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. 28 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 28 [X]
(Check appropriate box or boxes.)
DREYFUS 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)
----
X on July 16, 1997 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) 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.
DREYFUS 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 32
5 Management of the Fund 38
5(a) Management's Discussion of Fund's Performance 60
6 Capital Stock and Other Securities 61
7 Purchase of Securities Being Offered 40
8 Redemption or Repurchase 48
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-41
13 Investment Objectives and Policies B-2
14 Management of the Fund B-13
15 Control Persons and Principal B-17
Holders of Securities
16 Investment Advisory and Other B-18
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS 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-33
18 Capital Stock and Other Securities B-33
19 Purchase, Redemption and Pricing B-21, B-24
of Securities Being Offered B-31
20 Tax Status B-31
21 Underwriters B-21
22 Calculations of Performance Data B-34
23 Financial Statements B-105
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-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS PREMIER STATE MUNICIPAL BOND FUND
PROSPECTUS JULY 16, 1997
Dreyfus 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 professionally manages the Fund's portfolios.
This Prospectus sets forth concisely information about the Fund that
you should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information dated July 16, 1997, 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, and 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....................... 31
DESCRIPTION OF THE FUND............................ 32
MANAGEMENT OF THE FUND............................. 38
HOW TO BUY SHARES.................................. 40
SHAREHOLDER SERVICES............................... 44
HOW TO REDEEM SHARES............................... 48
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN.... 52
DIVIDENDS, DISTRIBUTIONS AND TAXES................. 52
PERFORMANCE INFORMATION............................ 60
GENERAL INFORMATION................................ 61
APPENDIX........................................... 63
Page 2
FEE TABLE
<TABLE>
<CAPTION>
CONNECTICUT SERIES FLORIDA SERIES
---------------------------- ----------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........ 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) None* 4.00% 1.00% None* 4.00% 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 $55/15** $27/17** $ 54 $54/14** $30/20**
3 YEARS.......................... $ 73 $76/46** $52 $ 73 $75/45** $62
5 YEARS.......................... $ 94 $99/79** $89 $ 93 $97/77** $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* 4.00% 1.00% None* 4.00% 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 $55/15** $30/20** $ 54 $55/15** $28/18**
3 YEARS.......................... $ 74 $76/46** $62 $ 72 $75/45** $57
5 YEARS.......................... $ 95 $99/79** $107 $ 93 $98/78** $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.
Page 3
FEE TABLE
MASSACHUSETTS SERIES MICHIGAN 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* 4.00% 1.00% None* 4.00% 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 $55/15** $27/17** $ 54 $55/15** $27/17**
3 YEARS....................... $ 73 $75/45** $53 $ 73 $76/46** $54
5 YEARS....................... $ 94 $98/78** $92 $ 94 $99/79** $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* 4.00% 1.00% None* 4.00% 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% .75% .73% 1.43%
Total Fund Operating Expenses.. .90% 1.43% 1.42% 1.30% 1.78% 2.73%
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 CLASS A CLASS B CLASS C
------- ------- ------- ------- ------- -------
1 Year........................ $ 54 $55/15** $24/14** $58 $58/18** $38/28**
3 Years....................... $ 72 $75/45** $45 $84 $86/56** $85
5 Years....................... $ 93 $98/78** $78 $113 $116/96** $144
10 Years...................... $151 $144*** $170 $195 $185*** $306
*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.
Page 4
FEE TABLE
NORTH CAROLINA SERIES OHIO 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* 4.00% 1.00% None* 4.00% 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 $55/15** $28/18** $ 54 $54/14** $27/17**
3 Years....................... $ 75 $78/48** $54 $ 72 $75/45** $ 51
5 Years....................... $ 98 $102/82** $94 $ 92 $98/78** $ 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
------- ------- ------- ------- ------- -------
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* 4.00% 1.00% None* 4.00% 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 $55/15** $28/18** $ 54 $55/15** $27/17**
3 Years....................... $ 73 $75/45** $55 $ 73 $75/45** $54
5 Years....................... $ 94 $98/78** $95 $ 94 $98/78** $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.
Page 5
VIRGINIA SERIES
-----------------------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS 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* 4.00% 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 $56/16** $28/18**
3 Years............................................ $ 77 $79/49** $54
5 Years............................................ $100 $105/85** $94
10 Years........................................... $167 $159*** $204
</TABLE>
*A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
**Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
- ------------------------------------------------------------------------------
The amounts listed in the 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 the Fund and investors, the
payment of which will reduce investors' annual return. 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 Fund shares; such fees are not reflected in the foregoing
tables. See "Management of the Fund," "How to Buy Shares," "How to Redeem
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 for
each period indicated. This information has been derived from the Series'
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.
Page 7
CONNECTICUT SERIES (CONTINUED)
------------------------------------------------------
Class B Shares Class C Shares
----------------------------- ----------------------
Year Ended APRIL 30, Year Ended APRIL 30,
----------------------------- ----------------------
1993(1) 1994 1995 1996 1996(2)
------- ------- ------ ------- -------
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.
Page 8
FLORIDA SERIES
-----------------------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------------------
Year Ended April 30,
-----------------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ------- ------- ------- -------
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.
Page 9
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)
-------- ------- ------- ------- -------
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.
Page 10
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)
------ ------ ------ ------ ------ ------ ------ ------ -----
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.
Page 11
MARYLAND SERIES
-----------------------------------------------------------------------------------------------
Class A Shares
-----------------------------------------------------------------------------------------------
Year Ended April 30,
-----------------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ------- ------- ------- -------
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.
Page 12
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)
________ ________ ________ ________ ________
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.
Page 13
MASSACHUSETTS SERIES
_______________________________________________________________________________________________
Class A Shares
_______________________________________________________________________________________________
Year Ended April 30,
________________________________________________________________________________________________
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
_______ _______ _______ _______ _______ _______ _______ _______ _______
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.
Page 14
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)
________ ________ ________ ________ ________
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.
Page 15
MICHIGAN SERIES
--------------------------------------------------------------------------------------
Class A Shares
--------------------------------------------------------------------------------------
Year Ended April 30,
--------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
___ ___ ___ ___ ___ ___ ___ ___ ___
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.
Page 16
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)
---- ---- ---- ---- ----
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.
Page 17
MINNESOTA SERIES
_________________________________________-__________________________________________________-
Class A Shares
_________________________________________________________________________________-__________-
Year Ended April 30,
_________________________________________________________________________________-__________-
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
___ ___ ___ ___ ___ ___ ___ ___ ___
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.
Page 18
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)
___- ___- ___- ___- ___-
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.
Page 19
NEW JERSEY SERIES*
__________________________________________________________
CLASS A SHARES
__________________________________________________________
Year Ended July 31, Nine Months Ended
________________________________
PER SHARE DATA: 1994(1) 1995 1996 APRIL 30, 1997(2)
___- ____ ___- ____________________
Net asset value, beginning of year.. $12.50 $12.58 $12.71 $12.79
___- ___- ___- ___-
INVESTMENT OPERATIONS:
Investment income-net............... .18 .71 .59 .42
Net realized and unrealized gain (loss)
on investments...................... .08 .13 .08 (.02)
___- ___- ___- ___-
TOTAL FROM INVESTMENT OPERATIONS.... .26 .84 .67 .40
___- ___- ___- ___-
DISTRIBUTIONS:
Dividends from investment income-net (.18) (.71) (.59) (.42)
Dividends from net realized gain on investments ._ ._ ._ (.14)
___- ___- ___- ___-
TOTAL DISTRIBUTIONS................. (.18) (.71) (.59) (.56)
___- ___- ___- ___-
Net asset value, end of year........ $12.58 $12.71 $12.79 $12.63
==== ==== ==== ====
TOTAL INVESTMENT RETURN(3)............ 2.07%(4) 7.01% 5.31% 4.25%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ._ .10% 1.14% 1.20%(5)
Ratio of net investment income to
average net assets.................. 5.25%(5) 5.60% 4.55% 4.39%(5)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. 2.50%(5) 1.35% .08% .10%(5)
Portfolio Turnover Rate............. ._ 43.48% 28.14% 110.12%(4)
Net Assets, end of year (000's omitted) $2,318 $4,981 $5,212 $4,837
*On March 31, 1997, the New Jersey Series commenced operations through a transfer of assets from the New Jersey
Series of Premier Insured Municipal Bond Fund. The financial data provided above prior to such date is for the New
Jersey Series of Premier Insured Municipal Bond Fund.
(1) From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) Effective August 1, 1996, the Series has changed its fiscal year end from July 31 to April 30. The information provided
is from August 1, 1996 through April 30, 1997.
(3) Exclusive of sales load.
(4) Not annualized.
(5) Annualized.
Page 20
NEW JERSEY SERIES* (CONTINUED)
______________________________________________________
CLASS B SHARES
______________________________________________________
Year Ended July 31, Nine Months Ended
________________________________
PER SHARE DATA: 1994(1) 1995 1996 APRIL 30, 1997(2)
___- ____ ___- ____________________
Net asset value, beginning of year.. $12.50 $12.58 $12.71 $12.79
___- ___- ___- ___-
INVESTMENT OPERATIONS:
Investment income-net............... .16 .65 .52 .37
Net realized and unrealized gain (loss)
on investments...................... .08 .13 .08 (.02)
___- ___- ___- ___-
TOTAL FROM INVESTMENT OPERATIONS.... .24 .78 .60 .35
___- ___- ___- ___-
DISTRIBUTIONS:
Dividends from investment income-net (.16) (.65) (.52) (.37)
Dividends from net realized gain on investments ._ ._ ._ (.14)
___- ___- ___- ___-
TOTAL DISTRIBUTIONS................. (.16) (.65) (.52) (.51)
___- ___- ___- ___-
Net asset value, end of year........ $12.58 $12.71 $12.79 $12.63
==== ==== ==== ====
TOTAL INVESTMENT RETURN(3)............ 1.94%(4) 6.48% 4.79% 3.74%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .50%(5) .61% 1.63% 1.69%(5)
Ratio of net investment income to
average net assets.................. 4.69%(5) 5.00% 4.04% 3.88%(5)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. 2.50%(5) 1.29% .08% .09%(5)
Portfolio Turnover Rate............. ._ 43.48% 28.14% 110.12%(4)
Net Assets, end of year (000's omitted) $2,373 $6,852 $8,910 $8,680
*On March 31, 1997, the New Jersey Series commenced operations through a transfer of assets from the New Jersey
Series of Premier Insured Municipal Bond Fund. The financial data provided above prior to such date is for the New
Jersey Series of Premier Insured Municipal Bond Fund.
(1) From May 4, 1994 (commencement of operations) to July 31, 1994.
(2) Effective August 1, 1996, the Series has changed its fiscal year end from July 31 to April 30. The information provided
is from August 1, 1996 through April 30, 1997.
(3) Exclusive of sales load.
(4) Not annualized.
(5) Annualized.
Page 21
NEW JERSEY SERIES* (CONTINUED)
__________________________________________________________
CLASS C SHARES
__________________________________________________________
Year Ended July 31, Nine Months Ended
____________________
PER SHARE DATA: 1996(1) APRIL 30, 1997(2)
___- ____________________
Net asset value, beginning of year.. $13.21 $12.78
___- ___-
INVESTMENT OPERATIONS:
Investment income-net............... .32 .35
Net realized and unrealized gain (loss)
on investments...................... (.43) ._
___- ___-
TOTAL FROM INVESTMENT OPERATIONS.... (.11) .35
___- ___-
DISTRIBUTIONS:
Dividends from investment income-net (.32) (.35)
Dividends from net realized gain on investments ._ (.14)
___- ___-
TOTAL DISTRIBUTIONS................. (.32) (.49)
___- ___-
Net asset value, end of year........ $12.78 $12.64
==== ====
TOTAL INVESTMENT RETURN(3)............ (1.21%)(4) 3.72%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 1.95%(4) 1.97%(4)
Ratio of net investment income to
average net assets.................. 3.68%(4) 3.62%(4)
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation (limited to
the expense limitation provision of the
Management Agreement)................. .02%(4) .76%(4)
Portfolio Turnover Rate............. 28.14% 110.12%(5)
Net Assets, end of year (000's omitted) $6 $1
*On March 31, 1997, the New Jersey Series commenced operations through a transfer of assets from the New Jersey
Series of Premier Insured Municipal Bond Fund. The financial data provided above prior to such date is for the New
Jersey Series of Premier Insured Municipal Bond Fund.
(1) From December 4, 1995 (commencement of initial offering) to July 31, 1996.
(2) Effective August 1, 1996, the Series has changed its fiscal year end from July 31 to April 30. The information provided
is from August 1, 1996 through April 30, 1997.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
Page 22
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)
___ ___ ___ ___ ___ ___ ___ __- ___ ___
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.
Page 23
OHIO SERIES
_________________________________________------------------------------------------------------
Class A Shares
_________________________________________------------------------------------------------------
Year Ended April 30,
_________________________________________------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 992 1993 1994 1995 1996
___---- ___---- ___---- ___---- ___---- ___---- ___---- ___---- ___----
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.
Page 24
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)
___--- ___--- ___--- ___--- ___---
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.
Page 25
PENNSYLVANIA SERIES
_________________________________________------------------------------------------------------
Class A Shares
_________________________________________------------------------------------------------------
Year Ended April 30,
_________________________________________------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
___---- ___---- ___---- ___---- ___---- ___---- ___---- ___---- ___----
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.
Page 26
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)
------ ------ ------ ------ ------
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 $59,057 $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.
Page 27
TEXAS SERIES
--------------------------------------------------------------------------------------
Class A Shares
--------------------------------------------------------------------------------------
Year Ended April 30,
--------------------------------------------------------------------------------------
PER SHARE DATA: 1988(1) 1989 1990 1991 1992 1993 1994 1995 1996
___ ___ ___ ___ ___ ___ ___ ___ ___
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.
Page 28
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)
___- ___- ___- ___- ___-
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.
Page 29
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)
___ ___ ___ ___ ___ ___ ___ __- ___ ___
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 30
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 Series.
Class B shares are subject to a maximum 4% contingent deferred sales
charge ("CDSC"), which is assessed if you redeem Class B shares within
six years of 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 of the Classes in the context of your own investment
time frame. For example, while Class C
Page 31
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 A and 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
$100,000 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 32
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 ("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 BBB by S&P and Fitch are regarded as having an
adequate capacity to pay principal and interest, while those rated Baa by
Moody's are considered medium grade obligations which lack outstanding
investment characteristics and have speculative characteristics.
Investments rated Ba or lower by Moody's and BB or lower by S&P and Fitch
ordinarily provide higher yields but involve greater risk because of
their speculative characteristics. 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 will be
considered 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. See "Investment Considerations and Risks" below.
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. See "Dividends, Distribution and Taxes." For a discussion
of the investment
Page 33
techniques and their related risks, see "Investment Considerations and
Risks" and "Appendix_Investment Techniques" 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. It is estimated that the General Fund had a cumulative
deficit under GAAP of $607.9 million as of June 30, 1996. 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
Page 34
required. Revenue bonds may be issued by the State or
its agencies without a vote of Florida's electors only to finance or
refinance the cost of State fixed capital outlay projects which may be
payable solely from funds derived directly from sources other than State
tax revenues. Fiscal year 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
Page 35
1990-91 with negative balances of $310 million and $169 million,
respectively. This cumulative deficit was eliminated as of the fiscal
year ended September 30, 1992. Michigan ended fiscal years 1992-93,
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 8.4% during 1992. Since then, New Jersey's
unemployment rate fell to an average of 6.2% during 1996. 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. The poultry
industry production is the leading source of agricultural income in the
State, accounting for 29% of gross agricultural income. The tobacco and
pork industries also are significant sources of gross agricultural
income.
The North Carolina Constitution requires a balanced budget.
In 1996, State voters approved a State Constitutional amendment to give
the Governor the power to veto budgetary and certain other legislative
actions.
OHIO SERIES _ Non-manufacturing industries now employ approximately
79% of all non-agricultural payroll workers 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 sources of growth currently 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 fiscal years
1992 through 1996 were years of recovery from the recession in 1990 and
1991. The recovery fiscal years were characterized by modest economic
growth and low inflation rates. At the close of fiscal 1996, the fund
balance for the Commonwealth's governmental fund types totaled
approximately $
Page 36
2 billion, an increase of $58.7 million over fiscal 1995
and $758.5 million over fiscal 1992. The Commonwealth began fiscal 1992
with a governmental fund types deficit totalling approximately $21
million. A recurrence of the financial difficulties experienced by the
Commonwealth in fiscal years 1990 and 1991 could result in defaults or
declines in the market value of Pennsylvania Municipal Obligations in
which the Fund invests.
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
Page 37
taxable, the Fund would treat such security as a permissible Taxable
Investment within the applicable limits set forth herein.
ZERO COUPON SECURITIES _ The Fund may invest in zero coupon
securities and pay-in-kind bonds (bonds which pay interest through the
issuance of additional bonds). 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 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 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, 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 each Series 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
Page 38
a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As of
May 30, 1997, The Dreyfus Corporation managed or administered
approximately $87 billion in assets for approximately 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 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, Massachusetts Series, the New
Jersey 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, with
respect to the North Carolina Series and Virginia Series since August
1991, and with respect to the New Jersey Series since March 31, 1997 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 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 $259 billion in assets as
of March 31, 1997, including approximately $88 billion in proprietary
mutual fund assets. As of March 31, 1997, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.061 trillion in assets
including approximately $58 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, 1997, the Fund paid The
Dreyfus Corporation a monthly management fee pursuant to undertakings in
effect at the effective annual rate set forth below as a percentage of
the relevant Series' average daily net assets:
Page 39
EFFECTIVE ANNUAL
RATE OF
NAME OF SERIES MANAGEMENT FEE PAID
___________ ___________________
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%
New Jersey .46 of 1%
North Carolina .53 of 1%
Ohio .55 of 1%
Pennsylvania .55 of 1%
Texas .0
Virginia .0
In allocating brokerage transactions, 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's 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 _ Fund shares may be purchased only by clients of certain
financial institutions (which may include banks), securities dealers
("Selected Dealers") and other industry professionals (collectively,
"Service Agents"), except that full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors
of The Dreyfus Corporation, Board members of a fund advised by The
Dreyfus Corporation, including members of the Fund's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares
directly through the Distributor. Subsequent purchases may be sent
directly to the Transfer Agent or your Service Agent.
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 their clients which are
different from those described in this Prospectus, and, to the extent
Page 40
permitted by applicable regulatory authority, may charge their clients
direct fees. 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
"The Dreyfus Family of Funds," and should specify the Series in which you
are investing. Payments which are mailed should be sent to Dreyfus
Premier State Municipal Bond Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. If you are opening a new account, please enclose 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. Neither initial nor
subsequent investments should be made by third party check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or in any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to The Bank of New York,
together with the applicable Series' DDA # as shown below, for purchase
of Fund shares in your name:
DDA #8900119489/Dreyfus Premier State Municipal Bond
Fund/Connecticut Series
DDA #8900119381/Dreyfus Premier State Municipal Bond
Fund/Florida Series
DDA #8900117087/Dreyfus Premier State Municipal Bond
Fund/Georgia Series
DDA #8900119403/Dreyfus Premier State Municipal Bond
Fund/Maryland Series
DDA #8900119470/Dreyfus Premier State Municipal Bond
Fund/Massachusetts Series
DDA #8900119411/Dreyfus Premier State Municipal Bond
Fund/Michigan Series
DDA #8900119438/Dreyfus Premier State Municipal Bond
Fund/Minnesota Series
DDA #8900088389/Dreyfus Premier State Municipal Bond Fund/
New Jersey Series
DDA #8900208635/Dreyfus Premier State Municipal Bond
Fund/North Carolina Series
DDA #8900119446/Dreyfus Premier State Municipal Bond
Fund/Ohio Series
DDA #8900119454/Dreyfus Premier State Municipal Bond
Fund/Pennsylvania Series
DDA #8900119462/Dreyfus Premier State Municipal Bond
Fund/Texas Series
DDA #8900208678/Dreyfus 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, and must
indicate the Class of shares being purchased. If your initial purchase of
Fund shares is by wire, please call 1-800-554-4611 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.
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
Page 41
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 of each Class 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:
<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>
Page 42
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 Distributor may pay Service Agents an
amount up to 1% of the net asset value of Class A shares purchased by
their clients that are subject to CDSC. 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 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.
Page 43
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 Dreyfus
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 1-800-554-4611 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 certain other funds
managed or administered by The Dreyfus Corporation, to the extent such
shares are offered for sale in your state of residence. These funds have
different investment objectives which may be of interest to you. You also
may exchange your Fund shares that are subject to a CDSC for shares of
Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so purchased
will be held in a special account created solely for
this purpose ("Exchange Account"). Exchanges of shares from an Exchange
Account only can be made into certain other funds managed or administered
by The Dreyfus Corporation. No CDSC is charged when an investor exchanges
into an Exchange Account; however, the applicable CDSC will be imposed
when shares are redeemed from an Exchange Account or other applicable
Fund account. Upon redemption, the applicable CDSC will be calculated
without regard to the time such shares were held in an Exchange Account.
See "How to Redeem 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
Page 44
Withdrawal Plan. To use this service, you should consult your
Service Agent or call 1-800-554-4611 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 1-800-554-4611.
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
1-800-554-4611, or by oral request from any of the authorized
signatories on the account by calling 1-800-554-4611. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-554-4611. 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. 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 days' written notice, to charge
shareholders a nominal administrative 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 of
other funds in the Dreyfus 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
Page 45
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 Dreyfus 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 Dreyfus 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 1-800-554-4611. 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 1-800-554-4611. You may cancel your participation in this
Privilege or change the amount of purchase at any time by mailing written
notification to Dreyfus 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 1-800-554-4611. Death or legal incapacity will
terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate
Federal agency. Further, the Fund may terminate your participation upon
30 days' notice to you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same class of another fund in the Dreyfus 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
Page 46
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 1-800-554-4611.
You may cancel these privileges by mailing written notification to Dreyfus
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
1-800-554-4611. 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.
[/R]
No CDSC with respect to Class B shares will be imposed on
withdrawals made under the Automatic Withdrawal Plan, provided that the
amounts withdrawn under the plan do not exceed on an annual basis 12% of
the account value at the time the shareholder elects to participate in
the Automatic Withdrawal Plan. Withdrawals with respect to Class B shares
under the Automatic Withdrawal Plan that exceed on an annual basis 12% of
the value of the shareholder's account will be subject to a CDSC on the
amounts exceeding 12% of the initial account value. Withdrawal with
respect to Class A shares subject to a CDSC and Class C shares under 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 1-800-554-4611, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased in a
13-month period pursuant to the terms and conditions set forth in the
Letter of Intent. A minimum initial purchase of $5,000 is required. To
compute the applicable sales load, the offering price of shares you hold
(on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above
may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount.
If your purchases qualify for a further
sales load reduction, the sales load will be adjusted to reflect your
total purchase at the end of 13 months. If total purchases are less than
the amount specified, you will be requested to remit an amount equal to
the difference between the sales load actually paid and the sales load
applicable to the aggregate purchases actually made. If such remittance
is not received within 20 days, the Transfer Agent, as attorney-in-fact
pursuant to the terms of the Letter of Intent, will redeem an appropriate
number of Class A shares held in escrow to realize the difference.
Signing a Letter of Intent does not bind you to purchase, or the Fund to
sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the
reduced sales load. At the
Page 47
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 may charge their clients a fee
for effecting redemptions of Fund shares. Any certificates representing
Fund shares being redeemed must be submitted with the redemption request.
The value of the shares redeemed may be more or less than their original
cost, depending 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 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
Page 48
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 for
Class B shares, except for Class B shares purchased by shareholders who
beneficially owned Class B shares on November 30, 1996:
YEAR SINCE PURCHASE CDSC AS A % OF AMOUNT
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
____________________ ________________________________
First........................ 4.00
Second................................ 4.00
Third............................. 3.00
Fourth............................... 3.00
Fifth............................... 2.00
Sixth...................... 1.00
The following table sets forth the rates of the CDSC for
Class B shares purchased by shareholders who beneficially owned Class B
shares on November 30, 1996:
YEAR SINCE PURCHASE CDSC AS A % OF AMOUNT
PAYMENT WAS MADE INVESTED OR REDEMPTION PROCEEDS
____________________ ________________________________
First............................ 3.00
Second.................. ... 3.00
Third....................... 2.00
Fourth...................... 2.00
Fifth....................... 1.00
Sixth................................... 0.00
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that
results in the lowest possible rate. It will be assumed that the
redemption is made first of amounts representing shares acquired pursuant
to the reinvestment of dividends and distributions; then of amounts
representing the increase in net asset value of Class B shares above the
total amount of payments for the purchase of Class B shares made during
the preceding six years (five years for shareholders beneficially owning
Class B shares on November 30, 1996); then of amounts representing the
cost of shares purchased six years (five years for shareholders
beneficially owning Class B shares on November 30, 1996) prior to the
redemption; and finally, of amounts representing the cost of shares held
for the longest period of time within the applicable six-year period
(five-year period for shareholders beneficially owning Class B shares on
November 30, 1996).
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 4%
(the applicable rate in the second year after purchase) for a total CDSC
of $9.60.
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 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
Page 49
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
investment company with the relevant Series by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 70-1/2 in the case of
an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code, and (e) redemptions pursuant to the Automatic Withdrawal Plan,
as described in the Fund's Prospectus. 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. 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.
Your redemption request may direct that the redemption
proceeds be used to purchase shares of other funds advised or
administered by The Dreyfus Corporation that are not available through
the Exchange Privilege. The applicable CDSC will be charged upon the
redemption of Class B and Class C shares. Your redemption proceeds will
be invested in shares of the other fund on the next business day. Before
you make such a request, you must obtain and should review a copy of the
current prospectus of the fund being purchased. Prospectuses may be
obtained by calling 1-800-554-4611. The prospectus will contain
information concerning minimum investment requirements and other
conditions that may apply to your purchase.
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 TELETRANSFER 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
Page 50
request being processed at a later time than it would have been if
TELETRANSFER redemption had been used. During the delay, the
Series' net asset value may fluctuate.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may
redeem shares by written request mailed to Dreyfus Premier State
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
Redemption requests must be signed by each shareholder, including each
owner of a joint account, and each signature must be guaranteed. The
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from
domestic banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
If you have any questions with respect to signature guarantees, please
contact your Service Agent or call the telephone number listed on the
cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ CLASS A SHARES _ 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 1-800-554-4611 or,
if you are calling from overseas, call 516-794-5452.
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
Page 51
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 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 _ Upon written request, you may reinvest up
to the number of Class A or Class B shares you have redeemed, within 45
days of redemption, at the then-prevailing net asset value without a
sales load, or reinstate your account for the purpose of exercising Fund
Exchanges. Upon reinvestment, with respect to Class B shares, or Class A
shares if such shares were subject to a CDSC, the shareholder's account
will be credited with an amount equal to the CDSC previously paid upon
redemption of the Class A or Class B shares reinvested. 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 _ Each Series 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
Page 52
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 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 _ 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. 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, and (ii) a
factor in determining the extent to which a shareholder's Social Security
benefits are taxable. If a Series purchases such securities, the portion
of the Series' dividends related thereto will not necessarily be tax
exempt to an investor who is subject to the alternative minimum tax and/or
tax on Social Security benefits and may cause an investor to be subject
to such taxes.
Notice as to the tax status of your dividends and
distributions will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and distributions from securities gains, if any, paid during
the year. These statements set forth the dollar amount of income exempt
from Federal tax and the dollar amount, if any, subject to Federal tax.
These dollar amounts will vary depending on the size and length of time
of your investment in a Series. If a Series pays dividends derived from
Page 53
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.
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.
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.
Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of taxable
dividends, distributions from net realized securities gains and the
proceeds of any redemption, regardless of the extent to which gain or
loss may be realized, paid to a shareholder if such shareholder fails to
certify either that the TIN furnished in connection with opening an
account is correct, or that such shareholder has not received notice from
the IRS of being subject to backup withholding as a result of a failure
to properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect
or if a shareholder has failed to properly report taxable dividend and
interest income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account, and may be
claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that each Series has
qualified for the fiscal year ended April 30, 1997 as a "regulated
investment company" under the Code. Each Series intends to continue to so
qualify, if such qualification is in the best interests of its
shareholders. Qualification as a regulated investment company relieves
the Series of any liability for Federal income taxes to the extent its
earnings are distributed in accordance with applicable provisions of the
Code. Each Series of the Fund is subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains, if any.
STATE AND LOCAL TAX TREATMENT _ Each Series will invest primarily in
Municipal Obligations of the State after which the Series is named.
Except to the extent specifically noted below, dividends by a Series are
not subject to an income tax by such State to the extent that the
dividends are attributable to interest on such Municipal Obligations.
However, some or all of the other dividends or distributions by a Series
may be taxable by those States that have
income taxes, even if the dividends or distributions are attributable to
income of the Series derived from obligations of the United States or its
agencies or instrumentalities.
The Fund anticipates that a substantial portion of the
dividends paid by each Series will not be subject to income tax of the
State after which the Series is named. However, to the extent that you
are obligated to pay State or local taxes outside of such State,
dividends earned by an investment in such Series may represent taxable
income. Also, all or a portion of the dividends paid by a Series that are
not subject to income tax of the State after which the Series is named
may be a preference item for such State's alternative minimum tax (where
imposed). Finally, you should be aware that State and local taxes, other
than those described above, may apply to the dividends, distributions or
shares of a Series.
Page 54
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 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,
Page 55
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.
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
Page 56
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 is 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 and other territories and possessions of the United States and
certain other specified securities exempt from New Jersey income taxes.
Additionally, a qualified investment fund must comply with certain
continuing reporting requirements.
If the New Jersey Series continues to qualify 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 subject to New Jersey gross
Page 57
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 was repealed, 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 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
Page 58
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 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
Page 59
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.
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."
Page 60
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 the Series' average annual total return
for one, five and ten year periods, or for shorter periods depending upon
the length of time the 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. Before July 2, 1990, the Fund's name was Premier
State Tax Exempt Bond Fund and, before March 31, 1997, its name was
Premier State Municipal Bond Fund. The Fund is authorized to issue an
unlimited number of shares of beneficial interest, par value $.001 per
share. The Fund's shares are classified into three classes _ Class A,
Class B and Class C. Each share has one vote and shareholders will vote
in the aggregate and not by class except as otherwise required by
law. 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,
Page 61
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 62
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 the 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 the Series 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,
certain Derivatives subject the Fund to the rules of the Commodity
Futures Trading Commission which limit the extent to which a Series can
invest in such 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, exceeds 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
Page 63
the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
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 64
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 or has been given a rating below
that which otherwise is permissible for purchase by the Series, it will
be backed by an irrevocable letter of credit or guarantee of a bank that
the Series' Board has determined meets prescribed quality standards for
banks, 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. In
no event will the aggregate interest paid with respect to the two classes
exceed the interest paid by the underlying Municipal Obligations. The
value of the second class and similar securities should be expected to
fluctuate more than the value of a
Page 65
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
Page 66
Fitch; obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper rated not lower than P-1 by Moody's,
A-1 by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic
banks, including foreign branches of domestic banks, with assets of one
billion dollars or more; time deposits; bankers' acceptances and other
short-term bank obligations; and repurchase agreements in respect of any
of the foregoing. Dividends paid by a Series that are attributable to
income earned by the Series from Taxable Investments will be taxable to
investors. See "Dividends, Distributions and Taxes." Except for temporary
defensive purposes, at no time will more than 20% of the value of a
Series' net assets be invested in Taxable Investments. When a Series has
adopted a temporary defensive position, including when acceptable State
Municipal Obligations are unavailable for investment by a Series, in
excess of 35% of 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
fund that invested in higher rated securities.
Page 67
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, which
invested over 5% of its assets in Municipal Obligations rated below
investment grade, 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%
======== ========
(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/A
AA (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 Fund's official sales literature in connection with the offer
of Series shares, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the
Fund. This Prospectus does not constitute an offer in any State in which,
or to any person to whom, such offering may not lawfully be made.
Copy Rights 1997 Dreyfus Service Corporation PSTMBp071697
Page 68
DREYFUS PREMIER STATE MUNICIPAL BOND FUND
CLASS A AND CLASS B AND CLASS C SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JULY 16, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Premier State Municipal Bond Fund (the "Fund"), dated July 16, 1997,
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-18
Purchase of Shares B-20
Distribution Plan and Shareholder Services Plan B-23
Redemption of Shares B-25
Shareholder Services B-27
Determination of Net Asset Value B-30
Dividends, Distributions and Taxes B-31
Portfolio Transactions B-32
Performance Information B-33
Information About the Fund B-42
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-42
Appendix A B-43
Appendix B B-96
Financial Statements and Reports of Independent Auditors:
Connecticut B-105 New Jersey B-195
Florida B-128 North Carolina B-
210
Georgia B-138 Ohio B-224
Maryland B-150 Pennsylvania B-236
Massachusetts B-160 Texas B-248
Michigan B-173 Virginia B-259
Minnesota B-185
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
Municipal Obligations. The average distribution of investments (at
value) in Municipal Obligations (including notes) by ratings for the fiscal
year ended April 30, 1997, computed on a monthly basis, for each Series was
as follows:
Fitch Investors Moody's Investors Standard & Poor's
Service, L.P. Service, Inc. Ratings GroupConnecticut Florida
Georgia
("Fitch") or ("Moody's") or ("S&P") Series Series
Series
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%
MarylandMassachusettsMichigan
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%
New North
Minnesota JerseyCarolina Ohio
Fitch or Moody's or S&P Series Series
Series Series
AAA Aaa AAA 50.3% 91.7% 31.4% 38.8%
AA Aa AA 21.3 .1 22.7 8.3
A A A 13.3 1.8 30.4 23.4
BBB Baa BBB 10.3 4.7 13.8 18.3
BB Ba BB - .5 - 6.7
F-1 MIG 1/P-1 SP-1/A-1 1.1 1.2 - 1.0
Not Rated Not Rated Not Rated 3.7 7 - 1.7 8 3.59
100.0% 100.0% 100.0% 100.0%
PennsylvaniaTexas 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 11.810 3.1 11 1.7 12
100.0% 100.0% 100.0%
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 and, with respect to Class B and Class C shares only,
Distribution Plan, 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. A Series will not invest more than 15% of the value of its
net assets in lease obligations that are illiquid and in other illiquid
securities. See "Investment Restriction No. 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 the 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 in which each Series may invest
up to 5% of its net assets. Zero coupon 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
Each Series has adopted investment restrictions numbered 1 through
9 as fundamental policies, which 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 10
and 11 are not fundamental policies and may be changed 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. 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.
4. 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.
5. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests, but this shall not prevent the Fund from investing in
Municipal Obligations secured by real estate or interests therein, or
prevent the Fund from purchasing and selling futures contracts,
including those related to indices, and options on futures contracts or
indices.
6. Make loans to others except through the purchase of qualified
debt obligations and the entry into repurchase agreements referred to
above and in the Fund's Prospectus; however, the Fund may lend 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.
7. 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.
8. Invest in companies for the purpose of exercising control.
9. Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or acquisition
of assets.
10. 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.
11. 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.
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.
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, Cognizant Corporation, a
service provider of marketing information and information
technology, The Dun & Bradstreet Corporation, MCI Communications
Corporation, Mutual of America Life Insurance Company and TLC
Beatrice International Holdings, Inc. He is 63 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 54 years old and her address is c/o New York University
School of Law, 249 Sullivan Street, New York, New York 10011.
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995,
Chairman of the Board for various funds in the Dreyfus Family of
Funds. He also is Chairman of the Board of Directors of Noel
Group, Inc., a venture capital company; and a director of The
Muscular Dystrophy Association, HealthPlan Services Corporation,
Carlyle Industries, Inc. (formerly Belding Heminway, Inc.), a
button packager and distributor, 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 24, 1994, the Fund's distributor. From August 1994
to December 31, 1994, he was a director of Mellon Bank
Corporation. He is 53 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, including
President of the New York Psychoanalytic Society, and has
published many articles on subjects in the field of
psychoanalysis. He is 64 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
77 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 governments. He is 54 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, 1997, 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, 1996, were
as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
Clifford L. Alexander, Jr. $4,250 $ 82,436 (17)
Peggy C. Davis $4,250 $ 73,084 (15)
Joseph S. DiMartino $5,313 $517,075 (94)
Ernest Kafka $4,250 $ 69,584 (15)
Saul B. Klaman $4,250 $ 73,584 (15)
Nathan Leventhal $4,000 $ 71,084 (15)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $3,026 for all Board members as a group.
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. She is 39 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. He is 33 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. 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, he was
Vice President, Assistant Treasurer and Tax Director - Mutual
Funds of The Boston Company, Inc. He is 41 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 33 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 35 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer.
Director of Strategic Client Initiatives for Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by the Manager. From December 1989 through November
1996, he was employed by GE Investments where he held various
financial, business development and compliance positions. He
also served as Treasurer of the GE Funds and as Director of GE
Investment Services. He is 36 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor since September 1995, and an
officer of other investment companies advised or administered by
the Manager. She is 27 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 28 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior
Paralegal of the Distributor and an officer of other investment
companies advised or administered by the Manager. Prior to August
1993, he was employed as an Associate Examiner at the National
Association of Securities Dealers, Inc. He is 27 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 June 10,
1996.
As of June 10, 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 - 13.9%; Alicia B. Nichols - 5.3%; Maryland Series -
Stephens Inc., Little Rock, AR - 5.7%; Michigan Series - Merrill Lynch
Pierce Fenner & Smith, Inc., Jacksonville FL - 7.9%; North Carolina
Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 6.5%;
Ohio Series - BHC Securities, Philadelphia, PA - 6.3%; Pennsylvania
Series - Mary Alice Morrissey & James D. Morrissey, Huntingdon Valley,
PA - 5.5%; Virginia Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 5.9%. Class B: Connecticut Series - Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL - 7.0%; Florida Series -
Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 8.6%; Georgia
Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 16.3%;
Maryland Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL
- - 6.1%; Michigan Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 9.7%; Virginia Series - Merrill Lynch Pierce Fenner
& Smith, Jacksonville, FL - 7.6%. Class C: Connecticut Series - US
Clearing Corp, New York, NY - 18.4%; Paul L. Lutson, Stratford, CT -
8.3%; US Clearing Corp, New York, NY - 7.4%; US Clearing Corp, New
York, NY - 6.0%; U.S. Clearing Corp., New York, NY - 5.2%; Florida
Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 62.5%;
PaineWebber for the benefit of The Erick Stern Revocable Living Trust,
Fort Lee, NJ - 26.6%; Frederick Carleton & Helen Carleton, 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 - 60.7%; PaineWebber for the benefit of Adela Rotsztain, Potomac, MD
- - 36.7%; Massachusetts Series - Premier Mutual Fund Services, Boston,
MA - 100%; Michigan Series - Merrill Lynch Pierce Fenner & Smith, Inc.,
Jacksonville, FL - 56.1%; Murvale L. Huston & Catherine Ann Huston,
Saint Clair, MI - 21.8%; Lee O. Newport & Alice B. Newport,
Constantine, MI - 6.8%; Richard D. Snyder & Carole G. Snyder,
Kalamazoo, MI 6.5%; Violet V. Webber, Waterford, MI - 6.1%; Minnesota
Series - John D. Floyd & Becky S. Floyd, Apple Valley, MN - 58.0%;
Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 20.8%; Lawrence
McConnell, Chatfield, MN - 14.1%; Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 6.8%; North Carolina Series - William L. Crowe & C.
Elizabeth Crowe, Cary, NC - 90.2%; Premier Mutual Fund Services, Inc.
Boston, MA - 9.7%; Ohio Series - Max Weisbrod & Sylvia Weisbrod,
Canton, OH - 69.0%; JoAnn Robedeau, Toledo, OH - 23.5%; Merrill Lynch
Pierce Fenner & Smith, Inc., Jacksonville, FL - 6.6%; Pennsylvania
Series - Charles R. Weikert & Mary Jane Weikert, Fairfield, PA - 65.0%;
Robert Hoffman & Dorothy Hoffman, Norristown, PA - 18.5%; Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL - 12.7%; Texas Series - Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL - 85.2%; Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL - 13.4%; Virginia Series - US
Clearing Corp, New York, NY - 35.5%; Stephens Inc., Little Rock, AR -
20.0%; Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL - 22.6%;
Stephens Inc., Little Rock, AR - 18.1%. 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 October 31, 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; William T. Sandalls, Jr., Senior Vice President and
Chief Financial Officer; 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; William V. Healey,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt and Frank
V. Cahouet, 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, Douglas
J. Gaylor, Karen M. Hand, Stephen C. Kris, Richard J. Moynihan, Jill C.
Shaffro, 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 and for other funds advised by the Manager.
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, 1995, 1996 and 1997, the management fee
payable, the reduction in such fee pursuant to undertakings in effect,
and the net management fee paid by each Series was as set forth below:
Series Management Fee Reduction in Fee Net Fee Paid
Payable
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1996 1997 1995 1996 1997 1995 1996 1997
Connecticut $2,082,924 $2,045,864 $ $ 35,533 $ 0 $ 0 $2,047.391 $2,045864 $ 0
Florida 1,599,533 1,504,679 - 27,718 0 - 1,571,835 1,504,679 -
Georgia 49,119 160,860 - 149,119 59,898 - 0 100,962 -
Maryland 1,901,194 1,852,002 - 32,614 0 - 1,868,580 1,852,002 -
Massachuetts 426,673 423,126 - 7,190 0 - 419,483 423,126 -
Michigan 1,074,186 1,067,900 - 18,112 0 - 1,056,074 1,067,900 -
Minnesota 943,648 924,716 - 15,888 0 - 927,660 924,716 -
New Jersey 38,710 74,073 56,351 38,710 10,732 9,646 0 63,341 46,695
North Carolina 535,236 517,799 - 297,996 20,032 - 237,240 497,767 -
Ohio 1,707,720 1,684,215 28,783 0 - 1,678,937 1,678,937 -
Pennsylvania 1,589,232 1,600,235 - 26,631 0 - 1,562,601 1,600,235 -
Texas 485,593 464,591 - 485,593 464,501 - 0 0 -
Virginia 496,788 522,229 - 496,788 522,229 - 0 0 -
</TABLE>
____________________________________
1. The fiscal year ended was July 31, 1995.
2. The fiscal year ended was July 31, 1996.
3. Effective August 1, 1996, the New Jersey Series changed its fiscal
year end from July 31 to April 30. The information provided is
from August 1, 1996 through April 30, 1997.
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 Dreyfus 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, 1997, 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
and Class C, of each Series:
Series Class A Class B Class C
Connecticut $25,153 $57,412 -0-
Florida 21,041 62,568 -0-
Georgia 1,369 36,034 -0-
Maryland 24,087 63,161 -0-
Massachusetts 6,837 3,841 -0-
Michigan 16,807 34,324 -0-
Minnesota 13,055 43,202 -0-
New Jersey* 137 10,000 -0-
North Carolina 5,070 72,256 -0-
Ohio 23,198 52,134 -0-
Pennsylvania 21,826 133,577 -0-
Texas 4,008 25,002 -0-
Virginia 10,873 38,249 -0-
__________________________________
*The New Jersey Series has changed its fiscal year end from July 31 to
April 30. The information provided is from August 1, 1996 through April
30, 1997.
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, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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
North
Massachusetts Michigan Minnesota New Jersey Carolina
Series Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share $11.50 $15.15 $14.98 $12.63 $12.91
Sales load for individual sales of shares
aggregating less than $50,000 - 4.5%
of offering price (approxamately
4.7% of net asset value per share) .54 .71 .70 .59 .61
Offering price to public $12.04 $15.86 $15.68 $13.22 $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 the 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 October 31, 1996.
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, 1997, each Series 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
New Jersey* 32,737 32
North Carolina 217,316 5
Ohio 184,668 6
Pennsylvania 362,739 9
Texas 87,651 6
Virginia 157,606 276
_______________________________
*Effective August 1, 1996, the New Jersey Series changed its fiscal
year end from July 31 to April 30. The information provided is from
August 1, 1996 through April 30, 1997.
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 October 31, 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, 1997, each Series 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
New Jersey* 9,235 16,369 10
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
_______________________________
* Effective August 1, 1996 the New Jersey Series changed its fiscal year
end from July 31 to April 30. The information provided is from August 1,
1996 through April 30, 1997.
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 Premier Family of Funds or
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 Dreyfus 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 1-800-554-4611. 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.
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 Dreyfus Premier Family of Funds or 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, and with respect to
Class B and Class C shares only, Distribution Plan, are accrued daily
and are taken into account for the purpose of determining the net asset
value of the relevant Class of each Series' shares. Because of the
difference in operating expenses incurred by each Class, the per share
net asset value of each Class will differ.
New York Stock Exchange Closings. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Dividends, Distributions and Taxes."
Management believes that each Series qualified for the fiscal year
ended April 30, 1997 as a "regulated investment company" under the
Code. Each Series intends to continue to so qualify, if such
qualification is in the best interests of its shareholders. 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.
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. In
addition, the Code provides that if a shareholder has not held his
shares for more than six months (or such shorter period as the Internal
Revenue Service may prescribe by regulation) and has received an
exempt-interest dividend with respect to such shares, any loss incurred
on the sale of such shares will be disallowed to the extent of the
exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain or loss. However, all or a portion of
any gain realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income under Section 1276 of
the Code. In addition, all or a portion of any gain realized from
engaging in "conversion transactions" may be treated as ordinary income
under Section 1258 of the Code. "Conversion transactions" are defined
to include certain forward, futures, option and "straddle"
transactions, transactions marketed or sold to produce capital gains,
or transactions described in Treasury regulations to be issued in the
future.
Under Section 1256 of the Code, gain or loss 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 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."
The current yield for the 30-day period ended April 30, 1997, 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 4.89% -
Florida 4.69 -
Georgia 4.45 -
Maryland 5.01 -
Massachusetts 4.87 -
Michigan 4.57 -
Minnesota 4.57 -
New Jersey 4.47 4.44%
North Carolina 4.90 -
Ohio 4.55 -
Pennsylvania 5.01 -
Texas 5.29 4.76
Virginia 5.33 4.80
____________________________
(1) This column sets forth current yield had certain expenses for the
indicated Series not been absorbed.
Current Net of Absorbed
Series Yield Expenses(1)
________ __________ _____________________
Class B:
Connecticut 4.54% -
Florida 4.33 -
Georgia 4.17 -
Maryland 4.71 -
Massachusetts 4.60 -
Michigan 4.28 -
Minnesota 4.27 -
New Jersey 4.18 4.16%
North Carolina 4.63 -
Ohio 4.25 -
Pennsylvania 4.73 -
Texas 5.03 4.48
Virginia 5.07 4.52
Current Net of Absorbed
Series Yield Expenses(1)
_______ __________ ______________________
Class C:
Connecticut 4.23% -
Florida 4.05 -
Georgia 3.79 -
Maryland 4.53 -
Massachusetts 4.33 -
Michigan 3.99 -
Minnesota 4.00 -
New Jersey 3.94 2.79%
North Carolina 4.43 -
Ohio 4.00 -
Pennsylvania 4.27 -
Texas 4.68 4.13
Virginia 4.86 4.31
____________________________
(1) This column sets forth current yield had certain expenses for the
indicated Series 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 net asset value (or maximum
offering price in the case of Class A) per share 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 1997 combined (except where noted) Federal and
applicable State tax rate specified below, the tax equivalent yield for the
30-day period ended April 30, 1997 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% 8.48% -
Florida(2) 39.60 7.76 -
Georgia 43.22 7.84 -
Maryland 42.62 8.73 -
Massachusetts 46.85 9.16 -
Michigan 42.26 7.91 -
Minnesota 44.73 8.27 -
New Jersey 43.45 7.90 7.85%
North Carolina 44.28 8.79 -
Ohio 43.83 8.10 -
Pennsylvania 41.29 8.53 -
Texas(2) 39.60 8.76 7.88
Virginia 43.07 9.36 8.43
Class B:
Connecticut 42.32 7.87% -
Florida(2) 39.60 7.17 -
Georgia 43.22 7.34 -
Maryland 42.62 8.21 -
Massachusetts 46.85 8.65 -
Michigan 42.26 7.41 -
Minnesota 44.73 7.73 -
New Jersey 43.45 7.39 7.36%
North Carolina 44.28 8.31 -
Ohio 43.83 7.57 -
Pennsylvania 41.29 8.06 -
Texas(2) 39.60 8.33 7.42
Virginia 43.07 8.91 7.94
___________________________
(1) This column sets forth tax equivalent yield had certain expenses for
the indicated Series not been absorbed.
(2) Federal tax rate only. No state personal income tax imposed during
1996.
1Tax Equivalent Net of Absorbed
Series Tax Rate Yield Expenses(1)
Class C:
Connecticut 42.32% 7.33% -
Florida(2) 39.60 6.71 -
Georgia 43.22 6.67 -
Maryland 42.62 7.89 -
Massachusetts 46.85 8.15 -
Michigan 42.26 6.91 -
Minnesota 44.73 7.24 -
New Jersey 43.45 6.97 4.93%
North Carolina 44.28 7.95 -
Ohio 43.83 7.12 -
Pennsylvania 41.29 7.27 -
Texas(2) 39.60 7.75 6.84
Virginia 43.07 8.54 7.57
_________________________
(1) This column sets forth tax equivalent yield had certain expenses for
the indicated Series 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.
<TABLE>
<CAPTION>
The average annual total return for the periods indicated for Class A
of each Series was as follows:
<S> <C> <C> <C>
1-year period 5-year period 9.926-year period
Series ended April 30, 1997 ended April 30, 1997 ended April 30, 1997
Connecticut 2.04% 5.89% 7.11%
Florida 0.04 5.57 8.56
Georgia 1.43 5.70(1) -
Maryland 2.08 5.75 6.59
Massachusetts 2.28 5.70 6.58
Michigan 2.10 6.42 8.44
Minnesota 1.35 5.66 7.56
New Jersey 1.13 4.26(2) -
North Carolina 2.94 6.03 6.72(3)
Ohio 2.12 6.03 5.15
Pennsylvania 2.09 6.23 7.54(4)
Texas 2.91 6.92 10.14
Virginia 3.14 6.55 7.20(3)
</TABLE>
____________________________
(1) For the 4.658 year period ended April 30, 1997.
(2) For the 2.99 year period ended April 30, 1997
(3) For the 5.748 year period ended April 30, 1997.
(4) For the 9.753 year period ended April 30, 1997.
The average annual total return for the periods indicated since the
initial offering for Class B of each Series was as follows:
1-year period 4.290-year period
Series ended April 30, 1997 ended April 30, 1997
Connecticut 2.31% 5.06%
Florida 0.33 4.87
Georgia 1.55 5.44
Maryland 2.34 5.26
Massachusetts 2.66 4.95
Michigan 2.28 5.75
Minnesota 1.60 5.22
New Jersey 1.34 4.44(1)
North Carolina 3.27 5.13
Ohio 2.27 5.34
Pennsylvania 2.41 5.62
Texas 3.15 6.36
Virginia 3.41 5.56
____________________________
(1) For the 2.99 year period ended April 30, 1997.
The average annual total return for the periods indicated since the
initial offering for Class
C of each Series was as follows:
1-year period 1.710 years
Series ended April 30, 1997 ended April 30, 1997
Connecticut 4.94% 5.70%
Florida 2.98 4.27
Georgia 4.30 5.74
Maryland 5.16 5.94
Massachusetts 5.56 5.40
Michigan 4.94 6.05
Minnesota 4.34 5.29
New Jersey 4.19 1.38(1)
North Carolina 6.00 6.58
Ohio 5.07 5.93
Pennsylvania 4.92 6.28
Texas 5.79 7.04
Virginia 6.18 6.57
____________________________
(1) For the 1.41 year period ended April 30, 1997.
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, 1997
(except where indicated) for Class A of each Series was as follows:
Based on Maximum Based on Net Asset
Series Offering Price Value
Connecticut 97.78 107.13
Florida 126.03 136.76
Georgia(1) 29.47 35.58
Maryland 88.42 97.32
Massachusetts 88.20 97.05
Michigan 123.59 134.05
Minnesota 106.26 116.04
New Jersey(2) 13.34 18.68
North Carolina(3) 45.35 52.26
Ohio 64.62 72.32
Pennsylvania(4) 103.07 112.68
Texas 160.92 173.19
Virginia(3) 49.19 56.23
____________________________
(1) For the period from September 3, 1992 (commencement of operations)
through April 30, 1997.
(2) For the period from May 4, 1994 (commencement of operations) through
April 30, 1997.
(3) For the period from August 1, 1991 (commencement of operations) through
April 30, 1997.
(4) For the period from July 30, 1987 (commencement of operations) through
April 30, 1997.
The total return for the period January 15, 1993 to April 30, 1997 for
Class B of each Series was as follows:
Based on Net Asset Based on
Series Value Maximum CDSC
Connecticut 25.59% 23.61%
Florida 24.55 22.62
Georgia 27.50 25.50
Maryland 26.58 24.58
Massachusetts 24.98 23.04
Michigan 29.08 27.09
Minnesota 26.41 24.41
New Jersey(1) 16.94 13.94
North Carolina 25.93 23.93
Ohio 26.98 24.98
Pennsylvania 28.43 26.43
Texas 32.26 30.26
Virginia 28.11 26.11
___________________________________
(1) For the period May 4, 1995 (commencement of operations) to April 30,
1997.
The total return for the period August 15, 1995 to April 30, 1997
(except where indicated) for Class C of each Series was as follows:
Based on Net Asset
Series Value*
_____ ________________
Connecticut 9.94%
Florida 7.42
Georgia 10.01
Maryland 10.36
Massachusetts 9.40
Michigan 10.56
Minnesota 9.21
New Jersey(1) 1.95
North Carolina 11.52
Ohio 10.35
Pennsylvania 10.98
Texas 12.33
Virginia 11.49
___________________________________
* No CDSC is charged Class C shares after one year of purchase.
(1) For the period December 4, 1994 (commencement of operations) to April
30, 1997.
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.
On March 31, 1997, the New Jersey Series commenced operations through a
transfer of assets from the New Jersey Series of Premier Insured Bond Fund
(the "Insured New Jersey Fund"). The performance information provided above
for periods prior to such date for the New Jersey Series is for the Insured
New Jersey Fund and reflects the fact that for such periods, the Insured New
Jersey Fund was required to invest (i) at least 65% of the value of its
total assets in Municipal Obligations insured as to timely payment of
principal and interest by recognized insurers of Municipal Obligations and
(ii) in Municipal Obligations rated no lower than Baa by Moody's or BBB by
S&P and Fitch.
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, and to
Morningstar ratings and related analysis 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 $25 billion 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 fiscal year ending April 30, 1997, the Fund
paid the Transfer Agent $1,012,323.
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 LLP, 180 Maiden Lane, New York, New York
10038-4982, 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-43
Florida Series B-46
Georgia Series B-50
Maryland Series B-54
Massachusetts Series B-56
Michigan Series B-58
Minnesota Series B-61
New Jersey Series B-67
North Carolina Series B-69
Ohio Series B-74
Pennsylvania Series B-79
Texas Series B-87
Virginia Series B-92
Connecticut Series
Connecticut's economy is diverse, with manufacturing, services and
trade accounting for approximately 70% of total non-agricultural employment.
The State's manufacturing industry is diversified, but from 1970 to 1993
manufacturing employment declined 33.5%, while non-manufacturing employment
increased 63.3%, particularly in the service, trade and finance categories,
resulting in an increase of 27.6% in total growth in non-agricultural
sectors. Defense-related business plays an important role in the
Connecticut economy, and economic activity has been affected by the volume
of defense contracts awarded to Connecticut firms. From 1984 to 1995,
Connecticut ranked from sixth to twelfth among all states in total defense
contract awards, receiving 3.0% of all such contracts in 1995. 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 1995 was $104.1 billion, a 5.7% increase over the previous
year. Total personal income in the State increased 29.6% from 1987 to 1992
and 20.0% from 1990 to 1995, compared with national increases of 37.3% and
25.0%, respectively. According to U.S. Department of Commerce projections,
the State is expected to continue to rank among the highest in state per
capital income.
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 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. As of March
1995, $456 million 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 States's Economic Recovery Notes. The Comptroller's
annual reports for the fiscal years ended June 30, 1993, 1994, 1995 and 1996
reflected General Fund operating surpluses of $113.5 million, $19.7 million,
$80.5 million, and $250 million, respectively. The unappropriated surplus
in the General Fund is deemed to be appropriated for debt service for the
following fiscal year.
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. Based on estimates from
the Controller's Office as of September 30, 1996, the cumulative deficit on
a GAAP basis is estimated at $608 million for fiscal 1995-96. 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.
The adopted budget for fiscal 1996-97 anticipates General Fund revenues
of $9.0497 billion and General Fund expenditures of $9.0494 billion
resulting in a projected surplus of $0.3 million.
The adopted budget reflects implementation of significant tax changes
aimed at increasing overall disposable income and encouraging economic
expansion in the State. A phase down in the personal income tax rate was
enacted. To improve the business climate in the State and stimulated long
term job growth, legislation was also enacted which will reduce
Connecticut's corporate tax rate from its current rate of 11.25% to 7.5% by
January 1, 2000. The adopted budget also reflects significant reductions in
expenditures from current service levels.
As part of the adopted budget, approximately $241 million of the
original $965.7 million in Economic Recovery Notes issued to fund the
cumulative deficit of fiscal year 1990-91, will be retired in fiscal years
1996-97 through 1998-99, rather than in fiscal 1995-96. Of the original
$965.7 million issued, $725 million will be retired on schedule and the
Economic Recovery Notes will be paid in full by the expiration of the
current Governor's term.
On November 3, 1992, Connecticut voters approved a constitutional
amendment which requires a balanced budget for each year and imposes a cap
on the growth of expenditures. The General Assembly is required by the
constitutional amendment to adopt by three-fifths vote certain spending cap
definitions. The statutory spending cap limits the growth of expenditures
to either (1) the rolling five-year average annual growth in personal
income, or (2) the increase in the consumer price index for urban consumers
during the preceding twelve-month period, whichever is greater.
Expenditures for the payment of bonds, notes and other evidences of
indebtedness are excluded from the constitutional and statutory definitions
of general budget expenditures. To preclude shifting expenditures out of
the General Fund to other funds, the spending cap applies to all
appropriated funds combined. For fiscal 1993-94 and for fiscal 1994-95,
permitted growth in capped expenditures is 5.82% and 4.49%, respectively.
The adoption Budget for fiscal 1993-94 and 1994-95 is approximately $58
million and $24 million, respectively, below the spending cap.
The State has no constitutional or other organic limit on its power to
issue obligations or incur indebtedness other than that it may only borrow
for public purposes. There are no reported court decisions relating to
State bonded indebtedness other than two cases validating the legislative
determination of the public purpose for improving employment opportunities
and related activities. The State Constitution has never contained
provisions requiring submission of the questions of incurring indebtedness
to a public referendum. Therefore, the authorization and issuance of State
debt, including the purpose, amount and nature thereof, the method and
manner of the incurrence of such debt, the maturity and terms of repayment
thereof, and other related matters are statutory.
The State has established a program of temporary note issuances to
cover periodic cash flow requirements. The maximum volume of cash flow
borrowing is determined based upon the State's actual cash needs on a daily
basis. The State, as of April 17, 1990, commenced a program permitting the
issuance of up to $539 million of General Obligation Temporary Notes (the
"April 1990 Program"). Under the April 1990 Program, the State may issue
notes during a five-year period concluding in April of 1995. Additionally,
a separate $200 million temporary note program commenced as of April 30,
1991 and concluded on October 31, 1991. There are currently no notes
outstanding under either program.
The General Assembly has empowered, pursuant to bond acts in effect,
the State Bond Commission to authorize general obligation bonds in the
amount of approximately $9.069 billion. As of September 15, 1995, the State
Bond Commission has issued approximately $7.716 billion of such bonds and
the balance of approximately $1.445 billion was available for authorization.
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 rated 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 in the
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
spite 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 205,200 from May 1992 to October 1996, a
recovery of 78% 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 6.2% during
the first ten months of 1995.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Sales and Use Tax collections for Fiscal Year 1997 as $4.390
billion, a 4.0% increase from Fiscal Year 1996 revenue. The Fiscal Year
1998 estimate of $4.56 billion, is a 3.9% increase from the Fiscal Year 1997
estimate.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Gross Income Tax collections for Fiscal Year 1997 of $4.71
billion, a 4.4% increase from Fiscal Year 1996 revenue. The estimate for
fiscal year 1998 as shown in the Governor's Fiscal Year 1998 Budget of
$4.830 billion, is a 2.5% increase from the Fiscal Year 1997 estimate.
Included in the Fiscal Year 1998 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). Fiscal Year 1998 revenues are $200 million lower than they would
have been if the 1996 property tax deduction for local property taxes had
not been enacted.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Corporation Business Tax collections for Fiscal Year 1997 of
$1.120 billion. 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 as well as two policy changes enacted into law in 1995
which (i) effective June 30, 1997, allow corporations with multi-state
operations to allocate income to New Jersey using a formula which double
weights the sales receipts factor to give a tax preference to corporations
that have a higher concentration of payroll and facilities in New Jersey and
(ii) provide a 7.5% rather than a 9% tax rate for corporations that have net
income up to $100,000. The Fiscal Year 1998 forecast as shown in the
Governor's Fiscal 1998 Budget of $1.13 billion, represents a 1.2% increase
from the Fiscal Year 1997 estimate.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Other Miscellaneous Taxes Fees and Revenues collections for Fiscal
Year 1997 as $1.932 billion, a decrease from fiscal year 1996 revenue.
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 $16.109 billion and $15.978
billion for Fiscal 1996 and 1997, respectively. Of the $15.978 billion
appropriated in Fiscal Year 1997 from the General Fund, the Property Tax
Relief Fund, the Casino Control Fund, the Casino Revenue Fund and
Gubernatorial Elections Fund, $6.385 billion (39.9%) is appropriated for
State aid to local governments, $3.751 billion (23.5%) 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), $5.043 billion (31.6%) for Direct State
services, $447.0 million (2.8%) for debt service on State general obligation
bonds and $352.0 million (2.2%) 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 1997 and for Fiscal year 1998 reflect the amounts contained in
the Governor's Fiscal Year 1998 Budget.
The State has made appropriations for principal and interest payments
for general obligation bonds for fiscal years 1994 through 1997 in the
amounts of $119.9 million, $103.6 million, $466.3 million and $447.0
million, respectively. The Governor's Fiscal Year 1998 Budget for Fiscal
Year 1998 includes an appropriation in the amount of $491.2 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 1995, 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 44% 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% in 1993. Seasonally adjusted data for July 1996 shows an
unemployment rate of 5.1% compared to an unemployment rate of 5.4% 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.
The Tax Stabilization Reserve Fund was established in 1986 and provided
with initial funding from General Fund appropriations. The Tax
Stabilization Reserve Fund receives 15% of any budgetary basis fiscal year-
end surplus and all proceeds from the disposition of assets of the
Commonwealth not designated for deposit elsewhere. It is to be used for
emergencies threatening the health, safety or welfare of citizens or to
offset unanticipated revenue shortfalls due to economic downturns. Assets
of the fund may be used upon recommendation by the Governor and an approving
vote by two-thirds of the members of each house of the General Assembly. On
June 30, 1996, the balance in the Tax Stabilization Reserve Fund was $183.6
million and $27.6 million in the General Fund pending transfer to the Tax
Stabilization Reserve Fund for fiscal 1996. The transfer was completed in
September of 1996.
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 (35.6% of
General Fund revenues in fiscal 1996), the 2.8% personal income tax (33.6%
of General Fund revenues in fiscal 1996) and the 10.99% corporate net income
tax (15.7% of General Fund revenues in fiscal 1996). 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, $12.9 billion of the
fiscal 1996 budget, and $13.2 billion of the fiscal 1997 budget).
Governmental Fund Types: Financial Condition/Results of Operations
(GAAP Basis). The Fiscal years 1992 through 1996 were years of recovery from
the recession in 1990 and 1991. The recovery fiscal years were
characterized by modest economic growth and low inflation rates. These
economic conditions, combined with several years of tax reductions following
the various tax rate increases and tax base expansions enacted in fiscal
1991 for the General Fund, produced modest increases in tax revenues during
the period. Tax revenues from fiscal 1992 through fiscal 1996 rose at an
annual average rate of 2.8%. Total revenues and other income sources
increased during this period by an average annual rate of 3.3%.
Intergovernmental revenue was the income category with the largest rate of
increase during the period. Over the five-year period, receipts from this
source rose 58.5%. One-third of that increase occurred during fiscal 1996.
This large one-year increase was due mainly to an accounting change in the
General Fund in which food stamp coupon revenue received from the federal
government is now counted as income to the Commonwealth. Expenditures and
other uses during the fiscal 1992 through fiscal 1996 period rose at a 4.4%
annual rate, led by annual average increases of 14.2% for protection of
persons and property program costs and 11.4% for capital outlay costs.
Expenditure reductions for fiscal 1996 from the previous fiscal year for
operating transfers out and for conservation of natural resources program
costs were the result of accounting changes affecting the General Fund and
the Motor License Fund and a recategorization of expenditures due to a
departmental restructuring in the General Fund. At the close of fiscal
1996, the fund balance for the governmental fund types totaled $1,986
billion, an increase of $58.7 million over fiscal 1996 and $758.5 million
over fiscal 1992.
General Fund: Financial Condition/Results of Operations.
Five Year Overview (GAAP Basis). The five year period from fiscal 1992
through fiscal 1996 recorded a 4.6% average annual increase in revenues and
other sources, led by an average annual increase of 13.2 % for
intergovernmental revenues. The increase for intergovernmental revenues in
fiscal 1996 is partly due to an accounting change. Tax revenues during the
five year period increased an average of 2.5% as modest economic growth, low
inflation rates and several tax rate reductions and other tax reduction
measures constrained the growth of tax revenues. The tax reduction measures
followed a $2.7 billion tax increase measure adopted for the 1992 fiscal
year.
Expenditures and other uses during the fiscal 1992 through fiscal 1996
period rose at an average annual rate of 6.0% led by increases of 14.2% for
protection of persons and property program costs. The costs of a prison
expansion program and other correctional program expenses are responsible
for the large percentage increase. A reduction in debt services costs at an
average annual rate of 29.1% over the five year period is a result of
reduced short-term borrowing for cash flow purposes. Improved financial
results and structural cash flow modifications contributed to the lower
borrowing. Efforts to control costs for various social welfare programs and
the presence of favorable economic conditions have led to a modest 5.6%
increase for public health and welfare costs for the five year period.
The fund balance at June 30, 1996 totaled $635.2 million, a $547.7
million increase from a balance of $87.5 million at June 30, 1992.
Fiscal 1995 Financial Results (GAAP Basis): Revenues and other sources
totaled $23,771.6 million, an increase of $1,135.0 million (0.5%) over the
prior fiscal year. The largest increase was $817.9 million in taxes which
represents a 5.6% 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%. 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%, 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% 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% 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.
Fiscal 1996 Financial Results (GAAP Basis): For fiscal 1996 the fund
balance was drawn down $53.1 million from the balance at the end of fiscal
1995 to $635.2 million. A planned draw down of the budgetary unappropriated
surplus during fiscal 1996 contributed to expenditures and other uses
exceeding revenues and other sources by $28.0 million. Consequently, the
unreserved fund balance declined by $61.1 million, reducing the balance to
$381.8 million at the end of fiscal 1996. Total revenues and other sources
increased by 8.7% for the fiscal year. Expenditures and other uses
increased by 8.6% for the fiscal year.
Fiscal 1996 Financial Results (Budgetary Basis): The unappropriated
surplus (prior to transfers to Tax Stabilization Reserve Fund) at the close
of the fiscal year for the General Fund was $183.8 million, $65.5 million
above estimate. From fiscal year appropriations, net expenditures and
encumbrances from commonwealth revenues, including $113.0 million of
supplemental appropriations but excluding pooled financing expenditures,
total $16,162.9 million. Expenditures exceeded available revenues and
lapses by $253.2 million. The difference was funded from a planned partial
drawdown of the $437.0 million fiscal year adjusted beginning unappropriated
surplus.
Transfers to the Tax Stabilization Reserve Fund from fiscal 1996
operations were $27.6 million. This amount represents the 15% of the fiscal
year ending unappropriated surplus transfer provided under current law.
With the addition of this transfer, the Tax Stabilization Reserve Fund
balance is over $215 million.
Fiscal 1997 Budget: The fiscal 1997 budget provides for expenditures
from commonwealth revenues of $16,375.8 million, a 0.6% increase over total
appropriations from commonwealth revenues in fiscal 1996. The fiscal 1997
budget is based on anticipated commonwealth revenues before refunds of
$16,744.5 million, an increase over actual fiscal 1996 revenues of 2.5%.
The revenue estimate for fiscal 1997 includes provision for a $15 million
tax credit program enacted with the fiscal 1997 budget for businesses
creating new jobs. Staggered corporation tax years cause fiscal 1997
revenues to continue to be affected by the business tax reductions enacted
during the past two completed fiscal years. These reductions, together with
the new job creation tax credit, cause revenue growth comparisons between
fiscal 1996 and fiscal 1997 to be understated. When taking into account the
effect of the recent tax changes, revenues are anticipated in the fiscal
1997 budget to increase at a rate of 3.0%. The fiscal 1997 revenue estimate
is based on a forecast of the national economy for real gross domestic
product to slow to a growth rate of 2.0% for 1996 and below 1.5% for 1997.
The expectation for slowing economic growth is based on an assumption that
the Federal Reserve Board does not cut interest rates and an assumption that
foreign economic growth is weak. The consequence of this economic scenario
is a U.S. economy with very low growth, slow gains in consumer spending,
declining inflation rates, but increasing unemployment which raises the
unemployment rate to over 6.0% by the end of 1996.
Increased authorized spending for fiscal 1997 is driven largely by
increased costs of the corrections and the probation and parole programs.
Continuation of the trend of a rapidly rising inmate population increases
operating costs for correctional facilities and requires the opening of new
facilities. The fiscal 1997 budget contains an appropriation increase in
excess of $110 million for these programs.
Actual commonwealth revenues for the fiscal year through January 1997
are $189.2 million over estimated levels. The higher than estimated
revenues have occurred generally because economic conditions in the nation
and the state have exceeded the projections used to project revenues.
Collections from corporate taxes, the sales tax, and the personal income tax
are all above estimate for the period. In a review of the trends for
revenue and expenditures for fiscal 1997 completed during January 1997 in
preparation of its fiscal 1998 budget proposal to the General Assembly, the
Commonwealth raised its estimate of commonwealth revenues for the fiscal
year by $194.5 million, to raise the fiscal year-over-year growth to 3.7%.
In that review the potential for additional appropriations for the fiscal
year in the net amount of $89.5 million was identified. Medical assistance
costs represent $85.0 million of the amount, largely to offset the portion,
not otherwise covered, of an increase to the federal participation rate
anticipated in the budget that did not occur. Based on these revisions and
estimated appropriation lapses of $100 million, the Commonwealth projects an
unappropriated surplus balance of $209 million on June 30, 1997, prior to a
projected $31.3 million transfer to the Tax Stabilization Reserve Fund.
Proposed Fiscal 1998 Budget: On February 4, 1997, the Governor
presented his proposed General Fund budget for fiscal 1998 to the General
Assembly. Revenue estimates in the proposed budget were developed using a
national economic forecast with projected annual growth rates below 2%.
Total commonwealth revenues before reductions for refunds and proposed tax
changes are estimated to be $17,339.2 billion, 2.4% above revised estimates
for fiscal 1997. Proposed appropriations against those revenues total
$16,915.7 million, a 2.7% increase over currently estimated fiscal 1997
appropriations.
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 $5,054.5 million at June 30, 1996.
Over the 10-year period ended June 30, 1996, total outstanding general
obligation debt increased at an annual rate of 1.1%.
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 currently has a total of $550
million of tax anticipation notes outstanding for the account of the General
Fund in fiscal 1997, which mature on June 30, 1997.
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, $60 million of bond anticipation notes are
authorized to be issued.
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 31, 1996: Delaware River Joint Toll Bridge
Commission ($53.9 million), Delaware River Port Authority ($523.8 million),
Pennsylvania Economic Development Financing Authority ($1,371.5 million),
Pennsylvania Energy Development Authority ($118.0 million), Pennsylvania
Higher Education Assistance Agency ($1,408.8 million), Pennsylvania Higher
Educational Facilities Authority ($2,667.1 million), Pennsylvania Industrial
Development Authority ($416.2 million), Pennsylvania Infrastructure
Investment Authority ($205.9 million), Pennsylvania Turnpike Commission
($1,205.8 million), Philadelphia Regional Port Authority ($61.1 million),
and the State Public School Building Authority ($324.0 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 ($2,357.9 million of revenue bonds as of
December 31, 1996), 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
($1.34 million of the loan principal was outstanding as of December 31,
1996).
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 1997); (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 judgment pending enactment by the legislature of
funding consistent with the opinion. The legislature has yet to consider
legislation implementing the judgment; (d) in November 1990, the ACLU
brought a class action suit on behalf of the inmates in thirteen
Commonwealth correctional institutions challenging confinement conditions
and including a variety of other allegations. 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 state and federal court
by an association of rural and small schools and several individual school
districts and parents challenging the constitutionality of the
Commonwealth's system for funding local school districts. The federal case
has been stayed pending resolution of the state case. The trial has not yet
been 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; 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 30, 1996.
PICA has issued $1,761,710,000 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 of the city as of June 30, 1996, showed a
surplus of approximately $118.5 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
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and 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.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for bonds in each of the generic rating categories
Aa, A, Baa, Ba and B. Moody's also provides numerical modifiers of 2 and 3
in each of these categories for bond issues in the health care, higher
education and other not-for-profit sectors; the modifier 1 indicates that
the issue ranks in the higher end of its generic rating category; the
modifier 2 indicates that the issue is in the mid-range of the generic
category; and the modifier 3 indicates that the issue is in the low end of
the generic 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.
_______________________________
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%).
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%).
DREYFUS 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; for the New Jersey Series
for the period from May 3, 1994 (commencement of operations)
to July 31, 1994, for each of the two years ended July 30,
1996, and for the nine month period from August 1, 1996 to
April 30, 1997.
Included in Part B of the Registration Statement:
Statement of Investments-- for the New
Jersey Series as of April 30, 1997
Statement of Assets and Liabilities-- for
the New Jersey Series as of April 30, 1997
Statement of Operations-- for the New
Jersey Series for the year ended July 31, 1996 and for
the nine months ended April 30, 1997.
Statement of Changes in Net Assets-- for
the New Jersey Series for each of the years ended July
31, 1995 and 1996 and for the nine months ended April
30, 1997.
Notes to Financial Statements
Report of Ernst & Young LLP, Independent
Auditors, for the New Jersey Series, dated June 5, 1997.
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.
(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.
(b) Certificate of Assistant Secretary.
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 August 21, 1996
______________ _____________________________
Shares of
beneficial interest,
par value $.001 per share Class A Class B Class C
Connecticut Series- 6,516 1,295 27
Florida Series- 4,920 588 4
Georgia Series- 207 461 4
Maryland Series- 6,492 1,660 3
Massachusetts Series- 1,660 148 1
Michigan Series- 4,597 590 6
Minnesota Series- 3,043 928 3
North Carolina Series- 1,156 1,306 1
Ohio Series- 5,938 1,371 3
Number of Record
Title of Class Holders as of August 21, 1996
______________ _____________________________
Shares of
beneficial interest,
par value of $.001 per share Class A Class B Class C
Pennsylvania Series- 6,282 2,725 6
Texas Series- 1,084 429 5
Virginia Series- 1,621 1,004 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) Dreyfus Premier Insured Municipal Bond Fund
82) Dreyfus Premier California Municipal Bond Fund
83) Dreyfus Premier Equity Funds, Inc.
84) Dreyfus Premier Global Investing, Inc.
85) Dreyfus Premier GNMA Fund
86) Dreyfus Premier Worldwide Growth Fund, Inc.
87) Dreyfus Premier Municipal Bond Fund
88) Dreyfus Premier New York Municipal Bond Fund
89) Dreyfus Premier State Municipal Bond Fund
90) Dreyfus Premier Strategic Growth Fund
91) Dreyfus 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 11th day of June, 1997.
DREYFUS 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 6/11/97
______________________________ Officer) and Treasurer
Marie E. Connolly
/s/Joseph F. Tower, III* Vice President and Assistant 6/11/97
______________________________ Treasurer (Principal Accounting
Joseph F. Tower, III and Financial Officer)
/s/Clifford L. Alexander, Jr.* Trustee 6/11/97
______________________________
Clifford L. Alexander, Jr.
/s/Peggy C. Davis* Trustee 6/11/97
______________________________
Peggy C. Davis
/s/Joseph S. DiMartino* Chaiman of the Board of 6/11/97
______________________________ Trustees
Joseph S. DiMartino
/s/Ernest Kafka* Trustee 6/11/97
______________________________
Ernest Kafka
/s/Saul B. Klaman* Trustee 6/11/97
______________________________
Saul B. Klaman
/s/Nathan Leventhal* Trustee 6/11/97
______________________________
Nathan Leventhal
*BY: __________________________
Elizabeth A. Bachman,
Attorney-in-Fact
INDEX OF EXHIBITS
__________________
ITEM PAGE
____ ____
(b) Exhibits:
(8)(a) Custody Agreement
(11) Consent of Independent Auditors
(17) Financial Data Schedule
(18) (a) Powers of Attorney of the Trustees and Officers
(b) Certificate of Assistant Secretary
CUSTODY AGREEMENT
Custody Agreement made as of January 17, 1990, as
revised as of October 31, 1996, between PREMIER STATE MUNICIPAL
BOND FUND, a business trust organized and existing under the laws
of the Commonwealth of Massachusetts, having its principal office
and place of business at 200 Park Avenue, New York, New York 10166
(hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New
York corporation authorized to do a banking business, having its
principal office and place of business at 90 Washington Street,
New York, New York 10286 (hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth the Fund and the Custodian agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Authorized Person" shall be deemed to include the
Treasurer, the Controller or any other person, whether or not any
such person is an Officer or employee of the Fund, duly authorized
by the Fund's Board to give Oral Instructions and Written
Instructions on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
2. "Available Balance" shall mean for any given day
during a calendar year the aggregate amount of Federal Funds held
in the Fund's custody account(s) at The Bank of New York, or its
successors, as of the close of such day or, if such day is not a
business day, the close of the preceding business day.
3. "Bankruptcy" shall mean with respect to a party such
party's making a general assignment, arrangement or composition
with or for the benefit of its creditors, or instituting or having
instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or the entry of an order for relief under
the Federal bankruptcy law or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or if a petition is presented for the winding
up or liquidation of the party or a resolution is passed for its
winding up or liquidation, or it seeks, or becomes subject to, the
appointment of an administrator, receiver, trustee, custodian or
other similar official for it or for all or substantially all of
its assets or its taking any action in furtherance of, or
indicating its consent to approval of, or acquiescence in, any of
the foregoing.
4. "Book-Entry System" shall mean the Federal Reserve/
Treasury book-entry system for United States and Federal agency
securities, its successor or successors and its nominee or
nominees.
5. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options, Futures
Contracts and Futures Contract Options entitling the holder, upon
timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified
underlying Securities.
6. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually received
by the Custodian and signed on behalf of the Fund by any two
Officers of the Fund.
7. "Clearing Member" shall mean a registered broker-
dealer which is a clearing member under the rules of O.C.C. and a
member of a national securities exchange qualified to act as a
custodian for an investment company, or any broker-dealer
reasonably believed by the Custodian to be such a clearing member.
8. "Collateral Account" shall mean a segregated account
so denominated and pledged to the Custodian as security for, and
in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in para-
graph 8 of Article V herein, or (b) any receipt described in
Article V or VIII herein.
9. "Consumer Price Index" shall mean the U.S. Consumer
Price Index, all items and all urban consumers, U.S. city average
1982-84 equals 100, as first published without seasonal adjustment
by the Bureau of Labor Statistics, the Department of Labor,
without regard to subsequent revisions or corrections by such
Bureau.
10. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the
writer thereof the specified Securities (excluding Futures
Contracts) which are owned by the writer thereof and subject to
appropriate restrictions.
11. "Depository" shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the Securities
and Exchange Commission, its successor or successors and its
nominee or nominees, provided the Custodian has received a
certified copy of a resolution of the Fund's Board specifically
approving deposits in DTC. The term "Depository" shall further
mean and include any other person authorized to act as a
depository under the Investment Company Act of 1940, as amended,
its successor or successors and its nominee or nominees,
specifically identified in a certified copy of a resolution of the
Fund's Board specifically approving deposits therein by the
Custodian.
12. "Earnings Credit" shall mean for any given day
during a calendar year the product of (a) the Federal Funds Rate
for such date minus .25%, and (b) 82% of the Available Balance.
13. "Federal Funds" shall mean immediately available
same day funds.
14. "Federal Funds Rate" shall mean, for any day, the
Federal Funds (Effective) interest rate so denominated as
published in Federal Reserve Statistical Release H.15 (519) and
applicable to such day and each succeeding day which is not a
business day.
15. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities, including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes, U.S.
Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
16. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
17. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
18. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant or
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant or Clearing Member, or
otherwise, in accordance with an agreement between the Fund, the
Custodian and a broker, dealer, futures commission merchant or
Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may
from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry on its books and records.
19. "Merger" shall mean with respect to a party, the
consolidation or amalgamation with, merger into, or transfer of
all or substantially all of such party's assets to, another
entity, where such party is not the surviving entity.
20. "Money Market Security" shall be deemed to include,
without limitation, debt obligations issued or guaranteed as to
principal and interest by the government of the United States or
agencies or instrumentalities thereof, commercial paper,
certificates of deposit and bankers' acceptances, repurchase and
reverse repurchase agreements with respect to the same and bank
time deposits, where the purchase and sale of such securities
ordinarily requires settlement in Federal funds on the same date
as such purchase or sale.
21. "O.C.C." shall mean Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its nominee
or nominees.
22. "Officers" shall be deemed to include the
President, any Vice President, the Secretary, the Treasurer, the
Controller, any Assistant Secretary, any Assistant Treasurer or
any other person or persons duly authorized by the Fund's Board to
execute any Certificate, instruction, notice or other instrument
on behalf of the Fund and listed in the Certificate annexed hereto
as Appendix B or such other Certificate as may be received by the
Custodian from time to time.
23. "Option" shall mean a Call Option, Covered Call
Option, Stock Index Option and/or a Put Option.
24. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Authorized Person or
from a person reasonably believed by the Custodian to be an
Authorized Person.
25. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder, upon
timely exercise and tender of the specified underlying Securities,
to sell such Securities to the writer thereof for the exercise
price.
26. "Reverse Repurchase Agreement" shall mean an
agreement pursuant to which the Fund sells Securities and agrees
to repurchase such Securities at a described or specified date and
price.
27. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
stock and other instruments or rights having characteristics
similar to common stocks, preferred stocks, debt obligations
issued by state or municipal governments and by public authorities
(including, without limitation, general obligation bonds, revenue
bonds and industrial bonds and industrial development bonds),
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing
rights to receive, purchase, sell or subscribe for the same, or
evidencing or representing any other rights or interest therein,
or any property or assets.
28. "Segregated Security Account" shall mean an account
maintained under the terms of this Agreement as a segregated
account, by recordation or otherwise, within the custody account
in which certain Securities and/or other assets of the Fund shall
be deposited and withdrawn from time to time in accordance with
Certificates received by the Custodian in connection with such
transactions as the Fund may from time to time determine.
29. "Series" shall mean (i) the Series of the Fund
specified on Appendix D hereto, or, where the context requires
each such Series, or (ii) if no Series are set forth on such
Appendix, the Fund.
30. "Shares" shall mean the shares of beneficial
interest of the Fund, each of which, in the case of a Fund having
Series, is allocated to a particular Series.
31. "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties agree to take or
make delivery of an amount of cash equal to a specified dollar
amount times the difference between the value of a particular
stock index at the close of the last business day of the contract
and the price at which the futures contract is originally struck.
32. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference between
the exercise price and the value of the index on the date of
exercise.
33. "Written Instructions" shall mean written
communications actually received by the Custodian from an
Authorized Person or from a person reasonably believed by the
Custodian to be an Authorized Person by telex or any other such
system whereby the receiver of such communications is able to
verify by codes or otherwise with a reasonable degree of certainty
the authenticity of the sender of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of all the Securities and moneys at any
time owned by the Fund during the period of this Agreement, except
that (a) if the Custodian fails to provide for the custody of any
of the Fund's Securities and moneys located or to be located
outside the United States in a manner satisfactory to the Fund,
the Fund shall be permitted to arrange for the custody of such
Securities and moneys located or to be located outside the United
States other than through the Custodian at rates to be negotiated
and borne by the Fund and (b) if the Custodian fails to continue
any existing sub-custodial or similar arrangements on
substantially the same terms as exist on the date of this
Agreement, the Fund shall be permitted to arrange for such or
similar services other than through the Custodian at rates to be
negotiated and borne by the Fund. The Custodian shall not charge
the Fund for any such terminated services after the date of such
termination.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter
set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to be
delivered to the Custodian all Securities and all moneys owned by
any Series, including cash received for the issuance of such
Series' shares, at any time during the period of this Agreement
and shall specify the Series, if any, to which the same are to be
specifically allocated. The Custodian will not be responsible for
such Securities and such moneys until actually received by it.
The Custodian will be entitled to reverse any credits made on a
Series' behalf where such credits have been previously made and
moneys are not finally collected. The Fund shall deliver to the
Custodian a certified resolution of the Fund's Board approving,
authorizing and instructing the Custodian on a continuous and on-
going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein and to utilize the Book-Entry System
to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of Securities collateral.
Prior to a deposit of Securities of a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of
the Fund's Board approving, authorizing and instructing the
Custodian on a continuous and on-going basis until instructed to
the contrary by a Certificate actually received by the Custodian
to deposit in the Depository all Securities eligible for deposit
therein and to utilize the Depository to the extent possible in
connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales
of Securities, loans of Securities, and deliveries and returns of
Securities collateral. Securities and moneys of such Series
deposited in either the Book-Entry System or the Depository will
be represented in accounts which include only assets held by the
Custodian for customers, including, but not limited to, accounts
in which the Custodian acts in a fiduciary or representative
capacity. Prior to the Custodian's accepting, utilizing and
acting with respect to Clearing Member confirmations for Options
and transactions in Options as provided in this Agreement, the
Custodian shall have received a certified resolution of the Fund's
Board approving, authorizing and instructing the Custodian on a
continuous and on-going basis, until instructed to the contrary by
a Certificate actually received by the Custodian, to accept,
utilize and act in accordance with such confirmations as provided
in this Agreement.
2. The Custodian shall credit to a separate account in
the name of the Fund for each Series all moneys received by it for
the account of the Fund, with respect to such Series. Money
credited to the separate account for a Series shall be disbursed
by the Custodian only:
(a) In payment for Securities purchased, as provided in
Article IV hereof;
(b) In payment of dividends or distributions, as
provided in Article XI hereof;
(c) In payment of original issue or other taxes, as
provided in Article XII hereof;
(d) In payment for Shares redeemed by it, as provided
in Article XII hereof;
(e) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the
Series account from which payment is to be made and the purpose
for which payment is to be made; or
(f) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian, as provided in Article
XV hereof.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary of all transfers to or from the account of each Series
during said day. Where Securities are transferred to the account
of a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a
fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on
the books of the Book-Entry System or the Depository. At least
monthly and from time to time, the Custodian shall furnish the
Fund with a detailed statement of the Securities and moneys held
for each Series under this Agreement.
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held for a Series,
which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by
the Custodian in that form; all other Securities held for a Series
may be registered in the name of such Series, in the name of any
duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the
Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository, any Securities which it
may hold for the account of a Series and which may from time to
time be registered in the name of such Series. The Custodian
shall hold all such Securities which are not held in the Book-
Entry System or in the Depository in a separate account in the
name of such Series physically segregated at all times from those
of any other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System
or the Depository with respect to Securities therein deposited,
shall with respect to all Securities held for each Series in
accordance with this Agreement:
(a) Collect all income due or payable and, in any
event, if the Custodian receives a written notice from the Fund
specifying that an amount of income should have been received by
the Custodian within the last 90 days, the Custodian will provide
a conditional payment of income within 60 days from the date the
Custodian received such notice, unless the Custodian reasonably
concludes that such income was not due or payable to the Fund,
provided that the Custodian may reverse any such conditional
payment upon its reasonably concluding that all or any portion of
such income was not due or payable, and provided further that the
Custodian shall not be liable for failing to collect on a timely
basis the full amount of income due or payable in respect of a
"floating rate instrument" or "variable rate instrument" (as such
terms are defined under Rule 2a-7 under the Investment Company Act
of l940, as amended) if it has acted in good faith, without
negligence or willful misconduct.
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice
of such call appears in one or more of the publications listed in
Appendix C annexed hereto, which may be amended at any time by the
Custodian upon five business days' prior notification to the Fund;
(c) Present for payment and collect the amount payable
upon all Securities which may mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as Custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws or
the laws or regulations of any other taxing authority now or
hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for
the account of each Series all rights and similar securities
issued with respect to any Securities held by the Custodian
hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System or
the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as
owner of any Securities may be exercised;
(b) Deliver any Securities held for the Series in
exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(c) Deliver any Securities held for the Series to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to evidence such
delivery;
(d) Make such transfers or exchanges of the assets of
the Series and take such other steps as shall be stated in said
order to be for the purpose of effectuating any duly authorized
plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this
Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, Option or Futures Contract Option until after it shall
have determined, or shall have received a Certificate from the
Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a
Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to such
availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures
Contracts, Options or Futures Contract Options by making payments
or deliveries specified in Certificates received by the Custodian
in connection with any such purchase, sale, writing, settlement or
closing out upon its receipt from a broker, dealer or futures
commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by
brokers, dealers, or futures commission merchants with respect to
such Futures Contracts, Options or Futures Contract Options, as
the case may be, confirming that such Security is held by such
broker, dealer or futures commission merchant, in book-entry form
or otherwise, in the name of the Custodian (or any nominee of the
Custodian) as custodian for the Fund, provided, however, that
payments to or deliveries from the Margin Account shall be made in
accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are
available, the Custodian shall, notwithstanding any provision in
this Agreement to the contrary, make payment for any Futures
Contract, Option or Futures Contract Option for which such
instruments or such certificates are available only against the
delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract
Option for which such instruments or such certificates are
available only against receipt by the Custodian of payment
therefor. Any such instrument or certificate delivered to the
Custodian shall be held by the Custodian hereunder in accordance
with, and subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND OTHER THAN OPTIONS,
FUTURES CONTRACTS, FUTURES CONTRACT OPTIONS AND REVERSE
REPURCHASE AGREEMENTS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of any Option, Futures Contract,
Futures Contract Option or Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each purchase
of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, a Certificate, Oral Instructions or Written
Instructions, specifying with respect to each such purchase: (a)
the Series to which the Securities purchased are to be
specifically allocated; (b) the name of the issuer and the title
of the Securities; (c) the number of shares or the principal
amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the
total amount payable upon such purchase; (g) the name of the
person from whom or the broker through whom the purchase was made,
and the name of the clearing broker, if any; and (h) the name of
the broker to which payment is to be made. The Custodian shall,
upon receipt of Securities purchased by or for such Series, pay
out of the moneys held for the account of such Series the total
amount payable to the person from whom, or the broker through
whom, the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Certificate, Oral
Instructions or Written Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option or Reverse Repurchase Agreement, the Fund shall
deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
Certificate, Oral Instructions or Written Instructions, specifying
with respect to each such sale: (a) the Series to which such
Securities sold were specifically allocated; (b) the name of the
issuer and the title of the Security; (c) the number of shares or
principal amount sold, and accrued interest, if any; (d) the date
of sale; (e) the sale price per unit; (f) the total amount payable
to such Series upon such sale; (g) the name of the broker through
whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom
the Securities are to be delivered. The Custodian shall deliver
the Securities upon receipt of the total amount payable to the
Fund for the account of such Series upon such sale, provided that
the same conforms to the total amount payable as set forth in such
Certificate, Oral Instructions or Written Instructions. Subject
to the foregoing, the Custodian may accept payment in such form as
shall be satisfactory to it, and may deliver Securities and
arrange for payment in accordance with the customs prevailing
among dealers in Securities.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the Series
to which the Option purchased is to be specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer
and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such
Option relates and the number of Stock Index Options purchased;
(d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund
for the account of such Series in connection with such purchase;
(h) the name of the Clearing Member through which such Option was
purchased; and (i) the name of the broker to whom payment is to be
made. The Custodian shall pay, upon receipt of a Clearing
Member's statement confirming the purchase of such Option held by
such Clearing Member for the account of the Custodian (or any duly
appointed and registered nominee of the Custodian) as custodian
for the Fund, out of moneys held for the account of such Series,
the total amount payable upon such purchase to the Clearing Member
through whom the purchase was made, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which the Option sold was specifically
allocated; (b) the type of Option (put or call); (c) the name of
the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index to
which such Option relates and the number of Stock Index Options
sold; (d) the date of sale; (e) the sale price; (f) the date of
settlement; (g) the total amount payable to the Fund for the
account of such Series upon such sale; and (h) the name of the
Clearing Member through which the sale was made. The Custodian
shall consent to the delivery of the Option sold by the Clearing
Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option
against payment to the Custodian of the total amount payable to
the Fund for the account of such Series, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Call Option: (a) the Series to which the Call
Option exercised was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call
Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount
to be paid by the Fund for the account of such Series upon such
exercise; and (g) the name of the Clearing Member through which
such Call Option was exercised. The Custodian shall, upon receipt
of the Securities underlying the Call Option which was exercised,
pay out of the moneys held for the account of such Series the
total amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the total
amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series to which the Put
Option exercised was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put
Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount
to be paid to the Fund for the account of such Series upon such
exercise; and (g) the name of the Clearing Member through which
such Put Option was exercised. The Custodian shall, upon receipt
of the amount payable upon the exercise of the Put Option, deliver
or direct the Depository to deliver the Securities, provided the
same conforms to the amount payable to the Fund for the account of
such Series as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series to which
the Stock Index Option exercised was specifically allocated;
(b) the type of Stock Index Option (put or call); (c) the number
of Options being exercised; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise price;
(g) the total amount to be received by the Fund for the account of
such Series in connection with such exercise; and (h) the Clearing
Member from which such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series to which the Covered Call Option written is to be
specifically allocated; (b) the name of the issuer and the title
and number of shares for which the Covered Call Option was written
and which underlie the same; (c) the expiration date; (d) the
exercise price; (e) the premium to be received by the Fund for the
account of such Series; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through which the
premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified
in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing
among Clearing Members dealing in Covered Call Options and shall
impose, or direct the Depository to impose, upon the underlying
Securities specified in the Certificate such restrictions as may
be required by such receipts. Notwithstanding the foregoing, the
Custodian has the right, upon prior written notification to the
Fund, at any time to refuse to issue any receipts for Securities
in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct the
Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series to which the Covered Call
Option exercised was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Covered
Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable
to the Fund for the account of such Series upon such delivery.
Upon the return and/or cancellation of any receipts delivered
pursuant to paragraph 6 of this Article, the Custodian shall
deliver, or direct the Depository to deliver, the underlying
Securities as specified in the Certificate for the amount to be
received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Put Option: (a) the Series to which the Put
Option written is to be specifically allocated; (b) the name of
the issuer and the title and number of shares for which the Put
Option is written and which underlie the same; (c) the expiration
date; (d) the exercise price; (e) the premium to be received by
the Fund for the account of such Series; (f) the date such Put
Option is written; (g) the name of the Clearing Member through
which the premium is to be received and to whom a Put Option
guarantee letter is to be delivered; (h) the amount of cash,
and/or the amount and kind of Securities, if any, to be deposited
in the Segregated Security Account; and (i) the amount of cash
and/or the amount and kind of Securities to be deposited into the
Collateral Account. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate,
issue a Put Option guarantee letter substantially in the form
utilized by the Custodian on the date hereof, and deliver the same
to the Clearing Member specified in the Certificate against
receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no
obligation to issue any Put Option guarantee letter or similar
document if it is unable to make any of the representations
contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which the Put Option exercised was specifically
allocated; (b) the name of the issuer and title and number of
shares subject to the Put Option; (c) the Clearing Member from
which the underlying Securities are to be received; (d) the total
amount payable by the Fund upon such delivery; (e) the amount of
cash and/or the amount and kind of Securities to be withdrawn from
the Collateral Account; and (f) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from the
Segregated Security Account. Upon the return and/or cancellation
of any Put Option guarantee letter or similar document issued by
the Custodian in connection with such Put Option, the Custodian
shall pay out of the moneys held for the account of such Series
the total amount payable to the Clearing Member specified in the
Certificate as set forth in such Certificate, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series to which the Stock Index Option written is to be
specifically allocated; (b) whether such Stock Index Option is a
put or a call; (c) the number of Options written; (d) the stock
index to which such Option relates; (e) the expiration date;
(f) the exercise price; (g) the Clearing Member through which such
Option was written; (h) the premium to be received by the Fund for
the account of such Series; (i) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Segregated Security Account; (j) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in the
Collateral Account; and (k) the amount of cash and/or the amount
and kind of Securities, if any, to be deposited in a Margin
Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into the
Segregated Security Account specified in the Certificate, and
either (1) deliver such receipts, if any, which the Custodian has
specifically agreed to issue, which are in accordance with the
customs prevailing among Clearing Members in Stock Index Options
and make the deposits into the Collateral Account specified in the
Certificate, or (2) make the deposits into the Margin Account
specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) the Series to which the Stock Index Option exercised was
specifically allocated; (b) such information as may be necessary
to identify the Stock Index Option being exercised; (c) the
Clearing Member through which such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and
whether such amount is to be paid by or to the Fund for the
account of such Series; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin
Account; and (f) the amount of cash and/or amount and kind of
Securities, if any, to be withdrawn from the Segregated Security
Account and the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Account.
Upon the return and/or cancellation of the receipt, if any,
delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs 6, 8 or 10 of
this Article in a transaction expressly designated as a "Closing
Purchase Transaction" in order to liquidate its position as a
writer of an Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Option
being purchased: (a) the Series to which the Option purchased is
to be specifically allocated; (b) that the transaction is a
Closing Purchase Transaction; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case
of a Stock Index Option, the stock index to which such Option
relates and the number of Options held; (d) the exercise price;
(e) the premium to be paid by the Fund for the account of such
Series; (f) the expiration date; (g) the type of Option (put or
call); (h) the date of such purchase; (i) the name of the Clearing
Member to which the premium is to be paid; and (j) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Collateral Account, a specified Margin Account
or the Segregated Security Account. Upon the Custodian's payment
of the premium and the return and/or cancellation of any receipt
issued pursuant to paragraphs 6, 8 or 10 of this Article with
respect to the Option being liquidated through the Closing
Purchase Transaction, the Custodian shall remove, or direct the
Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
13. Upon the expiration or exercise of, or consummation
of a Closing Purchase Transaction with respect to, any Option
purchased or written by the Fund and described in this Article,
the Custodian shall delete such Option from the statements
delivered to the Fund for the account of a Series pursuant to
paragraph 3 of Article III herein, and upon the return and/or
cancellation of any receipts issued by the Custodian, shall make
such withdrawals from the Collateral Account, the Margin Account
and/or the Segregated Security Account as may be specified in a
Certificate received in connection with such expiration, exercise,
or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Futures Contract (or with respect
to any number of identical Futures Contract(s)): (a) the Series
to which the Futures Contract entered into is to be specifically
allocated; (b) the category of Futures Contract (the name of the
underlying stock index or financial instrument); (c) the number of
identical Futures Contracts entered into; (d) the delivery or
settlement date of the Futures Contract(s); (e) the date the
Futures Contract(s) was (were) entered into and the maturity date;
(f) whether the Fund is buying (going long) or selling (going
short) on such Futures Contract(s); (g) the amount of cash and/or
the amount and kind of Securities, if any, to be deposited in the
Segregated Security Account; (h) the name of the broker, dealer or
futures commission merchant through which the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to
be paid and the name of the broker, dealer or futures commission
merchant to whom such amount is to be paid. The Custodian shall
make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement.
The Custodian shall make payment of the fee or commission, if any,
specified in the Certificate and deposit in the Segregated
Security Account the amount of cash and/or the amount and kind of
Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund for the account of a Series to a
broker, dealer or futures commission merchant with respect to an
outstanding Futures Contract shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer or futures commission merchant to the Fund
with respect to an outstanding Futures Contract shall be received
and dealt with by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement is
made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Series to which the
Futures Contract retained is to be specifically allocated; (b) the
Futures Contract; (c) with respect to a Stock Index Futures
Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (d) the broker,
dealer or futures commission merchant to or from which payment or
delivery is to be made or received; and (e) the amount of cash
and/or Securities to be withdrawn from the Segregated Security
Account. The Custodian shall make the payment or delivery
specified in the Certificate and delete such Futures Contract from
the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a Certificate
specifying: (a) the Series to which the offsetting Futures
Contract is to be specifically allocated; (b) the items of
information required in a Certificate described in paragraph 1 of
this Article, and (c) the Futures Contract being offset. The
Custodian shall make payment of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being
offset from the statements delivered to the Fund for the account
of such Series pursuant to paragraph 3 of Article III herein, and
make such withdrawals from the Segregated Security Account as may
be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract
Option: (a) the Series to which the Futures Contract Option
purchased is to be specifically allocated; (b) the type of Futures
Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option purchased;
(d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by
the Fund for the account of such Series upon such purchase; (h)
the name of the broker or futures commission merchant through
which such option was purchased; and (i) the name of the broker or
futures commission merchant to whom payment is to be made. The
Custodian shall pay the total amount to be paid upon such purchase
to the broker or futures commission merchant through whom the
purchase was made, provided that the same conforms to the amount
set forth in such Certificate.
2. Promptly after the sale of any Futures Contract
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to
which the Futures Contract Option sold was specifically allocated;
(b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the date of sale; (e) the sale price; (f) the
date of settlement; (g) the total amount payable to the Fund for
the account of such Series upon such sale; and (h) the name of the
broker or futures commission merchant through which the sale was
made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the
Custodian of the total amount payable to the Fund for the account
of such Series, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which the Futures Contract Option exercised was
specifically allocated; (b) the particular Futures Contract Option
(put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise;
(e) the name of the broker or futures commission merchant through
which the Futures Contract Option is exercised; (f) the net total
amount, if any, payable by the Fund; (g) the amount, if any, to be
received by the Fund for the account of such Series; and (h) the
amount of cash and/or the amount and kind of Securities to be
deposited in the Segregated Security Account. The Custodian shall
make the payments, if any, and the deposits, if any, into the
Segregated Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the
Series to which the Futures Contract Option written is to be
specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the expiration date;
(e) the exercise price; (f) the premium to be received by the Fund
for the account of such Series; (g) the name of the broker or
futures commission merchant through which the premium is to be
received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Segregated Security
Account. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits into the
Segregated Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly deliver
to the Custodian a Certificate specifying: (a) the Series to
which the Futures Contract Option exercised was specifically
allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract
Option; (d) the name of the broker or futures commission merchant
through which such Futures Contract Option was exercised; (e) the
net total amount, if any, payable to the Fund for the account of
such Series upon such exercise; (f) the net total amount, if any,
payable by the Fund for the account of such Series upon such
exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Segregated Security Account.
The Custodian shall, upon its receipt of the net total amount
payable to the Fund for the account of such Series, if any,
specified in such Certificate make the payments, if any, and the
deposits, if any, into the Segregated Security Account as
specified in the Certificate. The deposits, if any, to be made to
the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written
by the Fund and which is a Put Option is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which the Futures Contract Option exercised was
specifically allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying such
Futures Contract Option; (d) the name of the broker or futures
commission merchant through which such Futures Contract Option is
exercised; (e) the net total amount, if any, payable to the Fund
for the account of such Series upon such exercise; (f) the net
total amount, if any, payable by the Fund for the account of such
Series upon such exercise; and (g) the amount and kind of
Securities and/or cash to be withdrawn from or deposited in the
Segregated Security Account, if any. The Custodian shall, upon
its receipt of the net total amount payable to the Fund for the
account of such Series, if any, specified in the Certificate, make
the payments, if any, and the deposits, if any, into the
Segregated Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any,
shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a
writer of such Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to
which the Futures Contract Option purchased is to be specifically
allocated; (b) that the transaction is a closing transaction; (c)
the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the exercise price; (e) the premium to be
paid by the Fund for the account of such Series; (f) the
expiration date; (g) the name of the broker or futures commission
merchant to which the premium is to be paid; and (h) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Segregated Security Account. The Custodian
shall effect the withdrawals from the Segregated Security Account
specified in the Certificate. The withdrawals, if any, to be made
from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration or exercise of, or consummation
of a closing transaction with respect to, any Futures Contract
Option written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to para-
graph 3 of Article III herein, and (b) make such withdrawals from,
and/or, in the case of an exercise, such deposits into, the
Segregated Security Account as may be specified in a Certificate.
The deposits to and/or withdrawals from the Margin Account, if
any, shall be made by the Custodian in accordance with the terms
and conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sale, the Fund shall
deliver to the Custodian a Certificate specifying: (a) the Series
to which the short sale is to be specifically allocated; (b) the
name of the issuer and the title of the Security; (c) the number
of shares or principal amount sold, and accrued interest or
dividends, if any; (d) the dates of the sale and settlement; (e)
the sale price per unit; (f) the total amount credited to the Fund
for the account of such Series upon such sales, if any; (g) the
amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in
which such Margin Account has been or is to be established; (h)
the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in a Segregated Security Account; and (i) the
name of the broker through which such short sale was made. The
Custodian shall upon its receipt of a statement from such broker
confirming such sale and that the total amount credited to the
Fund upon such sale, if any, as specified in the Certificate is
held by such broker for the account of the Custodian (or any
nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the
Segregated Security Account specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing-out: (a)
the Series to which the short sale being closed-out was
specifically allocated; (b) the name of the issuer and the title
of the Security; (c) the number of shares or the principal amount,
and accrued interest or dividends, if any, required to effect such
closing-out to be delivered to the broker; (d) the dates of the
closing-out and settlement; (e) the purchase price per unit; (f)
the net total amount payable to the Fund for the account of such
Series upon such closing-out; (g) the net total amount payable to
the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Segregated
Security Account; and (j) the name of the broker through which the
Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund for the
account of such Series upon such closing-out and the return and/or
cancellation of the receipts, if any, issued by the custodian with
respect to the short sale being closed-out, pay out of the moneys
held for the account of the Series to the broker the net total
amount payable to the broker, and make the withdrawals from the
Margin Account and the Segregated Security Account, as the same
are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund, on behalf of a Series,
enters into a Reverse Repurchase Agreement with respect to
Securities and money held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate or in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate, Oral Instructions or Written Instructions specifying:
(a) the Series to which the Reverse Repurchase Agreement is to be
specifically allocated; (b) the total amount payable to the Fund
for the account of such Series in connection with such Reverse
Repurchase Agreement; (c) the broker or dealer through or with
which the Reverse Repurchase Agreement is entered; (d) the amount
and kind of Securities to be delivered by the Fund to such broker
or dealer; (e) the date of such Reverse Repurchase Agreement; and
(f) the amount of cash and/or the amount and kind of Securities,
if any, to be deposited in a Segregated Security Account in
connection with such Reverse Repurchase Agreement. The Custodian
shall, upon receipt of the total amount payable to the Fund
specified in the Certificate, Oral Instructions or Written
Instructions make the delivery to the broker or dealer, and the
deposits, if any, to the Segregated Security Account, specified in
such Certificate, Oral Instructions or Written Instructions.
2. Upon the termination of a Reverse Repurchase
Agreement described in paragraph 1 of this Article, the Fund shall
promptly deliver a Certificate or, in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate,
Oral Instructions or Written Instructions to the Custodian
specifying: (a) the Series to which the Reverse Repurchase
Agreement terminated was specifically allocated; (b) the Reverse
Repurchase Agreement being terminated; (c) the total amount
payable by the Fund for the account of such Series in connection
with such termination; (d) the amount and kind of Securities to be
received by the Fund for the account of such Series in connection
with such termination; (e) the date of termination; (f) the name
of the broker or dealer with or through which the Reverse
Repurchase Agreement is to be terminated; and (g) the amount of
cash and/or the amount and kind of Securities to be withdrawn from
the Segregated Security Account. The Custodian shall, upon
receipt of the amount and kind of Securities to be received by the
Fund specified in the Certificate, Oral Instructions or Written
Instructions, make the payment to the broker or dealer, and the
withdrawals, if any, from the Segregated Security Account,
specified in such Certificate, Oral Instructions or Written
Instructions.
ARTICLE X
CONCERNING MARGIN ACCOUNTS, SEGREGATED SECURITY
ACCOUNTS AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Segregated Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the amount of cash and/or the amount and
kind of Securities to be deposited in, or withdrawn from, the
Segregated Security Account. In the event that the Fund fails to
specify in a Certificate the designated Series, the name of the
issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian
into, or withdrawn from, a Segregated Securities Account, the
Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose benefit,
the account was established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by the
Custodian in any Collateral Account described herein. In
accordance with applicable law, the Custodian may enforce its lien
and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or
similar document or any receipt issued hereunder by the Custodian.
In the event the Custodian should realize on any such property net
proceeds which are less than the Custodian's obligations under any
Put Option guarantee letter or similar document or any receipt,
such deficiency shall be a debt owed the Custodian by the Fund
within the scope of Article XIII herein.
5. On each business day, the Custodian shall furnish
the Fund with respect to each Series a statement with respect to
each Margin Account in which money or Securities are held
specifying as of the close of business on the previous business
day: (a) the name of the Margin Account; (b) the amount and kind
of Securities held therein; and (c) the amount of money held
therein. The Custodian shall make available upon request to any
broker, dealer or futures commission merchant specified in the
name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each
business day in which cash and/or Securities are maintained in a
Collateral Account, the Custodian shall furnish the Fund with a
Statement with respect to such Collateral Account specifying the
amount of cash and/or the amount and kind of Securities held
therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to
the Custodian a Certificate or Written Instructions specifying the
then market value of the securities described in such statement.
In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put
Option, guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or
Securities to be deposited in such Collateral Account to eliminate
such deficiency.
ARTICLE XI
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. For each Series, the Fund shall furnish to the
Custodian a copy of the resolution of the Fund's Board, certified
by the Secretary or any Assistant Secretary, either (i) setting
forth the date of the declaration of a dividend or distribution,
the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount
payable per share to the shareholders of record as of that date
and the total amount payable to the Dividend Agent of the Fund on
the payment date, or (ii) authorizing the declaration of dividends
and distributions on a daily basis and authorizing the Custodian
to rely on Oral Instructions, Written Instructions or a
Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record
date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of
record as of that date and the total amount payable to the
Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions, Written Instructions or Certificate, as the
case may be, the Custodian shall pay out of the moneys held for
the account of the Series the total amount payable to the Dividend
Agent of the Fund.
ARTICLE XII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Series' Shares, the
Fund shall deliver to the Custodian a Certificate duly specifying:
(a) The number of Shares sold, trade date, and price;
and
(b) The amount of money to be received by the Custodian
for the sale of such Shares.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the account of such
Series.
3. Upon issuance of any Series' Shares in accordance
with the foregoing provisions of this Article, the Custodian shall
pay, out of the money held for the account of such Series, all
original issue or other taxes required to be paid by the Fund for
the account of such Series in connection with such issuance upon
the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
shall hereafter redeem any Series' Shares, the Fund shall furnish
to the Custodian a Certificate specifying:
(a) The number of Shares redeemed; and
(b) The amount to be paid for the Shares redeemed.
5. Upon receipt from the Transfer Agent of an advice
setting forth the number of a Series' Shares received by the
Transfer Agent for redemption and that such Shares are valid and
in good form for redemption, the Custodian shall make payment to
the Transfer Agent out of the moneys held for the account of such
Series of the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the
redemption of any of Series' Shares, whenever a Series' Shares are
redeemed pursuant to any check redemption privilege which may from
time to time be offered by the Fund, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of an
advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with the
check redemption procedure, honor the check presented as part of
such check redemption privilege out of the money held in the
account of the Fund for such purposes.
ARTICLE XIII
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion
advance funds on behalf of a Series which results in an overdraft
because the moneys held by the Custodian for the account of such
Series shall be insufficient to pay the total amount payable upon
a purchase of Securities as set forth in a Certificate or Oral
Instructions issued pursuant to Article IV, or which results in an
overdraft in the account for such Series for some other reason, or
if a Series is for any other reason indebted to the Custodian
(except a borrowing for investment or for temporary or emergency
purposes using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this
Article XIII), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to such Series payable on demand
and shall bear interest from the date incurred at a rate per annum
(based on a 360-day year for the actual number of days involved)
equal to the Federal Funds Rate plus l/2%, such rate to be
adjusted on the effective date of any change in such Federal Funds
Rate but in no event to be less than 6% per annum, except that any
overdraft resulting from an error by the Custodian shall bear no
interest. Any such overdraft or indebtedness shall be reduced by
an amount equal to the total of all amounts due such Series which
have not been collected by the Custodian on behalf of such Series
when due because of the failure of the Custodian to make timely
demand or presentment for payment. In addition, the Fund hereby
agrees that the Custodian shall have a continuing lien and
security interest in and to any property at any time held by it
for the benefit of such Series or in which such Series may have an
interest which is then in the Custodian's possession or control or
in possession or control of any third party acting in the
Custodian's behalf. The Fund authorizes the Custodian, in its
sole discretion, at any time to charge any such overdraft or
indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the
Custodian's books. For purposes of this Section 1 of
Article XIII, "overdraft" shall mean a negative Available Balance.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for
investment or for temporary or emergency purposes using Securities
in a Series' portfolio as collateral for such borrowings, a notice
or undertaking in the form currently employed by any such bank
setting forth the amount which such bank will loan to the Fund
against delivery of a stated amount of collateral. The Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to each such borrowing: (a) the Series to which the
borrowing relates; (b) the name of the bank; (c) the amount and
terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund,
or other loan agreement; (d) the time and date, if known, on which
the loan is to be entered into; (e) the date on which the loan
becomes due and payable; (f) the total amount payable to the Fund
for the account of such Series on the borrowing date; (g) the
market value of Securities to be delivered as collateral for such
loan, including the name of the issuer, the title and the number
of shares or the principal amount of any particular Securities;
and (h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such loan
is in conformance with the Investment Company Act of 1940, as
amended, and the Fund's prospectus. The Custodian shall deliver
on the borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or
loan agreement. The Custodian shall deliver such Securities as
additional collateral as may be specified in a Certificate to
collateralize further any transaction described in this paragraph.
The Fund shall cause all Securities released from collateral
status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may
be tendered to it. In the event that the Fund fails to specify in
a Certificate the Series, the name of the issuer, the title and
number of shares or the principal amount of any particular
Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any
Securities.
ARTICLE XIV
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. If the Fund is permitted by the terms of its
organization documents and as disclosed in its most recent and
currently effective prospectus to lend the portfolio Securities of
a Series, within 24 hours after each loan of portfolio Securities
the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan: (a) the
Series to which the Securities to be loaned are specifically
allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount
loaned; (d) the date of loan and delivery; (e) the total amount to
be delivered to the Custodian against the loan of the Securities,
including the amount of cash collateral and the premium, if any,
separately identified; and (f) the name of the broker, dealer or
financial institution to which the loan was made. The Custodian
shall deliver the Securities thus designated to the broker, dealer
or financial institution to which the loan was made upon receipt
of the total amount designated as to be delivered against the loan
of Securities. The Custodian may accept payment in connection
with a delivery otherwise than through the Book-Entry System or
Depository only in the form of a certified or bank cashier's check
payable to the order of the Fund or the Custodian drawn on New
York Clearing House funds and may deliver Securities in accordance
with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
Series to which the Securities to be returned are specifically
allocated; (b) the name of the issuer and the title of the
Securities to be returned; (c) the number of shares or the
principal amount to be returned; (d) the date of termination; (e)
the total amount to be delivered by the Custodian (including the
cash collateral for such Securities minus any offsetting credits
as described in said Certificate); and (f) the name of the broker,
dealer or financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned
from the broker, dealer, or financial institution to which such
Securities were loaned and upon receipt thereof shall pay, out of
the moneys held for the account of the Series specified in the
Certificate, the total amount payable upon such return of
Securities as set forth in the Certificate.
ARTICLE XV
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the
Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to
act or otherwise, either hereunder or under any Margin Account
Agreement, except for any such loss or damage arising out of its
own negligence or willful misconduct. The Custodian may, with
respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of
counsel to the Fund or of its own counsel, at the expense of the
Fund, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to the Fund for any loss
or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, misfeasance or
willful misconduct on the part of the Custodian or any of its
employees or agents.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into, and
shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount
paid or received therefor;
(b) The legality of the issue or sale of any of the
Fund's Shares, or the sufficiency of the amount to be received
therefor;
(c) The legality of the redemption of any of the Fund's
Shares, or the propriety of the amount to be paid therefor;
(d) The legality of the declaration or payment of any
dividend by the Fund;
(e) The legality of any borrowing by the Fund using
Securities as collateral;
(f) The legality of any loan of portfolio Securities
pursuant to Article XIV of this Agreement, nor shall the Custodian
be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer or financial
institution or held by it at any time as a result of such loan of
portfolio Securities of the Fund is adequate collateral for the
Fund against any loss it might sustain as a result of such loan.
The Custodian specifically, but not by way of limitation, shall
not be under any duty or obligation periodically to check or
notify the Fund that the amount of such cash collateral held by it
for the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund. In
addition, the Custodian shall be under no duty or obligation to
see that any broker, dealer or financial institution to which
portfolio Securities of the Fund are lent pursuant to Article XIV
of this Agreement makes payment to it of any dividends or interest
which are payable to or for the account of the applicable Series
of the Fund during the period of such loan or at the termination
of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are
not paid and received when due; or
(g) The sufficiency or value of any amounts of money
and/or Securities held in any Margin Account, Segregated Security
Account or Collateral Account in connection with transactions by
the Fund. In addition, the Custodian shall be under no duty or
obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be
entitled to receive from such broker, dealer, futures commission
merchant or Clearing Member, to see that any payment received by
the Custodian from any broker, dealer, futures commission merchant
or Clearing Member is the amount the Fund is entitled to receive,
or to notify the Fund of the Custodian's receipt or non-receipt of
any such payment; provided however that the Custodian, upon the
Fund's written request, shall, as Custodian, demand from any
broker, dealer, futures commission merchant or Clearing Member
identified by the Fund the payment of any variation margin payment
or similar payment that the Fund asserts it is entitled to receive
pursuant to the terms of a Margin Account Agreement or otherwise
from such broker, dealer, futures commission merchant or Clearing
Member.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented by
any check, draft or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls,
conversions, exchange, offers, tenders, interest rate changes or
similar matters relating to Securities held in the Depository,
unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in the
Depository which may mature or be redeemed, retired, called or
otherwise become payable. However, upon receipt of a Certificate
from the Fund of an overdue amount on Securities held in the
Depository, the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any
action, suit or proceeding in respect to any Securities held by
the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount due
to the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent of
the Fund of any amount paid by the Custodian to the Transfer Agent
of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or
obligation to take action to effect collection of any amount, if
the Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
7. The Custodian may appoint one or more banking
institutions as Depository or Depositories or as Sub-Custodian or
Sub-Custodians, including, but not limited to, banking
institutions located in foreign countries, of Securities and
moneys at any time owned by the Fund, upon terms and conditions
approved in the Certificate, which shall, if requested by the
Custodian, be accompanied by an approving resolution of the Fund's
Board adopted in accordance with Rule 17f-5 under the Investment
Company Act of 1940, as amended. Notwithstanding anything to the
contrary contained in this Agreement, the Custodian shall hold
harmless and indemnify the Fund from and against any losses,
actions, claims, demands, expenses and proceedings, including
counsel fees, that occur as a result of any act or omission of any
Foreign Sub-Custodian or Depository with respect to the
safekeeping of moneys and securities of the Fund.
8. The Custodian shall not be under any duty or
obligation to ascertain whether any Securities at any time
delivered to or held by it for the account of the Fund are such as
properly may be held by the Fund under the provisions of its
organization documents.
9. (a) The Custodian shall be entitled to receive and
the Fund agrees to pay to the Custodian all reasonable out-of-
pocket expenses and such compensation and fees as are specified on
Schedule A hereto. The Custodian shall not deem amounts payable
in respect of foreign custodial services to be out-of-pocket
expenses, it being the parties' intention that all fees for such
services shall be as set forth on Schedule B hereto and shall be
provided for the term of this Agreement without any automatic or
unilateral increase. The Custodian shall have the right to
unilaterally increase the figures on Schedule A on or after
March 1, 1997 and on or after each succeeding March 1 thereafter
by an amount equal to 50% of the increase in the Consumer Price
Index for the calendar year ending on the December 31 immediately
preceding the calendar year in which such March 1 occurs,
provided, however, that during each such annual period commencing
on a March 1, the aggregate increase during such period shall not
be in excess of 10%. Any increase by the Custodian shall be
specified in a written notice delivered to the Fund at least
thirty days prior to the effective date of the increase. The
Custodian may charge such compensation and any expenses incurred
by the Custodian in the performance of its duties pursuant to such
agreement against any money held by it for the account of the
Fund. The Custodian shall also be entitled to charge against any
money held by it for the account of the Fund the amount of any
loss, damage, liability or expense, including counsel fees, for
which it shall be entitled to reimbursement under the provisions
of this Agreement. The expenses which the Custodian may charge
against the account of the Fund include, but are not limited to,
the expenses of Sub-Custodians and foreign branches of the
Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the
Fund.
(b) The Fund shall receive a credit for each
calendar month against such compensation and fees of the Custodian
as may be payable by the Fund with respect to such calendar month
in an amount equal to the aggregate of its Earnings Credit for
such calendar month. In no event may any Earnings Credits be
carried forward to any fiscal year other than the fiscal year in
which it was earned, or, unless permitted by applicable law,
transferred to, or utilized by, any other person or entity,
provided that any such transferred Earnings Credit can be used
only to offset compensation and fees of the Custodian for services
rendered to such transferee and cannot be used to pay the
Custodian's out-of-pocket expenses. For purposes of this sub-
section (b), the Fund is permitted to transfer Earnings Credits
only to The Dreyfus Corporation, its affiliates and/or any
investment company now or in the future for which The Dreyfus
Corporation or any of its affiliates acts as the sole investment
adviser. For purposes of this sub-section (b), a fiscal year
shall mean the twelve-month period commencing on the effective
date of this Agreement and on each anniversary thereof.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by the
Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions and any Written Instructions actually received
by the Custodian pursuant to Article IV or XI hereof. The Fund
agrees to forward to the Custodian a Certificate or facsimile
thereof, confirming such Oral Instructions or Written Instructions
in such manner so that such Certificate or facsimile thereof is
received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business of the same day that such Oral
Instructions or Written Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions
are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions
hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions, provided such instructions reasonably appear to have
been received from an Authorized Person.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property of
the Fund. Such books and records shall be prepared and maintained
as required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access
to such books and records during the Custodian's normal business
hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian to the
Fund or the Fund's authorized representative at the Fund's
expense.
13. The Custodian shall provide the Fund with any
report obtained by the Custodian on the system of internal
accounting control of the Book-Entry System or the Depository, or
O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims, losses
and demands whatsoever, including attorney's fees, howsoever
arising or incurred because of or in connection with the
Custodian's payment or non-payment of checks pursuant to paragraph
6 of Article XII as part of any check redemption privilege program
of the Fund, except for any such liability, claim, loss and demand
arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this
Agreement, the Custodian may deliver and receive Securities, and
receipts with respect to such Securities, and arrange for payments
to be made and received by the Custodian in accordance with the
customs prevailing from time to time among brokers or dealers in
such Securities.
16. The Custodian shall have no duties or responsi-
bilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
ARTICLE XVI
TERMINATION
1. (a) Any termination may be effected only by the
terminating party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than two hundred seventy (270) days after the date of giving of
such notice.
(b) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its obligations
under this Agreement and such breach has remained uncured for a
period of thirty days after the Custodian's receipt from the Fund
of written notice specifying such breach.
(c) Either party, immediately upon written notice
to the other party, may terminate this Agreement upon the Merger
or Bankruptcy of the other party.
(d) The Fund may at any time terminate this
Agreement if the Custodian has materially breached its obligations
under the "Amendment to Transfer Agency Agreements" dated August
18, 1989 and has not cured such breach as promptly as practicable
and in any event within seven days of its receipt of written
notice of such breach, provided that the Custodian shall not be
permitted to cure any such material breach arising from the
willful misconduct of the Custodian.
In the event notice of termination is given by the Fund,
it shall be accompanied by a copy of a resolution of the Fund's
Board, certified by the Secretary or any Assistant Secretary,
electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event notice of termination is
given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution
of its Board, certified by the Secretary or any Assistant
Secretary, designating a successor custodian or custodians. In
the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. Upon the date set forth in such notice,
this Agreement shall terminate and the Custodian shall, upon
receipt of a notice of acceptance by the successor custodian, on
that date deliver directly to the successor custodian all
Securities and moneys then owned by the Fund and held by it as
Custodian, after deducting all fees, expenses and other amounts
for the payment or reimbursement of which it shall then be
entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding paragraph,
the Fund shall, upon the date specified in the notice of
termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and
moneys then owned by the Fund, be deemed to be its own custodian,
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in the Book-Entry System, in any
Depository or by a Clearing Member which cannot be delivered to
the Fund, to hold such Securities hereunder in accordance with
this Agreement.
ARTICLE XVII
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate
setting forth the names of the present Authorized Persons. The
Fund agrees to furnish to the Custodian a new Certificate in
similar form in the event that any such present Authorized Person
ceases to be an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until
such new Certificate shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered Certificate.
2. Annexed hereto as Appendix B is a Certificate signed
by two of the present Officers of the Fund setting forth the names
of the present Officers of the Fund. The Fund agrees to furnish
to the Custodian a new Certificate in similar form in the event
any such present Officer ceases to be an Officer of the Fund, or
in the event that other or additional Officers are elected or
appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions
of this Agreement upon the signatures of the Officers as set forth
in the last delivered Certificate.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, shall be sufficiently given if addressed to the
Custodian and mailed or delivered to it at its offices at 90
Washington Street, 13th Floor, New York, New York 10286, or at
such other place as the Custodian may from time to time designate
in writing.
4. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Fund,
shall be sufficiently given if addressed to the Fund and mailed or
delivered to it at its offices at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or at such other place as the Fund
may from time to time designate in writing.
5. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the same formality as this Agreement and approved by a resolution
of the Fund's Board.
6. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of the
Fund, authorized or approved by a resolution of its Board.
7. This Agreement shall be construed in accordance with
the laws of the State of New York.
8. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
9. This Agreement has been executed on behalf of the
Fund by the undersigned officer of the Fund. The obligations of
this Agreement shall only be binding upon the assets and property
of the Fund and shall not be binding upon any trustee, officer or
shareholder of the Fund individually.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers, thereunto
duly authorized, as of the day and year first above written.
PREMIER STATE MUNICIPAL BOND FUND
By:
Attest:
THE BANK OF NEW YORK
By:
Attest:
Appendix A
PREMIER STATE MUNICIPAL BOND FUND
AUTHORIZED SIGNATORIES:
CASH ACCOUNT AND/OR CUSTODIAN ACCOUNT
FOR PORTFOLIO SECURITIES TRANSACTIONS
Group I Group II
Phyllis Meiner, Paul R.
Casti, Jr., Thomas J.
Durante, Jean Farley,
Gregory S. Gruber, Paul
T. Molloy, Jeffrey N.
Nachman, James M.
Windels, Michael
Condon, Richard
Cassaro, Lori McNab,
Stephen Powanda and
Laura Sanderson
Paul R. Casti, Jr.
Jeffrey N. Nachman
Christopher Condron
Joseph I. Connolly
Thomas J. Durante
Gregory S. Gruber
James M. Windels
Paul T. Molloy
Jean Farley
William T. Sandalls, Jr.
Cash Account
1. Fees payable to The Bank of New York pursuant to written
agreement with the Fund for services rendered in its capacity
as Custodian or agent of the Fund, or to Dreyfus Transfer, Inc.
in its capacity as Transfer Agent or agent of the Fund:
Two (2) signatures required, one of which must be from
Group II, except that no individual shall be authorized to
sign more than once.
2. Other expenses of the Fund, $5,000 and under:
Any combination of two (2) signatures from either Group I
or Group II, or both such Groups, except that no
individual shall be authorized to sign more than once.
3. Other expenses of the Fund, over $5,000 but not over $25,000:
Two (2) signatures required, one of which must be from
Group II, except that no individual shall be authorized to
sign more than once.
4. Other expenses of the Fund, over $25,000:
Two (2) signatures required, one from Group I or Group II,
including any one of the following: Paul R. Casti, Jr.,
Christopher Condron, James M. Windels, Jeffrey N. Nachman,
Joseph I. Connolly or William T. Sandalls, Jr., except
that no individual shall be authorized to sign more than
once.
Custodian Account for Portfolio Securities Transactions
Two (2) signatures required from any of the following:
Joseph I. Connolly, Paul R. Casti, Jr., Thomas J.
Durante, Jean Farley, Gregory S. Gruber, Paul T.
Molloy, Jeffrey N. Nachman, James M. Windels, Michael
Condron, Richard Cassaro, Alan Brown, Linda Lionetti,
Michelle Pressa, Richard Wiener, Douglas Christensen,
Lori McNab, Joseph Bruno, Vincent Grolli, Elizabeth
McDonough, Stephen Powanda and all current Portfolio
Managers.
Appendix B
PREMIER STATE MUNICIPAL BOND FUND
The undersigned Officers of the Fund do hereby certify
that the following individuals, whose specimen signatures are on
file with The Bank of New York, have been duly elected or appointed
by the Fund's Board to the position set forth opposite their names
and have qualified therefor:
Name Position
Marie E. Connolly President and Treasurer
John E. Pelletier Vice President and Secretary
Elizabeth A. Keeley Vice President and Assistant
Secretary
Douglas C. Conroy Vice President and Assistant
Secretary
Richard W. Ingram Vice President and Assistant
Secretary
Mark A. Karpe Vice President and Assistant
Secretary
Joseph S. Tower, III Vice President and Assistant
Treasurer
Mary A. Nelson Vice President and Assistant
Treasurer
Michael S. Petrucelli Vice President and Assistant
Treasurer
Elizabeth A. Keeley, Douglas C. Conroy,
Vice President and Assistant Vice President and Assistant
Secretary Secretary
Appendix C
The following are designated publications for purposes of
paragraph 5(b) of Article III:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
The New York Times
Standard & Poor's Called Bond Record
The Wall Street Journal
Appendix D
Name of Series
Connecticut Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
North Carolina Series
Ohio Series
Pennsylvania Series
Texas Series
Virginia Series
Schedule A
The fees payable to the Custodian with respect to
securities held in domestic custody are annexed hereto.
DOMESTIC CUSTODY FEES
CUSTODY
HOLDING FEES TRANSACTION FEES
1 BP FIRST 500MM BOOK
1/2 BP ON NEXT 1.5B $7 PER
1/4 ON EXCESS
GLOBAL PHYSICAL
REVISED FEES BASED ON COUNTRY $13 PER
PAYDOWNS
$6 PER
NOTE: NO CHANGE TO HOLDING
FEE FOR THE FOLLOWING
TWO (2 FUNDS)
THE FOLLOWING TRANSACTIONS
DREYFUS LIQUID ASSETS, INC. REMAIN THE SAME
DREYFUS AMERICA EURO CD $40.00
PHYSICAL PUTS $20.00
SUB CUST. BOOK $20.00
TIME DEPOSITS $20.00
PRINCIPAL PAYM'TS $15.00
PTC SETTLEMENT $15.00
GNMA $10.00
MARGIN $5.00
FUTURES $5.00
OPTIONS $5.00
GLOBAL
REVISED FEES BASED ON COUNTRY
EARNINGS CREDIT BASED ON 100% OF CUSTODY BALANCES,
LESS DEPOSIT RESERVE REQUIREMENTS AND F.D.I.C. INSURANCE
Schedule B
The fees payable to the Custodian with respect to
securities held in foreign custody are annexed hereto.
GLOBAL CUSTODY FEE PROPOSAL
THE DREYFUS FAMILY OF FUNDS
SAFEKEEPING TRANSACTIONS
ARGENTINA 20 b.p. $ 70
AUSTRALIA 7 b.p. 50
AUSTRIA 7 b.p. 60
BANGLADESH 40 b.p. 170
BELGIUM 7 b.p. 75
BRAZIL 45 b.p. 35
CANADA 7 b.p. 15
CHILE 35 b.p. 65
CHINA 25 b.p. 50
COLOMBIA 50 b.p. 160
CZECH REPUBLIC 25 b.p. 55
DENMARK 7 b.p. 65
EUROMARKET/CEDEL 5 b.p. 15
FINLAND 10 b.p. 70
FRANCE 7 b.p. 70
GERMANY 7 b.p. 35
GREECE 30 b.p. 145
HONG KONG 12 b.p. 80
HUNGARY 65 b.p. 200
INDIA 50 b.p. 175
INDONESIA 12 b.p. 75
IRELAND 7 b.p. 50
ISRAEL 75 b.p. 55
ITALY 7 b.p. 75
JAPAN 7 b.p. 15
LUXEMBOURG 6.5 b.p. 75
MALAYSIA 13 b.p. 100
MEXICO 12 b.p. 60
NETHERLANDS 7 b.p. 15
NEW ZEALAND 7 b.p. 50
NORWAY 7 b.p. 85
PAKISTAN 40 b.p. 150
PERU 65 b.p. 175
PHILIPPINES 12.5 b.p. 150
POLAND 50 b.p. 150
PORTUGAL 25 b.p. 220
SINGAPORE 10 b.p. 100
SOUTH AFRICA 7 b.p. 50
SOUTH KOREA 13 b.p. 25
SPAIN 7 b.p. 40
SRI LANKA 20 b.p. 60
SWEDEN 7 b.p. 50
SWITZERLAND 7 b.p. 75
TAIWAN 15 b.p. 140
THAILAND 7 b.p. 50
TURKEY 25 b.p. 60
UNITED KINGDOM 7 b.p. 35
URUGUAY * 55 b.p. 75
VENEZUELA 45 b.p. 75
* $4,000 Per Year, Per Account.
OUT-OF-POCKET EXPENSES
TELEX, TELEPHONE, SECURITIES REGISTRATION, ETC., ARE IN ADDITION TO
THE ABOVE.
(..continued)
0421451.01
- -40-
0421451.01
0421451.01
GLOBAL CUSTODY FEE PROPOSAL
THE DREYFUS FAMILY OF FUNDS
SAFEKEEPING TRANSACTIONS
0421451.01
0421451.01
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 report
dated June 5, 1997, in this Registration Statement (Form N-1A 33-10238)
of Dreyfus Premier State Municipal Bond Fund - New Jersey Series.
ERNST & YOUNG LLP
New York, New York
June 11, 1997
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (171)
<DISTRIBUTIONS-OF-GAINS> (102)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26
<NUMBER-OF-SHARES-REDEEMED> (43)
<SHARES-REINVESTED> 13
<NET-CHANGE-IN-ASSETS> (319)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 145
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 39
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107
<AVERAGE-NET-ASSETS> 8975
<PER-SHARE-NAV-BEGIN> 12.79
<PER-SHARE-NII> .250
<PER-SHARE-GAIN-APPREC> .070
<PER-SHARE-DIVIDEND> (.250)
<PER-SHARE-DISTRIBUTIONS> (.140)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.72
<EXPENSE-RATIO> .017
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806176
<NAME> PREMIER STATE MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 015
<NAME> NEW JERSEY SERIES-CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 12885
<INVESTMENTS-AT-VALUE> 13119
<RECEIVABLES> 170
<ASSETS-OTHER> 572
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13861
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 52
<TOTAL-LIABILITIES> 52
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13575
<SHARES-COMMON-STOCK> 1
<SHARES-COMMON-PRIOR> 1
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 234
<NET-ASSETS> 6
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 386
<OTHER-INCOME> 0
<EXPENSES-NET> 107
<NET-INVESTMENT-INCOME> 279
<REALIZED-GAINS-CURRENT> 12
<APPREC-INCREASE-CURRENT> 72
<NET-CHANGE-FROM-OPS> 363
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (319)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 145
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 39
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 107
<AVERAGE-NET-ASSETS> 6
<PER-SHARE-NAV-BEGIN> 12.78
<PER-SHARE-NII> .230
<PER-SHARE-GAIN-APPREC> .070
<PER-SHARE-DIVIDEND> (.230)
<PER-SHARE-DISTRIBUTIONS> (.140)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.71
<EXPENSE-RATIO> .020
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
J35-030-064-023-4 (MW)
Item 24.(b)
Other
Exhibits (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Elizabeth A.
Keeley Marie E. Connolly, Richard W. Ingram, Mark A. Karpe and John E.
Pelletier and each of them, with full power to act without the other, his or
heretrue and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or here and in his or her name, place
stead, in any all capacities (until revoked in writing) to sign any and all
amendments to the Registration Statement of Dreyfus Premier State Municipal
Bond Fund (including post-effective amendments and amendments thereto), and
to file the same , with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, grating
unto said attorneys-in-fact and agents, and each of the, fund power and
authority to do and perform each and every act and thing ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereto.
/s/Clifford L. Alexander, Jr. November 7, 1996
- -------------------------------
Clifford L. Alexander, Jr.
/s/Peggy C. Davis November 7, 1996
- -------------------------------
Peggy C. Davis
/s/Joseph S. DiMartino November 7, 1996
- -------------------------------
Joseph S. DiMartino
/s/Ernst Kafka November 7, 1996
- -------------------------------
Ernst Kafka
/s/Saul B. Klaman November 7, 1996
- -------------------------------
Saul B. Klaman
/s/Nathan Leventhal November 7, 1996
- -------------------------------
Nathan Leventhal
J34-030-064-023-4 (MW)
ITEM 24. (b)
OTHER EXHIBIT (B)
DREYFUS PREMIER STATE MUNICIPAL BOND FUND
Certificate of Assistant Secretary
The undersigned, Elizabeth A. Keeley, Vice President and Assistant
Secretary of Dreyfus Premier State Municipal Bond Fund (the "Fund"), hereby
certifies that set forth below is a copy of the resolution adopted by the
Fund's Board authorizing the signing by Elizabeth A. Keeley, Marie E.
Connolly, Richard W. Ingram, Mark A. Karpe and John Pelletier on behalf of
the proper officers of the Fund pursuant to a power of attorney:
RESOLVED, that the Registration Statement and any and all amendments
and supplements thereto, may be signed by any one of Elizabeth A.
Keeley, Marie E. Connolly, Richard W. Ingram, Mark A. Karpe and John
Pelletier as the attorney-in-fact for the proper officers of the Fund,
with full power of substitution and resubstitution; and that the
appointment of each of such persons as such a-in-fact hereby is
authorized and approved; and that such power and authority to do and
perform each and every act and thing requisite and necessary to be done
in connection with such Registration Statement and any and all
amendments and supplements thereto, as fully to all intents and
purposes as the officer, for whom he or she is acting as attorney-in-
fact, might or could do in person.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of the Fund on June 11, 1997.
-------------------
Elizabeth A. Keeley
Vice President and
Assistant Secretary
