1/2011........................................................ 4,000,000 4,247,320
7%, 8/1/2014............................................................ 4,765,000 5,116,514
Hillsborough County Aviation Authority, Revenue, Refunding (Delta Airlines):
6.80%, 1/1/2024......................................................... 2,500,000 2,570,150
7.75%, 1/1/2024......................................................... 1,500,000 1,587,435
Indian Trace Community Development District, Water and Sewer Revenue
8.50%, 4/1/1997......................................................... 151,000 155,681
Jacksonville, Excise Taxes Revenue, Refunding 6.50%, 10/1/2013 (Insured; AMBAC) 5,000,000 5,293,350
Jacksonville, Water and Sewer Revenue 5%, 10/1/2020 (Insured; MBIA)......... 3,000,000 2,668,800
Jacksonville Health Facilities Authority, HR, Refunding (Saint Luke's Hospital)
7.125%, 11/15/2020...................................................... 6,700,000 7,201,428
Lake County Resource Recovery, IDR, Refunding (NRG/Recovery Group)
5.85%, 10/1/2009........................................................ 6,000,000 5,790,600
Marion County Hospital District, Revenue, Refunding
(Munroe Regional Medical Center) 6.25%, 10/1/2012 (Insured; FGIC)....... 3,000,000 3,124,200
North Miami, Educational Facilities Revenue (Johnson & Whales University Project)
6.10%, 4/1/2013......................................................... 5,000,000 4,883,850
North Miami Health Facilities Authority, Health Facilities Revenue
(Villa Maria Nursing Housing Project) 7.50%, 9/1/2012................... 2,670,000 2,888,326
Orange County, Solid Waste Facilities Revenue 6.375%, 10/1/2007 (Insured; FGIC) 4,910,000 5,293,226
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
FLORIDA (CONTINUED)
Orange County Health Facilities Authority, Health Facilities Revenue
(Mental Health Service Project) 9.25%, 7/1/2020 (Prerefunded 7/1/2000) (b) $ 3,780,000 $ 4,459,379
Osceola County Industrial Development Authority, Revenue
(Community Provider Pooled Loan Program) 7.75%, 7/1/2017................ 5,235,000 5,295,674
Palm Bay, Utility Revenue, Refunding (Palm Bay Utility Corp. Project)
5%, 10/1/2022 (Insured; MBIA)........................................... 5,300,000 4,662,039
Palm Beach County:
Solid Waste Industrial Development Revenue:
(Okeelanta Power LP Project) 6.85%, 2/15/2021......................... 11,000,000 10,862,830
(Osceola Power LP) 6.85%, 1/1/2014.................................... 5,800,000 5,737,824
Water and Sewer Revenue 5%, 10/1/2010 (Insured; MBIA)................... 4,320,000 4,084,042
Palm Beach County Housing Finance Authority, Single Family Mortgage
Purchase Revenue 6.55%, 4/1/2027........................................ 2,750,000 2,770,900
Pinellas County, PCR, Refunding (Florida Power Corp.) 7.20%, 12/1/2014...... 3,000,000 3,203,820
Pinellas County Housing Finance Authority, SFMR:
7.70%, 8/1/2022......................................................... 2,810,000 2,949,207
(Multi-County Program) 6.70%, 2/1/2028 (Insured; FHA)................... 5,000,000 5,060,050
Polk County Industrial Development Authority, IDR
(IMC Fertilizer) 7.525% 1/1/2015........................................ 10,000,000 10,355,200
Reedy Creek, Improvement District 5%, 6/1/2019 (Insured; AMBAC)............. 3,325,000 2,963,539
Saint Lucie County, SWDR (Florida Power and Light Co. Project)
7.15%, 2/1/2023......................................................... 4,000,000 4,318,040
Sarasota County, Utility System Revenue, Refunding
5.25%, 10/1/2016 (Insured; FGIC)........................................ 1,000,000 931,800
Sunrise, Special Tax District Number 1, Refunding
6.375%, 11/1/2021 (LOC; Bayerische Hypotheken-und Weschel Bank) (a)..... 2,500,000 2,570,400
Tampa, Water and Sewer Revenue 5.125%, 10/1/2017 (Insured; FGIC)............ 1,000,000 908,090
U.S. RELATED-4.3%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 5,000,000 5,015,200
Virgin Islands Public Finance Authority, Revenue, Refunding 7.25%, 10/1/2018 5,400,000 5,682,258
__________
TOTAL INVESTMENTS (cost $247,491,507)....................................... $251,189,849
============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FNMA Federal National Mortgage Association MFMR Multi-Family Mortgage Revenue
GNMA Government National Mortgage Association PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<S> <C> <C> <C>
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _______ _______________ ____________________
AAA Aaa AAA 50.3%
AA Aa AA 15.3
A A A 2.6
BBB Baa BBB 10.5
BB Ba BB 5.8
Not Rated (d) Not Rated (d) Not Rated (d) 15.5
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $247,491,507)-see statement..................................... $251,189,849
Receivable for investment securities sold............................... 4,063,458
Interest receivable..................................................... 3,753,959
Receivable for shares of Beneficial Interest subscribed................. 28,830
Prepaid expenses........................................................ 19,543
_____________
259,055,639
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 115,542
Due to Distributor...................................................... 63,611
Due to Custodian........................................................ 3,819,244
Payable for shares of Beneficial Interest redeemed...................... 461,014
Accrued expenses........................................................ 59,907 4,519,318
____________ _____________
NET ASSETS ................................................................ $254,536,321
==============
REPRESENTED BY:
Paid-in capital......................................................... $245,312,787
Accumulated undistributed net realized gain on investments.............. 5,525,192
Accumulated net unrealized appreciation on investments-Note 3........... 3,698,342
_____________
NET ASSETS at value......................................................... $254,536,321
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 15,710,599
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,867,187
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 2,430
===============
NET ASSET VALUE per share:
Class A Shares
($227,478,154 / 15,710,599 shares).................................... $14.48
========
Class B Shares
($27,023,005 / 1,867,187 shares)...................................... $14.47
========
Class C Shares
($35,162 / 2,430 shares).............................................. $14.47
========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $17,013,955
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,504,679
Shareholder servicing costs-Note 2(c)................................. 855,159
Distribution fees-Note 2(b)........................................... 134,701
Professional fees..................................................... 78,027
Custodian fees........................................................ 29,329
Prospectus and shareholders' reports.................................. 6,418
Trustees' fees and expenses-Note 2(d)................................. 3,746
Registration fees..................................................... 1,892
Miscellaneous......................................................... 18,676
__________
TOTAL EXPENSES.................................................. 2,632,627
__________
INVESTMENT INCOME-NET........................................... 14,381,328
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,336,711
Net unrealized (depreciation) on investments............................ (2,819,982)
__________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 3,516,729
__________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $17,898,057
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
_____________ ___________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 16,368,966 $ 14,381,328
Net realized gain on investments........................................ 4,410,983 6,336,711
Net unrealized (depreciation) on investments for the year............... (2,782,324) (2,819,982)
_____________ ___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 17,997,625 17,898,057
_____________ ___________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (15,149,356) (13,092,008)
Class B shares........................................................ (1,219,610) (1,288,976)
Class C shares........................................................ _ (344)
Net realized gain on investments:
Class A shares........................................................ (716,166) (3,306,553)
Class B shares........................................................ (65,057) (370,770)
Class C shares........................................................ _ (14)
_____________ ___________
TOTAL DIVIDENDS................................................... (17,150,189) (18,058,665)
_____________ ___________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 12,537,474 9,844,149
Class B shares........................................................ 5,009,096 4,401,949
Class C shares........................................................ _ 36,586
Dividends reinvested:
Class A shares........................................................ 5,971,345 6,539,239
Class B shares........................................................ 509,461 644,364
Class C shares........................................................ _ 107
Cost of shares redeemed:
Class A shares........................................................ (56,564,392) (41,280,587)
Class B shares........................................................ (2,889,736) (3,176,969)
_____________ ___________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (35,426,752) (22,991,162)
_____________ ___________
TOTAL (DECREASE) IN NET ASSETS.................................. (34,579,316) (23,151,770)
NET ASSETS:
Beginning of year....................................................... 312,267,407 277,688,091
_____________ ___________
End of year............................................................. $277,688,091 $254,536,321
============ ===============
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 877,487 658,995 350,773 295,615 2,423
Shares issued for dividends
reinvested........... 419,064 437,472 35,744 43,121 7
Shares redeemed........ (3,988,619) (2,776,392) (202,194) (214,088) _
_________ _______ _______ _______ _______
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (2,692,068) (1,679,925) 184,323 124,648 2,430
============ ============ ========== ========== ============
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Florida Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $2,593 during the year ended April 30, 1996 from commissions earned
on sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$134,640 was charged to the Series for the Class B shares and $61 was charged
to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. During the year ended April 30, 1996,
$616,605, $67,320 and $20 were charged to Class A, Class B and Class C
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $44,055 for the period
from December 1, 1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $144,987,747 and $171,615,659, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $3,698,342, consisting of $7,261,047 gross unrealized appreciation and
$3,562,705 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Florida Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Florida Series at April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
__________ __________
<S> <C> <C>
GEORGIA-97.9%
Albany, Sewer System Revenue 6.50%, 7/1/2009 (Insured; MBIA)................ $ 100,000 $ 109,094
Albany-Dougherty Inner City Authority, Revenue, Refunding 6%, 2/1/2011...... 200,000 203,008
Athens-Clarke County Unified Government, Water and Sewer Revenue, Refunding
5.875%, 1/1/2008 (Insured; FGIC)........................................ 265,000 273,888
Atlanta:
Airport Facilities Revenue:
6.50%, 1/1/2013....................................................... 150,000 154,929
6%, 1/1/2014 (Insured; AMBAC)......................................... 1,000,000 1,000,260
COP (Atlanta Pretrial Detention Center Project) 6.25%, 12/1/2011 (Insured; MBIA) 300,000 311,370
GO 6.10%, 12/1/2019..................................................... 1,000,000 1,008,860
School Improvement 5.60%, 12/1/2018..................................... 1,000,000 957,360
Atlanta Downtown Development Authority, Revenue, Refunding
(Underground Atlanta Project) 6.25%, 10/1/2016.......................... 200,000 205,354
Barrow County School District 5.60%, 2/1/2015 (Insured; MBIA)............... 1,000,000 977,780
Bartow County, Water and Sewer Revenue, Refunding
6%, 9/1/2015 (Insured; AMBAC)........................................... 450,000 455,989
Chatham County School District 6.25%, 8/1/2016.............................. 1,000,000 1,098,460
Clayton County and Clayton County Water Authority, Water and Sewer Revenue,
Refunding 5.60%, 5/1/2013 (Insured; AMBAC).............................. 1,200,000 1,191,816
Columbus, Water and Sewer Revenue, Refunding:
6.25%, 5/1/2011 (Insured; FGIC)......................................... 155,000 162,114
5.70%, 5/1/2020......................................................... 500,000 478,905
Columbus Hospital Authority, Revenue Certificates (Saint Francis Hospital)
6.20%, 1/1/2010 (Insured; MBIA)......................................... 200,000 207,090
Coweta County School System:
6.35%, 8/1/2012......................................................... 100,000 104,388
Refunding 5.75%, 2/1/2010 (Insured; FGIC)............................... 200,000 203,348
Dekalb County Development Authority, Revenue:
Refunding (Emory University Project) 5.25%, 11/1/2015................... 1,000,000 943,500
(Wesley Homes, Inc.-Budd Terrace Project)
6.75%, 10/1/2013 (LOC; Wachovia Bank of Georgia, N.A.) (a)............ 200,000 207,382
Dekalb County Health Facilities, GO 5.50%, 1/1/2020......................... 1,000,000 942,550
Dekalb County School District, Refunding 5.60%, 7/1/2010.................... 500,000 503,125
Fayette County School District 6.125%, 3/1/2015............................. 500,000 514,455
Fulco Hospital Authority, Revenue Anticipation Certificates
(Georgia Baptist Healthcare) 6.25%, 9/1/2013............................ 250,000 241,265
Fulton County, Water and Sewer Revenue, Refunding
6.375%, 1/1/2014 (Insured; FGIC)........................................ 290,000 311,759
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ __________
GEORGIA (CONTINUED)
Fulton County Building Authority, Revenue, Refunding
(County Government and Health Facilities Project) 6.125%, 1/1/2011..... $ 300,000 $ 311,193
Fulton County Development Authority, Special Facilities Revenue, Refunding
(Delta Air Lines Inc., Project) 6.95%, 11/1/2012........................ 245,000 253,698
Fulton County Hospital Authority, Revenue Anticipation Certificates
(Northside Hospital Project)
6.625%, 10/1/2016 (Insured; MBIA) (Prerefunded 10/1/2002) (b)........... 200,000 223,430
Gainesville, Water and Sewer Revenue, Refunding 6%, 11/15/2012 (Insured; FGIC) 300,000 315,981
Gainesville and Hall County Hospital Authority, Revenue Anticipation
Certificates
(Northeast Healthcare Project) 6.25%, 10/1/2012 (Insured; MBIA)......... 100,000 104,004
Georgia, GO:
6.30%, 3/1/2008......................................................... 100,000 110,042
6.65%, 3/1/2009......................................................... 1,000,000 1,128,960
5.65%, 3/1/2012......................................................... 1,000,000 1,012,570
Georgia Housing and Finance Authority, Revenue:
(Home Ownership Opportunity Program) 6.50%, 12/1/2011................... 130,000 132,817
Single Family Mortgage 6.50%, 12/1/2017 (Insured; FHA).................. 1,000,000 1,007,270
Georgia Medical Center Hospital Authority, Revenue
(Columbus Regional Healthcare System) 5.50%, 8/15/2015 (Insured; MBIA).. 2,200,000 2,087,206
Georgia Municipal Electric Authority:
Power Revenue, Refunding:
5.50%, 1/1/2012....................................................... 1,000,000 956,420
6.125%, 1/1/2014 (Insured; FGIC)...................................... 300,000 305,415
Special Obligation (First Crossover-General Resolution) 6.50%, 1/1/2020. 100,000 105,548
Glynn County, Board of Education 5.10%, 7/1/2011............................ 500,000 471,610
Hancock County, Various Purpose Asset Guaranty 6.70%, 4/1/2015.............. 1,000,000 1,042,960
Henry County and Henry County Water and Sewer Authority, Revenue, Refunding
6.50%, 2/1/2011 (Insured; MBIA)......................................... 100,000 105,748
Marietta Development Authority, Revenue (First Mortgage-Life College)
5.75%, 9/1/2014 (Insured; CGIC)......................................... 850,000 831,564
Metropolitan Atlanta Rapid Transportation Authority, Sales Tax Revenue, Refunding
6.25%, 7/1/2020 (Insured; AMBAC)........................................ 300,000 317,604
Monroe County Development Authority, PCR (Oglethorpe Power Corp. Scherer
Project)
6.80%, 1/1/2011......................................................... 100,000 108,026
Private Colleges and Universities Authority, Revenue, Refunding
(Spellman College Project) 6.20%, 6/1/2014 (Insured; FGIC).............. 1,000,000 1,037,510
Roswell, GO 5.65%, 2/1/2011................................................. 1,000,000 1,009,610
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_____________ __________
GEORGIA (CONTINUED)
Savannah Economic Development Authority, PCR, Refunding (Union Camp Corp. Project)
6.80%, 2/1/2012......................................................... $ 200,000 $ 214,074
Savannah Hospital Authority, Revenue, Refunding (Saint Joseph's Hospital
Project)
6.20%, 7/1/2023......................................................... 1,000,000 964,940
Sugar Hill Public Utility, Revenue, Refunding 5.90%, 1/1/2014 (Insured; FSA) 500,000 498,595
U.S. RELATED-2.1%
Puerto Rico, GO, Refunding 6%, 7/1/2014..................................... 600,000 591,786
______
TOTAL INVESTMENTS (cost $27,683,090)........................................ $28,016,630
______
______
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation GO General Obligation
CGIC Capital Guaranty Insurance Company LOC Letter of Credit
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration PCR Pollution Control Revenue
FSA Financial Security Assurance
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_________ ______ _________________ ___________________
<S> <C> <C> <C>
AAA Aaa AAA 49.1%
AA Aa AA 35.3
A A A 14.7
BB Ba BB .9
_____
100.0%
=====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Secured by letters of credit.
(b) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $27,683,090)-see statement...................................... $28,016,630
Cash.................................................................... 110,909
Interest receivable..................................................... 479,345
Receivable for shares of Beneficial Interest subscribed................. 10,000
Prepaid expenses........................................................ 1,384
__________
28,618,268
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $12,932
Due to Distributor...................................................... 14,221
Payable for shares of Beneficial Interest redeemed...................... 27,051
Accrued expenses........................................................ 24,167 78,371
_______ ___________
NET ASSETS.................................................................. $28,539,897
___________
___________
REPRESENTED BY:
Paid-in capital......................................................... $28,940,292
Accumulated net realized (loss) on investments.......................... (733,935)
Accumulated net unrealized appreciation on investments-Note 3........... 333,540
__________
NET ASSETS at value......................................................... $28,539,897
___________
___________
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 639,462
___________
___________
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,539,970
___________
___________
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 6,723
___________
___________
NET ASSET VALUE per share:
Class A Shares
($8,346,358 / 639,462 shares)......................................... $13.05
__________
__________
Class B Shares
($20,105,797 / 1,539,970 shares)...................................... $13.06
__________
__________
Class C Shares
($87,742 / 6,723 shares).............................................. $13.05
__________
__________
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $1,673,453
EXPENSES:
Management fee-Note 2(a).............................................. $ 160,860
Shareholder servicing costs-Note 2(c)................................. 103,832
Distribution fees-Note 2(b)........................................... 101,771
Custodian fees........................................................ 3,641
Professional fees..................................................... 3,061
Prospectus and shareholders' reports.................................. 1,092
Registration fees..................................................... 795
Trustees' fees and expenses-Note 2(d)................................. 356
Miscellaneous......................................................... 4,655
______
TOTAL EXPENSES.................................................. 380,063
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 59,898
______
NET EXPENSES.................................................... 320,165
__________
INVESTMENT INCOME-NET........................................... 1,353,288
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(205,254)
Net unrealized appreciation on investments.............................. 774,119
______
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 568,865
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,922,153
___________
___________
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
___________________
1995 1996
_______ ______
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 1,478,725 $ 1,353,288
Net realized (loss) on investments...................................... (508,036) (205,254)
Net unrealized appreciation on investments for the year................. 667,389 774,119
_________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 1,638,078 1,922,153
_________ ____________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (548,712) (443,972)
Class B shares........................................................ (930,013) (908,818)
Class C shares........................................................ - (498)
_________ ____________
TOTAL DIVIDENDS................................................... (1,478,725) (1,353,288)
_________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 698,373 326,483
Class B shares........................................................ 4,788,621 2,305,085
Class C shares........................................................ - 88,634
Dividends reinvested:
Class A shares........................................................ 386,985 316,447
Class B shares........................................................ 479,506 438,970
Class C shares........................................................ - 498
Cost of shares redeemed:
Class A shares........................................................ (2,172,832) (1,482,789)
Class B shares........................................................ (2,227,045) (2,436,019)
_________ ____________
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 1,953,608 (442,691)
========= ============
TOTAL INCREASE IN NET ASSETS.................................... 2,112,961 126,174
NET ASSETS:
Beginning of year....................................................... 26,300,762 28,413,723
_________ ____________
End of year............................................................. $28,413,723 $28,539,897
_________ ____________
_________ ____________
</TABLE>
<TABLE>
<CAPTION>
SHARES
_____________________________________________________________________
CLASS A CLASS B CLASS C
________________________ ________________________ ___________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
________________________ ________________________
1995 1996 1995 1996 1996*
__________ ________ _______ _______ __________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 56,480 24,765 380,245 173,357 6,685
Shares issued for
dividends reinvested. 30,950 23,848 38,336 33,082 38
Shares redeemed........ (178,009) (111,113) (180,856) (183,789) -
________ _________ _________ _________ ________
NET INCREASE
(DECREASE)
IN SHARES
OUTSTANDING.... (90,579) (62,500) 237,725 22,650 6,723
________ _________ _________ _________ ________
________ _________ _________ _________ ________
_________________________
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series, including the Georgia Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid
monthly. Dividends from net realized capital gain, if any, are normally
declared and paid annually, but the Series may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net realized capital gain can be offset by
capital loss carryovers, it is the policy of the Series not to distribute
such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax-exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Series has an unused capital loss carryover of approximately $648,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1996. The
carryover does not include net realized securities losses from November 1,
1995 through April 30, 1996 which are treated, for Federal income tax
purposes, as arising in fiscal 1997. If not applied, $14,625 of the carryover
expires in fiscal 2002, $366,375 of the carryover expires in fiscal 2003 and
$267,000 of the carryover expires in fiscal 2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager
had undertaken from May 1, 1995 through July 6, 1995 to reimburse all fees
and expenses of the series (excluding 12b-1 distribution plan fees,
Shareholder Services Plan fees and certain expenses as described above), and
thereafter through March 17, 1996, to reduce the management fee and reimburse
such excess expenses paid by the Series, to the extent that the Series'
aggregate expenses (excluding 12b-1 distribution plan fees and certain
expenses as described above) exceeded specified annual percentages of the
Series' average daily net assets. The Manager has currently undertaken from
March 18, 1996 through April 30, 1997 to reduce the management fee or
reimburse such excess expenses paid by the Series, to the extent that the
Series' aggregate annual expenses (excluding 12b-1 distribution plan fees and
certain expenses as described above) exceed an annual rate of 1.25 of 1% of
the value of the Series' average daily net assets. The reduction in
management fee, pursuant to the undertakings, amounted to $59,898 for the
year ended April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $83 during the year ended April 30,1996 from commissions earned on
sales of the Series' shares.
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$101,671 was charged to the Series for the Class B shares and $100 was
charged to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$22,250, $50,835 and $33 were charged to Class A, Class B and Class C shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $5,294 for the period
from December 1, 1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $9,554,141 and $10,052,890, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $333,540, consisting of $612,291 gross unrealized appreciation and
$278,751 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, GEORGIA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Georgia Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Georgia Series at April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.8% AMOUNT VALUE
_______ _______
<S> <C> <C>
MARYLAND-84.0%
Anne Arundel County,
Consolidated Water and Sewer 7.75%, 3/15/2008........................... $ 1,000,000 $ 1,095,570
Baltimore:
7%, 10/15/2007 (Insured; MBIA).......................................... 1,500,000 1,740,000
7.15%, 10/15/2008....................................................... 1,275,000 1,478,554
Port Facilities Revenue (Consolidated Coal Sales) 6.50%, 12/1/2010...... 9,740,000 10,484,915
Baltimore City Housing Corp., MFHR, Refunding
7.25%, 7/1/2023 (Collateralized; FNMA).................................. 3,245,000 3,386,255
Baltimore County:
Mortgage Revenue:
(First Mortgage - Pickersgill) 7.70%, 1/1/2021........................ 3,000,000 3,120,750
(Refunding - Tindeco Wharf Project) 6.50%, 12/20/2012 (Collateralized; GNMA) 1,500,000 1,553,940
PCR Refunding (Bethlehem Steel Corp. Project):
7.50%, 6/1/2015....................................................... 3,500,000 3,586,660
7.55%, 6/1/2017....................................................... 2,500,000 2,581,650
Gaithersburg, Hospital Facilities Improvement Revenue, Refunding (Shady
Grove)
6.50%, 9/1/2012 (Insured; FSA).......................................... 10,000,000 11,005,100
Howard County:
COP 8.15%, 2/15/2020.................................................... 605,000 797,154
EDR, Refunding (M.O.R. XIV Associates Project) 7.75%, 6/1/2012.......... 2,500,000 2,669,150
Howard County Metropolitan District 6.125%, 5/15/2023....................... 2,000,000 2,058,640
Kent County, College Revenue, Refunding (Washington College Project)
7.70%, 7/1/2018......................................................... 1,750,000 1,897,052
Maryland Community Development Administration,
Department of Housing and Community Development:
MFHR:
5.95%, 5/15/2013.................................................. 10,000,000 10,006,600
6.50%, 5/15/2013.................................................. 5,000,000 5,165,300
8.875%, 5/15/2021................................................. 360,000 365,069
7.30%, 5/15/2023.................................................. 2,205,000 2,308,370
6.85%, 5/15/2033.................................................. 5,000,000 5,126,900
6.70%, 5/15/2036 (Insured; FHA)................................... 5,415,000 5,541,982
Single Family Program:
7.40%, 4/1/2009................................................... 1,000,000 1,054,950
6.95%, 4/1/2011................................................... 6,125,000 6,385,312
7.70%, 4/1/2015................................................... 3,590,000 3,723,979
6.55%, 4/1/2026................................................... 7,500,000 7,610,475
6.75%, 4/1/2026................................................... 3,650,000 3,723,693
7.375%, 4/1/2026.................................................. 2,000,000 2,059,000
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MARYLAND (CONTINUED)
Maryland Community Development Administration,
Department of Housing and Community Development (continued):
Single Family Program (continued):
Zero Coupon, 4/1/2029............................................. $ 85,075,000 $ 5,887,190
7.625%, 4/1/2029.................................................. 7,545,000 7,829,597
7.45%, 4/1/2032................................................... 6,410,000 6,686,591
Maryland Department of Transportation, Consolidated Transportation
6.375%, 9/1/2006........................................................ 5,000,000 5,354,450
Maryland Economic Development Corp., Revenue
(Health and Mental Hygiene Providers Facilities Acquisition Program):
8.375%, 3/1/2013...................................................... 4,415,000 4,684,006
8.75%, 3/1/2017....................................................... 5,150,000 5,462,863
Maryland Health and Higher Educational Facilities Authority, Revenue:
(Bon Secours Hospital) 7.375%, 9/1/2017 (Prerefunded 7/1/2000) (a)...... 2,575,000 2,822,406
(Frederick Memorial Hospital) 5%, 7/1/2023 (Insured; FGIC) (b).......... 2,870,000 2,506,428
(Refunding - Doctors Community Hospital) 5.50%, 7/1/2024................ 4,700,000 4,010,181
(Refunding - Francis Scott Key Medical Center) 5%, 7/1/2023 (Insured; FGIC) 1,000,000 873,320
(Refunding - Memorial Hospital of Cumberland) 6.50%, 7/1/2017 (Insured; MBIA) 1,000,000 1,022,430
(Refunding - Roland Park Project) 7.75%, 7/1/2012....................... 2,230,000 2,355,304
(Refunding - Suburban Hospital) 5.125%, 7/1/2021 (Insured; AMBAC)....... 4,700,000 4,199,732
(Union Hospital of Cecil County) 6.70%, 7/1/2009........................ 2,320,000 2,381,039
(University of Maryland Medical Systems):
7%, 7/1/2022 (Insured; FGIC).......................................... 4,500,000 5,225,355
Refunding:
5.40%, 7/1/2008 (Insured; FGIC)................................... 2,625,000 2,627,993
(Northwest Hospital Center) 5.25%, 7/1/2013 (Insured; AMBAC)...... 6,500,000 6,103,955
Maryland Industrial Development Financing Authority, EDR
(Medical Waste Association) 8.75%, 11/15/2010........................... 750,000 750,000
Maryland Local Government Insurance Trust, Capitalization Program, COP
7.125%, 8/1/2009........................................................ 3,250,000 3,551,535
Maryland National Capital Park and Planning Commission,
Prince Georges County, Refunding
(Park Aquisition and Development) 5.125%, 7/1/2010...................... 1,990,000 1,917,246
Maryland Stadium Authority, Sports Facility LR 7.60%, 12/15/2019............ 5,250,000 5,739,930
Maryland State and Local Facilities 5.125%, 10/15/2010...................... 4,635,000 4,479,218
Maryland Transportation Authority, Transportation Facilities Project Revenue
Refunding 5.70%, 7/1/2005............................................... 3,700,000 3,884,186
Maryland Water Quality Financing Administration, Revolving Loan Fund Revenue:
6.70%, 9/1/2013 (Prerefunded 9/1/2001) (a).............................. 1,200,000 1,332,612
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MARYLAND (CONTINUED)
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue (continued):
7.10%, 9/1/2013 (Prerefunded 9/1/2001) (a)............................ $ 600,000 $ 676,794
Montgomery County, PCR, Refunding (Potomac Electric Power Company)
5.375%, 2/15/2024 (Insured; MBIA)....................................... 8,750,000 8,136,538
Montgomery County Housing Opportunities Commission, Revenue:
Multi-Family Mortgage:
7.05%, 7/1/2032....................................................... 2,485,000 2,570,260
7.375%, 7/1/2032...................................................... 4,630,000 4,831,729
Single Family Mortgage:
7.375%, 7/1/2017...................................................... 1,835,000 1,939,228
6.625%, 7/1/2026...................................................... 3,750,000 3,825,150
Montgomery County Revenue Authority, LR (Olney Indoor Swim Center Project)
6.30%, 7/15/2012 (Prerefunded 7/15/2000) (a)............................ 2,110,000 2,284,307
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project):
6%, 7/1/2006.......................................................... 6,170,000 6,334,739
6%, 7/1/2008.......................................................... 3,690,000 3,737,343
6.20%, 7/1/2010....................................................... 8,650,000 8,724,304
Prince Georges County:
Consolidated Public Improvement:
5.50%, 1/1/2012 (Insured; MBIA)....................................... 3,000,000 2,973,360
Refunding 6.75%, 7/1/2010 (Prerefunded 7/1/2001) (a).................. 1,170,000 1,266,069
PCR, Refunding (Potomac Electric Project):
5.75%, 3/15/2010...................................................... 5,250,000 5,339,093
6%, 9/1/2022.......................................................... 3,750,000 3,790,763
Prince Georges County Housing Authority:
Mortgage Revenue, Refunding:
(New Keystone Apartment Project) 6.80%, 7/1/2025 (Insured: FHA & MBIA) 4,300,000 4,467,829
(Stevenson Apartments Project) 6.35%, 7/20/2020 (Collateralized; GNMA) 3,000,000 3,055,890
SFMR 6.60%, 12/1/2025 (Collateralized: FNMA & GNMA)..................... 4,660,000 4,745,464
University of Maryland, System Auxiliary Facility and Tuition Revenue:
5.375%, 4/1/2009........................................................ 2,500,000 2,502,500
6.50%, 10/1/2012 (Prerefunded 10/1/2002) (a)............................ 1,420,000 1,575,802
Washington County, Public Improvement
4.875%, 1/1/2014 (Insured; FGIC)........................................ 1,450,000 1,299,142
Washington Suburban Sanitary District, Refunding
(Water Supply) 5%, 6/1/2011............................................. 1,200,000 1,128,996
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
U. S. RELATED-14.8%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ $ 4,000,000 $ 4,012,160
Guam Power Authority, Revenue 6.30%, 10/1/2012.............................. 3,400,000 3,346,892
Puerto Rico Commonwealth 5.85%, 7/1/2009.................................... 5,000,000 5,046,350
Puerto Rico Commonwealth Aqueduct and Sewer Authority, Revenue, Refunding
5%, 7/1/2019............................................................ 6,000,000 5,196,420
Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue:
5.40%, 7/1/2006 (Insured; FSA).......................................... 11,000,000 11,022,770
5.50%, 7/1/2013......................................................... 4,000,000 3,822,160
Refunding:
5.25%, 7/1/2021 (c)................................................... 2,500,000 2,206,325
5%, 7/1/2022.......................................................... 2,080,000 1,764,630
Puerto Rico Public Buildings Authority, Revenue, Refunding 5.70%, 7/1/2009.. 3,500,000 3,543,400
University of Puerto Rico, University Revenue 5.25%, 6/1/2025 (Insured; MBIA) 7,775,000 7,171,971
____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $307,100,599)................... $314,552,965
==============
SHORT-TERM MUNICIPAL INVESTMENTS-1.2%
MARYLAND-.1%
Frederick, VRDN 3.90% (LOC; Fuji Bank and Trust Company) (d,e).............. $ 300,000 $ 300,000
U.S. RELATED-1.1%
Puerto Rico Electric Power Authority, Power Revenue 3.32% (Insured; FSA) (f) 3,600,000 3,600,000
____________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $3,900,000).................... $ 3,900,000
==============
TOTAL INVESTMENTS-100.0% (cost $311,000,599)................................ $318,452,965
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation LR Lease Revenue
EDR Economic Development Revenue MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association PCR Pollution Control Revenue
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GNMA Government National Mortgage Association VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<S> <C> <C> <C>
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
____ ________ ___________________ ______________________
AAA Aaa AAA 30.8%
AA Aa AA 35.2
A A A 21.9
BBB Baa BBB 4.9
F1+ & F1 MIG1, VMIG1 & P1 SP1 & A1 .1
Not Rated (h) Not Rated (h) Not Rated (h) 7.1
__________
100.0%
===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Wholly held by the custodian in a segregated account as collateral
for a delayed-delivery security.
(c) Purchased on a delayed-delivery basis.
(d) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(e) Secured by letters of credit.
(f) Inverse floater security - the interest rate is subject to change
periodically.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(i) At April 30, 1996, the Series had $103,850,755 (31.9% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from housing projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $311,000,599)-see statement..................................... $318,452,965
Cash.................................................................... 1,251,041
Interest receivable..................................................... 5,430,384
Receivable for investment securities sold............................... 2,677,860
Receivable for shares of Beneficial Interest subscribed................. 196,474
Prepaid expenses........................................................ 8,469
___________
328,017,193
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 147,272
Due to Distributor...................................................... 83,750
Payable for investment securities purchased............................. 2,242,850
Payable for shares of Beneficial Interest redeemed...................... 393,595
Accrued expenses........................................................ 65,973 2,933,440
____________ _____________
NET ASSETS.................................................................. $325,083,753
=============
REPRESENTED BY:
Paid-in capital......................................................... $314,643,536
Accumulated undistributed net realized gain on investments.............. 2,987,851
Accumulated net unrealized appreciation on investments-Note 3........... 7,452,366
___________
NET ASSETS at value......................................................... $325,083,753
=============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 22,367,145
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,244,429
=============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 2,094
=============
NET ASSET VALUE per share:
Class A Shares
($283,877,760 / 22,367,145 shares).................................... $12.69
========
Class B Shares
($41,179,420 / 3,244,429 shares)...................................... $12.69
========
Class C Shares
($26,573 / 2,094 shares).............................................. $12.69
========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 20,680,770
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,852,002
Shareholder servicing costs-Note 2(c)................................. 1,067,466
Distribution fees-Note 2(b)........................................... 194,102
Professional fees..................................................... 48,325
Custodian fees........................................................ 36,892
Prospectus and shareholders' reports.................................. 13,072
Registration fees..................................................... 6,769
Trustees' fees and expenses-Note 2(d)................................. 4,732
Miscellaneous......................................................... 23,089
___________
TOTAL EXPENSES.................................................. 3,246,449
____________
INVESTMENT INCOME-NET........................................... 17,434,321
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $4,318,992
Net unrealized appreciation on investments.............................. 1,867,438
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 6,186,430
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $23,620,751
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
________________________________
1995 1996
______________ ______________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 19,487,297 $ 17,434,321
Net realized gain on investments........................................ 874,479 4,318,992
Net unrealized appreciation on investments for the year................. 276,297 1,867,438
______________ ______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 20,638,073 23,620,751
______________ ______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (17,819,972) (15,612,512)
Class B shares........................................................ (1,667,325) (1,821,592)
Class C shares........................................................ - (217)
Net realized gain on investments:
Class A shares........................................................ - (1,739,958)
Class B shares........................................................ - (229,505)
Class C shares........................................................ - (6)
______________ ______________
TOTAL DIVIDENDS................................................... (19,487,297) (19,403,790)
______________ ______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 15,871,084 11,106,487
Class B shares........................................................ 7,200,284 7,992,863
Class C shares........................................................ - 27,000
Dividends reinvested:
Class A shares........................................................ 11,260,663 11,154,241
Class B shares........................................................ 1,087,620 1,358,026
Class C shares........................................................ - 219
Cost of shares redeemed:
Class A shares........................................................ (61,788,292) (44,093,946)
Class B shares........................................................ (3,903,364) (3,601,826)
______________ ______________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (30,272,005) (16,056,936)
______________ ______________
TOTAL (DECREASE) IN NET ASSETS.................................. (29,121,229) (11,839,975)
NET ASSETS:
Beginning of year....................................................... 366,044,957 336,923,728
______________ ______________
End of year............................................................. $336,923,728 $325,083,753
============ ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________ ____________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 1,283,464 860,692 582,210 620,596 2,077
Shares issued for
dividends reinvested. 913,405 863,509 88,247 105,093 17
Shares redeemed........ (5,049,171) (3,429,459) (321,839) (279,793) -
_________ _______ _______ _______ _______
NET INCREASE
(DECREASE)
IN SHARES
OUTSTANDING.... (2,852,302) (1,705,258) 348,618 445,896 2,094
============ ============ ========== ========== ============
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Maryland Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $1,197 during the year ended April 30, 1996 from commissions earned
on sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$194,067 was charged to the Series for the Class B shares and $35 was charged
to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. During the year ended April 30, 1996,
$744,774, $97,033 and $12 were charged to Class A, Class B and Class C
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $62,934 for the period
from December 1, 1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $137,715,503 and $160,233,158, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $7,452,366, consisting of $10,271,631 gross unrealized appreciation and
$2,819,265 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Maryland Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Maryland Series at April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
_______ _______
<S> <C> <C>
MASSACHUSETTS-81.7%
Boston Industrial Development Financing Authority, Sewer Facility Revenue
(Harbor Electric Energy Co. Project) 7.375%, 5/15/2015.................. $ 2,500,000 $ 2,681,625
Leominster 7.50%, 4/1/2009 (Insured; MBIA, Prerefunded 4/1/2000) (a)........ 1,275,000 1,430,193
Lynn Water and Sewer Commission, General Revenue
7.25%, 12/1/2010 (Insured; MBIA, Prerefunded 12/1/2000) (a)............. 1,000,000 1,125,740
Massachusetts Bay Transportation Authority:
7%, 3/1/2021............................................................ 1,000,000 1,141,620
7.053%, 3/1/2021 (Insured; MBIA) (b,c).................................. 2,300,000 1,940,625
Massachusetts Commonwealth:
7.25%, 3/1/2000 (Insured; FGIC)......................................... 650,000 721,903
7%, 8/1/2012 (Prerefunded 8/1/2001) (a)................................. 1,850,000 2,074,368
Massachusetts Education Loan Authority, Education Loan Revenue
7.75%, 1/1/2008 (Insured; MBIA)......................................... 1,220,000 1,240,923
Massachusetts Health and Educational Facilities Authority, Revenue:
(Cooley Dickinson Hospital) 5.50%, 11/15/2018 (Insured; AMBAC).......... 3,500,000 3,274,915
(Medical Center of Central Massachusetts) 7.10%, 7/1/2021............... 1,000,000 1,064,500
(New England Deaconess Hospital) 6.875%, 4/1/2022....................... 6,000,000 6,271,020
(Refunding - Milton Hospital) 7%, 7/1/2016 (Insured; MBIA).............. 2,050,000 2,209,613
(South Shore Hospital) 7.50%, 7/1/2020
(Insured; MBIA, Prerefunded 7/1/2000) (a)............................. 2,000,000 2,253,540
(University Hospital) 7.25%, 7/1/2019 (Insured; MBIA)................... 2,750,000 2,995,988
Massachusetts Housing Finance Agency, Single Family Housing Revenue:
7.80%, 12/1/2005........................................................ 875,000 922,197
7.90%, 6/1/2014......................................................... 880,000 932,738
7.95%, 6/1/2023......................................................... 1,930,000 2,033,969
Massachusetts Industrial Finance Agency, Revenue:
(Brooks School) 5.95%, 7/1/2023......................................... 1,000,000 980,770
(Provider Lease Program) 8.75%, 7/15/2009............................... 685,000 722,504
(Water Treatment - American Hingham) 6.95%, 12/1/2035................... 3,000,000 3,011,580
Massachusetts Municipal Wholesale Electric Co., Power Supply Systems Revenue
6.125%, 7/1/2019........................................................ 1,200,000 1,180,920
Massachusetts Port Authority, Revenue:
Refunding 5%, 7/1/2018.................................................. 3,680,000 3,250,213
Special Project (Harborside Hyatt) 10%, 3/1/2026........................ 3,000,000 3,369,570
Massachusetts Water Pollution Abatement Trust (Pool Loan Program) 5.70%, 2/1/2015 1,300,000 1,292,317
Massachusetts Water Resources Authority:
7.625%, 4/1/2014 (Prerefunded 4/1/2000) (a)............................. 750,000 844,905
5%, 12/1/2016 (Insured; MBIA)........................................... 3,000,000 2,701,920
5%, 12/1/2025 (Insured; MBIA)........................................... 5,400,000 4,699,782
South Essex Sewer District, Refunding 5.25%, 6/15/2024 (Insured; MBIA)...... 1,000,000 913,140
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
U. S. RELATED-18.3%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ $ 1,500,000 $ 1,504,560
Puerto Rico Commonwealth:
5.40%, 7/1/2025......................................................... 2,000,000 1,811,340
Public Improvement 6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)........... 1,000,000 1,122,000
Refunding:
6%, 7/1/2014.......................................................... 2,000,000 1,972,620
5.375%, 7/1/2022 (Insured; MBIA)...................................... 2,500,000 2,352,825
Puerto Rico Commonwealth Highway and Transportation Authority,
Highway Revenue:
6.573%, 7/1/2009 (b).................................................. 1,000,000 905,000
6.673%, 7/1/2010 (b).................................................. 1,000,000 897,500
Puerto Rico Public Buildings Authority,
Guaranteed Government Facilities Revenue 6.25%, 7/1/2015 (Insured; AMBAC) 1,100,000 1,177,231
Virgin Islands Public Finance Authority, Revenue, Refunding
7.25%, 10/1/2018........................................................ 1,000,000 1,052,270
__________
TOTAL INVESTMENTS (cost $69,082,072)........................................ $70,078,444
============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _______ _______________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 46.2%
AA Aa AA 10.2
A A A 23.5
BBB Baa BBB 12.8
Not Rated (e) Not Rated (e) Not Rated (e) 7.3
________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse floater security-the interest rate is subject to change
periodically.
(c) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1996, this security amounted to $1,940,625 or 2.6% of net assets.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(f) At April 30, 1996, 32.2% of the Series' net assets are insured by
MBIA.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $69,082,072)-see statement...................................... $70,078,444
Cash.................................................................... 2,505,274
Interest receivable..................................................... 1,377,601
Receivable for shares of Beneficial Interest subscribed................. 188,009
Prepaid expenses........................................................ 2,191
____________
74,151,519
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $33,389
Due to Distributor...................................................... 17,331
Accrued expenses........................................................ 33,135 83,855
____________ ____________
NET ASSETS.................................................................. $74,067,664
============
REPRESENTED BY:
Paid-in capital......................................................... $71,387,032
Accumulated undistributed net realized gain on investments.............. 1,684,260
Accumulated net unrealized appreciation on investments-Note 3........... 996,372
____________
NET ASSETS at value......................................................... $74,067,664
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 5,985,415
============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 457,347
============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 89
============
NET ASSET VALUE per share:
Class A Shares
($68,812,117 / 5,985,415 shares)...................................... $11.50
=======
Class B Shares
($5,254,525 / 457,347 shares)......................................... $11.49
=======
Class C Shares
($1,022 / 89 shares).................................................. $11.48
=======
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,011,570
EXPENSES:
Management fee-Note 2(a).............................................. $ 423,126
Shareholder servicing costs-Note 2(c)................................. 248,839
Distribution fees-Note 2(b)........................................... 24,282
Professional fees..................................................... 10,940
Custodian fees........................................................ 8,595
Prospectus and shareholders' reports.................................. 3,544
Registration fees..................................................... 2,902
Trustees' fees and expenses-Note 2(d)................................. 1,020
Miscellaneous......................................................... 14,320
______________
TOTAL EXPENSES.................................................. 737,568
___________
INVESTMENT INCOME-NET........................................... 4,274,002
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 2,354,880
Net unrealized (depreciation) on investments............................ (2,363,586)
______________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (8,706)
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $4,265,296
=============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
___________ ___________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 4,665,750 $ 4,274,002
Net realized gain (loss) on investments................................. (120,750) 2,354,880
Net unrealized (depreciation) on investments for the year............... (311,459) (2,363,586)
____________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 4,233,541 4,265,296
____________ ____________
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (4,451,783) (4,029,063)
Class B shares........................................................ (213,967) (244,904)
Class C shares........................................................ - (35)
From net realized gain on investments:
Class A shares........................................................ - (164,269)
Class B shares........................................................ - (11,333)
Class C shares........................................................ (2)
In excess of net realized gain on investments:
Class A shares........................................................ (343,505) -
Class B shares........................................................ (17,797) -
Class C shares........................................................ - -
____________ ____________
TOTAL DIVIDENDS................................................... (5,027,052) (4,449,606)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 4,730,079 2,996,973
Class B shares........................................................ 1,042,859 1,256,028
Class C shares........................................................ - 1,000
Dividends reinvested:
Class A shares........................................................ 2,596,861 2,291,472
Class B shares........................................................ 123,653 142,581
Class C shares........................................................ - 37
Cost of shares redeemed:
Class A shares........................................................ (10,711,882) (9,062,697)
Class B shares........................................................ (603,243) (324,846)
____________ ____________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (2,821,673) (2,699,452)
____________ ____________
TOTAL (DECREASE) IN NET ASSETS.................................. (3,615,184) (2,883,762)
NET ASSETS:
Beginning of year...................................................... 80,566,610 76,951,426
____________ ____________
End of year........................................................... $ 76,951,426 $ 74,067,664
============== ================
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________ _________________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 413,848 255,371 90,978 106,403 86
Shares issued for
dividends reinvested. 228,208 194,345 10,873 12,098 3
Shares redeemed........ (939,699) (771,980) (53,757) (27,545) -
_________ _______ _______ _______ _______
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (297,643) (322,264) 48,094 90,956 89
============= =========== ======== =========== ===========
____________________
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Massachusetts Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code.
To the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $825 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$24,276 was charged to the Series for the Class B shares and $6 was charged
to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$180,190, $12,138 and $2 were charged to Class A, Class B and Class C shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $13,747 for the period
from December 1, 1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $26,612,251 and $33,956,985, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $996,372, consisting of $2,696,274 gross unrealized appreciation and
$1,699,902 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Massachusetts Series (one of the Series constituting the Premier State
Municipal Bond Fund) as of April 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and financial highlights
for each of the years indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Massachusetts Series at April
30, 1996, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.4% AMOUNT VALUE
_______ _______
<S> <C> <C>
MICHIGAN-98.0%
Brighton Area School District, Refunding:
Zero Coupon, 5/1/2014 (Insured; AMBAC).................................. $ 8,000,000 $ 2,702,560
Zero Coupon, 5/1/2020 (Insured; AMBAC).................................. 5,000,000 1,157,400
Byron Center Public Schools, Refunding 5.875%, 5/1/2024 (Insured; MBIA) (a). 3,400,000 3,344,954
Capital Region Airport Authority, Airport Revenue
6.70%, 7/1/2021 (Insured; MBIA)......................................... 2,500,000 2,615,550
Chelsea School District 6%, 5/1/2015 (Insured; FGIC) (a).................... 1,625,000 1,645,101
Chippewa Valley Schools, Refunding 7%, 5/1/2010 (Prerefunded 5/1/2001) (b).. 1,275,000 1,424,303
Clarkston Community School 5.75%, 5/1/2016 (Insured; FGIC).................. 1,340,000 1,321,990
Detroit:
(Development Area No. 1) 7.60%, 7/1/2010................................ 4,150,000 4,599,445
(Unlimited Tax) 6.35%, 4/1/2014......................................... 3,325,000 3,236,455
Water Supply Systems Revenue, Refunding:
4.75%, 7/1/2019 (Insured; FGIC)....................................... 2,500,000 2,099,000
8.79%, 7/1/2022 (Insured; FGIC) (c)................................... 1,500,000 1,578,750
Ferris State University, Revenue, Refunding 5.25%, 10/1/2020 (Insured; MBIA) 1,200,000 1,103,328
Flat Rock Community School District 5.25%, 5/1/2018 (Insured; MBIA)......... 1,500,000 1,383,315
Grand Ledge Public School District, Refunding 5.375%, 5/1/2024 (Insured; MBIA) 1,000,000 930,420
Grand Rapids Housing Finance Authority, Multi-Family Revenue, Refunding
7.625%, 9/1/2023 (Collateralized; FNMA)................................. 1,000,000 1,086,810
Huron Valley School District, Refunding:
Zero Coupon, 5/1/2018 (Insured; FGIC)................................... 6,370,000 1,665,755
6.125%, 5/1/2020 (Insured; FGIC)........................................ 1,735,000 1,772,285
Iron Mountain City School District, Refunding 5.125%, 5/1/2021 (Insured; AMBAC) 1,000,000 905,990
Kalamazoo Hospital Finance Authority, Hospital Facilities Revenue, Refunding
(Borgess Medical Center) 6.25%, 6/1/2014 (Insured; FGIC)................ 2,000,000 2,121,860
Kent County, Airport Revenue (Kent County International Airport):
5.90%, 1/1/2012......................................................... 1,145,000 1,134,512
5.90%, 1/1/2013......................................................... 1,095,000 1,078,925
Lake Orion Community School District:
5.25%, 5/1/2021 (Insured; FSA) (d)...................................... 1,400,000 1,284,360
Refunding 5.80%, 5/1/2015 (Insured; AMBAC).............................. 2,085,000 2,057,853
Lapeer Economic Development Corp., Ltd. Obligation Revenue
(Lapeer Health Services Project) 8.625%, 2/1/2020 (Prerefunded 2/1/2000) (b) 2,000,000 2,290,500
Leslie Public School (Ingham and Jackson Counties School Building and Site)
Refunding 6%, 5/1/2015 (Insured; AMBAC)................................. 1,000,000 1,013,260
Mason Public Schools District 5.40%, 5/1/2021 (Insured; FGIC)............... 1,760,000 1,655,544
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MICHIGAN (CONTINUED)
Michigan Building Authority, Revenue 6.75%, 10/1/2007 (Insured; AMBAC) (a).. $ 1,600,000 $ 1,755,488
Michigan Higher Education Student Loan Authority, Student Loan Revenue:
6.875%, 10/1/2007 (Insured; AMBAC)...................................... 2,250,000 2,287,890
7.55%, 10/1/2008 (Insured; MBIA)........................................ 1,625,000 1,662,537
6.125%, 9/1/2010........................................................ 1,520,000 1,499,906
Michigan Hospital Finance Authority, HR:
(Crittenton Hospital) 6.70%, 3/1/2007................................... 2,250,000 2,316,083
(Daughters of Charity National Health Systems-Providence Hospital) 7%, 11/1/2021 2,700,000 2,868,723
Refunding:
(Daughters of Charity National Health Systems-Providence Hospital)
5.25%, 11/1/2015.................................................. 3,700,000 3,389,459
(Detroit Medical Center) 8.125%, 8/15/2012............................ 220,000 236,898
(Genesys Health Systems) 8.125%, 10/1/2021............................ 5,000,000 5,420,450
(Henry Ford Health System) 5.25%, 11/15/2025.......................... 8,500,000 7,510,770
(Middle Michigan Obligation Group) 6.625%, 6/1/2010................... 2,000,000 2,029,040
(Sinai Hospital of Greater Detriot) 6.70%, 1/1/2026................... 2,500,000 2,475,850
(Sisters of Mercy Health Corp.):
6.25%, 2/15/2009 (Insured; FSA)................................... 1,065,000 1,116,674
5.375%, 8/15/2014 (Insured; MBIA)................................. 1,340,000 1,258,233
Michigan Housing Development Authority:
(Home Improvement Program) 7.65%, 12/1/2012............................. 2,150,000 2,264,789
MFHR 8.375%, 7/1/2019 (Insured; FGIC)................................... 1,550,000 1,632,351
Rental Housing Revenue:
6.50%, 4/1/2006....................................................... 2,000,000 2,085,340
7.70%, 4/1/2023 (Insured; FSA)........................................ 4,185,000 4,434,384
SFMR:
7.55%, 12/1/2014...................................................... 105,000 105,392
7.50%, 6/1/2015....................................................... 2,355,000 2,485,679
7.75%, 12/1/2019...................................................... 2,480,000 2,588,128
6.95%, 12/1/2020...................................................... 1,750,000 1,842,173
Michigan Municipal Bond Authority, Revenue (State Revolving Fund):
6.50%, 10/1/2014........................................................ 2,500,000 2,664,475
6.50%, 10/1/2017........................................................ 3,500,000 3,674,020
Michigan Strategic Fund:
Ltd. Obligation Revenue:
(Northeastern Community Mental Health Foundation) 8.25%, 1/1/2009..... 1,495,000 1,548,536
Refunding (Ledyard Association Ltd. Partnership Project)
6.25%, 10/1/2011 (Insured; ITT Lyndon Property Insurance Co.)..... 3,075,000 3,140,559
Solid Waste Disposal Revenue Refunding
(Genesee Power Station Project) 7.50%, 1/1/2021....................... 3,000,000 3,011,790
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MICHIGAN (CONTINUED)
Monroe County:
PCR (Detroit Edison Project):
7.50%, 12/1/2019 (Insured; AMBAC)..................................... $ 4,650,000 $ 5,117,185
7.875%, 12/1/2019..................................................... 2,720,000 2,950,275
7.65%, 9/1/2020 (Insured; FGIC)....................................... 2,250,000 2,476,575
6.55%, 6/1/2024 (Insured; MBIA)....................................... 1,700,000 1,756,831
Water Supply Systems (Frenchtown Charter Township Water Treatment
and Distribution Systems) 6.50%, 5/1/2013............................. 2,500,000 2,614,725
Monroe County Economic Development Corp., Ltd. Obligation Refunding, Revenue
(Detroit Edison Co. Project) 6.95%, 9/1/2022 (Insured; FGIC)............ 2,000,000 2,292,000
Muskegon Public Schools 5.25%, 5/1/2013 (Insured; FGIC)..................... 2,100,000 1,990,317
Nice Community School District of Marquette and Baraga Counties
5.25%, 5/1/2016 (Insured; MBIA)......................................... 1,950,000 1,799,070
Northville, Special Assessment (Wayne County) 7.875%, 1/1/2006.............. 1,685,000 1,837,779
Northwestern Michigan College, Community College Improvement Revenue,
Refunding
7%, 7/1/2011............................................................ 1,800,000 1,913,166
Novi Community School District 5.30%, 5/1/2021 (Insured; FGIC) (d).......... 6,600,000 6,097,806
Oakland County Economic Development Corp., Ltd. Obligation Revenue
(Pontiac Osteopathic Hospital Project)
9.625%, 1/1/2020 (Prerefunded 1/1/2000) (b)............................. 1,630,000 1,922,080
Oxford Area Community School District, Building and Site
5.40%, 5/1/2025 (Insured; FGIC)......................................... 1,000,000 936,860
Riverview Community School District, Refunding:
5.25%, 5/1/2014 (Insured; AMBAC)........................................ 2,000,000 1,862,260
5.25%, 5/1/2021 (Insured; AMBAC)........................................ 2,000,000 1,834,800
Rockford Public Schools, Refunding (Kent County School Building and Site)
7.375%, 5/1/2019 (Prerefunded 5/1/2000) (b)............................. 2,000,000 2,218,240
Romulus Community Schools, Refunding:
5.125%, 5/1/2017 (Insured; FGIC)........................................ 4,650,000 4,253,262
Capital Appreciation Zero Coupon, 5/1/2019 (Insured; FGIC).............. 2,390,000 588,012
Romulus Economic Development Corp., Ltd. Obligation EDR
Refunding (Romulus Hir Ltd. Partnership Project)
7%, 11/1/2015 (Insured; ITT Lyndon Property Insurance Co.).............. 3,700,000 3,943,053
Saint Johns Public Schools 5.625%, 5/1/2020 (Insured; FGIC)................. 2,500,000 2,420,125
Sandusky Community School District, Refunding 5.25%, 5/1/2021 (Insured; AMBAC) 1,000,000 917,400
South Lyon Community Schools (School Building) 6.375%, 5/1/2018............. 1,500,000 1,554,045
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ _______
MICHIGAN (CONTINUED)
Traverse City Area Public Schools (Building and Site)
5.70%, 5/1/2020 (Insured; MBIA)......................................... $ 5,000,000 $ 4,888,150
Wayne Charter County, Special Airport Facilities Revenue, Refunding
(Northwest Airlines Inc.) 6.75%, 12/1/2015.............................. 5,000,000 4,995,850
U.S. RELATED-1.4%
Puerto Rico Housing Finance Corp., MFMR
7.50%, 4/1/2022 (LOC; Government Development Bank) (e).................. 2,510,000 2,646,971
______________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $175,510,898)..................................................... $180,342,679
==============
SHORT-TERM MUNICIPAL INVESTMENT-.6%
MICHIGAN;
Midland County Economic Development Corp., Economic Development Limited Obligation
Revenue, Refunding, VRDN (Dow Chemical Corp.) 4% (f)
(cost $1,000,000)....................................................... $ 1,000,000 $ 1,000,000
==============
TOTAL INVESTMENTS-100.0%
(cost $176,510,898)..................................................... $181,342,679
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
EDR Economic Development Revenue Insurance Corporation
FGIC Financial Guaranty Insurance Company MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association MFMR Multi-Family Mortgage Revenue
FSA Financial Security Assurance PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ _____ _________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 46.7%
AA Aa AA 17.3
A A A 13.2
BBB Baa BBB 10.0
F1 MIG1 SP1 .6
Not Rated (h) Not Rated (h) Not Rated (h) 12.2
________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Held by the custodian in a segregated account as collateral for a
delayed-delivery security.
(b) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(c) Inverse floater security - the interest rate is subject to change
periodically.
(d) Purchased on a delayed-delivery basis.
(e) Secured by letters of credit.
(f) Security payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(i) At April 30, 1996, the Series had $61,403,484 (33.1% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from city municipal projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $176,510,898)-see statement..................................... $181,342,679
Receivable for investment securities sold............................... 6,402,083
Interest receivable..................................................... 3,891,829
Receivable for shares of Beneficial Interest subscribed................. 9,268
Prepaid expenses........................................................ 6,558
___________
191,652,417
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 84,311
Due to Distributor...................................................... 46,194
Payable for investment securities purchased............................. 5,546,040
Payable for shares of Beneficial Interest redeemed...................... 151,155
Accrued expenses and other liabilities.................................. 122,794 5,950,494
____________ ____________
NET ASSETS.................................................................. $185,701,923
=============
REPRESENTED BY:
Paid-in capital......................................................... $178,271,945
Accumulated undistributed net realized gain on investments.............. 2,598,197
Accumulated net unrealized appreciation on investments-Note 3........... 4,831,781
___________
NET ASSETS at value......................................................... $185,701,923
=============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 10,992,391
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,256,241
=============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 8,764
=======
NET ASSET VALUE per share:
Class A Shares
($166,537,676 / 10,992,391 shares).................................... $15.15
=======
Class B Shares
($19,031,405 / 1,256,241 shares)...................................... $15.15
=======
Class C Shares
($132,842 / 8,764 shares)............................................. $15.16
=======
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $12,183,096
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,067,900
Shareholder servicing costs-Note 2(c)................................. 643,363
Distribution fees-Note 2(b)........................................... 92,339
Professional fees..................................................... 26,897
Custodian fees........................................................ 21,558
Prospectus and shareholders' reports.................................. 17,979
Registration fees..................................................... 2,905
Trustees' fees and expenses-Note 2(d)................................. 2,496
Miscellaneous......................................................... 17,727
____________
TOTAL EXPENSES.................................................. 1,893,164
____________
INVESTMENT INCOME-NET........................................... 10,289,932
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 4,253,950
Net unrealized (depreciation) on investments............................ (1,629,095)
____________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 2,624,855
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $12,914,787
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
____________ ____________
<S> <C> <C>
OPERATIONS:
Investment income-net........................................... $ 10,969,293 $ 10,289,932
Net realized gain on investments........................................ 1,828,821 4,253,950
Net unrealized (depreciation) on investments for the year............... (818,115) (1,629,095)
____________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 11,979,999 12,914,787
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (10,186,162) (9,401,220)
Class B shares........................................................ (783,131) (886,953)
Class C shares........................................................ - (1,759)
Net realized gain on investments:
Class A shares........................................................ (2,793,660) (2,113,095)
Class B shares........................................................ (239,175) (230,061)
Class C shares........................................................ - (13)
____________ ____________
TOTAL DIVIDENDS................................................... (14,002,128) (12,633,101)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 10,587,097 6,590,274
Class B shares........................................................ 4,942,392 4,290,323
Class C shares........................................................ - 135,546
Dividends reinvested:
Class A shares........................................................ 7,582,697 6,818,746
Class B shares........................................................ 656,238 688,066
Class C shares........................................................ - 1,816
Cost of shares redeemed:
Class A shares........................................................ (27,084,772) (23,824,458)
Class B shares........................................................ (2,852,874) (2,354,777)
____________ ____________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (6,169,222) (7,654,464)
____________ ____________
TOTAL (DECREASE) IN NET ASSETS.................................. (8,191,351) (7,372,778)
NET ASSETS:
Beginning of year...................................................... 201,266,052 193,074,701
____________ ____________
End of year............................................................. $193,074,701 $185,701,923
============= ============
</TABLE>
<TABLE>
<CAPTION>
SHARES
___________________________________________________________________________________
CLASS A CLASS B CLASS C
_____________________________ ____________________ _______________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_____________________________ ____________________
1995 1996 1995 1996 1996*
_________ _______ _______ _______ _______
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 701,669 424,521 327,697 276,378 8,647
Shares issued for
dividends reinvested. 511,163 437,436 44,292 44,106 117
Shares redeemed........ (1,819,806) (1,537,548) (191,401) (152,659) -
_________ _______ _______ _______ _______
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (606,974) (675,591) 180,588 167,825 8,764
========== =========== ========= ========= ==========
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series, including the Michigan Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such
gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax-exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $5,680 during the year ended April 30, 1996 from commissions earned
on sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$92,044 was charged to the Series for the Class B shares and $295 was charged
to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$439,289, $46,022 and $98 were charged to Class A, Class B and Class C
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $39,610 for the period
from December 1, 1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $108,216,959 and $116,812,970, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $4,831,781, consisting of $7,151,570 gross unrealized appreciation and
$2,319,789 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Michigan Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Michigan Series at April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.9% AMOUNT VALUE
_______________ _________________
<S> <C> <C>
MINNESOTA-91.1%
Anoka County:
Resources Recovery Revenue (Northern States Power Co.) 7.15%, 12/1/2008. $ 1,150,000 $ 1,227,062
Solid Waste Disposal Revenue (United Power Association Project)
6.95%, 12/1/2008 (Guaranteed; National Rural Utilities
Cooperative Finance Corp.)............................................ 3,825,000 4,054,500
Burnsville, MFHR Refunding (Conventry Court Apartments)
7.50%, 9/1/2027 (Insured; FHA).......................................... 2,250,000 2,358,788
Burnsville Independent School District Number 191 5.125%, 2/1/2015.......... 3,875,000 3,617,894
Dakota County Housing and Redevelopment Authority, South-Saint Paul
Revenue Refunding (Single Family-GNMA Program) 8.10%, 9/1/2012.......... 155,000 164,438
Duluth Economic Development Authority, Health Care Facilities Revenue
(Benedictine Health-Saint Mary's Project)
8.375%, 2/15/2020 (Prerefunded 2/15/2000) (a)........................... 2,500,000 2,872,900
Eagan, MFHR Refunding (Forest Ridge Apartments) 7.50%, 9/1/2017 (Insured; FHA) 1,000,000 1,056,070
Eden Prairie, MFHR Refunding:
(Eden Investments Project) 7.40%, 8/1/2025 (Insured; FHA)............... 500,000 523,795
(Welsh Parkway Apartments) 8%, 7/1/2026 (Insured; FHA).................. 2,860,000 3,085,626
Edina:
Hospital Systems Revenue (Fairview Hospital) 7.125%, 7/1/2006........... 1,000,000 1,062,660
Housing Development Revenue Refunding (Edina Park Plaza Project)
7.70%, 12/1/2028 (Insured; FHA)....................................... 2,500,000 2,631,675
Hubbard County, Solid Waste Disposal Revenue (Potlatch Corp. Project)
7.375%, 8/1/2013........................................................ 1,000,000 1,068,030
Minneapolis:
Zero Coupon, 12/1/2014.................................................. 1,825,000 609,331
Home Ownership Program 7.10%, 6/1/2021.................................. 730,000 758,689
HR (Lifespan Inc.-Minneapolis Children's Medical Center Project):
8.125%, 8/1/2017 (Prerefunded 8/1/1998) (a)........................... 1,500,000 1,651,950
7%, 12/1/2020 (Prerefunded 6/1/2001) (a).............................. 5,650,000 6,324,836
MFHR Refunding (Churchill Apartments Project) 7.05%, 10/1/2022 (Insured; FSA) 4,000,000 4,158,560
MFMR (Seward Towers Project) 7.375%, 12/20/2030 (Collateralized; GNMA).. 2,350,000 2,481,177
Refunding (Sports Arena Project) 5.20%, 10/1/2024....................... 5,000,000 4,517,000
Minneapolis Community Development Agency, Ltd. Tax Support
Development Revenue:
8.375%, 6/1/2007...................................................... 2,500,000 2,694,325
8%, 12/1/2009......................................................... 300,000 315,228
7.75%, 12/1/2019...................................................... 2,850,000 3,114,024
7.40%, 12/1/2021...................................................... 2,000,000 2,161,320
Minneapolis-Saint Paul Housing and Redevelopment Authority,
Health Care Systems Revenue:
8%, 8/15/2014 (Prerefunded 8/15/2000) (a)............................. 3,000,000 3,447,900
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______________ ________________
MINNESOTA (CONTINUED)
Minneapolis-Saint Paul Housing and Redevelopment Authority,
Health Care Systems Revenue (continued):
(Group Health Plan Inc., Project) 6.75%, 12/1/2013...................... $ 2,750,000 $ 2,910,270
Refunding:
(Childrens Health Care) 5.50%, 8/15/2025 (Insured; FSA)............... 1,000,000 937,190
(Healthspan Health Systems) 4.75%, 11/15/2018 (Insured; AMBAC)........ 2,000,000 1,674,780
Minneapolis-Saint Paul Housing Finance Board, SFMR:
8.875%, 11/1/2018 (Collateralized; GNMA)................................ 125,000 131,685
8.30%, 8/1/2021 (Collateralized; GNMA).................................. 370,000 388,189
7.30%, 8/1/2031 (Collateralized; GNMA).................................. 6,265,000 6,539,282
Minneapolis-Saint Paul Metropolitan Apartments Community 7.80%, 1/1/2014.... 3,000,000 3,281,490
State of Minnesota (Duluth Airport) 6.25%, 8/1/2014......................... 2,500,000 2,549,825
Minnesota Agricultural and Economic Development Board,
Minnesota Small Business Development Loan Revenue:
9%, Series B, 8/1/2008................................................ 75,000 77,127
9%, Series C, 8/1/2008................................................ 245,000 251,948
8.125%, Lot 2, 8/1/2009............................................... 500,000 521,975
8.125%, Lot 3, 8/1/2009............................................... 815,000 850,819
8.20%, 8/1/2009....................................................... 655,000 697,745
8.375%, 8/1/2010...................................................... 1,385,000 1,476,479
Minnesota Higher Education Facilities Authority, Revenue (University of St.
Thomas)
5.625%, 10/1/2016....................................................... 1,000,000 955,570
Minnesota Housing Finance Agency, Revenue:
Rental Housing 6.10%, 8/1/2009.......................................... 2,585,000 2,611,186
Single Family Mortgage:
7.35%, 7/1/2016....................................................... 1,555,000 1,647,787
7.30%, 1/1/2017....................................................... 895,000 947,393
7.90%, 7/1/2019....................................................... 1,630,000 1,705,860
7.45%, 7/1/2022 (Insured; FHA)........................................ 2,830,000 2,937,653
7.95%, 7/1/2022....................................................... 1,700,000 1,785,867
6.15%, 1/1/2026....................................................... 1,690,000 1,662,656
6.95%, 7/1/2026....................................................... 2,960,000 3,060,581
Minnesota Public Facilities Authority, Water Pollution Control Revenue:
7.10%, 3/1/2012 (Prerefunded 3/1/2000) (a).............................. 2,350,000 2,598,724
6.95%, 3/1/2013 (Prerefunded 3/1/2001) (a).............................. 3,000,000 3,344,790
6.50%, 3/1/2014......................................................... 5,200,000 5,532,020
New Prague Independent School District 5%, 2/1/2016 (Insured; MBIA)......... 2,000,000 1,809,860
New York Mills Independent School District,
Refunding 5.05%, 2/1/2015 (Insured; AMBAC).............................. 1,000,000 913,260
Northern Municipal Power Agency, Electric System Revenue Refunding
7.25%, 1/1/2016......................................................... 3,500,000 3,702,720
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______________ ______________
MINNESOTA (CONTINUED)
North Saint Paul Maplewood Independent School District, Refunding
5.125%, 2/1/2025........................................................ $ 2,500,000 $ 2,241,000
City of Red Wing, Health Care Facilities Revenue Refunding
(River Region Obligation Group) 6.50%, 9/1/2022......................... 3,445,000 3,461,329
Saint Cloud, Hospital Facilities Revenue (The Saint Cloud Hospital):
7%, 7/1/2020 (Insured; AMBAC) (Prerefunded 7/1/2001) (a)................ 1,000,000 1,120,850
Refunding 5%, 7/1/2020 (Insured; AMBAC)................................. 2,000,000 1,763,740
Saint Louis Park, Health Care Facilities Revenue (Health Systems Obligated
Group)
5.20%, 7/1/2016 (Insured; AMBAC)........................................ 2,500,000 2,266,250
Saint Paul Housing and Redevelopment Authority, SFMR
Refunding 6.90%, 12/1/2021 (Insured; FNMA).............................. 2,765,000 2,851,019
Saint Paul Port Authority:
First Lien Tax Increment Refunding (Energy Park Project)
5%, 2/1/2008 (Insured; AGIC).......................................... 5,495,000 5,097,107
IDR Refunding (Hampden Building Project) 9.25%, 6/1/2011................ 1,065,000 966,594
Sartell, PCR Refunding (Champion International Corp. Project) 6.95%, 10/1/2012 5,000,000 5,285,200
Seaway Port Authority of Duluth,
Industrial Development Dock and Wharf Revenues Refunding (Cargill Inc.
Project)
6.80%, 5/1/2012......................................................... 3,000,000 3,227,340
Southern Minnesota Municipal Power Agency, Power Supply System Revenue:
Zero Coupon, 1/1/2026 (Insured; MBIA)................................... 11,000,000 1,832,380
(Custodial Receipts) 5%, 1/1/2013....................................... 2,000,000 1,831,340
Refunding 4.75%, 1/1/2016............................................... 1,500,000 1,279,665
U.S. RELATED-8.8%
Commonwealth of Puerto Rico:
(Custodial Receipts) 6.45%, 7/1/2017 (Insured; AMBAC)................... 1,700,000 1,793,857
5.875%, 7/1/2018 (Insured; AMBAC)....................................... 4,000,000 3,958,080
Puerto Rico Highway and Transportation Authority, Highway Revenue
5.55%, 7/1/2010......................................................... 6,900,000 6,549,204
University of Puerto Rico 5.25%, 6/1/2025 (Insured; MBIA)................... 2,000,000 1,844,880
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $155,784,856)..................................................... $160,832,344
=============
SHORT-TERM MUNICIPAL INVESTMENT-.1%
U.S. RELATED;
Puerto Rico Electric Power Authority, Revenue VRDN 3.32% (Insured; FSA) (b)
(cost $200,000)......................................................... $ 200,000 $ 200,000
=============
TOTAL INVESTMENTS-100.0%
(cost $155,984,856)..................................................... $161,032,344
=============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AGIC Asset Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
AMBAC American Municipal Bond Assurance Corporation Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association MFMR Multi-Family Mortgage Revenue
FSA Financial Security Assurance PCR Pollution Control Revenue
GNMA Government National Mortgage Association SFMR Single Family Mortgage Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
IDR Industrial Development Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
____________ ____________ __________________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 50.5%
AA Aa AA 23.9
A A A 12.0
BBB Bbb BBB 10.6
Not Rated(d) Not Rated(d) Not Rated(d) 3.0
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse floater secuirty - the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's and Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(e) At April 30, 1996, the Series had $42,729,286 (26.0% of net assets)
invested in securities whose payment of prinicipal and interest is
dependent upon revenues generated from housing projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $155,984,856)-see statement..................................... $161,032,344
Cash.................................................................... 169,196
Interest receivable..................................................... 3,027,802
Receivable for shares of Beneficial Interest subscribed................. 61,945
Prepaid expenses........................................................ 5,377
________________
164,296,664
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 74,204
Due to Distributor...................................................... 44,543
Payable for shares of Beneficial Interest redeemed...................... 100,462
Accrued expenses........................................................ 30,110 249,319
_____________ ________________
NET ASSETS.................................................................. $164,047,345
================
REPRESENTED BY:
Paid-in capital......................................................... $158,631,229
Accumulated undistributed net realized gain on investments.............. 368,628
Accumulated net unrealized appreciation on investments-Note 3........... 5,047,488
________________
NET ASSETS at value......................................................... $164,047,345
================
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 9,213,422
================
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,706,860
================
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 24,834
================
NET ASSET VALUE per share:
Class A Shares
($138,057,638 / 9,213,422 shares)..................................... $14.98
================
Class B Shares
($25,616,979 / 1,706,860 shares)...................................... $15.01
================
Class C Shares
($372,728 / 24,834 shares)............................................ $15.01
================
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $10,604,102
EXPENSES:
Management fee-Note 2(a).............................................. $ 924,716
Shareholder servicing costs-Note 2(c)................................. 535,663
Distribution fees-Note 2(b)........................................... 123,681
Professional fees..................................................... 28,332
Custodian fees........................................................ 16,772
Prospectus and shareholders' reports.................................. 8,862
Registration fees..................................................... 1,660
Trustees' fees and expenses-Note 2(d)................................. 2,143
Miscellaneous......................................................... 3,284
_______________
TOTAL EXPENSES.................................................. 1,645,113
________________
INVESTMENT INCOME-NET........................................... 8,958,989
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,903,251
Net unrealized (depreciation) on investments............................ (911,785)
_______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 991,466
________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 9,950,455
================
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
________________________________________
1995 1996
________________ ________________
OPERATIONS:
Investment income-net................................................... $ 9,619,787 $ 8,958,989
Net realized gain (loss) on investments................................. (1,533,666) 1,903,251
Net unrealized appreciation (depreciation) on investments for the year.. 3,390,900 (911,785)
________________ ________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 11,477,021 9,950,455
________________ ________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (8,494,472) (7,756,084)
Class B shares........................................................ (1,125,315) (1,199,994)
Class C shares........................................................ - (2,911)
Net realized gain on investments:
Class A shares........................................................ (40,522) -
Class B shares........................................................ (6,066) -
________________ ________________
TOTAL DIVIDENDS................................................... (9,666,375) (8,958,989)
________________ ________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 5,767,528 8,018,049
Class B shares........................................................ 3,173,322 4,260,990
Class C shares........................................................ - 376,197
Dividends reinvested:
Class A shares........................................................ 5,693,880 5,052,267
Class B shares........................................................ 758,030 781,540
Class C shares........................................................ - 2,715
Cost of shares redeemed:
Class A shares........................................................ (23,226,166) (21,377,789)
Class B shares........................................................ (1,976,764) (2,719,337)
________________ ________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (9,810,170) (5,605,368)
________________ ________________
TOTAL (DECREASE) IN NET ASSETS.................................. (7,999,524) (4,613,902)
NET ASSETS:
Beginning of year....................................................... 176,660,771 168,661,247
________________ ________________
End of year............................................................. $168,661,247 $164,047,345
================ ================
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________________________
CLASS A CLASS B CLASS C
__________________________ _____________________________ _____________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
___________________________ ______________________________
1995 1996 1995 1996 1996*
___________ ___________ ___________ ____________ _________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 395,165 525,972 215,707 279,091 24,654
Shares issued for
dividends reinvested. 389,703 331,830 51,805 51,250 180
Shares redeemed........ (1,600,971) (1,405,368) (136,616) (179,050) -
___________ ___________ ___________ ____________ _________________
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (816,103) (547,566) 130,896 151,291 24,834
=========== =========== =========== ============ =================
________________________________
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Minnesota Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $174 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$123,137 was charged to the Series for the Class B shares and $544 was
charged to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$358,575, $61,568 and $182 were charged to Class A, Class B and Class C
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $29,902 for the period
from December 1, 1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $63,976,521 and $57,393,998, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $5,047,488, consisting of $7,303,483 gross unrealized appreciation and
$2,255,995 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Minnesota Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Minnesota Series at April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernst & Young LLP - Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
________________ ______________
<S> <C> <C>
NORTH CAROLINA-79.2%
Board of Governors of the University of North Carolina, Revenue
(University of North Carolina Hospitals at Chapel Hill):
6%, 2/15/2024......................................................... $ 3,000,000 $ 2,895,630
5.25%, 2/15/2026...................................................... 2,500,000 2,261,750
5%, 2/15/2029......................................................... 4,000,000 3,436,520
Buncombe County Metropolitan Sewage District, Sewage System Revenue:
6.75%, 7/1/2022 (Prerefunded 7/1/2002) (a).............................. 500,000 560,520
Refunding 5.50%, 7/1/2022 (Insured; FGIC)............................... 1,125,000 1,058,861
Charlotte, COP Refunding (Convention Facility Project)
5.25%, 12/1/2020 (Insured; AMBAC)....................................... 2,000,000 1,811,900
Haywood County, Environmental Improvement Revenue, Refunding
(Champion International Corp. Project) 6.25%, 9/1/2025.................. 2,000,000 1,983,840
Martin County Industrial Facilities and Pollution Control Financing
Authority,
Revenue (Solid Waste Disposal - Weyerhaeuser Company Project):
6.80%, 5/1/2024....................................................... 2,000,000 2,117,180
6%, 11/1/2025......................................................... 2,000,000 1,941,660
New Hanover County Industrial Facilities and Pollution Control Financing
Authority,
SWDR (Occidental Petroleum) 6.50%, 8/1/2014............................. 1,000,000 1,007,530
North Carolina Eastern Municipal Power Agency, Power System Revenue:
5.75%, 12/1/2016........................................................ 1,865,000 1,706,363
Refunding:
5.125%, 1/1/2012 (Insured; AMBAC)..................................... 3,000,000 2,797,830
5.875%, 1/1/2013...................................................... 5,000,000 4,750,000
6%, 1/1/2013.......................................................... 2,500,000 2,414,275
6%, 1/1/2022.......................................................... 1,000,000 960,130
North Carolina Housing Finance Agency, Single Family Revenue:
6.10%, 9/1/2025 (Insured; FHA).......................................... 3,730,000 3,818,625
6.50%, 9/1/2026......................................................... 4,275,000 4,340,963
6.70%, 9/1/2026......................................................... 2,185,000 2,227,258
North Carolina Medical Care Commission, HR:
(Annie Penn Memorial Hospital Project) 7.50%, 8/15/2021................. 4,250,000 4,388,167
(Duke University Hospital Project) 7%, 6/1/2021 (Prerefunded 6/1/2001) (a) 3,000,000 3,358,320
Refunding (Mercy Hospital Project) 6.50%, 8/1/2015...................... 1,000,000 1,009,710
North Carolina Municipal Power Agency Number 1, Catawba Electric Revenue:
5%, 1/1/2015 (Insured; MBIA)............................................ 1,000,000 903,610
5.75%, 1/1/2015 (Insured; MBIA)......................................... 6,250,000 6,092,438
5.75%, 1/1/2020 (Insured; MBIA)......................................... 2,000,000 1,938,260
Pitt County, Revenue Refunding (Pitt County Memorial Hospital)
5.25%, 12/1/2021........................................................ 3,500,000 3,177,790
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
______________ ______________
NORTH CAROLINA (CONTINUED)
Shelby, Combined Enterprise System Revenue, Refunding 5.625%, 5/1/2014...... $ 1,000,000 $ 963,850
Wake County, Hospital System Revenue, Refunding:
Zero Coupon, 10/1/2010 (Insured; MBIA).................................. 2,200,000 936,716
5.125%, 10/1/2026 (Insured; MBIA)....................................... 3,250,000 2,852,298
U.S. RELATED-20.8%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,006,080
Commonwealth of Puerto Rico:
5.40%, 7/1/2025......................................................... 2,000,000 1,811,340
Public Improvement:
6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)............................ 600,000 673,200
Refunding 5.50%, 7/1/2013............................................. 2,000,000 1,901,780
Puerto Rico Highway and Transportation Authority, Highway Revenue
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. 3,600,000 4,004,604
Puerto Rico Ports Authority, Special Facilities Revenue
(American Airlines, Inc. Project) 6.30%, 6/1/2023....................... 1,500,000 1,509,780
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health
Facilities Refunding 5.75%, 7/1/2015.................................... 4,500,000 4,291,245
Virgin Islands Public Finance Authority, Revenue, Refunding,
Matching Fund Loan Notes 7.25%, 10/1/2018............................... 1,500,000 1,578,405
_____________ _______________
TOTAL INVESTMENTS
(cost $86,142,776)...................................................... $85,488,428
===============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation HR Hospital Revenue
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (B) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
__________ __________ ___________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 31.6%
AA Aa AA 25.9
A A A 27.9
BBB Baa BBB 12.8
Not Rated (c) Not Rated (c) Not Rated (c) 1.8
__________
100.0%
==========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Fitch currently provides creditworthiness information for a limited
number of investments.
(c) Securities which, while not rated by Fitch, Moody's and Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(d) At April 30, 1996, the Series had $24,316,901 (27.1% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $86,142,776)-see statement...................................... $85,488,428
Cash.................................................................... 2,851,526
Interest receivable..................................................... 1,522,395
Receivable for shares of Beneficial Interest subscribed................. 51,739
Prepaid expenses........................................................ 3,877
______________
89,917,965
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $40,715
Due to Distributor...................................................... 36,068
Payable for shares of Beneficial Interest redeemed...................... 95,066
Accrued expenses........................................................ 35,432 207,281
____________ ______________
NET ASSETS ................................................................ $89,710,684
==============
REPRESENTED BY:
Paid-in capital......................................................... $92,094,075
Accumulated net realized (loss) on investments.......................... (1,729,043)
Accumulated net unrealized (depreciation) on investments-Note 3......... (654,348)
______________
NET ASSETS at value......................................................... $89,710,684
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)................. 3,644,295
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,307,913
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 81
==============
NET ASSET VALUE per share:
Class A Shares
($47,042,169 / 3,644,295 shares)...................................... $12.91
==============
Class B Shares
($42,667,470 / 3,307,913 shares)...................................... $12.90
==============
Class C Shares
($1,045 / 81 shares).................................................. $12.90
==============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,728,170
EXPENSES:
Management fee-Note 2(a).............................................. $ 517,799
Shareholder servicing costs-Note 2(c)................................. 307,348
Distribution fees-Note 2(b)........................................... 217,321
Professional fees..................................................... 14,110
Prospectus and shareholders' reports.................................. 12,402
Custodian fees........................................................ 10,310
Trustees' fees and expenses-Note 2(d)................................. 1,229
Registration fees..................................................... 597
Miscellaneous......................................................... 81,355
________________
TOTAL EXPENSES.................................................. 1,162,471
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 20,032
________________
NET EXPENSES.................................................... 1,142,439
______________
INVESTMENT INCOME-NET........................................... 4,585,731
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 874,881
Net unrealized appreciation on investments.............................. 520,983
________________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,395,864
______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $5,981,595
==============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
_____________________________________
1995 1996
__________________ _______________
OPERATIONS:
Investment income-net................................................... $ 5,259,404 $ 4,585,731
Net realized gain (loss) on investments................................. (2,342,576) 874,881
Net unrealized appreciation on investments for the year................. 2,019,925 520,983
__________________ _______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 4,936,753 5,981,595
__________________ _______________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares........................................................ (3,229,769) (2,589,575)
Class B shares........................................................ (2,029,635) (1,996,124)
Class C shares........................................................ - (32)
__________________ _______________
TOTAL DIVIDENDS................................................... (5,259,404) (4,585,731)
__________________ _______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 3,792,421 3,323,717
Class B shares........................................................ 5,258,725 3,025,081
Class C shares........................................................ - 1,000
Dividends reinvested:
Class A shares........................................................ 1,700,541 1,291,521
Class B shares........................................................ 1,251,870 1,177,707
Class C shares........................................................ - 32
Cost of shares redeemed:
Class A shares........................................................ (23,036,441) (8,574,929)
Class B shares........................................................ (3,172,359) (4,444,067)
__________________ _______________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (14,205,243) (4,199,938)
__________________ _______________
TOTAL (DECREASE) IN NET ASSETS.................................. (14,527,894) (2,804,074)
NET ASSETS:
Beginning of year....................................................... 107,042,652 92,514,758
__________________ _______________
End of year............................................................. $ 92,514,758 $ 89,710,684
================== ===============
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________________
CLASS A CLASS B CLASS C
____________________________ _________________________ _________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
____________________________ _________________________
1995 1996 1995 1996 1996*
_____________ _____________ ____________ __________ _________________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 302,337 254,297 420,696 229,111 78
Shares issued for
dividends reinvested. 135,607 98,177 100,207 89,591 3
Shares redeemed........ (1,840,173) (653,564) (256,909) (338,431) -
_____________ _____________ ____________ __________ _________________________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (1,402,229) (301,090) 263,994 (19,729) 81
============= ============= ============ ========== =========================
*From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the North Carolina Series (the "Series").
The Fund's investment objective is to maximize current income exempt from
Federal and, where applicable, from State income taxes, without undue risk.
The Dreyfus Corporation ("Manager") serves as the Fund's investment adviser.
The Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $1,728,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1996. If not
applied, $225,000 of the carryover expires in fiscal 2002, $1,308,000 of the
carryover expires in fiscal 2003 and $195,000 of the carryover expires in
fiscal 2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager
had undertaken through July 10, 1995 to reduce the management fee paid by the
Series, to the extent that the Series' aggregate expenses (exclusive of
certain expenses as described above) exceeded specified annual percentages of
the Series' average daily net assets. The reduction in management fee,
pursuant to the undertakings, amounted to $20,032 for the year ended April
30, 1996.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$217,316 was charged to the Series for the Class B shares and $5 was charged
to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. During the year ended April 30, 1996,
$126,703, $108,658 and $2 were charged to Class A, Class B and Class C
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Series. Such compensation amounted to $18,897 for the period from
December 1, 1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $43,892,947 and $50,856,286, respectively.
At April 30, 1996, accumulated net unrealized depreciation on investments
was $654,348, consisting of $1,446,961 gross unrealized appreciation and
$2,101,309 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
North Carolina Series (one of the Series constituting the Premier State
Municipal Bond Fund) as of April 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and financial highlights
for each of the years indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, North Carolina Series at April
30, 1996, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernst & Young LLP- Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.3% AMOUNT VALUE
________________ ________________
<S> <C> <C>
OHIO-95.5%
Akron, Waterworks System Mortgage Revenue Improvement:
6%, 3/1/2014 (Insured; FGIC)............................................ $ 1,000,000 $ 1,016,610
Refunding 4.875%, 3/1/2012 (Insured; MBIA).............................. 2,250,000 2,039,355
Akron Bath Copley Joint Township Hospital District, Revenue
(Summa Health Systems) 5.75%, 11/15/2008................................ 5,000,000 4,880,000
Akron-Wilbeth Housing Development Corp., First Mortgage Revenue
7.90%, 8/1/2003 (Insured; FHA).......................................... 1,805,000 2,077,410
Allen County, Industrial First Mortgage Revenue, Refunding
6.75%, 11/15/2008 (Guaranteed; K-Mart Corp.)............................ 1,280,000 1,135,104
Anthony Wayne Local School District 5.75%, 12/1/2024 (Insured; FGIC)........ 1,000,000 988,190
Breckville-Broadview Heights City School District, School Improvement
5.25%, 12/1/2021 (Insured; FGIC)....................................... 5,000,000 4,632,250
Butler County:
Hospital Facilities Revenue, Refunding and Improvement
(Fort Hamilton Hughes Hospital) 7.25%, 1/1/2001....................... 4,000,000 4,099,280
Sewer System Revenue 5.25%, 12/1/2021 (Insured; AMBAC).................. 1,500,000 1,385,925
City of Barberton, Hospital Facilities Revenue
(The Barberton Citizens Hospital Co. Project) 7.25%, 1/1/2012........... 2,400,000 2,549,424
Buckeye Valley Local School District
5.25%, 12/1/2020 (Insured; MBIA)........................................ 3,140,000 2,917,028
Celina City School District 5.25%, 12/1/2020 (Insured; FGIC)................ 1,750,000 1,610,700
City of Cambridge, HR Refunding (Guernsey Memorial Hospital Project)
8%, 12/1/2006........................................................... 2,000,000 2,150,880
Clermont County, Hospital Facilities Revenue, Refunding (Mercy Health
Systems):
6%, 9/1/2019 (Insured; AMBAC)........................................... 2,000,000 2,006,180
7.50%, 9/1/2019 (Prerefunded 9/1/2001) (Insured; AMBAC) (a)............. 180,000 203,573
City of Cleveland:
COP (Motor Vehicle, Motorized and Communication Equipment) 7.10%, 7/1/2002 2,000,000 2,086,720
Parking Facility Improvement Revenue 8%, 9/15/2012...................... 5,000,000 5,444,100
Waterworks First Mortgage Revenue:
5.50%, 1/1/2013 (Insured; MBIA)....................................... 2,660,000 2,626,936
5.50%, 1/1/2021 (Insured; MBIA)....................................... 5,000,000 4,794,550
Cleveland City School District, School Improvement 8%, 12/1/2001............ 1,675,000 1,901,292
Cuyahoga County:
5.25%, 11/15/2015....................................................... 1,485,000 1,381,198
HR:
(Meridia Health Systems):
7.25%, 8/15/2019.................................................. 4,715,000 5,047,454
7%, 8/15/2023..................................................... 1,750,000 1,863,155
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
Cuyahoga County (continued):
HR:
Refunding:
(Cleveland Clinic Foundation) 8%, 12/1/2015....................... $ 1,000,000 $ 1,049,530
Improvement (University Hospitals Health) 5.625%, 1/15/2015
(Insured; MBIA)............................................................. 3,695,000 3,615,225
(Mount Sinai Medical Center) 8.125%, 11/15/2014................... 1,000,000 1,059,940
Jail Facilities 7%, 10/1/2013 (Prerefunded 10/1/2001) (a)............... 6,125,000 6,885,480
Delaware City School District 5.75%, 12/1/2020 (Insured; FGIC).............. 1,000,000 988,920
Eaton, IDR Refunding (Baxter International Inc. Project) 6.50%, 12/1/2012... 1,500,000 1,573,545
Euclid City School District, Improvement:
7.10%, 12/1/2011 (Prerefunded 12/1/2001) (a)............................ 1,000,000 1,129,290
Library and School, Refunding 5.125%, 12/1/2015 (Insured; AMBAC)........ 1,420,000 1,318,796
Village of Evendale, IDR Refunding (Ashland Oil Inc. Project) 6.90%, 11/1/2010 2,000,000 2,078,720
Fairfield City School District, School Improvement Unlimited Tax:
7.20%, 12/1/2011 (Insured; FGIC)........................................ 1,000,000 1,146,770
7.20%, 12/1/2012 (Insured; FGIC)........................................ 1,250,000 1,433,463
6.10%, 12/1/2015 (Insured; FGIC)........................................ 2,000,000 2,048,700
6%, 12/1/2020 (Insured; FGIC)........................................... 2,000,000 2,028,240
Fairlawn, Health Care Facilities Revenue (Village at Saint Edward Project)
8.75%, 10/1/2019........................................................ 2,420,000 2,602,420
Fairview Park City School District, 5.25%, 12/15/2013 (Insured; AMBAC)...... 2,000,000 1,934,040
Franklin County:
Hospital Improvement Revenue (The Children's Hospital Project)
6.60%, 11/1/2011 (Prerefunded 11/1/2001) (a).......................... 1,500,000 1,660,245
HR:
(Holy Cross Health Systems Corp.-Mount Carmel Health)
6.75%, 6/1/2019 (Insured; MBIA)................................... 2,500,000 2,665,525
Refunding Improvement:
(The Children's Hospital Project) 6.60%, 5/1/2013................. 4,000,000 4,183,760
(Worthington Christian Village Congregate Care Project):
10.25%, 8/1/2015................................................ 805,000 882,385
7.80%, 2/1/2017 (Insured; FHA).................................. 5,690,000 6,067,190
Gallia County Local School District, 7.375%, 12/1/2004...................... 570,000 659,268
Greater Cleveland Gateway Economic Development Corp.:
Senior Lien Excise Tax Revenue 6.875%, 9/1/2005 (Insured; FSA).......... 1,500,000 1,630,020
Stadium Revenue 7.50%, 9/1/2005......................................... 5,675,000 6,221,389
Hamilton County:
Hospital Facilities Improvement Revenue, Refunding (Deaconess Hospital)
7%, 1/1/2012.......................................................... 2,570,000 2,713,792
Mortgage Revenue (Judson Care Center) 7.80%, 8/1/2019 (Insured; FHA).... 3,970,000 4,219,832
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
Hamilton County (continued):
Sewer Systems Improvement Revenue, Refunding
5.50%, 12/1/2017 (Insured; FGIC)...................................... $ 5,500,000 $ 5,314,430
Hilliard School District, School Improvement:
Zero Coupon, 12/1/2013 (Insured; FGIC).................................. 1,655,000 606,541
Zero Coupon, 12/1/2014 (Insured; FGIC).................................. 1,655,000 567,748
5.75%, 12/1/2019 (Insured; FGIC)........................................ 4,500,000 4,451,085
5%, 12/1/2020 (Insured; FGIC)........................................... 1,600,000 1,434,304
Kirtland Local School District 7.50%, 12/1/2009............................. 760,000 827,161
Knox County, IDR (Weyerhaeuser Co. Project) 9%, 10/1/2007................... 1,000,000 1,251,330
Lakota Local School District 6.125%, 12/1/2017 (Insured; AMBAC)............. 1,075,000 1,103,133
Lorain, Water System Revenue 5.20%, 4/1/2016 (Insured; AMBAC)............... 2,260,000 2,109,800
Lorain County, HR Refunding (EMH Regional Medical Center)
5.375%, 11/1/2021 (Insured; AMBAC)...................................... 4,650,000 4,287,067
Lowellville, Sanitary Sewer Systems Revenue (Browning-Ferris Industries Inc.)
7.25%, 6/1/2006......................................................... 1,300,000 1,369,849
Mahoning County, Health Care Facilities Revenue:
(Western Reserve Care System) 5.50%, 10/15/2025 (Insured; MBIA)......... 2,450,000 2,305,646
(Youngstown Osteopathic Hospital Project)
7.60%, 8/1/2010 (LOC; Marine Midland Bank) (b)........................ 3,775,000 4,073,565
Marion County, Health Care Facilities Revenue (United Church Homes Inc.)
Refunding and Improvement 6.375%, 11/15/2010............................ 3,000,000 2,945,610
Miami County, Hospital Facilities Revenue, Refunding
(Upper Valley Medical Center) 8.375%, 5/1/2013.......................... 525,000 549,397
Moraine, SWDR (General Motors Corp. Project)
6.75%, 7/1/2014......................................................... 5,000,000 5,458,750
Mount Vernon City School District 5.85%, 12/1/2019 (Insured; FGIC).......... 1,000,000 989,220
Muskingum County, Revenue, Refunding:
(Franciscan Health Advisory Services) 7.50%, 3/1/2012................... 3,185,000 3,345,811
Hospital Facilities Improvement (Bethesda Care System)
5.40%, 12/1/2016 (Insured; Connie Lee)................................ 2,755,000 2,587,221
North Royalton City School District 6.10%, 12/1/2019 (Insured; MBIA)........ 2,000,000 2,057,780
State of Ohio:
Economic Development Revenue:
Ohio Enterprise Bond Fund (VSM Corp. Project) 7.375%, 12/1/2011....... 885,000 932,781
(Sponge Inc. Project) 8.375%, 6/1/2014................................ 1,640,000 1,814,479
Mortgage Revenue (Odd Fellows Home Ohio Inc. Project)
8.15%, 8/1/2017 (Insured; FHA)........................................ 350,000 371,263
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
State of Ohio (continued):
PCR (Standard Oil Co. Project)
6.75%, 12/1/2015 (Guaranteed; British Petroleum Co. p.l.c.)........... $ 2,700,000 $ 3,007,881
Ohio Air Quality Development Authority, Revenue:
8.10%, 9/1/2018......................................................... 1,000,000 1,056,640
Pollution Control Refunding:
(Cleveland Electric Illuminating Co. Project) 6.85%, 7/1/2023......... 5,250,000 4,901,663
(Ohio Edison) 7.45%, 3/1/2016 (Insured; FGIC)......................... 3,500,000 3,832,325
Refunding:
(JMG Funding Limited Partnership Project) 6.375%, 4/1/2029 (Insured; AMBAC) 2,500,000 2,568,775
(Ohio Power Co. Project) 7.40%, 8/1/2009.............................. 1,500,000 1,572,615
Ohio Building Authority, State Facilities:
(Administration Building Fund Projects):
4.875%, 10/1/2009..................................................... 2,500,000 2,307,150
4.875%, 10/1/2010..................................................... 1,735,000 1,581,921
(Adult Correctional Facilities Building Fund Projects) 5.90%, 10/1/2012 (Insured; MBIA) 1,000,000 1,023,780
(Adult Correctional Facilities Building Fund Projects) 5.50%, 4/1/2016
(Insured; AMBAC)............................................................ 2,000,000 1,926,140
(Juvenile Correctional Building Fund Projects) 6.60%, 10/1/2014 (Insured; AMBAC) 1,660,000 1,768,680
Ohio Capital Corp. for Housing, MFHR Refunding
7.60%, 11/1/2023 (Collateralized; FNMA)................................. 1,250,000 1,328,400
Ohio Higher Educational Facility Community, Revenue
(Case Western Reserve Project):
7.70%, 10/1/2018 (Prerefunded 10/1/1997) (a).......................... 485,000 516,855
7.70%, 10/1/2018...................................................... 15,000 15,847
Ohio Housing Finance Agency:
Mortgage Revenue (Saint Francis Court Apartment Project)
8%, 10/1/2026 (Insured; FHA).......................................... 695,000 744,435
SFMR (GNMA Mortgage Backed Securities Program):
8.25%, 12/15/2019 .................................................... 165,000 173,616
8.125%, 3/1/2020...................................................... 365,000 384,389
Zero Coupon, 9/1/2021................................................. 17,545,000 2,324,011
7.85%, 9/1/2021....................................................... 1,880,000 1,971,142
7.65%, 3/1/2029....................................................... 5,325,000 5,591,357
7.80%, 3/1/2030....................................................... 3,005,000 3,160,419
Ohio Turnpike Commission, Turnpike Revenue 5.75%, 2/15/2024................. 3,250,000 3,142,555
Ohio Water Development Authority, Revenue:
(Fresh Water Development) 5.90%, 12/1/2015 (Insured; AMBAC)............. 4,000,000 4,001,360
Pollution Control Facilities:
(Cleveland Electric Illuminating Project) 8%, 10/1/2023............... 5,800,000 5,895,932
(Ohio Edison) 8.10%, 10/1/2023........................................ 3,700,000 3,924,109
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ________________
OHIO (CONTINUED)
Ohio Water Development Authority, Revenue (continued):
Pollution Control Facilities (continued):
(Pennsylvania Power Co. Project) 8.10%, 9/1/2018...................... $ 2,000,000 $ 2,112,740
Refunding:
(Ohio Edison) 7.625%, 7/1/2023.................................... 5,000,000 5,299,200
(Toledo Edison Co.):
7.55%, 6/1/2023................................................. 2,000,000 2,023,900
8%, 10/1/2023................................................... 3,635,000 3,724,094
Ottawa County, Sanitary Sewer Systems Special Assessment
(Portage-Catawba Island Sewer Project) 7%, 9/1/2011 (Insured; AMBAC).... 1,000,000 1,101,250
Shelby County, Hospital Facilities Revenue, Refunding and Improvement
(The Shelby County Memorial Hospital Association) 7.70%, 9/1/2018....... 2,500,000 2,628,075
South Euclid, Recreation Facilities 7%, 12/1/2011........................... 2,285,000 2,462,636
South Western City School District, (Franklin and Pickway Counties)
5%, 12/1/2013 (Insured; MBIA)........................................... 2,825,000 2,579,225
Southwest Regional Water District, Water Revenue:
6%, 12/1/2015 (Insured; MBIA)........................................... 1,600,000 1,626,848
6%, 12/1/2020 (Insured; MBIA)........................................... 1,250,000 1,266,037
Springboro Community City School District, Refunding
5.10%, 12/01/2023 (Insured; AMBAC)...................................... 6,000,000 5,421,300
Springdale, Hospital Facilities First Mortgage Revenue,
(Southwestern Seniors Services, Inc.) 5.875%, 11/1/2012................. 3,000,000 2,804,730
Student Loan Funding Corp.:
Student Loan Revenue, Refunding 7.20%, 8/1/2003......................... 3,115,000 3,293,801
Student Loan Senior Subordinated Revenue 6.15%, 8/1/2010................ 6,775,000 6,663,890
Sylvania City School District 5.75%, 12/1/2022 (Insured; FGIC).............. 1,750,000 1,732,255
University of Cincinnati, COP 6.75%, 12/1/2009 (Insured; MBIA).............. 750,000 815,235
University of Ohio, General Receipts, 5%, 12/1/2018 (Insured; FGIC)......... 1,250,000 1,112,675
Warren 7.75%, 11/1/2010 (Prerefunded 11/1/2000) (a)......................... 2,785,000 3,202,583
U.S. RELATED-3.8%
Puerto Rico Highway and Transportation Authority, Highway Revenue
5.45%, 7/1/2007......................................................... 5,500,000 5,299,250
Virgin Islands Public Finance Authority, Revenue Refunding
Matching Fund Loan Notes 7.25%, 10/1/2018............................... 2,200,000 2,314,994
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,450,000 3,652,550
________________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $281,807,598)..................................................... $291,247,035
================
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS-.7% AMOUNT VALUE
________________ ________________
OHIO;
Cuyahoga County Ohio Hospital Revenue
VRDN 4.15%, (LOC; The Dai-Ichi Kangyo Bank) (b,c)
(cost $2,000,000)....................................................... $ 2,000,000 $ 2,000,000
=================
TOTAL INVESTMENTS-100.0%
(cost $283,807,598)..................................................... $293,247,035
=================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
FNMA Federal National Mortgage Association PCR Pollution Control Revenue
FSA Financial Security Assurance SFMR Single-Family Mortgage Revenue
GNMA Government National Mortgage Association SWDR Solid Waste Disposal Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
IDR Industrial Development Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ ____________ __________________ _____________________
<S> <C> <C> <C>
AAA Aaa AA 44.0%
AA Aa AA 8.9
A A A 22.8
BBB Baa BBB 15.3
B B B 6.0
F1 MIG1 SP1 .7
Not Rated(e) Not Rated(e) Not Rated(e) 2.3
_________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letters of credit.
(c) Security payable on demand. The interest rate, which is subject to
change, is based upon prime rates or an index of market interest rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's and Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
(f) At April 30, 1996, the Series had $81,418,173 (27.3% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from health care projects.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $283,807,598)-see statement..................................... $293,247,035
Interest receivable..................................................... 5,282,357
Receivable for investment securities sold............................... 972,801
Receivable for shares of Beneficial Interest subscribed................. 156,757
Prepaid expenses........................................................ 9,345
_____________
299,668,295
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $134,689
Due to Distributor...................................................... 77,621
Due to Custodian........................................................ 141,842
Payable for investment securities purchased............................. 942,276
Payable for shares of Beneficial Interest redeemed...................... 202,537
Accrued expenses........................................................ 53,692 1,552,657
_____________ ____________
NET ASSETS.................................................................. $298,115,638
============
REPRESENTED BY:
Paid-in capital......................................................... $286,947,311
Accumulated undistributed net realized gain on investments.............. 1,728,890
Accumulated net unrealized appreciation on investments-Note 3........... 9,439,437
____________
NET ASSETS at value......................................................... $298,115,638
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 20,481,238
============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 3,215,868
============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 82
============
NET ASSET VALUE per share:
Class A Shares
($257,638,998 / 20,481,238 shares).................................... $12.58
============
Class B Shares
($40,475,608 / 3,215,868 shares)...................................... $12.59
============
Class C Shares
($1,032 / 82 shares).................................................. $12.59
============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $19,529,154
EXPENSES:
Management fee-Note 2(a).............................................. $ 1,684,215
Shareholder servicing costs-Note 2(c)................................. 976,878
Distribution fees-Note 2(b)........................................... 184,674
Custodian fees........................................................ 31,318
Prospectus and shareholders' reports.................................. 16,049
Professional fees..................................................... 10,791
Registration fees..................................................... 4,140
Trustees' fees and expenses-Note 2(d)................................. 3,907
Miscellaneous......................................................... 5,819
_______________
TOTAL EXPENSES.................................................. 2,917,791
_____________
INVESTMENT INCOME-NET........................................... 16,611,363
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 6,261,292
Net unrealized (depreciation) on investments............................ (2,957,977)
_______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 3,303,315
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $19,914,678
=============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
________________ ______________
OPERATIONS:
Investment income-net................................................... $ 17,976,032 $ 16,611,363
Net realized gain (loss) on investments................................. (231,734) 6,261,292
Net unrealized (depreciation) on investments for the year............... (1,447,408) (2,957,977)
________________ ______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 16,296,890 19,914,678
________________ ______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (16,395,897) (14,787,880)
Class B shares........................................................ (1,580,135) (1,823,448)
Class C shares........................................................ - (35)
Net realized gain on investments:
Class A shares........................................................ (737,090) (3,773,931)
Class B shares........................................................ (80,832) (523,745)
Class C shares........................................................ - (15)
________________ ______________
TOTAL DIVIDENDS................................................... (18,793,954) (20,909,054)
________________ ______________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 14,075,586 9,363,475
Class B shares........................................................ 7,880,402 9,283,699
Class C shares........................................................ - 1,000
Dividends reinvested:
Class A shares........................................................ 11,395,733 12,469,387
Class B shares........................................................ 1,146,894 1,692,992
Class C shares........................................................ - 48
Cost of shares redeemed:
Class A shares........................................................ (43,645,693) (36,740,008)
Class B shares........................................................ (3,696,758) (2,982,178)
________________ ______________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (12,843,836) (6,911,585)
________________ ______________
TOTAL (DECREASE) IN NET ASSETS.................................. (15,340,900) (7,905,961)
NET ASSETS:
Beginning of year....................................................... 321,362,499 306,021,599
________________ ______________
End of year............................................................. $306,021,599 $298,115,638
================ ==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
____________________________________________________________________________________________
CLASS A CLASS B CLASS C
____________________________ ________________________ __________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
____________________________ ________________________
1995 1996 1995 1996 1996*
____________ ____________ ___________ _________ _______________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold........... 1,122,269 724,402 625,670 718,846 79
Shares issued for
dividends reinvested 911,859 964,492 91,754 130,834 3
Shares redeemed....... (3,506,799) (2,853,615) (296,186) (230,753) -
____________ ____________ ___________ _________ _______________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING..... (1,472,671) (1,164,721) 421,238 618,927 82
============ ============ =========== ========= ===============
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Ohio Series (the "Series"). The Fund's
investment objective is to maximize current income exempt from Federal and,
where applicable, from State income taxes, without undue risk. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Funds' shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such
gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $554 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$184,668 was charged to the Series for the Class B shares and $6 was charged
to the Series for Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor,
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for provision of certain services. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$673,216, $92,334 and $2 were charged to Class A, Class B and Class C shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $56,600 for the period
from December 1, 1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities during the year ended April 30, 1996 amounted
to $131,059,631 and $140,879,528, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $9,439,437, consisting of $11,812,801 gross unrealized appreciation and
$2,373,364 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund
Ohio Series, (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Ohio Series at April 30, 1996,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
(Ernst & Young LLP-SIGNATURE)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-94.4% AMOUNT VALUE
__________________ ______________
<S> <C> <C>
PENNSYLVANIA-84.3%
Allegheny County, Airport Revenue, Refunding
(Pittsburgh International Airport)
5.75%, 1/1/2008 (Insured; FSA).......................................... $ 2,005,000 $ 2,025,251
Allegheny County Industrial Development Authority, Revenue:
Commercial Development, Refunding
(Kaufmann Medical Office Building) 6.80%, 3/1/2015 (Insured; MBIA) (a) 3,500,000 3,774,260
Medical Center, Refunding (Presbyterian Medical Center of
Oakmont Pennsylvania, Inc.) 6.75%, 2/1/2026 (Insured; FHA)............ 1,945,000 1,978,532
Allegheny County Residential Finance Authority, SFMR:
7.40%, 12/1/2022........................................................ 1,945,000 2,048,610
7.95%, 6/1/2023......................................................... 1,425,000 1,498,616
Beaver County Industrial Development Authority, PCR, Refunding:
(Ohio Edison Project) 7.75%, 9/1/2024................................... 3,150,000 3,320,069
(Pennsylvania Power Company Mansfield Project) 7.15%, 9/1/2021.......... 3,000,000 3,059,490
Berks County Municipal Authority, Revenue
(Phoebe Berks Village, Inc. Project) 8.25%, 5/15/2022................... 2,445,000 2,575,196
Bethlehem Authority, Water Revenue, Refunding
5.20%, 11/15/2021 (Insured; MBIA)....................................... 7,350,000 6,661,820
Blair County Hospital Authority, Revenue (Altoona Hospital Project)
6.375%, 7/1/2013 (Insured; AMBAC)....................................... 5,000,000 5,192,700
Bradford County Industrial Development Authority, SWDR
(International Paper Company Projects) 6.60%, 3/1/2019.................. 3,250,000 3,329,983
Bucks County Technical School Authority, Revenue
5.375%, 8/15/2015 (Insured; AMBAC)...................................... 1,640,000 1,553,178
Butler County Hospital Authority, Refunding,
HR (Butler Memorial Hospital) 5.25%, 7/1/2016 (Insured; FSA)............ 2,500,000 2,269,900
Revenue, Health Center (Saint Francis Health Care Project) 6%, 5/1/2008. 1,860,000 1,857,638
Cambria County Industrial Development Authority, RRR
(Cambria Cogen Project):
7.75%, 9/1/2019, Series F-1 (LOC; Fuji Bank) (b)...................... 1,750,000 1,837,290
7.75%, 9/1/2019, Series F-2 (LOC; Fuji Bank) (b)...................... 2,750,000 2,887,170
Delaware County Authority:
HR (Crozer - Chester Medical Center) 5.30%, 12/15/2011 (Insured; MBIA).. 2,750,000 2,598,970
Revenue (Elwyn Inc. Project) 8.35%, 6/1/2015............................ 4,300,000 4,707,769
University Revenue (Villanova University) 5.50%, 8/1/2023 (Insured; MBIA) 6,510,000 6,137,498
Haverford Township School District, Refunding
5.30%, 3/15/2019 (Insured; FGIC)........................................ 2,200,000 2,042,832
Langhorne Manor Borough Higher Educational and Health Authority, HR
(Lower Bucks Hospital) 7%, 7/1/2005..................................... 1,975,000 1,806,197
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________________ ______________
PENNSYLVANIA (CONTINUED)
Lawrence County 4.875%, 8/1/2010 (Insured; FGIC)............................ $ 3,890,000 $ 3,563,357
Lehigh County General Purpose Authority, Revenue:
Refunding (Ceder Crest College) 6.65%, 4/1/2017 (c)..................... 2,500,000 2,437,625
(Wiley House):
8.75%, 11/1/2014 (LOC; Northeastern Bank of Pennsylvania) (b)......... 3,785,000 3,902,600
9.50%, 11/1/2016...................................................... 2,000,000 2,138,100
Lehigh County Industrial Development Authority, PCR, Refunding
(Pennsylvania Power and Light Company Project)
6.40%, 11/1/2021 (Insured; MBIA)........................................ 4,845,000 5,046,213
Luzerne County Industrial Development Authority, Exempt Facilities Revenue,
Refunding
(Pennsylvania Gas and Water Company Project) 7.125%, 12/1/2022.......... 4,000,000 4,168,360
Meadville 5.25%, 10/1/2025 (Insured; AMBAC)................................. 2,655,000 2,427,281
Montgomery County 6.10%, 10/15/2025......................................... 5,000,000 5,078,600
Montgomery County Higher Educational and Health Authority:
HR (Abington Memorial Hospital) 5.125%, 6/1/2014 (Insured; AMBAC)....... 3,000,000 2,726,370
Revenue:
First Mortgage (Montgomery Income Project) 10.50%, 9/1/2020........... 3,000,000 3,247,470
Mortgage (Waverly Heights Project):
6%, 1/1/2013...................................................... 1,250,000 1,173,525
6.25%, 1/1/2018................................................... 2,825,000 2,677,337
(Northwestern Corporation) 8.375%, 6/1/2009........................... 2,685,000 2,909,976
Montgomery County Industrial Development Authority, RRR
7.50%, 1/1/2012 (LOC; Banque Paribas) (b)............................... 11,715,000 12,409,348
Norristown Municipal Waste Authority, Sewer Revenue
5.125%, 11/15/2023 (Insured; FGIC)...................................... 4,400,000 3,941,168
Northampton County Industrial Development Authority, Refunding, Revenue:
(Moravian Hall Square Project)
7.45%, 6/1/2014 (LOC; Meridian Bank) (Prerefunded 6/1/1999) (b,d)..... 1,800,000 1,987,812
Pollution Control:
(Bethlehem Steel) 7.55%, 6/1/2017..................................... 5,700,000 5,873,736
(Met Edison) 6.10%, 7/15/2021 (Insured; MBIA)......................... 5,000,000 5,041,850
Pennsylvania:
5%, 11/15/2011 (Insured; AMBAC)......................................... 3,875,000 3,622,350
5%, 11/15/2013 (Insured; AMBAC)......................................... 3,875,000 3,562,481
Pennsylvania Convention Center Authority, Revenue, Refunding
6.75%, 9/1/2019......................................................... 3,520,000 3,711,066
Pennsylvania Economic Development Financing Authority:
Exempt Facilities Revenue (Macmillan Ltd. Partnership Project) 7.60%, 12/1/2020 3,500,000 3,862,845
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________________ ______________
PENNSYLVANIA (CONTINUED)
Pennsylvania Economic Development Financing Authority (continued):
RRR (Northampton Generating Project):
6.40%, 1/1/2009....................................................... $ 2,500,000 $ 2,429,700
6.50%, 1/1/2013....................................................... 6,500,000 6,262,685
Wastewater Treatment Revenue (Sun Co. Inc. - R and M Project) 7.60%, 12/1/2024 4,240,000 4,651,577
Pennsylvania Higher Education Assistance Agency, Student Loan Revenue
7.05%, 10/1/2016 (Insured; AMBAC)....................................... 2,500,000 2,596,850
Pennsylvania Higher Educational Facilities Authority, College and University
Revenue
Refunding (Dequesne University) 7%, 4/1/2010 (Insured; MBIA)............ 2,000,000 2,155,740
Pennsylvania Housing Finance Agency:
6.50%, 7/1/2023......................................................... 2,750,000 2,819,658
Single Family Mortgage:
7.875%, 10/1/2020..................................................... 1,435,000 1,511,170
6.90%, 4/1/2025....................................................... 6,250,000 6,439,438
Philadelphia, Water and Wastewater Revenue:
Refunding 5.50%, 6/15/2007 (Insured; MBIA).............................. 4,155,000 4,232,657
Refunding 5.625%, 6/15/2008 (Insured; FSA).............................. 5,000,000 5,136,900
6.25%, 8/1/2010 (Insured; MBIA)......................................... 2,730,000 2,942,831
Refunding 5.25%, 6/15/2023 (Insured; MBIA).............................. 15,255,000 13,853,523
Philadelphia Hospital and Higher Education Facilities Authority:
HR:
(Albert Einstein Medical Center) 7%, 10/1/2021........................ 1,500,000 1,545,705
(Graduate Health System Obligation) 7.25%, 7/1/2018................... 3,500,000 3,523,030
(Pennsylvania Hospital) 5.25%, 2/15/2014 (Insured; FGIC).............. 2,500,000 2,290,025
(Refunding - Philadelphia Children's Hospital) 5%, 2/15/2021.......... 2,155,000 1,837,956
Revenue (Northwestern Corporation) 8.375%, 6/1/2009..................... 1,885,000 2,042,944
Philadelphia Industrial Development Authority, IDR, Refunding
(Ashland Oil Inc. Project) 5.70%, 6/1/2005.............................. 2,500,000 2,503,200
Philadelphia Municipal Authority, LR, Refunding
5.60%, 11/15/2009 (Insured; FGIC)....................................... 2,100,000 2,118,942
Philadelphia School District:
Refunding 6.25%, 9/1/2009 (Insured; AMBAC).............................. 2,000,000 2,162,920
5.50%, 9/1/2025 (Insured; AMBAC)........................................ 2,000,000 1,887,540
Pittsburgh Urban Redevelopment Authority:
Mortgage Revenue 7.05%, 4/1/2023........................................ 1,785,000 1,837,711
Single Family Mortgage 7.40%, 4/1/2024.................................. 860,000 893,454
Schuylkill County Industrial Development Authority, Refunding
First Mortgage Revenue (Valley Health Concerns) 8.75%, 3/1/2012......... 2,500,000 2,644,950
RRR (Schuylkill Energy Resources Inc.) 6.50%, 1/1/2010.................. 7,090,000 7,098,223
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________________ ______________
PENNSYLVANIA (CONTINUED)
Washington County Industrial Development Authority, Revenue, Refunding
(Presbyterian Medical Center) 6.75%, 1/15/2023 (Insured; FHA)........... $ 3,000,000 $ 3,109,410
York County Hospital Authority, Revenue
(Health Center - Village at Sprenkle Drive)
7.75%, 4/1/2022 (Prerefunded 4/1/2002) (d).............................. 1,205,000 1,403,740
U.S. RELATED-10.1%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 4,500,000 4,513,679
Guam Government 5.375%, 11/15/2013.......................................... 4,000,000 3,550,200
Puerto Rico Highway and Transportation Authority,
Highway Revenue:
5.40%, 7/1/2006....................................................... 10,000,000 9,658,100
5.25%, 7/1/2020 (Insured; FSA)........................................ 6,600,000 6,022,961
Puerto Rico Public Buildings Authority, Guaranteed Public Education and
Health Facilities, Refunding 5.70%, 7/1/2009................................... 5,000,000 5,078,800
______________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $264,448,694)................... $269,428,658
==============
SHORT-TERM MUNICIPAL INVESTMENTS-5.6%
PENNSYLVANIA-3.0%
Allegheny County Hospital Development Authority, Revenue, VRDN
(Presbyterian Health Center) 4.10% (Insured; MBIA) (e).................. $ 1,500,000 $ 1,500,000
Pennsylvania, TAN 4.50%, 6/28/1996.......................................... 2,000,000 2,002,140
Pennsylvania Energy Development Authority, Energy Development Revenue
(B and W Ebensburg Project) 4.20% (LOC; Swiss Bank Corporation) (b,e)... 5,000,000 5,000,000
U.S. RELATED-2.6%
Commonwealth of Puerto Rico Government Development Bank, Refunding, VRDN
3.75% (LOC; Credit Suisse) (b,e)........................................ 6,950,000 6,950,000
Puerto Rico Electric Power Authority, Power Revenue 3.32% (Insured; FSA) (f) 400,000 400,000
______________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $15,853,105)................... $ 15,852,140
==============
TOTAL INVESTMENTS-100%
(cost $280,301,799)..................................................... $285,280,798
==============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration PCR Pollution Control Revenue
FSA Financial Security Assurance RRR Resources Recovery Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit TAN Tax Anticipation Notes
LR Lease Revenue VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ _______________ ___________________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 43.7%
AA Aa AA 3.4
A A A 15.2
BBB Baa BBB 19.8
BB Ba BB .6
F1 MIG1/P1 SP1/A1 5.4
Not Rated (h) Not Rated (h) Not Rated (h) 11.9
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly held by custodian as collateral for delayed-delivery
security.
(b) Secured by letters of credit.
(c) Purchased on a delayed-delivery basis.
(d) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(e) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(f) Inverse Floater Security - the interest rate is subject to change
periodically.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $280,301,799)-see statement..................................... $285,280,798
Cash.................................................................... 1,233,609
Interest receivable..................................................... 5,521,212
Receivable for shares of Beneficial Interest subscribed................. 224,540
Receivable for investment securities sold............................... 93,433
Prepaid expenses........................................................ 9,137
______________
292,362,729
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 128,905
Due to Distributor...................................................... 88,348
Payable for investment securities purchased............................. 2,447,858
Payable for shares of Beneficial Interest redeemed...................... 214,060
Accrued expenses........................................................ 50,486 2,929,657
_______________
NET ASSETS.................................................................. $289,433,072
==============
REPRESENTED BY:
Paid-in capital......................................................... $282,542,947
Accumulated undistributed net realized gain on investments.............. 1,911,126
Accumulated net unrealized appreciation on investments-Note 3........... 4,978,999
______________
NET ASSETS at value......................................................... $289,433,072
==============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 13,408,608
==============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 4,492,451
==============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 1,302
==============
NET ASSET VALUE per share:
Class A Shares
($216,801,832 / 13,408,608 shares).................................... $16.17
=========
Class B Shares
($72,610,204 / 4,492,451 shares)...................................... $16.16
=========
Class C Shares
($21,036 / 1,302 shares).............................................. $16.16
=========
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $18,081,065
EXPENSES:
Management fee-Note 2(a).............................................. $1,600,235
Shareholder servicing costs-Note 2(c)................................. 981,973
Distribution fees-Note 2(b)........................................... 362,748
Professional fees..................................................... 45,123
Custodian fees........................................................ 32,496
Prospectus and shareholders' reports.................................. 21,254
Trustees' fees and expenses-Note 2(d)................................. 3,918
Registration fees..................................................... 1,736
Miscellaneous......................................................... 5,404
_______________
TOTAL EXPENSES.................................................... 3,054,887
_______________
INVESTMENT INCOME-NET............................................. 15,026,178
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $3,624,514
Net unrealized appreciation on investments.............................. 2,233,089
______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 5,857,603
_______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $20,883,781
===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
__________________________________________
1995 1996
____________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 16,303,282 $ 15,026,178
Net realized gain on investments........................................ 3,749,748 3,624,514
Net unrealized appreciation (depreciation) on investments for the year.. (2,373,737) 2,233,089
____________________ __________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 17,679,293 20,883,781
____________________ __________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (12,907,659) (11,560,546)
Class B shares........................................................ (3,395,623) (3,465,577)
Class C shares........................................................ - (55)
Net realized gain on investment:
Class A shares........................................................ - (3,548,917)
Class B shares........................................................ - (1,187,046)
Class C shares........................................................ - (17)
____________________ __________________
TOTAL DIVIDENDS................................................... (16,303,282) (19,762,158)
____________________ __________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 14,323,499 20,084,706
Class B shares........................................................ 13,962,833 6,829,157
Class C shares........................................................ - 21,000
Dividends reinvested:
Class A shares........................................................ 6,652,944 8,442,622
Class B shares........................................................ 2,024,872 2,978,350
Class C shares........................................................ - 73
Cost of shares redeemed:
Class A shares........................................................ (37,539,324) (32,654,140)
Class B shares........................................................ (5,465,675) (7,401,867)
____________________ __________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (6,040,851) (1,700,099)
____________________ __________________
TOTAL (DECREASE) IN NET ASSETS.................................. (4,664,840) (578,476)
NET ASSETS:
Beginning of year....................................................... 294,676,388 290,011,548
____________________ __________________
End of year............................................................. $290,011,548 $289,433,072
==================== ==================
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
________________________________________________________________________________________
CLASS A CLASS B CLASS C
____________________________ __________________________ ______________________
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
____________________________ __________________________ ______________________
1995 1996 1995 1996 1996*
____________ ___________ ___________ __________ ______________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 900,647 1,227,069 881,375 412,949 1,298
Shares issued for
dividends reinvested. 421,108 508,499 128,216 179,443 4
Shares redeemed........ (2,389,230) (1,973,350) (350,112) (448,471) -
____________ ___________ ___________ __________ ______________________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING...... (1,067,475) (237,782) 659,479 143,921 1,302
============= =========== =========== ========== ======================
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Pennsylvania Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. There was no expense
reimbursement for the year ended April 30, 1996.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $852 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$362,739 was charged to the Series for the Class B shares and $9 was charged
to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$546,007, $181,369 and $3 were charged to Class A, Class B and Class C
shares, respectively, by the Distributor pursuant to the Shareholder Services
Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $67,082 for the period
from December 1, 1995 through April 30, 1996.
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of
$250 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $148,797,723 and $173,013,257, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $4,978,999, consisting of $7,513,971 gross unrealized appreciation and
$2,534,972 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Pennsylvania Series (one of the Series constituting the Premier State
Municipal Bond Fund) as of April 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and financial highlights
for each of the years indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Pennsylvania Series at April
30, 1996, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernst & Young LLP Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-99.5% AMOUNT VALUE
_______________ ______________
<S> <C> <C>
TEXAS-98.1%
Allen Independent School District Building
5.20%, 2/15/2021........................................................ $ 2,030,000 $ 1,827,670
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc., Project) 7.50%, 12/01/2029..................... 3,800,000 4,041,224
Amarillo Health Facilities Corp., HR (High Plains Baptist Hospital)
6.562%, 1/3/2022 (Insured; FSA)......................................... 4,500,000 4,635,810
Bexar County, Refunding, Limited Tax 5%, 6/15/2010.......................... 5,000,000 4,711,850
Bexar County Health Facilities Development Corp., HR Refunding
(Baptist Memorial Hospital System Project) 6.625%, 2/15/2011 (Insured; MBIA) 2,690,000 2,873,861
Brazos Higher Education Authority Inc., Student Loan Revenue, Refunding:
5.70%, 6/1/2004......................................................... 3,500,000 3,564,680
6.80%, 12/1/2004........................................................ 850,000 899,725
Brazos River Authority, Special Facilities Revenue, Refunding
5.50%, 8/15/2021 (Insured; FGIC)........................................ 2,000,000 1,886,620
Clear Creek Independent School District
4.25%, 2/1/2013......................................................... 1,575,000 1,294,115
Clint Independent School District, Refunding
7%, 3/1/2015............................................................ 750,000 799,650
Dallas-Fort Worth Regional Airport, Joint Revenue
6.625%, 11/1/2021 (Insured; FGIC)....................................... 1,250,000 1,286,475
El Paso Housing Authority, Multi-Family Revenue
(Section 8 Projects) 6.25%, 12/1/2009................................... 2,510,000 2,533,042
Grapevine-Colleyville Independent School District
5.125%, 8/15/2022....................................................... 3,000,000 2,678,280
Gulf Coast Waste Disposal Authority, SWDR
(Champion International Corp. Project) 7.25%, 4/1/2017.................. 1,000,000 1,057,070
Harris County (Toll Road) Senior Lien 6.375%, 8/15/2024 (Insured; MBIA)..... 3,000,000 3,114,300
Harris County Health Facilities Development Corp., Health Care System Revenue
(Sisters of Charity) 7.10%, 7/1/2021.................................... 1,000,000 1,079,810
Houston:
Refunding 7%, 3/1/2008.................................................. 2,000,000 2,304,500
Water and Sewer System Revenue, Refunding (Junior Lien)
5.25%, 12/1/2025 (Insured; FGIC)...................................... 3,000,000 2,726,550
Keller Independent School District,
Unlimited Tax School Building and Refunding
5.125%, 8/15/2025....................................................... 2,000,000 1,778,600
Leander 6.75%, 8/15/2016.................................................... 2,325,000 2,349,389
Leon County, PCR, Refunding (Nucor Corp. Project) 7.375%, 8/1/2009.......... 750,000 816,982
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______________ _____________
TEXAS (CONTINUED)
Lewisville Independent School District 5.35%, 8/15/2014..................... $ 2,750,000 $ 2,612,858
Matagorda County Navigation District No. 1, PCR
(Collateralized Houston Lighting and Power) 7.875%, 2/1/2019............ 500,000 531,190
Montgomery County Health Facilities Development Corp., Hospital Mortgage
Revenue
(Woodlands Medical Center Project) 8.85%, 8/15/2014..................... 580,000 627,676
North Texas Higher Education Authority, Inc., Student Loan Revenue
7.25%, 4/1/2003 (Insured; AMBAC)........................................ 1,000,000 1,056,970
Red River Authority, PCR
(Hoechst Celanese Corp. Project) 6.875%, 4/1/2017....................... 4,100,000 4,325,377
San Antonio, Water Revenue (Prior Lien)
7.125%, 5/1/2016 (Prerefunded 5/1/1999) (a)............................. 750,000 817,110
Southwest Higher Education Authority, Inc., Higher Education Revenue
(Southern Methodist University Project) 5.125%, 10/1/2026 (Insured; FSA) 1,000,000 885,230
Texas (Veterans Housing Assistance) 6.80%, 12/1/2023........................ 3,135,000 3,205,569
Texas Health Facilities Development Corp., HR, Refunding
(All Saints Episcopal Hospitals) 6.25%, 8/15/2022 (Insured; MBIA)....... 2,000,000 2,044,280
Texas Higher Education Coordinating Board, College Student Loan Revenue
7.30%, 10/1/2003........................................................ 750,000 783,923
Texas National Research Laboratory Commission Financing Corp., LR
(Superconducting Super Collider):
6.95%, 12/1/2012...................................................... 700,000 772,877
7.10%, 12/1/2021 (Prerefunded 12/1/2001) (a).......................... 230,000 260,466
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation) 8.875%, 9/1/2011 (Prerefunded 9/1/2001) (a) 455,000 549,708
Texas Water Development Board, Revenue (State Revolving Fund) Senior Lien
6%, 7/15/2013........................................................... 3,000,000 3,014,130
Tomball Hospital Authority, Revenue, Refunding 6%, 7/1/2013................. 5,000,000 4,716,000
Tyler Texas Health Facility Development Corp., HR
(East Texas Medical Center Regional Health) 6.625%, 11/1/2011........... 1,820,000 1,831,575
West Side Calhoun County Navigation District, SWDR
(Union Carbide Chemical and Plastics) 8.20%, 3/15/2021.................. 500,000 557,685
U.S. RELATED-1.4%
Puerto Rico Public Buildings Authority, Guaranteed
Public Education and Health Facilities
6.875%, 7/1/2012 (Prerefunded 7/1/2002) (a)............................. 1,000,000 1,128,500
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $76,587,967)...................................................... $77,981,327
=============
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENT-.5% AMOUNT VALUE
________________ _______________
U.S. RELATED;
Puerto Rico Electric Power Authority, Power Revenue, 3.32% (Insured; FSA) (b)
(cost $400,000)......................................................... $ 400,000 $ 400,000
================
TOTAL INVESTMENTS-100.0%
(cost $76,987,967)...................................................... $78,381,327
================
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance PCR Pollution Control Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LR Lease Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
________________ _____________ ___________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 52.9%
AA Aa AA 15.4
A A A 11.6
BBB Baa BBB 15.6
Not Rated (d) Not Rated (d) Not Rated (d) 4.5
________
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse Floater Security - the interest rate is subject to change
periodically.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $76,987,967)-see statement...................................... $78,381,327
Cash.................................................................... 584,941
Interest receivable..................................................... 1,405,965
Receivable for shares of Beneficial Interest subscribed................. 20,000
Prepaid expenses........................................................ 7,101
________________
80,399,334
LIABILITIES:
Due to Distributor...................................................... $23,690
Payable for shares of Beneficial Interest redeemed...................... 20,714
Accrued expenses........................................................ 29,340 73,744
_____________ ________________
NET ASSETS.................................................................. $80,325,590
================
REPRESENTED BY:
Paid-in capital......................................................... $78,414,939
Accumulated undistributed net realized gain on investments.............. 517,291
Accumulated net unrealized appreciation on investments-Note 3........... 1,393,360
________________
NET ASSETS at value......................................................... $80,325,590
================
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 3,016,239
================
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 837,867
================
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 51
================
NET ASSET VALUE per share:
Class A Shares
($62,863,623 / 3,016,239 shares)...................................... $20.84
================
Class B Shares
($17,460,915 / 837,867 shares)........................................ $20.84
================
Class C Shares
($1,052 / 50,504 shares).............................................. $20.83
================
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,091,856
EXPENSES:
Management fee-Note 2(a).............................................. $ 464,591
Shareholder servicing costs-Note 2(c)................................. 257,487
Distribution fees-Note 2(b)........................................... 87,657
Professional fees..................................................... 15,522
Prospectus and shareholders' reports.................................. 10,225
Custodian fees........................................................ 9,835
Registration fees..................................................... 1,209
Trustees' fees and expenses-Note 2(d)................................. 1,123
Miscellaneous......................................................... 18,385
______________
TOTAL EXPENSES.................................................. 866,034
Less-Management fee waived due to
undertaking-Note 2(a)............................................. 464,591
______________
NET EXPENSES.................................................... 401,443
______________
INVESTMENT INCOME-NET........................................... 4,690,413
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,514,366
Net unrealized appreciation on investments.............................. 400,100
______________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,914,466
______________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $6,604,879
==============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
_________________________________________
1995 1996
____________________ _________________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 5,213,354 $ 4,690,413
Net realized gain on investments........................................ 336,502 1,514,366
Net unrealized appreciation on investments for the year................. 460,699 400,100
____________________ _________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.............. 6,010,555 6,604,879
____________________ _________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares........................................................ (4,315,213) (3,789,456)
Class B shares........................................................ (898,141) (900,921)
Class C shares........................................................ - (36)
Net realized gain on investments:
Class A shares........................................................ - (937,967)
Class B shares........................................................ - (248,855)
Class C shares........................................................ - (15)
____________________ _________________
TOTAL DIVIDENDS................................................... (5,213,354) (5,877,250)
____________________ _________________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 1,872,238 1,598,276
Class B shares........................................................ 1,960,522 1,221,189
Class C shares........................................................ - 1,014
Dividends reinvested:
Class A shares........................................................ 1,978,459 2,309,470
Class B shares........................................................ 498,663 668,539
Class C shares........................................................ - 51
Cost of shares redeemed:
Class A shares........................................................ (12,622,094) (9,766,053)
Class B shares........................................................ (1,719,028) (1,355,717)
____________________ _________________
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.... (8,031,240) (5,323,231)
____________________ _________________
TOTAL (DECREASE) IN NET ASSETS.................................. (7,234,039) (4,595,602)
NET ASSETS:
Beginning of year....................................................... 92,155,231 84,921,192
____________________ _________________
End of year............................................................. $ 84,921,192 $ 80,325,590
==================== =================
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
__________________________________________________________________________________
CLASS A CLASS B CLASS C
________________________ ______________________ _______________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
_______________________ _______________________
1995 1996 1995 1996 1996*
___________ __________ __________ __________ _______________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............ 92,136 75,223 96,542 57,381 49
Shares issued for
dividends reinvested. 97,778 108,052 24,656 31,283 2
Shares redeemed........ (636,330) (458,438) (86,401) (63,720) -
___________ __________ __________ __________ _______________________
NET INCREASE
(DECREASE) IN
SHARES OUTSTANDING (446,416) (275,163) 34,797 24,944 51
=========== ========== ========== ========== =======================
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Texas Series (the "Series"). The Fund's
investment objective is to maximize current income exempt from Federal and,
where applicable, from State income taxes, without undue risk. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To the
extent that net realized capital gain can be offset by capital loss carryovers,
if any, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager
has undertaken from May 1, 1995 to waive receipt of the management fee
payable to it by the Series until such time as the net assets of the Series
exceed $100 million, regardless of whether they remain at that level. The
management fee waived, pursuant to the undertaking, amounted to $464,591 for
the year ended April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$87,651 was charged to the Series for the Class B shares and $6 was charged
to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the year ended April 30, 1996,
$167,350, $43,826 and $2 were charged to Class A, Class B and Class C shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Effective December 1, 1995, the Series compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Series. Such compensation amounted to $11,727 for the period from
December 1, 1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $40,754,684 and $45,945,727, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $1,393,360, consisting of $2,110,926 gross unrealized appreciation and
$717,566 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Texas Series (one of the Series constituting the Premier State Municipal Bond
Fund) as of April 30, 1996, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Texas Series at April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernst & Young LLP - Signature)
New York, New York
June 5, 1996
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF INVESTMENTS APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
________________ ______________
<S> <C> <C>
VIRGINIA-84.5%
Alexandria Redevelopment and Housing Authority,
Multi-Family Housing Mortgage Revenue (Buckingham Village Apartments)
6.125%, 7/1/2021........................................................ $ 3,000,000 $ 2,941,260
Augusta County Industrial Development Authority, HR
(Augusta Hospital Corp. Project) 7%, 9/1/2021 (Prerefunded 9/1/2001) (a) 2,750,000 3,081,898
Capital Region Airport Commission, Airport Revenue
(Richmond International Airport Projects) 5.625%, 7/1/2025 (Insured; AMBAC) 3,000,000 2,843,670
Charlottesville-Albemarle Airport Authority, Airport Revenue Refunding:
6.125%, 12/1/2009....................................................... 450,000 432,738
6.125%, 12/1/2013....................................................... 350,000 335,807
Chesapeake, Water and Sewer System Revenue, Refunding 6.50%, 7/1/2012....... 1,000,000 1,049,240
Chesapeake Bay Bridge and Tunnel District, General Resolution Revenue,
Refunding 5%, 7/1/2022 (Insured; MBIA).................................. 5,410,000 4,767,779
Chesapeake Hospital Authority, Hospital Facility Revenue, Refunding
(Chesapeake General Hospital) 5.25%, 7/1/2018 (Insured; MBIA)........... 1,000,000 906,920
Community Housing Finance Corp. Arlington County,
Collateralized Mortgage Revenue, Refunding (Colonial Village Project)
6.25%, 6/1/2022 (Insured; FHA).......................................... 1,000,000 1,001,360
Covington-Alleghany County Industrial Development Authority,
Hospital Facility Revenue (Alleghany Regional Hospital)
6.875%, 4/1/2022 (Prerefunded 4/1/2002) (a)............................. 1,000,000 1,106,940
Fairfax County Park Authority, Park Facilities Revenue
6.625%, 7/15/2020....................................................... 2,665,000 2,710,545
Fairfax County Water Authority, Water Revenue:
5%, 4/1/2016............................................................ 2,000,000 1,806,900
7.561%, 4/1/2029 (b,c).................................................. 2,000,000 1,710,000
Hanover County Industrial Development Authority, HR
(Memorial Regional Medical Center Project) 5.50%, 8/15/2025 (Insured; MBIA) 1,000,000 930,670
Harrisonburg Redevelopment and Housing Authority, MFHR, Refunding
(Hanover Crossing Apartments Project) 6.35%, 3/1/2023................... 2,000,000 2,003,800
Industrial Development Authority of Albermarle County,
HR, Refunding (Martha Jefferson Hospital):
5.875%, 10/1/2013..................................................... 2,360,000 2,263,098
5.50%, 10/1/2020...................................................... 1,500,000 1,333,425
Industrial Development Authority of the City of Williamsburg,
Hospital Facility Revenue (Williamsburg Community Hospital) 5.75%, 10/1/2022 2,000,000 1,794,360
Industrial Development Authority of Giles County,
Exempt Facility Revenue (Hoechst Celanese Corp. Project)
5.95%, 12/1/2025........................................................ 3,000,000 2,919,690
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ _____________
VIRGINIA (CONTINUED)
Industrial Development Authority of the County of Henrico,
SWDR (Browning-Ferris Industries of South Atlantic, Inc. Project)
5.45%, 1/1/2014......................................................... $ 3,500,000 $ 3,312,855
Industrial Development Authority of the County of Prince William:
Hospital Facility Revenue (Potomac Hospital Corp. of Prince William)
6.85%, 10/1/2025...................................................... 1,000,000 1,043,820
HR, Refunding (Prince William Hospital)
5.625%, 4/1/2012...................................................... 1,000,000 944,700
Industrial Development Authority of the Town of West Point,
SWDR (Chesapeake Corp. Project) 6.375%, 3/1/2019........................ 2,500,000 2,431,825
Nelson County Service Authority, Water and Sewer Revenue, Refunding
5.50%, 7/1/2018 (Insured; FGIC)......................................... 1,750,000 1,648,430
Norfolk Redevelopment and Housing Authority, Educational Facility Revenue
(Tidewater Community College Campus) 5.875%, 11/1/2015.................. 1,000,000 976,210
Prince William County Park Authority, Revenue
6.875%, 10/15/2016...................................................... 3,000,000 3,195,630
Rector and Visitors of the University of Virginia, General Revenue Pledge
5.375%, 6/1/2020........................................................ 4,370,000 4,068,776
Richmond Industrial Development Authority, HR (Retreat Hospital)
7.35%, 7/1/2021 (Prerefunded 7/1/2001) (a).............................. 1,900,000 2,144,283
Richmond Metropolitan Authority, Expressway Revenue, Refunding
6.375%, 7/15/2016 (Insured; FGIC)....................................... 1,500,000 1,564,980
Southeastern Public Service Authority, Revenue
5.125%, 7/1/2013 (Insured; MBIA)........................................ 7,850,000 7,339,593
Upper Occoquan Sewer Authority, Regional Sewer Revenue:
6.50%, 7/1/2017 (Insured; MBIA) (Prerefunded 7/1/2001) (a).............. 1,000,000 1,098,140
5%, 7/1/2025 (Insured; MBIA)............................................ 4,000,000 3,508,920
Virginia Beach Development Authority
Nursing Home Revenue (Sentara Life Care Corp.) 7.75%, 11/1/2021......... 1,000,000 1,096,670
Virginia Housing Development Authority:
Commonwealth Mortgage:
6.20%, 7/1/2021....................................................... 3,255,000 3,221,929
6.85%, 1/1/2027....................................................... 2,000,000 2,040,300
Multi-Family Refunding 5.90%, 11/1/2017................................. 2,000,000 1,957,120
U. S. RELATED-15.5%
Guam Airport Authority, Revenue 6.70%, 10/1/2023............................ 2,000,000 2,006,080
Commonwealth of Puerto Rico:
5.40%, 7/1/2025......................................................... 3,000,000 2,717,010
(Public Improvement) 6.80%, 7/1/2021 (Prerefunded 7/1/2002) (a)......... 1,000,000 1,122,000
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________________ ______________
U. S. RELATED (CONTINUED)
Puerto Rico Highway and Transportation Authority, Highway Revenue:
6.625%, 7/1/2018 (Prerefunded 7/1/2002) (a)............................. $ 2,000,000 $ 2,224,780
5.50%, 7/1/2026......................................................... 5,000,000 4,597,650
Virgin Islands Public Finance Authority, Revenue, Refunding, Matching Fund
Loan Notes
7.25%, 10/1/2018........................................................ 1,500,000 1,578,405
______________
TOTAL INVESTMENTS (cost $92,283,183)........................................ $91,780,206
==============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration MFHR Multi-Family Housing Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (D) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____________ _____________ ___________________ _____________________
<S> <C> <C> <C>
AAA Aaa AAA 31.5%
AA Aa AA 20.6
A A A 35.2
BBB Baa BBB 11.0
Not Rated (e) Not Rated (e) Not Rated (e) 1.7
___________
100.0%
===========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Inverse Floater Security f the interest rate is subject to change
periodically.
(c) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
1996, this security amounted to $1,710,000 or 1.8% of net assets.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $92,283,183)-see statement...................................... $91,780,206
Cash.................................................................... 1,031,926
Interest receivable..................................................... 1,530,159
Receivable for shares of Beneficial Interest subscribed................. 208,537
Prepaid expenses........................................................ 3,900
_______________
94,554,728
LIABILITIES:
Due to Distributor...................................................... $32,981
Payable for shares of Beneficial Interest redeemed...................... 14,191
Accrued expenses........................................................ 72,788 119,960
____________ _______________
NET ASSETS.................................................................. $94,434,768
===============
REPRESENTED BY:
Paid-in capital......................................................... $95,195,136
Accumulated net realized (loss) on investments.......................... (257,391)
Accumulated net unrealized (depreciation) on investments-Note 3......... (502,977)
_______________
NET ASSETS at value......................................................... $94,434,768
===============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 3,759,009
===============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 2,036,179
===============
Class C Shares
(unlimited number of $.001 par value shares authorized)............... 10,194
===============
NET ASSET VALUE per share:
Class A Shares
($61,149,373 / 3,759,009 shares)...................................... $16.27
===============
Class B Shares
($33,119,613 / 2,036,179 shares)...................................... $16.27
===============
Class C Shares
($165,782 / 10,194 shares)............................................ $16.26
===============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $5,783,574
EXPENSES:
Management fee-Note 2(a).............................................. $ 522,229
Shareholder servicing costs-Note 2(c)................................. 315,653
Distribution fees-Note 2(b)........................................... 157,882
Professional fees..................................................... 18,106
Prospectus and shareholders' reports.................................. 15,763
Custodian fees........................................................ 10,760
Registration fees..................................................... 1,648
Trustees' fees and expenses-Note 2(d)................................. 1,264
Miscellaneous......................................................... 116,338
______________
TOTAL EXPENSES.................................................. 1,159,643
Less-management fee waived due to
undertaking-Note 2(a)............................................. 522,229
______________
NET EXPENSES.................................................... 637,414
_____________
INVESTMENT INCOME-NET........................................... 5,146,160
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,771,595
Net unrealized (depreciation) on investments............................ (539,154)
_____________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,232,441
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $6,378,601
=============
See notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
_____________________________________
1995 1996
_____________ _____________
OPERATIONS:
Investment income-net................................................... $ 5,219,359 $ 5,146,160
Net realized gain (loss) on investments................................. (1,651,777) 1,771,595
Net unrealized appreciation (depreciation) on investments for the year.. 1,713,847 (539,154)
_____________ _____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 5,281,429 6,378,601
_____________ _____________
DIVIDENDS TO SHAREHOLDERS:
From investment income-net:
Class A shares........................................................ (3,761,772) (3,546,219)
Class B shares........................................................ (1,457,587) (1,598,256)
Class C shares........................................................ - (1,685)
In excess of net realized gain on investments:
Class A shares........................................................ (120,788) -
Class B shares........................................................ (53,700) -
_____________ _____________
TOTAL DIVIDENDS................................................... (5,393,847) (5,146,160)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 7,081,776 4,126,648
Class B shares........................................................ 5,599,985 5,468,182
Class C shares........................................................ - 171,138
Dividends reinvested:
Class A shares........................................................ 2,086,577 1,849,325
Class B shares........................................................ 818,920 812,093
Class C shares........................................................ - 1,041
Cost of shares redeemed:
Class A shares........................................................ (11,840,016) (8,185,998)
Class B shares........................................................ (2,926,642) (2,280,799)
_____________ _____________
INCREASE IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS........................................... 820,600 1,961,630
_____________ _____________
TOTAL INCREASE IN NET ASSETS.................................... 708,182 3,194,071
NET ASSETS:
Beginning of year....................................................... 90,532,515 91,240,697
_____________ _____________
End of year............................................................. $91,240,697 $94,434,768
============= =============
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
SHARES
____________________________________________________________________________________________
CLASS A CLASS B CLASS C
__________________________ ____________________________________ ________________________
YEAR ENDED
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, APRIL 30,
__________________________ ____________________________________
1995 1996 1995 1996 1996*
____________ ___________ _______________ _______________ ________________________
<S> <C> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold.......... 447,976 249,234 356,143 328,113 10,131
Shares issued for
dividends reinvested 132,774 111,225 52,168 48,831 63
Shares redeemed...... (761,303) (494,748) (187,333) (137,908) -
____________ ___________ _______________ _______________ ________________________
NET INCREASE (DECREASE)
IN SHARES
OUTSTANDING.... (180,553) (134,289) 220,978 239,036 10,194
============ =========== =============== =============== ========================
* From August 15, 1995 (commencement of initial offering) to April 30, 1996.
See notes to financial statements.
</TABLE>
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
FINANCIAL HIGHLIGHTS
Reference is made to pages 6-27 of the Fund's Prospectus dated
September 3, 1996.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering twelve series including the Virginia Series (the "Series"). The
Fund's investment objective is to maximize current income exempt from Federal
and, where applicable, from State income taxes, without undue risk. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc., (the "Distributor") acts as the
distributor of the Fund's shares. The Series offers Class A, Class B and
Class C shares. Class A shares are subject to a sales charge imposed at the
time of purchase, Class B shares are subject to a contingent deferred sales
charge imposed at the time of redemption on redemptions made within five
years of purchase and Class C shares are subject to a contingent deferred
sales charge imposed at the time of redemption on redemptions made within one
year of purchase. Other differences between the three Classes include the
services offered to and the expenses borne by each Class and certain voting
rights.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $148,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1996. If not
applied, the carryover expires in fiscal 2003.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager
has undertaken from May 1, 1995 to waive receipt of the management fee
payable to it by the Series until such time as the net assets of the Series
exceed $100 million, regardless of whether they remain at that level. The
management fee waived, pursuant to the undertaking, amounted to $522,229 for
the year ended April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $39 during the year ended April 30, 1996 from commissions earned on
sales of the Series' shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the
Act, the Series pays the Distributor for distributing the Series' Class B and
Class C shares at an annual rate of .50 of 1% of the value of the average
daily net assets of Class B shares and .75 of 1% of the value of the average
daily net assets of Class C shares. During the year ended April 30, 1996,
$157,606 was charged to the Series for the Class B shares and $276 was
charged to the Series for the Class C shares.
(C) Under the Shareholder Services Plan, the Series pays the Distributor
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A, Class B and Class C shares for the provision of certain services.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Agents. During the year ended April 30, 1996, $158,482, $78,803 and $92 were
charged to Class A, Class B and Class C shares, respectively, by the
Distributor pursuant to the Shareholder Service Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $19,409 for the period
from December 1, 1995 through April 30, 1996.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended April 30, 1996
amounted to $49,693,408 and $47,684,106, respectively.
At April 30, 1996, accumulated net unrealized depreciation on investments
was $502,977, consisting of $2,070,929 gross unrealized appreciation and
$2,573,906 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Virginia Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of April 30, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier State Municipal Bond Fund, Virginia Series at April 30,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(ERNST & YOUNG LLP..... SIGNATURE LOGO)
New York, New York
June 5, 1996
PREMIER STATE MUNICIPAL BOND FUND
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for the period from May 28,
1987 (commencement of operations for the Connecticut Series,
Florida Series, Maryland Series, Massachusetts Series, Michigan
Series, Minnesota Series, Ohio Series and Texas Series, except
the Pennsylvania Series (which commenced operations on July 30,
1987)) to April 30, 1988 and for each
of the eight years ended April 30, 1996 for such Series; for
the North Carolina Series and Virginia Series for the period
from August 1, 1991 (commencement of operations) to April 30,
1992 and for each of the four years ended April 30, 1996; for
the Georgia Series for the period from September 3, 1992
(commencement of operations) to April 30, 1993 and for the
three years ended April 30, 1996.
Included in Part B of the Registration Statement:
Statement of Investments-- April 30, 1996
Statement of Assets and Liabilities-- April 30, 1996
Statement of Operations--year ended April 30, 1996
Statement of Changes in Net Assets--for each of the years
ended April 30, 1995 and 1996 for all series.
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors, dated
June 5, 1996.
All schedules and other financial statement information, for which provision
is made in the applicable accounting regulations of the Securities and
Exchange Commission, are either omitted because they are not required under
the related instructions, they are inapplicable, or the required information
is presented in the financial statements or notes thereto which are included
in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1) Registrant's Amended and Restated Agreement and Declaration of Trust
is incorporated by reference to Exhibit (1) of Post-Effective
Amendment No. 21 to the Registration Statement on Form N-1A, filed
on August 11, 1995.
(2) Registrant's By-Laws, as amended are incorporated by reference to
Exhibit (2) of Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A, filed on August 11, 1995.
(5) Management Agreement is incorporated by reference to Exhibit (5) of
Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A, filed on August 11, 1995.
(6)(a) Distribution Agreement is incorporated by reference to Exhibit
(6)(a) of Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A, filed on August 11, 1995.
(6)(b) Forms of Shareholder Services Plan Agreements are incorporated by
reference to Exhibit (6)(b) of Post-Effective Amendment No. 21 to
the Registration Statement on Form N-1A, filed on August 11, 1995.
(6)(c) Forms of Distribution Plan Agreements are incorporated by reference
to Exhibit (6)(c) of Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A, filed on August 11, 1995.
(8)(a) Custody Agreement is incorporated by reference to Exhibit (8)(a) of
Post-Effective Amendment No. 21 to the Registration Statement on
Form N-1A, filed on August 11, 1995.
(8)(b) Sub-Custodian Agreements are incorporated by reference to Exhibit
(8)(b) of Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A, filed on August 18, 1994.
(9) Shareholder Services Plan is incorporated by reference to Exhibit
(9) of Post-Effective Amendment No. 21 to the Registration Statement
on Form N-1A, filed on August 11, 1995.
(10) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A, filed on August 11, 1995.
(11) Consent of Independent Auditors.
(15) Distribution Plan is incorporated by reference to Exhibit (15) of
Post-Effective Amendment No. 21 to the Registration Statement on
Form N-1A, filed on August 11, 1995.
(16) Schedules of Computation of Performance Data are incorporated by
reference to Exhibit (16) of Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A, filed on August 18, 1994.
(17) Financial Data Schedules.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(18) Registrant's Rule 18f-3 Plan is incorporated by reference to Exhibit
(18) of Post-Effective Amendment No. 24 to the Registration
Statement on Form N-1A, filed on July 18, 1996.
Other Exhibits
______________
(a) Powers of Attorney of the Trustees and officers are
incorporated by reference to Other Exhibit (a) of Post-
Effective Amendment No. 25 to the Registration Statement
on Form N-1A, filed on August 27, 1996.
(b) Certificate of Assistant Secretary is incorporated by
reference to Other Exhibit (b) of Post-Effective Amendment
No. 25 to the Registration Statement on Form N-1A, filed
on August 27, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of October 22, 1996
______________ _____________________________
Shares of
beneficial interest,
par value $.001 per share Class A Class B Class C
Connecticut Series- 6,413 1,290 28
Florida Series- 4,815 586 4
Georgia Series- 204 458 5
Maryland Series- 6,386 1,654 3
Massachusetts Series- 1,646 147 1
Michigan Series- 4,527 582 6
Minnesota Series- 3,003 916 3
North Carolina Series- 1,129 1,292 2
Ohio Series- 5,843 1,368 3
Number of Record
Title of Class Holders as of October 22, 1996
______________ _____________________________
Shares of
beneficial interest,
par value of $.001 per share Class A Class B Class C
Pennsylvania Series- 6,150 2,691 5
Texas Series- 1,126 442 3
Virginia Series- 1,599 990 6
Item 27. Indemnification
_______ _______________
Reference is made to Article VIII of the Registrant's Amended and
Restated Declaration of Trust incorporated by reference to Exhibit
(1) of Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A, filed on August 11, 1995. The application
of these provisions is limited by Article 10 of the Registrant's By-
Laws, as amended, incorporated by reference to Exhibit (2) of Post-
Effective Amendment No. 21 to the Registration Statement on Form N-
1A, filed on August 11, 1995, and by the following undertaking set
forth in the rules promulgated by the Securities and Exchange
Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification
is against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer
or controlling person of the registrant in the successful
defense of any such action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with
the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.
Reference is also made to the Distribution Agreement attached as
Exhibit (6)(a) of Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A, filed on August 11, 1995.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser and manager for sponsored investment companies
registered under the Investment Company Act of 1940 and as an
investment adviser to institutional and individual accounts.
Dreyfus also serves as sub-investment adviser to and/or
administrator of other investment companies. Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, serves primarily
as a registered broker-dealer of shares of investment companies
sponsored by Dreyfus and of other investment companies for which
Dreyfus acts as investment adviser, sub-investment adviser or
administrator. Dreyfus Management, Inc., another wholly-owned
subsidiary, provides investment management services to various
pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****;
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and Member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE None
Director
JULIAN M. SMERLING None
Director
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company*****;
Vice Chairman of the Board:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****;
Executive Officer, The Boston Company*****;
Chief Operating Deputy Director:
Officer and a Mellon Trust****;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****;
President:
Boston Safe Deposit and Trust Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
Dreyfus America Fund
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****;
Laurel Capital Advisors****;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.****;
Boston Safe Deposit and Trust
Company*****;
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase
Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Dreyfus America Fund
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
ELIE M. GENADRY President:
Vice President- Institutional Services Division of Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*;
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President- Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) The Dreyfus/Laurel Funds, Inc.
34) The Dreyfus/Laurel Funds Trust
35) The Dreyfus/Laurel Tax-Free Municipal Funds
36) Dreyfus Stock Index Fund, Inc.
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus S&P 500 Index Fund
63) Dreyfus Short-Intermediate Government Fund
64) Dreyfus Short-Intermediate Municipal Bond Fund
65) Dreyfus Investment Grade Bond Funds, Inc.
66) The Dreyfus Socially Responsible Growth Fund, Inc.
67) Dreyfus Tax Exempt Cash Management
68) The Dreyfus Third Century Fund, Inc.
69) Dreyfus Treasury Cash Management
70) Dreyfus Treasury Prime Cash Management
71) Dreyfus Variable Investment Fund
72) Dreyfus Worldwide Dollar Money Market Fund, Inc.
73) General California Municipal Bond Fund, Inc.
74) General California Municipal Money Market Fund
75) General Government Securities Money Market Fund, Inc.
76) General Money Market Fund, Inc.
77) General Municipal Bond Fund, Inc.
78) General Municipal Money Market Fund, Inc.
79) General New York Municipal Bond Fund, Inc.
80) General New York Municipal Money Market Fund
81) Premier Insured Municipal Bond Fund
82) Premier California Municipal Bond Fund
83) Premier Equity Funds, Inc.
84) Premier Global Investing, Inc.
85) Premier GNMA Fund
86) Premier Growth Fund, Inc.
87) Premier Municipal Bond Fund
88) Premier New York Municipal Bond Fund
89) Premier State Municipal Bond Fund
90) Premier Strategic Growth Fund
91) Premier Value Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Vice President
and Chief Financial Officer and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Roy M. Moura+ First Vice President None
Dale F. Lampe+ Vice President None
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Elizabeth A. Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and State of
New York on the 30th day of October, 1996.
PREMIER STATE MUNICIPAL BOND FUND
BY: /s/Marie E. Connolly*
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities and on the
date indicated.
Signatures Title Date
___________________________ ______________________________ ___________
/s/Marie E. Connolly* President (Principal Executive 10/30/96
______________________________ Officer) and Treasurer
Marie E. Connolly
/s/Joseph F. Tower, III* Vice President and Assistant 10/30/96
______________________________ Treasurer (Principal Accounting
Joseph F. Tower, III and Financial Officer)
/s/Clifford L. Alexander, Jr.* Trustee 10/30/96
______________________________
Clifford L. Alexander, Jr.
/s/Peggy C. Davis* Trustee 10/30/96
______________________________
Peggy C. Davis
/s/Joseph S. DiMartino* Chaiman of the Board of 10/30/96
______________________________ Trustees
Joseph S. DiMartino
/s/Ernest Kafka* Trustee 10/30/96
______________________________
Ernest Kafka
/s/Saul B. Klaman* Trustee 10/30/96
______________________________
Saul B. Klaman
/s/Nathan Leventhal* Trustee 10/30/96
______________________________
Nathan Leventhal
*BY: __________________________
Elizabeth A. Bachman,
Attorney-in-Fact
INDEX OF EXHIBITS
__________________
ITEM PAGE
____ ____
(b) Exhibits:
(11) Consent of Independent Auditors
(17) Financial Data Schedule
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our reports
dated June 5, 1996, in this Registration Statement (Form N-1A 33-10238)
of Premier State Municipal Bond Fund.
ERNST & YOUNG LLP
New York, New York
October 30, 1996
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