PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Premier State
Municipal Bond Fund, Arizona Series. For its semi-annual reporting period
ended October 31, 1995, your Series' Class A and Class B shares produced
total returns of 6.51% and 6.23%, respectively.* Tax-free income dividends of
approximately $.342 per share for Class A shares and $.308 per share for
Class B shares were paid.** This amounts to an annualized tax-free
distribution rate per share of 4.91% for Class A shares and 4.63% for Class B
shares.***
THE ECONOMY
Concerns about lagging economic growth prompted the Federal Reserve Board
to ease the Fed Funds rate in July. The bond market has been well ahead of
the Federal Reserve in perceiving that inflation was under control. Long-term
interest rates have fallen for nearly 12 months and, accordingly, bond
investors have enjoyed significant price appreciation. Economic indicators
remain mixed, some causing concern about possible recession, while others
point toward continued expansion.
During times of business uncertainty, attention often shifts to the
consumer sector of the economy, particularly regarding the consumer's ability
to spend. There are some indications that consumers are being pinched. There
is little doubt that the economic recovery has been productivity-driven. That
is, corporations have succeeded in paring expenses from their cost of doing
business. With this reduction in overhead, bottom line profits have grown
dramatically. Yet little of this corporate prosperity has spilled over into
the consumer sector of the economy. Wages and salaries grew less than 3% over
the past year, barely keeping pace with inflation. An additional consumer
concern, new job creation, is at the slowest pace of the post-World War II
era. Recent retail sales reports were the weakest since June 1991, when the
economy was in recession. Also, there is worry that the coming holiday season
will be a poor one for retailers, since debt-burdened consumers may spend
cautiously.
Yet, there are also significant signs of continued growth. Despite
indications of a potential slowdown in consumer spending, measures of
consumer confidence remain high. Business capital spending and home-building
activity have continued, providing substantial fuel for economic growth.
Business investment in durable equipment, when calculated as a percentage of
Gross Domestic Product (GDP), is at a 35-year high with no sign of a letup.
No wonder industrial production is booming! And while job and wage growth is
slow, the index of hours worked (a key determinant of GDP growth and income
generation) is rising. Providing additional confidence is the fact that the
four-and-a-half-year recovery has been well balanced: corporate debt issuance
has been moderate and the banking system is not overstretched.
We are encouraged by the Federal Reserve's successful handling of several
crises (Mexico, derivatives, Japanese banking), any one of which could have
threatened the monetary system in the U.S. and/or abroad.
MARKET ENVIRONMENT
The municipal bond market recovered strongly in 1995 as long-term
interest rates fell. We believe that if economic conditions remain sluggish
and Congress is able to arrive at an acceptable budget accord, there may be a
good chance that the Fed will ease further. We believe this indicates a
favorable outlook for bond markets in general, particularly with inflation
under control. But inflation can only go so low, and we are wary that the
bond market's strength may be counting too much on continued improvement on
the price front. Thus, while we remain confident in this market environment,
we are alert to the stimulatory effect of easing monetary policy and are
watchful for any signs of rekindling inflation. Our primary task -- to
maximize current income exempt from Federal and Arizona State personal income
taxes to the extent consistent with the preservation of capital -- continues
to guide our portfolio management decisions.
While the municipal market and the Series have performed well this year,
results for municipal securities have been trailing other fixed income
markets. Concerns about tax reform may be limiting investor enthusiasm for
tax exempt securities. Since April, when serious tax reform proposals began
to surface, the municipal rally has lagged, resulting in an increase in
municipal yields as a percentage of comparable taxable bond yields. Today,
long-term municipal bonds are yielding nearly 90% of U.S. Treasuries, which
is a greater yield ratio than existed before the onset of talk about tax
reform. While it could be years before an actual change in the tax code is
adopted, the market's reaction so early in the proposal cycle suggests to us
that the ultimate legislation, if any, may have a less radical effect on the
market than feared.
THE PORTFOLIO
During the reporting period, the sector composition of the portfolio
remained relatively unchanged. Emphasis was placed on purchasing discount
coupon bonds in a market environment which offered a limited number of new
issues. These efforts were rewarded as the market continued to inch higher.
The total return of each Class was further enhanced by additional price
appreciation realized on existing holdings. Going forward, it is our
intention to seek value within the context of a balanced portfolio. Two areas
which could blur the ability to get a clear reading on the market are
possible changes in the Federal tax law and the upcoming Presidential
election. As always, we will manage the Series with our shareholders' best
interests in mind.
The high level of volatility exhibited by the market in recent years
underscores the need to maintain a disciplined and long-term focus. Solid
market performance thus far in 1995 has rewarded the patient investor.
Included in this report is a series of detailed statements about your
Series' holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the
Series and in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
November 16, 1995
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, without taking into consideration the maximum initial sales charge in
the case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B shares.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders. Income may be subject to some state and local taxes for
non-Arizona residents.
***Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price per share in the case of Class A shares or net asset value per
share in the case of Class B shares at the end of the period.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF INVESTMENTS OCTOBER 31, 1995 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-100.0% AMOUNT VALUE
------------- -------------
<S> <C> <C>
ARIZONA-93.9%
Arizona Board of Regents - Arizona State University, System Revenue,
Refunding
6.125%, 7/1/2015........................................................ $ 100,000 $ 103,070
Arizona Health Facilities Authority, Hospital System Revenue, Refunding
(Samaritan Health System) 5.625%, 12/1/2015 (Insured; MBIA)............. 700,000 700,497
Casa Grande Industrial Development Authority, PCR (Frito-Lay, Inc. Pollution
Control
Project) 6.60%, 12/1/2010 (Guaranteed; Pepsico)......................... 200,000 210,824
Chandler, Water and Sewer Revenue, Refunding 6.25%, 7/1/2013 (Insured; FGIC) 200,000 211,980
Douglas Industrial Development Authority, IDR, Refunding (KMart Corp.
Project)
6%, 1/1/2003............................................................ 460,000 424,138
Glendale, Improvement Revenue, District Number 59, 6%, 1/1/2013............. 100,000 101,114
Maricopa County Hospital District Number 1, Hospital Facilities, Refunding:
6.25%, 6/1/2010 (Insured; FGIC)......................................... 100,000 107,439
6.125%, 6/1/2015 (Insured; FGIC)........................................ 200,000 208,798
Maricopa County Industrial Development Authority:
Health Facility Revenue (Catholic Healthcare West) 5.50%, 7/1/2010
(Insured; MBIA)....................................................... 500,000 502,750
Revenue, Refunding (Baptist Hospital System) 5.75%, 9/1/2010 (Insured; MBIA) 500,000 514,010
Maricopa County Pollution Control Corp., PCR, Refunding
(Public Service Co.-Palo Verde) 6.375%, 8/15/2023....................... 1,000,000 956,710
Maricopa County School District:
Number 6 (Washington Elementary) 6%, 7/1/2009 (Insured; AMBAC).......... 100,000 104,959
Number 28 (Kyrene Elementary) 6%, 7/1/2013 (Insured; AMBAC)
(Prerefunded 7/1/2001) (a)............................................ 175,000 188,715
Number 40 (Glendale Project) 7.75%, 7/1/2006 (Insured; FGIC)............ 1,000,000 1,237,780
School Improvement Number 3 (Tempe Elementary) 6%, 7/1/2008
(Prerefunded 7/1/2006) (a)............................................ 200,000 218,962
Maricopa County Stadium District, Revenue 5.50%, 7/1/2013 (Insured; MBIA)... 1,000,000 1,001,030
Maricopa County Unified School District, School Improvement:
Chandler, Refunding 6.40%, 7/1/2010 (Insured; FGIC)..................... 300,000 323,901
Paradise Valley 5.875%, 7/1/2012 (Insured; FGIC)........................ 200,000 206,684
Scottsdale 6%, 7/1/2012 (Prerefunded 7/1/2002) (a)...................... 100,000 108,931
City of Mesa 5.70%, 7/1/2008 (Insured; MBIA)................................ 300,000 313,851
Navajo County Pollution Control Corp., PCR, Refunding (Arizona Public Service
Co.)
5.875%, 8/15/2028 (Insured; AMBAC)...................................... 1,000,000 1,007,300
City of Phoenix, Refunding:
6.25% 7/1/2016.......................................................... 500,000 547,355
Street and Highway User Revenue 6.25%, 7/1/2011 (Insured; FGIC)......... 200,000 214,124
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1995 (UNAUDITED)
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
------------- -------------
ARIZONA (CONTINUED)
Phoenix Civic Improvement Corp:
Wastewater System Lease Revenue:
6.125%, 7/1/2014 (Prerefunded 7/1/2003) (a)........................... $ 100,000 $ 111,438
6.125%, 7/1/2023 (Prerefunded 7/1/2003) (a)........................... 500,000 556,155
Water Systems Revenue 5.40%, 7/1/2014................................... 1,000,000 976,380
Pima County, Tuscon Unified School District Number 1, School Improvement:
6.10%, 7/1/2010 (Insured; FGIC)......................................... 100,000 105,529
5.875%, 7/1/2014 (Insured; FGIC)........................................ 1,000,000 1,029,460
Salt River Agricultural Improvement and Power District,
Electric System Revenue (Salt River Project):
6%, 1/1/2013.......................................................... 150,000 154,321
Refunding 5.75%, 1/1/2013............................................. 200,000 202,468
City of Scottsdale Municipal Property Corp., Excise Tax Revenue, Refunding
6.25%, 11/1/2014 (Insured; FGIC)........................................ 100,000 104,693
City of Tempe 6%, 7/1/2009.................................................. 200,000 209,544
City of Tuscon, Refunding:
6.10%, 7/1/2012 (Insured; FGIC)......................................... 250,000 261,875
Water System Revenue 5.75%, 7/1/2012.................................... 100,000 101,456
University of Arizona, COP (Administrative and Packaging Facility Project)
6%, 7/15/2023 (Insured; MBIA)........................................... 1,000,000 1,023,290
University of Arizona Medical Center Corp., HR, Refunding
6.25%, 7/1/2010 (Insured; MBIA)......................................... 200,000 213,694
U.S. RELATED-6.1%
Commonwealth of Puerto Rico, Refunding 6%, 7/1/2014......................... 400,000 405,216
Puerto Rico Electric Power Authority, Power Revenue
6.25%, 7/1/2017......................................................... 520,000 538,039
------------
TOTAL INVESTMENTS-100%
(cost $15,062,692)...................................................... $15,508,480
===========
</TABLE>
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation IDR Industrial Development Revenue
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
HR Hospital Revenue PCR Pollution Control 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 66.1%
AA Aa AA 16.3
A A A 8.7
BBB Baa BBB 2.7
BB Ba BB 6.2
-------
100.0%
=======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the tax-exempt 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.
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1995 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $15,062,692)-see statement...................................... $15,508,480
Cash.................................................................... 426,369
Receivable for investment securities sold............................... 728,710
Interest receivable..................................................... 296,177
Prepaid expenses........................................................ 10,005
------------
16,969,741
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 6,246
Due to Distributor...................................................... 7,234
Payable for shares of Beneficial Interest redeemed...................... 1,905,845
Accrued expenses and other liabilities.................................. 46,828 1,966,153
---------- ------------
NET ASSETS ................................................................ $15,003,588
============
REPRESENTED BY:
Paid-in capital......................................................... $14,960,655
Accumulated net realized (loss) on investments.......................... (402,855)
Accumulated net unrealized appreciation on investments-Note 3........... 445,788
------------
NET ASSETS at value......................................................... $15,003,588
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 655,473
============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 479,060
============
NET ASSET VALUE per share:
Class A Shares
($8,663,569 / 655,473 shares)......................................... $13.22
============
Class B Shares
($6,340,019 / 479,060 shares)......................................... $13.23
============
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF OPERATIONS SIX MONTHS ENDED OCTOBER 31, 1995 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 562,568
EXPENSES:
Management fee-Note 2(a).............................................. $ 52,489
Shareholder servicing costs-Note 2(c)................................. 33,828
Distribution fees (Class B shares)-Note 2(b).......................... 21,761
Prospectus and shareholders' reports.................................. 1,373
Custodian fees........................................................ 1,237
Registration fees..................................................... 585
Professional fees..................................................... 567
Trustees' fees and expenses-Note 2(d)................................. 99
Miscellaneous......................................................... 7,066
--------
119,005
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 34,845
--------
TOTAL EXPENSES.................................................. 84,160
----------
INVESTMENT INCOME-NET........................................... 478,408
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (59,402)
Net unrealized appreciation on investments.............................. 812,883
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 753,481
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,231,889
============
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
APRIL 30, OCTOBER 31, 1995
1995 (UNAUDITED)
------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income-net.................................................. $ 1,135,137 $ 478,408
Net realized (loss) on investments..................................... (343,444) (59,402)
Net unrealized appreciation on investments for the period.............. 602,025 812,883
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. 1,393,718 1,231,889
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares....................................................... (722,637) (274,089)
Class B shares....................................................... (412,500) (204,319)
------------- -------------
TOTAL DIVIDENDS...................................................... (1,135,137) (478,408)
------------- -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares....................................................... 3,423,651 794,772
Class B shares....................................................... 2,606,355 583,667
Dividends reinvested:
Class A shares....................................................... 336,271 114,336
Class B shares....................................................... 161,187 64,772
Cost of shares redeemed:
Class A shares....................................................... (3,489,944) (5,655,191)
Class B shares....................................................... (1,143,645) (2,879,994)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS................................. 1,893,875 (6,977,638)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 2,152,456 (6,224,157)
NET ASSETS:
Beginning of period.................................................... 19,075,289 21,227,745
------------- -------------
End of period.......................................................... $21,227,745 $15,003,588
============= =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------------------------------------------
CLASS A CLASS B
-------------------------------- ---------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
APRIL 30, OCTOBER 31, 1995 APRIL 30, OCTOBER 31, 1995
1995 (UNAUDITED) 1995 (UNAUDITED)
-------- --------------- -------- -------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold........................ 281,816 60,774 206,514 44,640
Shares issued for dividends reinvested 27,031 8,739 12,967 4,949
Shares redeemed.................... (283,309) (432,315) (93,196) (217,928)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING........... 25,538 (362,802) 126,285 (168,339)
======== ======== ======== ========
</TABLE>
See independent accountants' review report and notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS A SHARES
------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED APRIL 30, OCTOBER 31, 1995
------------------------------
PER SHARE DATA: 1993(1) 1994 1995 (UNAUDITED)
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $12.50 $13.12 $12.60 $12.74
------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............................. .51 .75 .75 .34
Net realized and unrealized gain (loss) on investments .62 (.51) .14 .48
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS................ 1.13 .24 .89 .82
------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net.............. (.51) (.75) (.75) (.34)
Dividends from net realized gain on investments... -- (.01) -- .-
------- ------- ------- -------
TOTAL DISTRIBUTIONS............................. (.51) (.76) (.75) (.34)
------- ------- ------- -------
Net asset value, end of period.................... $13.12 $12.60 $12.74 $13.22
======= ======= ======= =======
TOTAL INVESTMENT RETURN (2)........................... 14.01%(3) 1.61% 7.41% 12.91%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .......... -- -- -- .63%(3)
Ratio of net investment income to average net assets 5.71%(3) 5.51% 6.04% 5.27%(3)
Decrease reflected in above expense ratios due to
undertakings by the Manager..................... 1.87%(3) 1.26% 1.07% .38%(3)
Portfolio Turnover Rate .......................... 5.94%(4) 3.65% 21.96% 11.91%(4)
Net Assets, end of period (000's Omitted)......... $5,671 $12,506 $12,972 $8,664
(1) From September 3, 1992 (commencement of operations) to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
</TABLE>
See independent accountants' review report and notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Series' financial statements.
<TABLE>
<CAPTION>
CLASS B SHARES
------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED APRIL 30, OCTOBER 31, 1995
------------------------------
PER SHARE DATA: 1993(1) 1994 1995 (UNAUDITED)
------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $12.65 $13.12 $12.61 $12.75
------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income-net............................. .21 .68 .69 .31
Net realized and unrealized gain (loss) on investments. .47 (.50) .14 .48
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS................ .68 .18 .83 .79
------- ------- ------- -------
DISTRIBUTIONS:
Dividends from investment income-net.............. (.21) (.68) (.69) (.31)
Dividends from net realized gain on investments... -- (.01) -- --
------- ------- ------- -------
TOTAL DISTRIBUTIONS............................. (.21) (.69) (.69) (.31)
------- ------- ------- -------
Net asset value, end of period.................... $13.12 $12.61 $12.75 $13.23
======= ======= ======= =======
TOTAL INVESTMENT RETURN (2)........................... 18.49%(3) 1.16% 6.88% 12.36%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .......... .50%(3) .50% .50% 1.17%(3)
Ratio of net investment income to average net assets 4.61%(3) 4.95% 5.54% 4.68%(3)
Decrease reflected in above expense ratios due to
undertakings by the Manager .................... 1.68%(3) 1.27% 1.10% .35%(3)
Portfolio Turnover Rate .......................... 5.94%(4) 3.65% 21.96% 11.91%(4)
Net Assets, end of period (000's Omitted)......... $1,745 $6,569 $8,256 $6,340
(1) From January 15, 1993 (commencement of initial offering) to April 30, 1993.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
</TABLE>
See independent accountants' review report and notes to financial statements.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Premier State Municipal Bond Fund (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a non-diversified open-end management
investment company and operates as a series company currently offering fifteen
series including the Arizona Series (the "Series"). Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares. The Distributor, located at One Exchange Place, Boston, Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution Services, Inc., a
provider of mutual fund administration services, which in turn is a wholly-
owned subsidiary of FDI Holdings, Inc., the parent company of which is Boston
Institutional Group, Inc. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A.
On July 19, 1995, the Board of Trustees approved, subject to approval by
the shareholders of the Arizona Series, an Agreement and Plan of Reorganization
providing for the transfer of all or substantially all of the assets and
liabilities of the Series in a tax free exchange for shares of beneficial
interest of the Premier Municipal Bond Fund at net asset value and the
assumption of stated liabilities (the "Exchange"). The Series' Special Meeting
of Shareholders on November 15, 1995 was adjourned to a later date so that
further solicitation of votes could occur.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged
to that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
The Series offers both Class A and Class B shares. Class A shares are
subject to a sales charge imposed at the time of purchase and Class B shares
are subject to a contingent deferred sales charge imposed at the time of
redemption on redemptions made within five years of purchase. Other
differences between the two Classes include the services offered to and the
expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts
on investments,
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and
paid annually, but the Series may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Series has an unused capital loss carryover of approximately $262,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1995. The
carryover does not include net realized securities losses from November 1,
1994 through April 30, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, the carryover expires in
fiscal 2003.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the average
daily value of the Series' net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Series'
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series for any full fiscal year. However, the Manager
had undertaken from April 3, 1995 through September 28, 1995, to reduce the
management fee, shareholder services plan fees 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 September 29,
1995 through April 30, 1996 to reduce the management fee and reimburse such
excess expenses paid by the Series, to the extent that the Series' aggregate
annual expenses (excluding 12b-1 distribution plan fees and certain expenses
as described above) exceed an annual rate of 1.25 of 1% of the average daily
value of the Series' net assets. The reduction in management fee, pursuant to
the undertakings, amounted to $34,845 for the six months ended October 31,
1995.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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
shares at an annual rate of .50 of 1% of the value of the average daily net
assets of Class B shares. During the six months ended October 31, 1995,
$21,761 was charged to the Series for the Class B 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 and Class B 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 in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the six months ended October 31,
1995, $12,978 and $10,881 were charged to Class A and Class B shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities
amounted to $3,925,445 and $11,159,294, respectively, for the six months
ended October 31, 1995, and consisted entirely of long-term and short-term
municipal investments.
At October 31, 1995, accumulated net unrealized appreciation on
investments was $445,788, consisting of $539,827 gross unrealized
appreciation and $94,039 gross unrealized depreciation.
At October 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER STATE MUNICIPAL BOND FUND, ARIZONA SERIES
We have reviewed the accompanying statement of assets and liabilities,
including the statement of investments, of Premier State Municipal Bond Fund,
Arizona Series (one of the Series constituting the Premier State Municipal
Bond Fund) as of October 31, 1995 and the related statements of operations
and changes in net assets and financial highlights for the six month period
ended October 31, 1995. These financial statements and financial highlights
are the responsibility of the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
April 30, 1995 and financial highlights for each of the three years in the
period ended April 30, 1995 and in our report dated June 6, 1995, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
[Ernst and Young LLP signature logo]
New York, New York
December 7, 1995
[Dreyfus lion "d" logo]
PREMIER STATE MUNICIPAL
BOND FUND, ARIZONA SERIES
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 067/626SA9510
[Dreyfus logo]
Semi-Annual Report
Premier State
Municipal Bond Fund
Arizona Series
October 31, 1995
