File Nos. 33-10238
811-4906
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. 30 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 30 [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)
----
On August 28, 1998 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.
----
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 7
4 General Description of Registrant 31, 53
5 Management of the Fund 36
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 53
7 Purchase of Securities Being Offered 38
8 Redemption or Repurchase 43
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-45
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-20
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-35
18 Capital Stock and Other Securities B-45
19 Purchase, Redemption and Pricing B-23, B-28
of Securities Being Offered B-32
20 Tax Status B-33
21 Underwriters B-23
22 Calculations of Performance Data B-36
23 Financial Statements B-46
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-12
30 Location of Accounts and Records C-15
31 Management Services C-15
32 Undertakings C-15
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
_______________________________________________________________________________
PROSPECTUS AUGUST 28, 1998
DREYFUS PREMIER STATE MUNICIPAL BOND FUND
_______________________________________________________________________________
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 August 28, 1998, 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
Page
FEE TABLE................................................... 3
CONDENSED FINANCIAL INFORMATION............................. 7
ALTERNATIVE PURCHASE METHODS................................ 31
DESCRIPTION OF THE FUND..................................... 31
MANAGEMENT OF THE FUND...................................... 36
HOW TO BUY SHARES........................................... 38
SHAREHOLDER SERVICES........................................ 41
HOW TO REDEEM SHARES........................................ 43
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN............. 47
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................... 47
PERFORMANCE INFORMATION..................................... 53
GENERAL INFORMATION......................................... 53
APPENDIX.................................................... 55
[Page 2]
<TABLE>
Fee Table
CONNECTICUT SERIES FLORIDA SERIES
_______________________________ ________________________________
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
_________ ________ ________ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......... 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... None* 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% .37% .38% .36% .36% .41%
Total Fund Operating Expenses............ .90% 1.42% 1.68% .91% 1.41% 1.71%
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 $54/14** $27/17** $ 54 $54/14** $27/17**
3 YEARS................................. $ 72 $75/45** $53 $ 73 $75/45** $54
5 YEARS................................ $ 93 $98/78** $91 $ 93 $97/77** $93
10 YEARS............................... $151 $143*** $199 $152 $143*** $202
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% .61% .35% .37% .37%
Total Fund Operating Expenses........... .95% 1.44% 1.91% .90% 1.42% 1.67%
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** $29/19** $ 54 $54/14** $27/17**
3 YEARS................................ $ 74 $76/46** $60 $ 72 $75/45** $53
5 YEARS................................ $ 95 $99/79** $103 $ 93 $98/78** $91
10 YEARS............................... $156 $147*** $223 $151 $143*** $198
________________
*** A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
*** Assuming no redemption of shares.
*** Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
[Page 3]
<TABLE>
<CAPTION>
Fee Table
MASSACHUSETTS SERIES MICHIGAN SERIES
_______________________________ ________________________________
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
_________ ___-_____ ________ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...... 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge).. None* 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.......................... .36% .37% .34% .37% .37% .39%
Total Fund Operating Expenses........... .91% 1.42% 1.64% .92% 1.42% 1.69%
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 $54/14** $27/17** $ 54 $54/14** $27/17**
3 YEARS................................ $ 73 $75/45** $52 $ 73 $75/45** $53
5 YEARS................................ $ 93 $98/78** $89 $ 94 $98/78** $92
10 YEARS............................... $152 $144*** $194 $153 $144*** $200
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% .37% .43% .50% .51% .67%
Total Fund Operating Expenses........... .90% 1.42% 1.73% 1.05% 1.56% 1.97%
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
_________ ___-_____ ________ _______ _______ _______
Maximum Sales Load Imposed on Purchases
1 Year................................. $ 54 $54/14** $28/18** $55 $56/16** $30/20**
3 Years................................ $ 72 $75/45** $54 $77 $79/49** $62
5 Years................................ $ 93 $98/78** $94 $100 $105/85** $106
10 Years............................... $151 $143*** $204 $167 $159*** $230
________________________
* A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge
as part of an investment of $1 million or more.
** Assuming no redemption of shares.
*** Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
[Page 4]
<TABLE>
<CAPTION>
Fee Table
NORTH CAROLINA SERIES OHIO SERIES
_______________________________ _______________________________
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
_________ ___-_____ ________ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).... 4.50% None None 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)... None* 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........................... .32% .33% .32% .35% .36% .36%
Total Fund Operating Expenses............ .87% 1.38% 1.62% .90% 1.41% 1.66%
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................................. $ 53 $54/14** $26/16** $ 54 $54/14** $27/17**
3 Years................................ $ 72 $74/44** $51 $ 72 $75/45** $52
5 Years................................ $ 91 $ 96/76** $88 $ 93 $97/77** $90
10 Years............................... $147 $139*** $192 $151 $142*** $197
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% .39% .35% .36% .37%
Total Fund Operating Expenses............ .92% 1.43% 1.69% .90% 1.41% 1.67%
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** $27/17**
3 Years................................ $ 73 $75/45** $53 $ 72 $75/45** $53
5 Years................................ $ 94 $98/78** $92 $ 93 $97/77** $91
10 Years............................... $153 $145*** $200 $ 151 $142*** $198
_______________________________
* A contingent deferred sales charge of 1% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge
as part of an investment of $1 million or more.
** Assuming no redemption of shares.
*** Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the sixth year following the date of purchase.
</TABLE>
[Page 5]
<TABLE>
<CAPTION>
Fee Table
VIRGINIA SERIES
___________________________________
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS C
_________ _________ _________
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..... 4.50% None None
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge).... None* 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.......................... .34% .35% .35%
Total Fund Operating Expenses........... .89% 1.40% 1.65%
</TABLE>
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:
<TABLE>
CLASS A CLASS B CLASS C
_________ _________ _________
<S> <C> <C>
1 Year................................. $ 54 $54/14** $27/17**
3 Years................................ $ 72 $74/44** $52
5 Years................................ $ 92 $97/77** $90
10 Years............................... $150 $141*** $195
</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."
[Page 6]
Condensed Financial Information
The information in the following tables has been audited by Ernst &
Young LLP, the Fund's independent auditors. Further financial data, related
notes and the report of independent auditors accompany the Statement of
Additional Information, available upon request.
Financial Highlights
Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each Series for 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: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $10.72 $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.76 $11.90 $11.81
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net..... .81 .80 .77 .72 .71 .68 .67 .66 .64 .62
Net realized and unrealized
gain (loss) on investments... .38 (.15) .40 .17 .81 (.42) (.05) .14 .16 .47
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total from Investment
Operations..... 1.19 .65 1.17 .89 1.52 .26 .62 .80 .80 1.09
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from
investment income_net.. (.81) (.80) (.77) (.72) (.71) (.68) (.67) (.66) (.64) (.62)
Dividends from net realized gain
on investments.......... (.05) (.02) _ _ _ (.03) _ _ (.25) (.05)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total Distributions... (.86) (.82) (.77) (.72) (.71) (.71) (.67) (.66) (.89) (.67)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end
of year... $11.05 $10.88 $11.28 $11.45 $12.26 $11.81 $11.76 $11.90 $11.81 $12.23
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1).. 11.54% 5.93% 11.10% 8.14% 13.62% 1.92% 5.47% 6.85% 6.84% 9.44%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................ _ _ .21% .52% .69% .80% .89% .92% .93% .90%
Ratio of net investment income to
average net assets......... 7.24% 7.05% 6.81% 6.30% 5.93% 5.44% 5.77% 5.45% 5.32% 5.12%
Decrease reflected in above
expense ratios due to undertakings by
The Dreyfus Corporation (limited to
the expense limitation provision of
the Management Agreement).... 1.42% 1.10% .75% .41% .21% .09% .01% _ _ _
Portfolio Turnover Rate...... 72.52% 12.62% 6.30% 8.53% 24.22% 10.83% 10.48% 28.83% 30.66% 33.31%
Net Assets, end of year
(000's omitted)....... $31,056 $83,206 $183,788 $280,305 $360,020 $364,182 $335,964 $321,559 $313,881 $310,343
_________________
(1) Exclusive of sales load.
</TABLE>
<TABLE>
<CAPTION>
[Page 7]
CONNECTICUT SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $11.89 $12.26 $11.80 $11.76 $11.89 $11.80 $11.84 $11.89 $11.79
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income_net........ .18 .61 .61 .60 .57 .56 .40 .54 .53
Net realized and unrealized gain (loss)
on investments................ .37 (.43) (.04) .13 .16 .48 .05 .15 .48
______ ______ ______ ______ ______ ______ ______ ______ ______
Total from Investment Operations.. .55 .18 .57 .73 .73 1.04 .45 .69 1.01
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income_net.... (.18) (.61) (.61) (.60) (.57) (.56) (.40) (.54) (.53)
Dividends from net realized gain
on investments................ _ (.03) _ _ (.25) (.05) _ (.25) (.05)
______ ______ ______ ______ ______ ______ ______ ______ ______
Total Distributions........... (.18) (.64) (.61) (.60) (.82) (.61) (.40) (.79) (.58)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $12.26 $11.80 $11.76 $11.89 $11.80 $12.23 $11.89 $11.79 $12.22
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 16.08%(4) 1.26% 4.99% 6.20% 6.28% 8.97% 5.31%(4) 5.93% 8.68%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets...... 1.12%(4) 1.36% 1.41% 1.44% 1.45% 1.42% 1.64%(4) 1.70% 1.68%
Ratio of net investment income to
average net assets........ 4.57%(4) 4.78% 5.21% 4.92% 4.79% 4.59% 4.31%(4) 4.56% 4.29%
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% 30.66% 33.31% 28.83% 30.66% 33.31%
Net Assets, end of year
(000's omitted)..... $9,492 $32,246 $35,425 $38,838 $54,661 $59,315 $1,007 $1,290 $2,583
______________________
(1) From January 15, 1993 (commencement of initial offering of Class B shares)
to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C shares)
to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 8]
<TABLE>
<CAPTION>
FLORIDA SERIES
_______________________________________________________________________________________________
Class A Shares
_______________________________________________________________________________________________
Year Ended APRIL 30,
_______________________________________________________________________________________________
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.... $12.85 $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.51 $14.48 $14.06
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net..... 1.02 1.02 .99 .95 .92 .85 .81 .79 .76 .66
Net realized and unrealized
gain (loss) on investments.. .63 (.11) .61 .41 .86 (.51) .12 .17 (.08) .26
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total from Investment
Operations.... 1.65 .91 1.60 1.36 1.78 .34 .93 .96 .68 .92
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net........ (1.02) (1.02) (.99) (.95) (.92) (.85) (.81) (.79) (.76) (.66)
Dividends from net realized
gain on investments......... _ (.03) (.02) (.01) (.17) (.04) (.04) (.20) (.34) (.15)
Dividends in excess of net
realized gain on
investments......... _ _ _ _ _ (.04) _ _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total Distributions.. (1.02) (1.05) (1.01) (.96) (1.09) (.93) (.85) (.99) (1.10) (.81)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of
year........ $13.48 $13.34 $13.93 $14.33 $15.02 $14.43 $14.51 $14.48 $14.06 $14.17
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1)..... 13.32% 6.83% 12.40% 10.09% 12.84% 2.14% 6.71% 6.63% 4.74% 6.73%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets....... _ _ .21% .52% .69% .80% .90% .91% .92% .91%
Ratio of net investment income to
average net assets........ 7.26% 7.24% 7.11% 6.65% 6.21% 5.61% 5.67% 5.29% 5.27% 4.67%
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% 1.08% .74% .41% .21% .10% .01% _ _ _
Portfolio Turnover Rate.. 17.16% 27.69% .28% 20.99% 33.18% 20.84% 50.62% 54.37% 71.68% 91.18%
Net Assets, end of year
(000's omitted)..... $15,061 $67,416 $177,927 $245,474 $299,775 $289,791 $252,406 $227,478 $202,503 $167,793
__________________________
(1) Exclusive of sales load.
</TABLE>
[Page 9]
<TABLE>
<CAPTION>
FLORIDA SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.......... $14.59 $15.01 $14.42 $14.51 $14.47 $14.05 $14.65 $14.47 $14.05
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .24 .77 .73 .71 .69 .59 .48 .65 .55
Net realized and unrealized gain (loss)
on investments................ .42 (.51) .13 .16 (.08) .27 .02 (.08) .27
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .66 .26 .86 .87 .61 .86 .50 .57 .82
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net...... (.24) (.77) (.73) (.71) (.69) (.59) (.48) (.65) (.55)
Dividends from net realized gain
on investments................ _ (.04) (.04) (.20) (.34) (.15) (.20) (.34) (.15)
Dividends in excess of net realized
gain on investments......... _ (.04) _ _ _ _ _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.24) (.85) (.77) (.91) (1.03) (.74) (.68) (.99) (.70)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $15.01 $14.42 $14.51 $14.47 $14.05 $14.17 $14.47 $14.05 $14.17
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 15.60%(4) 1.54% 6.21% 6.01% 4.21% 6.26% 4.69%(4) 3.95% 5.94%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets..... 1.12%(4) 1.34% 1.41% 1.41% 1.42% 1.41% 1.99%(4) 1.97% 1.71%
Ratio of net investment income to
average net assets............ 4.87%(4) 4.91% 5.13% 4.77% 4.76% 4.16% 4.20%(4) 4.60% 3.69%
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% 71.68% 91.18% 54.37% 71.68% 91.18%
Net Assets, end of year
(000's omitted)..... $5,916 $22,476 $25,282 $27,023 $35,802 $32,545 $35 $58 $366
_____________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C shares)
to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 10]
<TABLE>
<CAPTION>
GEORGIA SERIES
_________________________________________________________
Class A Shares
__________________________________________________________
Year Ended April 30,
_________________________________________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year................. $12.50 $13.27 $12.69 $12.80 $13.05 $13.22
______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net.............................. .51 .73 .73 .66 .62 .61
Net realized and unrealized gain (loss) on investments... .77 (.58) .11 .25 .17 .41
______ ______ ______ ______ ______ ______
Total from Investment Operations................... 1.28 .15 .84 .91 .79 1.02
______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net............... (.51) (.73) (.73) (.66) (.62) (.61)
______ ______ ______ ______ ______ ______
Net asset value, end of year....................... $13.27 $12.69 $12.80 $13.05 $13.22 $13.63
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2)........................... 15.91%(3) .97% 6.87% 7.14% 6.16% 7.76%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............ _ .07% .25% .74% .98% .95%
Ratio of net investment income to average net assets.... 5.55%(3) 5.41% 5.80% 5.00% 4.71% 4.44%
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%(3) 1.02% .78% .21% _ _
Portfolio Turnover Rate............................ 37.79%(4) 6.76% 34.04% 33.09% 50.96% 36.64%
Net Assets, end of year (000's omitted)............ $7,304 $10,058 $8,985 $8,346 $6,598 $6,232
__________________________
(1)From September 3, 1992 (commencement of operations) to April 30, 1993.
(2)Exclusive of sales load.
(3)Annualized.
(4)Not annualized.
</TABLE>
<TABLE>
<CAPTION>
GEORGIA SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.. $12.71 $13.27 $12.69 $12.80 $13.06 $13.22 $12.85 $13.05 $13.22
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .20 .67 .66 .59 .56 .54 .38 .51 .47
Net realized and unrealized gain (loss)
on investments................ .56 (.58) .11 .26 .16 .41 .20 .17 .40
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .76 .09 .77 .85 .72 .95 .58 .68 .87
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net.... (.20) (.67) (.66) (.59) (.56) (.54) (.38) (.51) (.47)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $13.27 $12.69 $12.80 $13.06 $13.22 $13.63 $13.05 $13.22 $13.62
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 20.66%(4) .46% 6.33% 6.69% 5.55% 7.24% 6.28%(4) 5.30% 6.61%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets..... .50%(4) .58% .75% 1.24% 1.47% 1.44% 1.98%(4) 1.80% 1.91%
Ratio of net investment income to
average net assets............ 4.60%(4) 4.85% 5.27% 4.46% 4.20% 3.94% 3.73%(4) 3.87% 3.48%
Decrease reflected in above
expense ratios due to undertakings by
The Dreyfus Corporation (limited to the
expense limitation provision of the
Management Agreement)......... 1.37%(4) 1.02% .80% .20% _ _ _ _ _
Portfolio Turnover Rate....... 37.79% 6.76% 34.04% 33.09% 50.96% 36.64% 33.09% 50.96% 36.64%
Net Assets, end of year
(000's omitted).... $6,319 $16,243 $19,429 $20,106 $18,211 $17,558 $88 $105 $42
________________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C shares)
to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 11]
<TABLE>
<CAPTION>
MARYLAND SERIES
_______________________________________________________________________________________________-
Class A Shares
_______________________________________________________________________________________________-
Year Ended APRIL 30,
_______________________________________________________________________________________________-
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.... $11.38 $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.54 $12.69 $12.70
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net..... .87 .86 .85 .79 .76 .73 .70 .67 .68 .67
Net realized and unrealized
gain (loss) on investments... .34 (.09) .53 .35 .68 (.53) .08 .23 .18 .50
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT
OPERATIONS... 1.21 .77 1.38 1.14 1.44 .20 .78 .90 .86 1.17
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net.... (.87) (.86) (.85) (.79) (.76) (.73) (.70) (.67) (.68) (.67)
Dividends from net realized
gain on investments..... _ (.02) (.01) (.05) (.09) (.03) _ (.08) (.17) (.15)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS... (.87) (.88) (.86) (.84) (.85) (.76) (.70) (.75) (.85) (.82)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end
of year....... $11.72 $11.61 $12.13 $12.43 $13.02 $12.46 $12.54 $12.69 $12.70 $13.05
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1)... 11.05% 6.69% 12.24% 9.68% 11.93% 1.33% 6.52% 7.24% 6.91% 9.40%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets......... _ _ .21% .53% .69% .80% .90% .90% .90% .90%
Ratio of net investment income to
average net assets.... 7.26% 7.12% 6.98% 6.40% 5.93% 5.51% 5.69% 5.23% 5.29% 5.12%
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% 1.11% .75% .41% .22% .10% .01% _ _ _
Portfolio Turnover Rate.... 8.67% 30.03% 1.45% 16.21% 17.92% 10.27% 35.39% 41.65% 43.63% 18.12%
Net Assets, end of year
(000's omitted)..... $24,383 $85,794 $179,959 $254,240 $337,307 $335,518 $301,834 $283,878 $266,658 $262,560
____________________________
(1) Exclusive of sales load.
</TABLE>
[Page 12]
<TABLE>
<CAPTION>
MARYLAND SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $12.64 $13.02 $12.46 $12.54 $12.69 $12.70 $12.67 $12.69 $12.71
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .20 .65 .63 .61 .61 .60 .41 .58 .57
Net realized and unrealized gain
(loss) on investments.......... .38 (.53) .08 .23 .18 .50 .10 .19 .50
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .58 .12 .71 .84 .79 1.10 .51 .77 1.07
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net..... (.20) (.65) (.63) (.61) (.61) (.60) (.41) (.58) (.57)
Dividends from net realized gain
on investments................ _ (.03) _ (.08) (.17) (.15) (.08) (.17) (.15)
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.20) (.68) (.63) (.69) (.78) (.75) (.49) (.75) (.72)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $13.02 $12.46 $12.54 $12.69 $12.70 $13.05 $12.69 $12.71 $13.06
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 15.74%(4) .75% 5.94% 6.66% 6.34% 8.83% 5.57%(4) 6.16% 8.55%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets..... 1.09%(4) 1.37% 1.44% 1.43% 1.43% 1.42% 1.80%(4) 1.64% 1.67%
Ratio of net investment income to
average net assets............ 4.55%(4) 4.82% 5.13% 4.68% 4.75% 4.59% 4.59%(4) 4.47% 4.29%
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% 43.63% 18.12% 41.65% 43.63% 18.12%
Net Assets, end of year
(000's omitted)..... $5,931 $30,527 $35,090 $41,179 $45,329 $50,141 $27 $202 $1,618
_____________________________________
(1)From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2)From August 15, 1995 (commencement of initial offering of Class C shares)
to April 30, 1996.
(3)Exclusive of sales load.
(4)Annualized.
</TABLE>
[Page 13]
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES
_______________________________________________________________________________________________-
Class A Shares
_______________________________________________________________________________________________-
Year Ended APRIL 30,
_______________________________________________________________________________________________-
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.... $10.54 $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.53 $11.50 $11.40
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net..... .83 .82 .79 .75 .73 .71 .69 .66 .63 .61
Net realized and unrealized
gain (loss) on investments... .38 (.23) .37 .36 .73 (.44) (.06) _ .17 .40
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total from Investment
Operations..... 1.21 .59 1.16 1.11 1.46 .27 .63 .66 .80 1.01
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from
investment income_net....... (.83) (.82) (.79) (.75) (.73) (.71) (.69) (.66) (.63) (.61)
Dividends from net realized gain
on investments............... _ _ (.01) _ (.01) (.05) _ (.03) (.27) (.05)
Dividends in excess of net
realized gain on investments.... _ _ _ _ _ _ (.05) _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Total Distributions...... (.83) (.82) (.80) (.75) (.74) (.76) (.74) (.69) (.90) (.66)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of
year..... $10.92 $10.69 $11.05 $11.41 $12.13 $11.64 $11.53 $11.50 $11.40 $11.75
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1).. 11.91% 5.49% 11.23% 10.32% 13.14% 2.08% 5.72% 5.69% 7.08% 9.04%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.............. _ _ .19% .55% .69% .82% .94% .92% .92% .91%
Ratio of net investment income to
average net assets........ 7.58% 7.40% 7.21% 6.65% 6.16% 5.80% 6.04% 5.57% 5.46% 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).... 1.48% 1.11% .78% .41% .24% .11% .01% _ _ _
Portfolio Turnover Rate...... 17.76% 28.44% 47.07% 24.75% 11.36% 12.04% 13.62% 34.86% 24.45% 48.69%
Net Assets, end of year
(000's omitted).... $21,578 $43,375 $57,328 $66,873 $79,701 $76,865 $72,731 $68,812 $65,809 $60,529
______________________________________
(1) Exclusive of sales load.
</TABLE>
[Page 14]
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year........ $11.79 $12.13 $11.63 $11.52 $11.49 $11.40 $11.59 $11.48 $11.41
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .19 .64 .63 .60 .57 .55 .40 .54 .52
Net realized and unrealized
gain (loss) on investments.... .34 (.45) (.06) _ .18 .40 (.08) .20 .40
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .53 .19 .57 .60 .75 .95 .32 .74 .92
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net..... (.19) (.64) (.63) (.60) (.57) (.55) (.40) (.54) (.52)
Dividends from net realized gain
on investments................ _ (.05) _ (.03) (.27) (.05) (.03) (.27) (.05)
Dividends in excess of net
realized gain
on investments........... _ _ (.05) _ _ _ _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.19) (.69) (.68) (.63) (.84) (.60) (.43) (.81) (.57)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $12.13 $11.63 $11.52 $11.49 $11.40 $11.75 $11.48 $11.41 $11.76
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 15.56%(4) 1.44% 5.15% 5.15% 6.63% 8.49% 3.76%(4) 6.55% 8.22%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets..... 1.15%(4) 1.36% 1.45% 1.43% 1.43% 1.42% 1.69%(4) 1.65% 1.64%
Ratio of net investment income to
average net assets............ 4.92%(4) 5.18% 5.47% 5.03% 4.94% 4.71% 4.72%(4) 4.64% 4.51%
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% 24.45% 48.69% 34.86% 24.45% 48.69%
Net Assets, end of year
(000's omitted)..... $1,066 $3,702 $4,220 $5,255 $6,064 $6,584 $1 $1 $1
_______________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C
shares) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 15]
<TABLE>
<CAPTION>
MICHIGAN SERIES
_______________________________________________________________________________________________-
Class A Shares
_______________________________________________________________________________________________-
Year Ended APRIL 30,
_______________________________________________________________________________________________-
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year..... $13.45 $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.14 $15.15 $15.14
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net..... 1.07 1.05 1.01 .95 .92 .89 .85 .83 .81 .80
Net realized and unrealized gain (loss)
on investments........... .65 (.27) .54 .46 .98 (.30) .11 .20 .21 .48
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT
OPERATIONS..... 1.72 .78 1.55 1.41 1.90 .59 .96 1.03 1.02 1.28
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net.................. (1.07) (1.05) (1.01) (.95) (.92) (.89) (.85) (.83) (.81) (.80)
Dividends from net realized
gain on investments........ _ (.03) _ _ (.13) (.08) (.24) (.19) (.22) (.01)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS..... (1.07) (1.08) (1.01) (.95) (1.05) (.97) (1.09) (1.02) (1.03) (.81)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value,
end of year.... $14.10 $13.80 $14.34 $14.80 $15.65 $15.27 $15.14 $15.15 $15.14 $15.61
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1).. 13.25% 5.59% 11.61% 10.12% 13.25% 3.65% 6.65% 6.81% 6.89% 8.55%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.............. _ _ .20% .53% .69% .81% .92% .93% .91% .92%
Ratio of net investment income to
average net assets........ 7.49% 7.23% 7.07% 6.47% 6.01% 5.56% 5.66% 5.35% 5.34% 5.12%
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% 1.16% .79% .42% .25% .11% .01% _ _ _
Portfolio Turnover Rate.... 32.72% 20.23% 27.31% 21.42% 14.99% 19.96% 48.30% 56.88% 22.32% 41.46%
Net Assets, end of year
(000's omitted).......... $8,548 $56,699 $111,696 $145,159 $184,138 $187,405 $176,604 $166,538 $155,568 $149,221
_____________________________
(1) Exclusive of sales load.
</TABLE>
[Page 16]
<TABLE>
<CAPTION>
MICHIGAN SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.... $15.20 $15.64 $15.27 $15.13 $15.15 $15.13 $15.18 $15.16 $15.14
______ ______ ______ ______ ______ ______ ______ ______ ______
Investment income-net......... .24 .80 .77 .75 .74 .72 .50 .69 .67
Net realized and unrealized gain (loss)
on investments................ .44 (.29) .10 .21 .20 .49 .17 .20 .48
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .68 .51 .87 .96 .94 1.21 .67 .89 1.15
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net..... (.24) (.80) (.77) (.75) (.74) (.72) (.50) (.69) (.67)
Dividends from net realized gain
on investments................ _ (.08) (.24) (.19) (.22) (.01) (.19) (.22) (.01)
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.24) (.88) (1.01) (.94) (.96) (.73) (.69) (.91) (.68)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $15.64 $15.27 $15.13 $15.15 $15.13 $15.61 $15.16 $15.14 $15.61
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 15.50%(4) 3.11% 6.01% 6.33% 6.27% 8.08% 6.12%(4) 5.94% 7.70%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets..... 1.18%(4) 1.38% 1.44% 1.44% 1.42% 1.42% 1.70%(4) 1.72% 1.69%
Ratio of net investment income to
average net assets............ 4.85%(4) 4.88% 5.10% 4.82% 4.82% 4.61% 4.47%(4) 4.47% 4.26%
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% 22.32% 41.46% 56.88% 22.32% 41.46%
Net Assets, end of year
(000's omitted).......... $3,581 $13,861 $16,471 $19,031 $19,338 $20,938 $133 $241 $640
_________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C
shares) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 17]
<TABLE>
<CAPTION>
MINNESOTA SERIES
_______________________________________________________________________________________________-
Class A Shares
_______________________________________________________________________________________________-
Year Ended APRIL 30,
_______________________________________________________________________________________________-
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.... $13.37 $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $14.90 $14.98 $15.03
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net..... 1.07 1.04 1.02 .96 .92 .87 .83 .82 .82 .82
Net realized and unrealized
gain(loss) on investments...... .55 (.13) .56 .36 .77 (.53) .18 .08 .09 .27
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT
OPERATIONS..... 1.62 .91 1.58 1.32 1.69 .34 1.01 .90 .91 1.09
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net............. (1.07) (1.04) (1.02) (.96) (.92) (.87) (.83) (.82) (.82) (.82)
Dividends from net realized gain
on investments.......... _ (.05) (.02) (.01) (.09) (.06) _ _ (.04) _
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS...... (1.07) (1.09) (1.04) (.97) (1.01) (.93) (.83) (.82) (.86) (.82)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of
year... $13.92 $13.74 $14.28 $14.63 $15.31 $14.72 $14.90 $14.98 $15.03 $15.30
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1)... 12.57% 6.67% 11.89% 9.45% 11.96% 2.08% 7.14% 6.11% 6.16% 7.36%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets....... _ _ .20% .53% .69% .80% .90% .90% .91% .90%
Ratio of net investment income to
average net assets......... 7.66% 7.25% 7.19% 6.53% 6.13% 5.61% 5.68% 5.41% 5.42% 5.32%
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% 1.16% .79% .41% .24% .11% .01% _ _ _
Portfolio Turnover Rate... 31.64% 23.48% 14.04% 12.32% 23.42% 12.21% 51.95% 35.47% 25.82% 13.37%
Net Assets, end of year
(000's omitted)........... $13,019 $46,428 $85,066 $122,782 $148,765 $155,657 $145,444 $138,058 $129,031 $126,115
____________________________
(1) Exclusive of sales load.
</TABLE>
[Page 18]
<TABLE>
<CAPTION>
MINNESOTA SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.... $14.86 $15.32 $14.74 $14.92 $15.01 $15.06 $14.96 $15.01 $15.06
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .24 .78 .75 .74 .74 .74 .50 .70 .69
Net realized and unrealized gain (loss)
on investments................ .46 (.52) .18 .09 .09 .27 .05 .09 .27
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .70 .26 .93 .83 .83 1.01 .55 .79 .96
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net.... (.24) (.78) (.75) (.74) (.74) (.74) (.50) (.70) (.69)
Dividends from net realized gain
on investments................ _ (.06) _ _ (.04) _ _ (.04) _
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.24) (.84) (.75) (.74) (.78) (.74) (.50) (.74) (.69)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $15.32 $14.74 $14.92 $15.01 $15.06 $15.33 $15.01 $15.06 $15.33
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 16.32%(4) 1.55% 6.57% 5.62% 5.60% 6.79% 5.15%(4) 5.34% 6.46%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.... 1.16%(4) 1.38% 1.44% 1.43% 1.44% 1.42% 1.42%(4) 1.67% 1.73%
Ratio of net investment income to
average net assets............ 4.83%(4) 4.91% 5.13% 4.87% 4.90% 4.79% 4.00%(4) 4.62% 4.40%
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% 25.82% 13.37% 35.47% 25.82% 13.37%
Net Assets, end of year
(000's omitted).... $4,633 $21,004 $23,217 $25,617 $26,004 $28,568 $373 $307 $667
__________________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C
shares) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 19]
<TABLE>
<CAPTION>
NEW JERSEY SERIES*
_____________________________________________________________________
CLASS A SHARES
_____________________________________________________________________
NINE MONTHS YEAR
YEAR ENDED JULY 31, ENDED ENDED
____________________________
PER SHARE DATA: 1994(1) 1995 1996 APRIL 30, 1997(2) APRIL 30, 1998
______ ______ ______ __________________ _______________
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................... $12.50 $12.58 $12.71 $12.79 $12.63
______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net.................................. .18 .71 .59 .42 .61
Net realized and unrealized gain (loss)
on investments......................................... .08 .13 .08 (.02) .56
______ ______ ______ ______ ______
Total from Investment Operations....................... .26 .84 .67 .40 1.17
______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net................... (.18) (.71) (.59) (.42) (.61)
Dividends from net realized gain on investments........ _ _ _ (.14) (.11)
______ ______ ______ ______ ______
Total Distributions................................... (.18) (.71) (.59) (.56) (.72)
______ ______ ______ ______ ______
Net asset value, end of year........................... $12.58 $12.71 $12.79 $12.63 $13.08
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3).............................. 2.07%(4) 7.01% 5.31% 4.25%(5) 9.48%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................ _ .10% 1.14% 1.20%(5) 1.02%
Ratio of net investment income to average net assets... 5.25%(5) 5.60% 4.55% 4.39%(5) 4.73%
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) .03%
Portfolio Turnover Rate................................ _ 43.48% 28.14% 110.12%(4) 50.78%
Net Assets, end of year (000's omitted)............... $2,318 $4,981 $5,212 $4,837 $4,454
__________________________
* 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.
</TABLE>
[Page 20]
<TABLE>
<CAPTION>
NEW JERSEY SERIES* (CONTINUED)
_____________________________________________________________________
CLASS B SHARES
_____________________________________________________________________
NINE MONTHS YEAR
YEAR ENDED JULY 31, ENDED ENDED
____________________________
PER SHARE DATA: 1994(1) 1995 1996 APRIL 30, 1997(2) APRIL 30, 1998
______ ______ ______ __________________ _______________
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..................... $12.50 $12.58 $12.71 $12.79 $12.63
______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net.................................. .16 .65 .52 .37 .55
Net realized and unrealized gain (loss) on investments.. .08 .13 .08 (.02) .55
______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS....................... .24 .78 .60 .35 1.10
______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net................... (.16) (.65) (.52) (.37) (.55)
Dividends from net realized gain on investments......... _ _ _ (.14) (.11)
______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS.................................... (.16) (.65) (.52) (.51) (.66)
______ ______ ______ ______ ______
Net asset value, end of year........................... $12.58 $12.71 $12.79 $12.63 $13.07
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)............................... 1.94%(4) 6.48% 4.79% 3.74%(5) 8.85%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................ .50%(5) .61% 1.63% 1.69%(5) 1.53%
Ratio of net investment income to average net assets.... 4.69%(5) 5.00% 4.04% 3.88%(5) 4.20%
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) .03%
Portfolio Turnover Rate................................ _ 43.48% 28.14% 110.12%(4) 50.78%
Net Assets, end of year (000's omitted)................ $2,373 $6,852 $8,910 $8,680 $10,533
__________________________
* 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.
</TABLE>
[Page 21]
<TABLE>
<CAPTION>
NEW JERSEY SERIES* (CONTINUED)
________________________________________________________
CLASS C SHARES
________________________________________________________
NINE MONTHS YEAR
YEAR ENDED ENDED ENDED
JULY 31, 1996(1) APRIL 30, 1997(2) APRIL 30, 1998
_______________ __________________ ______________
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year.................... $13.21 $12.78 $12.64
______ _______ ______
INVESTMENT OPERATIONS:
Investment income-net................................. .32 .35 .50
Net realized and unrealized gain (loss) on investments (.43) _ .56
______ _______ ______
Total from Investment Operations...................... (.11) .35 1.06
______ _______ ______
DISTRIBUTIONS:
Dividends from investment income-net.................. (.32) (.35) (.50)
Dividends from net realized gain on investments....... _ (.14) (.11)
______ _______ ______
Total Distributions................................... (.32) (.49) (.61)
______ _______ ______
Net asset value, end of year.......................... $12.78 $12.64 $13.09
====== ======= ======
TOTAL INVESTMENT RETURN(3).............................. (1.21%)(4) 3.72%(4) 8.55%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............... 1.95%(4) 1.97%(4) 1.91%
Ratio of net investment income to average net assets.. 3.68%(4) 3.62%(4) 3.65%
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) .06%
Portfolio Turnover Rate............................... 28.14% 110.12%(5) 50.78%
Net Assets, end of year (000's omitted)............... $6 $1 $118
_________________________________
* 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.
</TABLE>
[Page 22]
<TABLE>
<CAPTION>
NORTH CAROLINA SERIES
_________________________________________________________________
CLASS A SHARES
_________________________________________________________________
YEAR ENDED APRIL 30,
_________________________________________________________________
PER SHARE DATA: 1992(1) 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $12.00 $12.39 $13.40 $12.73 $12.72 $12.91 $13.23
______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net.......................... .62 .78 .74 .70 .67 .67 .67
Net realized and unrealized gain (loss) on investments... .39 1.02 (.67) (.01) .19 .32 .68
______ ______ ______ ______ ______ ______ ______
Total from Investment Operations............... 1.01 1.80 .07 .69 .86 .99 1.35
______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net........... (.62) (.78) (.74) (.70) (.67) (.67) (.67)
Dividends from net realized gain on investments... _ (.01) _ _ _ _ _
______ ______ ______ ______ ______ ______ ______
Total Distributions............................ (.62) (.79) (.74) (.70) (.67) (.67) (.67)
______ ______ ______ ______ ______ ______ ______
Net asset value, end of year................... $12.39 $13.40 $12.73 $12.72 $12.91 $13.23 $13.91
______ ______ ______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN(2)....................... 11.36%(3) 14.97% .29% 5.70% 6.79% 7.81% 10.39%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........ _ .29% .44% .65% .98% 1.04% .87%
Ratio of net investment income to average net assets.... 6.35%(3) 5.94% 5.38% 5.63% 5.11% 5.10% 4.89%
Decrease reflected in above expense ratios
due to undertakings by The Dreyfus Corporation
(limited to the expense limitation provision of
the Management Agreement)...................... 1.14%(3) .76% .50% .31% .02% _ _
Portfolio Turnover Rate........................ 15.01%(4) 5.76% 11.62% 12.02% 47.15% 44.91% 32.28%
Net Assets, end of year (000's omitted)........ $26,387 $56,284 $68,074 $50,205 $47,042 $42,130 $41,592
__________________________________
(1) From August 1, 1991 (commencement of operations) to April 30, 1992.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
NORTH CAROLINA SERIES (continued)
_______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ __________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year........ $12.90 $13.39 $12.72 $12.71 $12.90 $13.22 $12.76 $12.90 $13.22
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .20 .66 .64 .60 .60 .60 .40 .57 .57
Net realized and unrealized gain (loss)
on investments................ .49 (.67) (.01) .19 .32 .68 .14 .32 .68
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .69 (.01) .63 .79 .92 1.28 .54 .89 1.25
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net.. (.20) (.66) (.64) (.60) (.60) (.60) (.40) (.57) (.57)
Dividends from net realized gain
on investments................ _ _ _ _ _ _ _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.20) (.66) (.64) (.60) (.60) (.60) (.40) (.57) (.57)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $13.39 $12.72 $12.71 $12.90 $13.22 $13.90 $12.90 $13.22 $13.90
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 18.53%(4) (.27%) 5.12% 6.25% 7.27% 9.84% 5.92%(4) 7.00% 9.58%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets....... .79%(4) 1.00% 1.18% 1.49% 1.54% 1.38% 1.73%(4) 1.77% 1.62%
Ratio of net investment income to
average net assets............ 4.47%(4) 4.78% 5.08% 4.59% 4.59% 4.39% 4.31%(4) 4.31% 4.08%
Decrease reflected in above
expense ratios due to undertakings by
The Dreyfus Corporation (limited to the
expense limitation provision of the
Management Agreement)......... .56%(4) .48% .30% .02% _ _ _ _ _
Portfolio Turnover Rate....... 5.76% 11.62% 12.02% 47.15% 44.91% 32.28% 47.15% 44.91% 32.28%
Net Assets, end of year
(000's omitted)...... $13,145 $38,968 $42,310 $42,668 $43,979 $45,296 $1 $11 $44
________________________________________
(1) From January 15, 1993 (commencement of initial offering of Class B shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C shares) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 23]
<TABLE>
<CAPTION>
OHIO SERIES
_______________________________________________________________________________________________
Class A Shares
_______________________________________________________________________________________________
Year Ended APRIL 30,
_______________________________________________________________________________________________
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year..................... $11.18 $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.62 $12.58 $12.65
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net....... .89 .88 .86 .80 .77 .74 .73 .71 .69 .67
Net realized and unrealized
gain (loss) on investments.... .48 (.08) .46 .36 .81 (.36) (.05) .14 .17 .34
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT
OPERATIONS........ 1.37 .80 1.32 1.16 1.58 .38 .68 .85 .86 1.01
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Dividends from investment
income-net................ (.89) (.88) (.86) (.80) (.77) (.74) (.73) (.71) (.69) (.67)
Dividends from net realized gain
on investments................. _ (.04) _ (.01) (.07) (.03) (.03) (.18) (.10) (.13)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS......... (.89) (.92) (.86) (.81) (.84) (.77) (.76) (.89) (.79) (.80)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value,
end of year... $11.66 $11.54 $12.00 $12.35 $13.09 $12.70 $12.62 $12.58 $12.65 $12.86
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1).... 12.72% 6.95% 11.84% 9.97% 13.24% 2.78% 5.63% 6.77% 6.91% 8.09%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.................. _ _ .21% .52% .70% .81% .92% .89% .91% .90%
Ratio of net investment income
to average net assets.. 7.57% 7.30% 7.20% 6.53% 6.03% 5.57% 5.84% 5.49% 5.40% 5.17%
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 1.12% .78% .41% .23% .12% .01% _ _ _
Portfolio Turnover Rate...... 14.49% 14.58% 3.00% 13.68% 6.08% 7.73% 39.53% 43.90% 29.65% 24.73%
Net Assets, end of year
(000's omitted)........ $31,420 $92,864 $176,223 $243,074 $295,564 $293,706 $273,225 $257,639 $242,572 $237,618
___________________________
(1) Exclusive of sales load.
</TABLE>
[Page 24]
<TABLE>
<CAPTION>
OHIO SERIES (continued)
______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ _________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ _________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year.......... $12.69 $13.09 $12.71 $12.63 $12.59 $12.65 $12.68 $12.59 $12.66
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .20 .66 .66 .64 .62 .60 .43 .59 .57
Net realized and unrealized gain (loss)
on investments................ .40 (.35) (.05) .14 .16 .35 .09 .17 .35
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.. .60 .31 .61 .78 .78 .95 .52 .76 .92
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net..... (.20) (.66) (.66) (.64) (.62) (.60) (.43) (.59) (.57)
Dividends from net realized gain
on investments................ _ (.03) (.03) (.18) (.10) (.13) (.18) (.10) (.13)
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS.......... (.20) (.69) (.69) (.82) (.72) (.73) (.61) (.69) (.70)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $13.09 $12.71 $12.63 $12.59 $12.65 $12.87 $12.59 $12.66 $12.88
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 16.36%(4) 2.24% 5.06% 6.19% 6.27% 7.62% 5.66%(4) 6.07% 7.35%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets...... 1.17%(4) 1.38% 1.44% 1.42% 1.42% 1.41% 1.63%(4) 1.64% 1.66%
Ratio of net investment income to
average net assets......... 4.62%(4) 4.89% 5.29% 4.94% 4.87% 4.65% 4.66%(4) 4.44% 4.38%
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% 29.65% 24.73% 43.90% 29.65% 24.73%
Net Assets, end of year
(000's omitted)... $8,482 $27,657 $32,797 $40,476 $44,746 $50,453 $1 $694 $579
__________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C
shares) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 25]
<TABLE>
<CAPTION>
PENNSYLVANIA SERIES
_______________________________________________________________________________________________
Class A Shares
_______________________________________________________________________________________________
Year Ended APRIL 30,
_______________________________________________________________________________________________
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year... $14.23 $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.12 $16.17 $16.23
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net........ 1.13 1.13 1.12 1.06 1.02 .95 .91 .87 .85 .85
Net realized and unrealized
gain (loss)
on investments............ .55 (.08) .55 .56 .99 (.57) .11 .32 .24 .71
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT
OPERATIONS.... 1.68 1.05 1.67 1.62 2.01 .38 1.02 1.19 1.09 1.56
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net.................. (1.13) (1.13) (1.12) (1.06) (1.02) (.95) (.91) (.87) (.85) (.85)
Dividends from net realized gain
on investments............ _ (.02) (.02) (.04) (.11) (.03) _ (.27) (.18) (.26)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........ (1.13) (1.15) (1.14) (1.10) (1.13) (.98) (.91) (1.14) (1.03) (1.11)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end
of year.... $14.78 $14.68 $15.21 $15.73 $16.61 $16.01 $16.12 $16.17 $16.23 $16.68
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1).... 12.21% 7.20% 11.74% 10.97% 13.19% 2.17% 6.65% 7.46% 6.89% 9.83%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................ _ _ .22% .56% .69% .81% .92% .92% .92% .92%
Ratio of net investment income to
average net assets.......... 7.46 7.38% 7.32% 6.75% 6.24% 5.61% 5.77% 5.28% 5.22% 5.09%
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% 1.24% .79% .41% .25% .12% .01% _ _ _
Portfolio Turnover Rate..... 25.10% 59.15% 25.74% 38.97% 8.64% 7.21% 55.19% 52.69% 60.57% 34.82%
Net Assets, end of year
(000's omitted).......... $12,083 $51,418 $113,439 $158,437 $220,920 $235,619 $219,949 $216,802 $201,229 $196,055
_______________________________
(1) Exclusive of sales load.
</TABLE>
[Page 26]
<TABLE>
<CAPTION>
PENNSYLVANIA SERIES (continued)
______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ _________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $16.10 $16.60 $16.01 $16.11 $16.16 $16.23 $16.18 $16.16 $16.23
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .26 .85 .83 .79 .77 .77 .53 .69 .70
Net realized and unrealized gain (loss)
on investments................ .50 (.56) .10 .32 .25 .70 .25 .25 .72
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS... .76 .29 .93 1.11 1.02 1.47 .78 .94 1.42
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net...... (.26) (.85) (.83) (.79) (.77) (.77) (.53) (.69) (.70)
Dividends from net realized gain
on investments................ _ (.03) _ (.27) (.18) (.26) (.27) (.18) (.26)
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.26) (.88) (.83) (1.06) (.95) (1.03) (.80) (.87) (.96)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $16.60 $16.01 $16.11 $16.16 $16.23 $16.67 $16.16 $16.23 $16.69
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 16.39%(4 1.65% 6.02% 6.92% 6.41% 9.20% 6.71%(4) 5.92% 8.91%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets..... 1.14%(4) 1.38% 1.44% 1.43% 1.43% 1.43% 1.70%(4) 1.83% 1.69%
Ratio of net investment income to
average net assets............ 4.90%(4) 4.95% 5.22% 4.76% 4.71% 4.57% 4.46%(4) 4.28% 3.98%
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% 60.57% 34.82% 52.69% 60.57% 34.82%
Net Assets, end of
year (000's omitted)..... $14,631 $59,057 $70,062 $72,610 $71,671 $74,855 $21 $32 $463
_____________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C
shares) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 27]
<TABLE>
<CAPTION>
TEXAS SERIES
_______________________________________________________________________________________________
Class A Shares
_______________________________________________________________________________________________
Year Ended APRIL 30,
_______________________________________________________________________________________________
PER SHARE DATA: 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.... $17.89 $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.69 $20.84 $20.99
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net........ 1.45 1.44 1.40 1.36 1.29 1.25 1.22 1.20 1.17 1.08
Net realized and unrealized gain (loss)
on investments.............. .75 (.05) .67 .69 1.37 (.66) .28 .45 .41 .99
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT
OPERATIONS........ 2.20 1.39 2.07 2.05 2.66 .59 1.50 1.65 1.58 2.07
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net............. (1.45) (1.44) (1.40) (1.36) (1.29) (1.25) (1.22) (1.20) (1.17) (1.08)
Dividends from net realized gain
on investments............ _ (.01) _ (.05) (.03) (.13) _ (.30) (.26) (.30)
Dividends in excess of net
realized gain on investments.. _ _ _ _ _ (.03) _ _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS.... (1.45) (1.45) (1.40) (1.41) (1.32) (1.41) (1.22) (1.50) (1.43) (1.38)
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end
of year.... $18.64 $18.58 $19.25 $19.89 $21.23 $20.41 $20.69 $20.84 $20.99 $21.68
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1).... 12.79% 7.55% 11.54% 10.97% 13.80% 2.62% 7.63% 8.06% 7.74% 10.03%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.................. _ _ _ .15% .36% .39% .37% .37% .37% .72%
Ratio of net investment income to
average net assets......... 7.90% 7.50% 7.29% 6.78% 6.18% 5.78% 6.01% 5.64% 5.54% 4.96%
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% 1.50% 1.27% .88% .62% .55% .55% .55% .55% .18%
Portfolio Turnover Rate.... 6.84% 2.62% 1.95% 7.49% 14.94% 9.68% 38.68% 49.24% 61.22% 27.18%
Net Assets, end of year
(000's omitted)........... $2,902 $5,642 $15,139 $37,208 $72,037 $76,277 $68,103 $62,864 $60,849 $59,758
_____________________________
(1) Exclusive of sales load.
</TABLE>
[Page 28]
<TABLE>
<CAPTION>
TEXAS SERIES (continued)
______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ _________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year...... $20.52 $21.23 $20.41 $20.69 $20.84 $20.98 $20.78 $20.83 $20.97
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .33 1.13 1.10 1.09 1.06 .97 .73 .99 .91
Net realized and unrealized gain (loss)
on investments................ .71 (.66) .28 .45 .40 1.00 .35 .40 1.00
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.... 1.04 .47 1.38 1.54 1.46 1.97 1.08 1.39 1.91
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net........ (.33) (1.13) (1.10) (1.09) (1.06) (.97) (.73) (.99) (.91)
Dividends from net realized gain
on investments................ _ (.13) _ (.30) (.26) (.30) (.30) (.26) (.30)
Dividends in excess of net realized gain
on investments................ _ (.03) _ _ _ _ _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.33) (1.29) (1.10) (1.39) (1.32) (1.27) (1.03) (1.25) (1.21)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $21.23 $20.41 $20.69 $20.84 $20.98 $21.68 $20.83 $20.97 $21.67
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)...... 17.60%(4) 2.05% 7.05% 7.51% 7.15% 9.53% 7.29%(4) 6.79% 9.24%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets... .82%(4) .94% .89% .88% .88% 1.23% 1.18%(4) 1.19% 1.52%
Ratio of net investment income to
average net assets............ 4.81%(4) 5.15% 5.46% 5.13% 5.03% 4.44% 4.77%(4) 4.57% 4.10%
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% .55% .18% .58%(4) .54% .15%
Portfolio Turnover Rate....... 14.94% 9.68% 38.68% 49.24% 61.22% 27.18% 49.24% 61.22% 27.18%
Net Assets, end of
year (000's omitted).... $6,373 $15,878 $16,818 $17,461 $17,396 $20,454 $1 $129 $261
___________________________________
(1) From January 15, 1993 (commencement of initial offering of Class B
shares) to April 30, 1993.
(2) From August 15, 1995 (commencement of initial offering of Class C
shares) to April 30, 1996.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
[Page 29]
<TABLE>
<CAPTION>
VIRGINIA SERIES
________________________________________________________________
CLASS A SHARES
________________________________________________________________
YEAR ENDED APRIL 30,
________________________________________________________________
PER SHARE DATA: 1992(1) 1993 1994 1995 1996 1997 1998
______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $15.00 $15.50 $16.80 $16.02 $16.03 $16.27 $16.61
______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net.......................... .78 1.00 .97 .94 .93 .94 .88
Net realized and unrealized gain (loss) on investments... .50 1.31 (.75) .04 .24 .34 .76
______ ______ ______ ______ ______ ______ ______
Total from Investment Operations............... 1.28 2.31 .22 .98 1.17 1.28 1.64
______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net........... (.78) (1.00) (.97) (.94) (.93) (.94) (.88)
Dividends from net realized gain on investments.... _ (.01) (.01) _ _ _ (.00)(2)
Dividends in excess of net realized gain on investments.. _ _ (.02) (.03) _ _ _
______ ______ ______ ______ ______ ______ ______
Total Distributions............................ (.78) (1.01) (1.00) (.97) (.93) (.94) (.88)
______ ______ ______ ______ ______ ______ ______
Net asset value, end of year................... $15.50 $16.80 $16.02 $16.03 $16.27 $16.61 $17.37
====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(3)....................... 11.54%(4) 15.32% 1.10% 6.39% 7.32% 8.02% 10.05%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........ _ .27% .46% .39% .50% .39% .75%
Ratio of net investment income to average net assets... 6.42%(4) 6.02% 5.64% 5.93% 5.58% 5.67% 5.10%
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%(4) .76% .55% .55% .55% .55% .14%
Portfolio Turnover Rate........................ 5.96%(5) 9.32% 30.69% 21.60% 50.06% 45.29% 21.25%
Net Assets, end of year (000's omitted)........ $23,096 $55,627 $65,279 $62,428 $61,149 $61,099 $65,086
__________________________________
(1) From August 1, 1991 (commencement of operations) to April 30, 1992.
(2) Amount represents less than $.01 per share.
(3) Exclusive of sales load.
(4) Annualized.
(5) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
VIRGINIA SERIES (continued)
______________________________________________________________________________________
Class B Shares Class C Shares
_________________________________________________________ _________________________
Year Ended April 30, Year Ended April 30,
_________________________________________________________ __________________________
PER SHARE DATA: 1993(1) 1994 1995 1996 1997 1998 1996(2) 1997 1998
______ ______ ______ ______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $16.25 $16.80 $16.02 $16.03 $16.27 $16.60 $16.17 $16.26 $16.60
______ ______ ______ ______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income-net......... .26 .88 .85 .84 .86 .79 .57 .81 .75
Net realized and unrealized gain (loss)
on investments................ .55 (.75) .04 .24 .33 .77 .09 .34 .76
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS... .81 .13 .89 1.08 1.19 1.56 .66 1.15 1.51
______ ______ ______ ______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment
income-net....... (.26) (.88) (.85) (.84) (.86) (.79) (.57) (.81) (.75)
Dividends from net realized gain
on investments................ _ (.01) _ _ _ (.00)(3) _ _ _
Dividends in excess of net realized gain
on investments................ _ (.02) (.03) _ _ _ _ _ _
______ ______ ______ ______ ______ ______ ______ ______ ______
TOTAL DISTRIBUTIONS........... (.26) (.91) (.88) (.84) (.86) (.79) (.57) (.81) (.75)
______ ______ ______ ______ ______ ______ ______ ______ ______
Net asset value, end of year.. $16.80 $16.02 $16.03 $16.27 $16.60 $17.37 $16.26 $16.60 $17.36
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(4)...... 17.22%(5) .54% 5.83% 6.77% 7.41% 9.56% 5.64%(5) 7.18% 9.22%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets...... .83%(5) 1.01% .90% 1.01% .90% 1.26% 1.21%(5) 1.17% 1.54%
Ratio of net investment income to
average net assets............ 4.62%(5) 5.02% 5.40% 5.06% 5.15% 4.58% 4.55%(5) 4.83% 4.24%
Decrease reflected in above
expense ratios due to undertakings by
The Dreyfus Corporation (limited to the
expense limitation provision of the
Management Agreement)......... .54%(5) .54% .55% .55% .55% .14% .52%(5) .54% .11%
Portfolio Turnover Rate....... 9.32% 30.69% 21.60% 50.06% 45.29% 21.25% 50.06% 45.29% 21.25%
Net Assets, end of year
(000's omitted)........ $8,402 $25,254 $28,813 $33,120 $35,787 $40,100 $166 $674 $1,996
________________________________
(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) Amount represents less than $.01 per share.
(4) Exclusive of sales load.
(5) 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 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
[Page 31]
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.
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 IBCA, Inc. ("Fitch"). Each Series may
invest up to 30% of the value of its net assets in Municipal Obligations
which, in the case of bonds, are rated lower than Baa by Moody's and BBB by
S&P and Fitch and as low as the lowest rating assigned by Moody's, S&P or
Fitch. Each Series may invest in short-term Municipal Obligations which are
rated in the two highest rating categories by Moody's, S&P or Fitch. See
"Appendix B" in the Statement of Additional Information. Municipal
Obligations rated 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
[Page 32]
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 for the current fiscal
year is not expected to exceed 100%. A turnover rate of 100% is equivalent to
a Series buying and selling all of the securities in its portfolio once in
the course of a year. 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 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. Connecticut's
economy has improved since a recession in the early 1990s. The improvements
have been primarily in non-manufacturing industries, whose employment has
recovered most of the losses suffered during the recession. Manufacturing
employment, however, has continued its downward trend. Despite the recession,
the average per capita personal income of Connecticut residents has remained
among the highest in the nation, and the State's financial performance has
improved. After having accumulated a $965,712,000 unappropriated deficit as
of June 30, 1991, the General Fund has run operating surpluses, based on the
State's budgetary method of accounting, for each of the six fiscal years
since. However, the State's high level of tax-supported debt imposes a
relatively significant burden on the State's revenue base. The State's
general obligation bonds are rated AA- by Standard &Poors and Aa3 by Moody's.
On March 17, 1995, Fitch reduced its ratings of the State's general
obligation bonds from AA+ to AA. There can be no assurance that general
economic difficulties or the financial circumstances of Connecticut or its
towns and cities will not adversely affect of the market value of their
obligations or the ability of the obligors to pay debt service on such
obligations.
FLORIDA SERIES _ The Florida Constitution and Statutes mandate that
the State budget as a whole, and each separate fund within the State budget,
be kept in balance from currently available revenues each fiscal year.
Florida's Constitution permits issuance of Florida Municipal Obligations
pledging the full faith and credit of the State, with a vote of the electors,
to finance or refinance fixed capital outlay projects authorized by the
Legislature, provided that the outstanding principal does not exceed 50% of
the total tax revenues of the State for the two preceding years. Florida's
Constitution also provides that the Legislature shall appropriate monies
sufficient to pay debt service on State bonds pledging the full faith and
credit of the State as the same becomes due. All State tax revenues, other
than trust funds dedicated by Florida's Constitution for other purposes,
would be available for such an appropriation, if required. Revenue bonds may
be issued by the State or its agencies without a vote of Florida's electors
only to finance or refinance the cost of State fixed capital outlay projects
which may be payable solely from funds derived directly from sources other
than State tax revenues. Fiscal year 1996-97 total General Revenue and
Working Capital Funds available are estimated to have been $19.17 billion,
which resulted in estimated unencumbered reserves of $440.5 million at the
[Page 33]
end of fiscal 1994-95. The General Revenue and Working Capital Funds
ended the 1995-96 fiscal year with unencumbered reserves of $293.3 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 an
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 1997 was approximately $333 million. Revenues are
estimated to exceed expenditures for fiscal 1998.
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 1998 budget was
enacted, it was estimated that the General Fund surplus on a budgetary basis
at June 30, 1998, would be approximately $27.9 million. As of July 1998, it
was estimated that the General Fund surplus on a budgetary basis at June 30,
1998, would be $317.2 million. When the 1999 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, 1999 would be approximately $7.6
million, and that the balance in the Revenue Stabilization Account of the
State Reserve Fund would be approximately $634 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 1998 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 4.2% in 1997.
Michigan ended fiscal years 1992-93, 1993-94, 1994 -95 and 1995-96
with annual surpluses of approximately $308 million, $460 million, $67.4
million and $6.2 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. For the six quarters following
mid-1996, employment growth in New Jersey has ranged between 1.5% and 2%. 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+. As of June 30,
1997, S&P, Moody's and Fitch rate the State's long-term general obligations
AA+, Aa1 and AA+, respectively.
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 is the
lead-
[Page 34]
ing 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 _ The "non-manufacturing" sector employs approximately
79.0% 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,
1998, the Ohio Office of Budget and Management reported positive $1,084.4
million and $1,649.0 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 Commonwealth's adopted
fiscal 1998-99 General Fund budget provided for a decrease in taxes of over
$218 million. As of June 30, 1998, the General Fund had a surplus of $676.1
million or 3.9% above the official estimate for the prior fiscal year.
TEXAS SERIES _ Economically and financially the State of Texas
suffered during the 1980s significant damage from the continued depressed
price of oil and gas and the overbuilding in the real estate market. The
decline in oil prices, particularly since 1986, and the recession that
followed have had a severe effect on the Texas banking and savings and loan
industries, resulting in a number of closings among banks and savings and
loans through the early 1990s. In recent years, the State's overall financial
situation has improved significantly, however, as Texas' economic growth has
been outpacing that of the United States as a whole. In fiscal years 1993,
1994, 1995, 1996 and 1997, Texas' General Revenue Fund ended with cash
surpluses of $1.630 billion, $2.225 billion, $2.101 billion, $2.270 billion
and $2.685 billion, respectively, translating into ten straight years that
Texas has ended the fiscal year in the black.
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. See "Dividends, Distributions and Taxes." 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
[Page 35]
Municipal Obligations for investment by the Fund so as to adversely
affect Fund shareholders, the Fund would reevaluate its investment objective
and policies and submit possible changes in the Fund's structure to
shareholders for their consideration. If legislation were enacted that would
treat a type of Municipal Obligation as taxable, the Fund would treat such
security as a permissible Taxable Investment within the applicable limits set
forth herein.
ZERO COUPON SECURITIES _ Each Series 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, 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 (commonly known as junk bonds). 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, or enter into,
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.
Year 2000 Risks _ Like other mutual funds, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by The Dreyfus Corporation and the
Fund's other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Dreyfus Corporation is taking
steps to address the Year 2000 Problem with respect to the computer systems
that it uses and to obtain assurances that comparable steps are being taken
by the Fund's other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the Fund.
Management of the Fund
INVESTMENT ADVISER _ The Dreyfus Corporation, located at 200 Park
Avenue, New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of July 31, 1998, The Dreyfus Corporation managed
or administered approximately $110 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 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
[Page 36]
Series, and has been employed by The Dreyfus Corporation since
February 1988. The primary portfolio manager for each of the Connecticut
Series and Virginia Series is Samuel J. Weinstock, who has held that position
since August 1987 with respect to the Connecticut Series and August 1991 with
respect to the Virginia Series, and has been employed by The Dreyfus
Corporation since March 1987. The primary portfolio manager for each of the
Maryland Series, Pennsylvania Series and Texas Series is Douglas J. Gaylor,
who has held that position since January 1996 with respect to each such
Series, 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 Massachusetts Series, Michigan Series,
Minnesota Series, New Jersey Series, North Carolina Series and Ohio Series is
W. Michael Petty, who has held that position since August 1997 and has been
employed by The Dreyfus Corporation since June 1997. Prior to joining The
Dreyfus Corporation, Mr. Petty was Vice President and a portfolio manager of
municipal bond funds at Merrill Lynch Asset Management, Inc. since 1992. 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., AFCOCredit Corporation and a number of companies
known as Mellon Financial Services Corporations. Through its subsidiaries,
including The Dreyfus Corporation, Mellon managed more than $350 billion in
assets as of June 30, 1998, including approximately $125 billion in
proprietary mutual fund assets. As of June 30, 1998, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.791 trillion in assets including
approximately $54 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, 1998, 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:
EFFECTIVE ANNUAL RATE OF
NAME OF SERIES MANAGEMENT FEE PAID
_______________ ___________________
Connecticut.............................. .55 of 1%
Florida.................................. .55 of 1%
Georgia.................................. .55 of 1%
Maryland................................. .55 of 1%
Massachusetts............................ .55 of 1%
Michigan................................. .55 of 1%
Minnesota................................ .55 of 1%
New Jersey............................... .52 of 1%
North Carolina........................... .55 of 1%
Ohio..................................... .55 of 1%
Pennsylvania............................. .55 of 1%
Texas.................................... .37 of 1%
Virginia................................. .41 of 1%
In allocating brokerage transactions, TheDreyfus 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.
[Page 37]
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. See "Appendix _
Additional Information About Purchases, Exchanges and Redemptions."
Service Agents may receive different levels of compensation for
selling different Classes of shares. Management understands that some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus, and, to the extent permitted by
applicable regulatory authority, may charge their clients 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
[Page 38]
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 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 in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund 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>
Total 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 39]
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 a 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 purchases of Class A shares subject
to a CDSC.
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 been subject
to an initial sales charge or a contingent 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 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.
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.
[Page 40]
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 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, which may be waived or reduced as described below, 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
[Page 41]
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. See "Appendix _ Additional Information About
Purchases, Exchanges and Redemptions." 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 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. 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 of Additional Information. Dividend ACHpermits 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.
[Page 42]
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 Automatic Withdrawal Plan may
be established by filing an Automatic Withdrawal Plan application with the
Transfer Agent or by oral request from any of the authorized signatories on
the account 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.
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. Withdrawals 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 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 by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund, the Fund will redeem the
shares at the next determined net asset value as described below. See
"Appendix _ Additional Information About Purchases, Exchanges and
Redemptions." 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.
[Page 43]
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 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 CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE 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 CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE 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
[Page 44]
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 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, for Class A shares, through the Check
Redemption Privilege which is granted automatically (if you invest in Class A
shares) unless you specifically refuse it by checking the applicable "No" box
on the Account Application. The Check Redemption Privilege may be established
for an existing account by a separate signed Shareholder Services Form. You
also may redeem shares through the TELETRANSFER Privilege, 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. 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 Fund Exchanges. 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
instruc-
[Page 45]
tions 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 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. The Check Redemption Privilege is granted
automatically unless you refuse it.
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 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 time-
[Page 46]
ly 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
reinstatement, with respect to Class B shares, or Class A shares if such
shares were subject to a CDSC, your 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
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. If a purchase order is not
accompanied by remittance in Federal Funds, there may be a delay between the
time the purchase order becomes effective and the time the shares purchased
start earning dividends. If your payment is not made in Federal Funds, it
must be converted into Federal Funds. This usually occurs within one business
day of receipt of a bank wire and within two business days of receipt of a
check drawn on a member bank of the Federal Reserve System. Checks drawn on
banks which are not members of the Federal Reserve System may take
considerably longer to convert into Federal Funds.
Dividends usually are paid on the last calendar day of each month and
are automatically reinvested in additional shares of the Series and the same
Class from which they were paid at net asset value without a sales load or,
at your option, paid in cash. Each Series' earnings for Saturdays, Sundays
and holidays are declared as dividends on the preceding business day. If you
redeem all shares in your account at any time during the month, all dividends
to which you are entitled will be paid to you along with the proceeds of the
redemption. If you are an omnibus accountholder and indicate in a partial
redemption request that a portion of any 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 without a sales load. If you elect to receive
dividends and distributions in cash, and your dividend or distribution check
is returned to the Fund as undeliverable or remains uncashed for six months,
the Fund reserves the right to reinvest such dividend or distribution and all
future dividends and distributions payable to you in additional shares at net
asset value. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. 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
[Page 47]
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 an individual generally will be
taxed on his or her net capital gain at a maximum rate of 28% with respect to
capital gain from securities held for more than one year but not more than 18
months and at a maximum rate of 20% with respect to capital gain from
securities held for more than 18 months. The Fund will notify shareholders of
that portion of a distribution taxable as long-term capital gains that is
eligible for the 20% capital gains rate. 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, or (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 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, IRS individual taxpayer
identification 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, 1998 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
[Page 48]
Code. Each Series of the Fund is subject to a non-deductible 4%
excise tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains, if any.
STATE AND LOCAL TAX TREATMENT _ Each Series will invest primarily in
Municipal Obligations of the State after which the Series is named. Except to
the extent specifically noted below, dividends by a Series are not subject to
an income tax by such State to the extent that the dividends are attributable
to interest on such Municipal Obligations. However, some or all of the other
dividends or distributions by a Series may be taxable by those States that
have income taxes, even if the dividends or distributions are attributable to
income of the Series derived from obligations of the United States or its
agencies or instrumentalities.
The Fund anticipates that a substantial portion of the dividends paid
by each Series will not be subject to income tax of the State after which the
Series is named. However, to the extent that you are obligated to pay State
or local taxes outside of such State, dividends earned by an investment in
such Series may represent taxable income. Also, all or a portion of the
dividends paid by a Series that are not subject to income tax of the State
after which the Series is named may be a preference item for such State's
alternative minimum tax (where imposed). Finally, you should be aware that
State and local taxes, other than those described above, may apply to the
dividends, distributions or shares of a Series.
The paragraphs below discuss the State tax treatment of dividends and
distributions by each Series to residents of the State after which the Series
is named. Investors should consult their own tax advisers regarding specific
questions as to Federal, State and local taxes.
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 if they are 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 subject to 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, instrumentality, possession or territory of the
United States, or (b) are attributable to gain realized by the Series from
the sale or exchange of
[Page 49]
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. In 1994, the
Massachusetts personal income tax statute was modified to provide for
graduated rates of tax (with some exceptions) on gains from the sale or
exchange of capital assets held for more than one year based on the length of
time the asset has been held since January 1, 1995. The Massachusetts
Department of Revenue has released proposed 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 the amount of such distributions attributable to each
of six classes of gains from the sale or exchange of capital assets held for
more than one year in a notice provided to shareholders and the Commissioner
of Revenue on or before March 1 of the calendar year after the calendar year
of such distributions. In the absence of such notice, the holding period of
the assets giving rise to such gains is deemed to be more than one but not
more than two years. Shareholders should consult their tax advisers with
respect to the Massachusetts 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 to the extent
that the dividends are attributable to income received by the Series as
interest from the Series' investment in Michigan Municipal Obligations,
obligations of U.S. possessions, as well as direct U.S. Government
obligations.
For Michigan personal income 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. The Michigan
intangibles tax was repealed as of January 1, 1998. 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.
[Page 50]
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 be subject to New Jersey gross income tax to
the extent that the dividends and distributions are attributable to income
earned by the Series as interest on or gain from New Jersey Municipal
Obligations, and (b) gain from the sale of New Jersey Series shares by a New
Jersey resident individual shareholder will not be subject to the New Jersey
gross income tax. Shares of the New Jersey Series are not subject to property
taxation by New Jersey or its political subdivisions. To the extent that you
are subject to state and local taxes outside of New Jersey, dividends and
distributions earned by an investment in the New Jersey Series may represent
taxable income.
NORTH CAROLINA SERIES _ Dividends paid by the North Carolina Series
to a North Carolina resident that are attributable to interest on North
Carolina Municipal Obligations or direct U.S. Government obligations are not
subject to the North Carolina income tax. Dividends or distributions
attributable to gain realized by the Series from the sale or exchange of
certain North Carolina Municipal Obligations issued before July 1, 1995 will
not be included in the North Carolina taxable income of a resident
individual, trust or estate. Other dividends or distributions which are
attributable to net realized securities gains and most other sources are
subject to the North Carolina income tax at the applicable rate. Gain
realized by a North Carolina resident shareholder from the sale or exchange
of an interest held in the North Carolina Series also will be subject to the
North Carolina income tax at the applicable rate.
The North Carolina intangibles tax previously imposed upon certain
intangible personal property 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
[Page 51]
may be subject to that tax. An additional deduction from Pennsylvania
taxable income is permitted for dividends or distributions paid by the Series
attributable to interest received by the Series from its investments in
Pennsylvania Municipal Obligations and U.S. Government obligations to the
extent included in Federal taxable income, but such a deduction is reduced by
any interest on indebtedness incurred to carry the securities and other
expenses incurred in the production of such interest income, including
expenses deducted on the Federal income tax return that would not have been
allowed under the Code if the interest were exempt from Federal income tax.
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.
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 Texas legislature has
proposed legislation that, if adopted, would extend applicability of the
franchise tax to numerous types of additional legal entities.
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 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.
[Page 52]
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."
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,
[Page 53]
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. 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 54]
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 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. 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, or enter into, 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 inopportune 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. EachSeries 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 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. EachSeries 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, aSeries 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 _ EachSeries 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 33 1\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 _ EachSeries 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
[Page 55]
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.
The Fund will set aside in a segregated account permissible liquid assets at
least equal at all times to the amount of the Fund's purchase commitments.
Certain Portfolio Securities
CERTAIN TAX EXEMPT OBLIGATIONS _ EachSeries 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 _ EachSeries may purchase from
financial institutions participation interests in Municipal Obligations (such
as industrial development 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 _ EachSeries 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 _ EachSeries 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 Municipal Obligation of comparable quality and
maturity and their purchase by a
[Page 56]
Series should increase the volatility of its net asset value and,
thus, its price per share. These custodial receipts are sold in private
placements. EachSeries 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. EachSeries 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 _ EachSeries 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 _ EachSeries may invest up to 15% of the value
of its net assets in securities as to which a liquid trading market does not
exist, provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
Series is subject to a risk that should the Series desire to sell them when a
ready buyer is not available at a price the Fund deems representative of
their value, the value of the Series' net assets could be adversely affected.
TAXABLE INVESTMENTS _ From time to time, on a temporary basis other
than for temporary defensive purposes (but not to exceed 20% of the value of
a Series' net assets) or for temporary defensive purposes, each Series may
invest in taxable short-term investments ("Taxable Investments") consisting
of: notes of issuers having, at the time of purchase, a quality rating within
the two highest grades of Moody's, S&P or Fitch; 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,
[Page 57]
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.
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended April 30, 1998, 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>
FLORIDA OHIO PENNSYLVANIA VIRGINIA
FITCH OR MOODY'S OR S & P SERIES SERIES SERIES SERIES(4)
______ _______ _____ ______ ______ __________ __________
<S> <C> <C> <C> <C> <C>
AAA Aaa AAA 51.4% 48.2% 50.1% 20.8%
AA Aa AA 14.3 9.0 6.7 14.7
A A A 4.8 17.3 19.9 30.9
BBB Baa BBB 12.1 13.5 9.1 15.7
BB Ba BB 1.5 6.6 _ _
F-1 MIG1/P-1 SP-1/A-1 2.5 1.4 .1 .5
Not Rated Not Rated Not Rated 13.4(1) 4.0(2) 14.1(3) 17.4(4)
______ ______ _______ _____
100.0% 100.0% 100.0% 100.0%
====== ====== ======= =====
__________________________________
(1) Included under the Not Rated category are securities
comprising 13.4% 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 (1.9%),
A/A (.8%), Baa/BBB (6.6%), Ba/BB (.6%), B/B(3.0%) and C/C (.5%).
(2) Included under the Not Rated category are securities
comprising 4.0% 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 (2.5%), A/A (.3%), Baa/BBB
(.9%) and Ba/BB (.3%).
(3) Included under the Not Rated category are securities
comprising 14.1% 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 (1.0%), A/A (1.8%), Baa/BBB
(6.1%), Ba/BB (2.9%) and B (2.3%).
(4) Included under the Not Rated category are securities
comprising 17.4% 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 (2.0%), Baa/BBB (8.5%) and
Ba/BB (6.9%).
</TABLE>
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.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS _
The Fund is intended to be a long-term investment vehicle and is not designed
to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's
management determines that an investor is engaged in excessive trading, the
Fund, with or without prior notice, may temporarily or permanently terminate
the availability of Fund Exchanges, or reject in whole or part any purchase
or exchange request, with respect to such investor's account. Such investors
also may be barred from purchasing other funds in the Dreyfus Family of
Funds. Generally, an investor who makes more than four exchanges out of the
Fund during any calendar year (for calendar year 1998, beginning on January
15th) or who makes exchanges that appear to coincide with an active
market-timing strategy may be deemed to be engaged in excessive trading.
Accounts under common ownership or control will be considered as one account
for purposes of determining a pattern of excessive trading. In addition, the
Fund may refuse or restrict purchase or exchange requests by any person or
group if, in the judgment of the Fund's management, the Fund would be unable
to invest the money effectively in accordance with its investment objective
and policies or could otherwise be adversely affected or if the Fund receives
or anticipates receiving simultaneous orders that
[Page 58]
may significantly affect the Fund (e.g., amounts equal to 1% or more
of the Fund's total assets). If an exchange request is refused, the Fund will
take no other action with respect to the shares until it receives further
instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would
be disruptive to efficient portfolio management or would adversely affect the
Fund. The Fund's policy on excessive trading applies to investors who invest
in the Fund directly or through financial intermediaries, but does not apply
to the Dreyfus Auto-Exchange Privilege, to any automatic investment or
withdrawal privilege described herein, or to participants in
employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components _ redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but
the purchase order would be effective only at the net asset value next
determined after the fund being purchased receives the proceeds of the
redemption, which may result in the purchase being delayed.
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.
[Page 59]
Copy Rights 1998 Dreyfus Service Corporation PSTMBp0898
DREYFUS PREMIER STATE MUNICIPAL BOND FUND
CLASS A AND CLASS B AND CLASS C SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 28, 1998
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 August 28,
1998, 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-20
Purchase of Shares B-23
Distribution Plan and Shareholder Services Plan B-26
Redemption of Shares B-28
Shareholder Services B-30
Determination of Net Asset Value B-32
Dividends, Distributions and Taxes B-33
Portfolio Transactions B-35
Performance Information B-36
Information About the Fund B-45
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-45
Financial Statements and Reports of Independent
Auditors B-46
Appendix A B-47
Appendix B B-105
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, 1998, computed on a monthly basis, for each Series was
as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Moody's Investors Standard & Poor's
Fitch IBCA, Inc. Service, Inc. Ratings Group Connecticut Florida Georgia
("Fitch") or ("Moody's") or ("S&P") Series Series Series
AAA Aaa AAA 31.3% 51.4% 69.2%
AA Aa AA 29.1 14.3 23.5
A A A 6.7 4.8 .6
BBB Baa BBB 25.0 12.1 1.7
BB Ba BB - 1.5 -
F-1 MIG 1/P-1 SP-1/A-1 .3 2.5 5.0
Not Rated Not Rated Not Rated 7.6 1 13.4 2 -
100.0% 100.0% 100.0%
Maryland Massachusetts Michigan
Fitch or Moody's or S&P Series Series Series
AAA Aaa AAA 25.8% 37.2% 46.0%
AA Aa AA 31.4 11.9 13.1
A A A 23.2 24.8 14.4
BBB Baa BBB 10.6 14.1 9.3
BB Ba BB - - -
F-1 MIG 1/P-1 SP-1/A-1 .9 .9 1.8
Not Rated Not Rated Not Rated 8.1 3 11.1 4 15.4 5
100.0% 100.0% 100.0%
</TABLE>
_______________________________
1 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: Baa/BBB (7.2%) and Ba/BB (.4%).
2 Included in the Not Rated category are securities comprising 13.4% 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 (1.9%), A/A (.8%), Baa/BBB
(6.6%), Ba/BB (.6%), B/B (3.0%) and C/C (.5%).
3 Included in the Not Rated category are securities comprising 8.1% 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: A/A (.1%), Baa/BBB (5.9%), Ba/BB (.1%)
and B (2.0%).
4 Included in the Not Rated category are securities comprising 11.1% 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 rated category: Baa/BBB (11.1%).
5 Included in the Not Rated category are securities comprising 15.4% 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 (5.7%), A/A (.8%), Baa/BBB
(5.3%) and Ba/BB (3.6%).
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
New North
Minnesota Jersey Carolina Ohio
Fitch or Moody's or S&P Series Series Series Series
AAA Aaa AAA 52.4% 33.3% 19.5% 48.2%
AA Aa AA 23.7 5.0 26.6 9.0
A A A 13.9 9.5 14.7 17.3
BBB Baa BBB 6.7 39.9 27.9 13.5
BB Ba BB - 3.9 - 6.6
F-1 MIG 1/P-1 SP-1/A-1 1.1 2.7 2.3 1.4
Not Rated Not Rated Not Rated 2.2 6 5.7 7 9.0 8 4.0 9
100.0% 100.0% 100.0% 100.0%
Pennsylvania Texas Virginia
Fitch or Moody's or S&P Series Series Series
AAA Aaa AAA 50.1% 56.4% 20.8%
AA Aa AA 6.7 8.0 14.7
A A A 19.9 12.7 30.9
BBB Baa BBB 9.1 16.2 15.7
BB Ba BB - - -
F-1 MIG 1/P-1 SP-1/A-1 .1 2.2 .5
Not Rated Not Rated Not Rated 14.1 10 4.5 11 17.4 12
100.0% 100.0% 100.0%
</TABLE>
________________________
6 Included in the Not Rated category are securities comprising 2.2% 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 rated category: Baa/BBB (2.2%).
7 Included in the Not Rated category are securities comprising 5.7% 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
rated category: BBB (5.7%).
8 Included in the Not Rated category are securities comprising 9.0% 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 rated category: BBB (9.0%).
9 Included in the Not Rated category are securities comprising 4.0% 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 (2.5%), A/A (.3%), Baa/BBB (.9%)
and Ba/BB (.3%).
10 Included in the Not Rated category are securities comprising 14.1% 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 (1.0%), A/A (1.8%), Baa/BBB
(6.1%), Ba/BB (2.9%) and B (2.3%).
11 Included in the Not Rated category are securities comprising 4.5% 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 (.6%) and Baa/BBB (3.9%).
12 Included in the Not Rated category are securities comprising 17.4% 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 (2.0%), Baa/BBB (8.5%) and Ba/BB
(6.9%).
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 Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P"), or
Fitch IBCA, Inc. ("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, or enter into,
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 each 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. 7, 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, and 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 64 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 55 years old and her address is c/o New York University
School of Law, 40 Washington Square South, New York, New York
10012.
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995,
Chairman of the Board of various funds in the Dreyfus Family of
Funds. He also is a director of Noel Group, Inc., a venture
capital company (for which, from February 1995 until November
1997, he was Chairman of the Board), The Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of
marketing, administrative and risk management services to health
and other benefit programs, Carlyle Industries, Inc. (formerly,
Belding Heminway Company, Inc.), a button packager and
distributor, Century Business Services, Inc., a provider of
various outsourcing functions for small and medium sized
companies, and Career Blazers Inc. (formerly, Staffing
Resources), a temporary placement firm. 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 until December 31, 1994,
he was a director of Mellon Bank Corporation. He is 54 years old
and his address is 200 Park Avenue, New York, New York 10166.
ERNEST KAFKA, Board Member. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents.
Since 1981, he has served as an Instructor at the New York
Psychoanalytic Institute and, prior thereto, held other teaching
positions. He is Associate Clinical Professor of Psychiatry at
Cornell Medical School. For more than the past five years, Dr.
Kafka has held numerous administrative positions and has published
many articles on subjects in the field of psychoanalysis. He is
65 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
78 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 served as
Chairman of Citizens Union, an organization which strives to
reform and modernize city and state governments from June 1994 to
June 1997. He is 55 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, 1998, 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, 1997, 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. $3,750 $ 88,305 (19)
Peggy C. Davis $4,000 $ 78,750 (16)
Joseph S. DiMartino $5,000 $597,128 (94)
Ernest Kafka $3,750 $ 77,500 (16)
Saul B. Klaman $4,000 $ 78,750 (16)
Nathan Leventhal $4,000 $ 78,750 (16)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $4,385 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 41 years old.
MARGARET W. CHAMBERS, Vice President and Secretary. Senior Vice President
and General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, Ms. Chambers was Vice President and
Assistant General Counsel for Loomis, Sayles & Company, L.P. From
January 1986 to July 1996, she was an associate with the law firm of
Ropes & Gray. She is 38 years old.
MICHAEL S. PETRUCELLI, Vice President, Assistant Treasurer and Assistant
Secretary. Senior Vice President of 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 Investment Services where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as a Director of GE Investment Services. He is 37
years old.
STEPHANIE D. PIERCE, Vice President, Assistant Treasurer and Assistant
Secretary . Vice President and Client Development Manager of Funds
Distributor, Inc., and an officer of other investment companies advised
or administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. She is 30 years
old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and 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 34 years old.
GEORGE A. RIO, Vice President and Assistant Treasurer. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by the
Manager. From June 1995 to March 1998, he was Senior Vice President,
Senior Key Account Manager for Putnam Mutual Funds. From May 1994 to
June 1995, he was Director of Business Development for First Data
Corporation. From September 1983 to May 1994, he was Senior Vice
President & Manager of Client Services and Director of Internal Audit
at The Boston Company. He is 43 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., 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 36 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President 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 29
years old.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of Funds Distributor,
Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1994 to July 1996, he was
Assistant Counsel at Forum Financial Group. From October 1992 to March
1994, he was employed by Putnam Investments in legal and compliance
capacities. He is 33 years old.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was a Fund Accountant
for Investors Bank & Trust Company. She is 25 years old.
ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
March 1990 to May 1996, she was employed by U.S. Trust Company of New
York where she held various sales and marketing positions. She is 36
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 August 3,
1998.
As of August 3, 1998, the following persons owned 5% or more of
the outstanding shares of beneficial interest of the Fund:
Class A Shares:
Connecticut Series - Merrill Lynch Pierce Fenner & Smith,
Jacksonville, FL - 9.4%;
Florida Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 5.9%;
Georgia Series - Judith Alexander, New York, NY - 6.9%;
Maryland Series - None;
Massachusetts Series - None;
Michigan Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 8.3%;
Minnesota Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 5.4%;
New Jersey Series - Joan B. Scannell, Upper Montclair, NJ - 10.5%;
Bernard and Rhoda Stern, Cranbury, NJ - 8.4%;
North Carolina Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 7.2%;
Ohio Series - None;
Pennsylvania Series - NFSC FEBO Mary Alice and James D. Morrisey, Huntingdon,
Valley, PA - 6.1%;
Texas Series - None;
Virginia Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 8.5%.
Class B Shares:
Connecticut Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 6.3%;
Florida Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 10.6%;
Georgia Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 15.4%;
Maryland Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 8.7%;
Massachusetts Series - None;
Michigan Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 11.8%;
Minnesota Series - None;
New Jersey Series - NFSC FEBO Lakeview Developers LTD, Fort Lee, NJ - 10.1%;
Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 7.1%;
North Carolina Series - None;
Ohio Series - None;
Pennsylvania Series - None;
Texas Series - None;
Virginia Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 10.0%.
Class C Shares:
Connecticut Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 12.1%; Painewebber for the Benefits of Herbert A.
Granath, New York, NY - 6.8%; US Clearing Corp.,
New York, NY - 5.7%;
Florida Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 27.4%; Painwebber for the Benefits of Christine
Hassuk Revocable Living Trust Christine Hassuk TTEE,
N. Miami Beach, FL - 13.3%; Painewebber for the
Benefits of Ruth Cole Succ. TTEE FBO Faye Gordon,
San Diego, CA - 7.9%; Painewebber for the Benefits of
Hildred Levine TTEE Hildred Levine Revocable Trust,
Delray Beach, FL - 7.5%; Painewebber for the Benefits
of Bridleway Partners, Boca Raton, FL - 6.8%;
Painewebber for the Benefits of Maynard D.
Hellman EXEC Estate of Florence Hellman, Rochester,
NY - 6.8%; Wachovia Securities, Inc., Winston - Salem,
NC - 6.8%; Painewebber for the Benefits of Nathan
Finkestein and Shirley Finkestein Ten Ent, Hallandale,
FL - 6.6%;
Georgia Series - Donaldson Lufkin Jenrette, Securities Corporation,
Inc., Jersey City, NJ - 71.3%; Merrill Lynch Pierce
Fenner & Smith, Jacksonville, FL - 26.0%;
Maryland Series - Painewebber for the Benefits of Charles Guthmann,
Chevy Chase, MD - 10.7%; Pamela S. Becker, Catonsville,
MD - 7.3%; Painewebber for the Benefits of Evelyne A.
and Judith A. Burger JTWROS, Timonium, MD - 5.9%;
Massachusetts Series - Premier Mutual Fund Services, Inc., Boston, MA - 100%;
Michigan Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 40.6%; Prudential Securities Inc., FBO Mr. Robert
J. Nordin TTEE Mr. Robert J. Nordin Revocable Living
Trust, Kalamazoo, MI - 7.7%; Murvale L. and Catherine
A. Huston TTEES Catherine A. Huston Revocable Living
Trust, Saint Clair, MI -6.6%;
Minnesota Series - Everen Clearing Corp., Charles and Shirley
Indericeden, Milwaukee, WI - 15.6%; Lawrence McConnell,
Chatfield, MN - 11.3%; Merrill Lynch Pierce Fenner &
Smith, Jacksonville, FL - 7.0%; NFSC FEBO Harold A. and
Mary Lou Schneider, Waite Park, MN - 6.8%;
New Jersey Series - Painewebber Inc. Cust FBO Ann and Jeff Berk JT WROS,
Scotch Plains, NJ - 49.8%; PaineWebber for the Benefit
of Meredith Spencer, Bayhead, NJ - 26.7%; BHC
Securities, Inc., Philadelphia, PA - 13.6%; NFSC FEBO
Lisa M. Kops - Wendel and Robert C. Wendel, Westfield,
NJ - 8.9%;
North Carolina Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 76.4%; William L. and C. Elizabeth Crowe, Cary,
NC - 11.5%; NFSC FEBO Ralph J. Arehart, Havelock,
NC - 10.9%;
Ohio Series - Max and Sylvia Weisbrod JTWROS, Canton, OH - 27.8%;
Painewebber for the Benefits of Richard C. and Carol J.
Walker Jt Ten, Oxford, OH - 17.1%; NFSC FEBO Clell L.
and Vera Maxwell, Walnut Creek, OH - 13.9%; Merrill
Lynch Pierce Fenner & Smith, Jacksonville, FL - 12.4%;
Jo Ann Robedeau, Toledo, OH - 5.2%;
Pennsylvania Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 65.9%; Everen Clearing Corp., Dr. Alan M. Polson,
Milwaukee, WI - 7.7%; Painewebber for the Benefit of
William J. and Randi J. Marrazzo Jt/WROS, Philadelphia,
PA - 7.7%; Texas Series - Merrill Lynch Pierce
Fenner & Smith, Jacksonville, FL - 62.8%; BHC
Securities Inc., Philadelphia, PA - 24.2%; Painewebber
for the Benefit of Jack D. Teter, Dallas, TX - 9.5%;
Virginia Series - Merrill Lynch Pierce Fenner & Smith, Jacksonville,
FL - 71.9%; US Clearing Corp., New York, NY - 9.7%;
Wheat First FBO David and Doris C. Rode Jt TEN,
Lynchburg VA - 5.5%; First Union Brokerage Services
Leland W. Potter, Charles City, VA - 5.5%.
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 July 15, 1998. 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; Ronald P. O'Hanley III, Vice Chairman; J. David
Officer, Vice Chairman 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; Andrew S. Wasser, Vice President-Information Systems;
James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet
and Richard F. Syron, directors.
The Manager manages each Series' portfolio of investments in
accordance with the stated policies of such Series, subject to the
approval of the Fund's Board. The Manager is responsible for
investment decisions, and provides the Fund with portfolio managers who
are authorized by the Board to execute purchases and sales of
securities. The Fund's portfolio managers are Joseph P. Darcy, A. Paul
Disidier, Douglas J. Gaylor, Karen M. Hand, Stephen C. Kris, Richard J.
Moynihan, W. Michael Petty, 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, 1996, 1997 and 1998, 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:
Management Fee Payable
1996 1997 1998
Connecticut $2,045,864 $1,972,181 $2,056,770
Florida 1,504,679 1,318,540 1,217,046
Georgia 160,860 147,484 136,699
Maryland 1,852,002 1,755,487 1,735,376
Massachusetts 423,126 404,124 382,683
Michigan 1,067,900 1,003,722 969,239
Minnesota 924,716 874,105 861,736
New Jersey 74,0731 56,3512 81,625
North Carolina 517,799 481,809 481,978
Ohio 1,684,215 1,617,417 1,599,166
Pennsylvania 1,600,235 1,553,060 1,513,450
Texas 464,591 437,938 442,275
Virginia 522,229 534,594 574,324
Reduction in Fee
1996 1997 1998
Connecticut $0 $0 $0
Florida 0 0 0
Georgia 59,898 0 0
Maryland 0 0 0
Massachusetts 0 0 0
Michigan 0 0 0
Minnesota 0 0 0
New Jersey 10,7321 9,6562 4,579
North Caarolina 20,032 0 0
Ohio 0 0 0
Pennsylvania 0 0 0
Texas 464,591 437,938 145,790
Virginia 522,229 534,594 147,021
Net Fee Paid
1996 1997 1998
Connecticut $2,045,864 $1,972,181 $2,056,770
Florida 1,504,679 1,318,540 1,217,046
Georgia 100,962 147,484 136,699
Maryland 1,852,002 1,755,487 1,735,376
Massachusetts 423,126 404,124 382,683
Michigan 1,067,900 1,003,722 969,239
Minnesota 924,716 874,105 861,736
New Jersey 63,3411 46,6952 77,046
North Carolina 497,767 481,809 481,978
Ohio 1,684,215 1,617,417 1,599,166
Pennsylvania 1,600,235 1,553,060 1,513,450
Texas 0 0 296,485
Virginia 0 0 427,303
______________________
1. The fiscal year ended was July 31, 1996.
2. 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.
For the fiscal years ended April 30, 1996, 1997 and 1998, 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series Class A Class B Class C
1996 1997 1998 1996 1997 1998 1996 1997 1998
*
Connecticut $25,153 $22,875 24,947 $57,412 $91,437 $79,931 $ -0- $4,291 $50
Florida 21,041 8,377 6,983 62,568 67,358 88,555 -0- -0- 0
Georgia 1,369 215 453 36,034 41,536 29,318 -0- -0- 20
Maryland 24,087 17,726 20,191 63,161 83,431 66,118 -0- -0- 247
Massachusetts 6,837 5,320 3,640 3,841 14,492 6,252 -0- -0- 0
Michigan 16,807 12,046 8,197 34,324 54,072 39,054 -0- -0- 0
Minnesota 13,055 9,460 11,909 43,202 50,144 25,293 -0- -0- 0
New Jersey 3,4921 1372 1,456 15,0061 10,0002 32,380 -0-3 -0-2 100
N. Carolina 5,070 3,281 4,367 72,256 72,766 52,671 -0- -0- 0
Ohio 23,198 13,993 15,644 52,134 84,422 85,243 -0- -0- 150
Pennsylvania 21,816 12,886 10,760 133,577 123,667 87,672 -0- -0- 42
Texas 4,008 3,327 3,891 25,002 27,930 16,845 -0- -0- 0
Virginia 10,873 8,159 14,139 38,249 65,396 37,262 -0- -0- 0
</TABLE>
___________________
*From August 15, 1995 (commencement of initial offering of Class C shares)
to April 30, 1996.
1 The fiscal year ended was July 31, 1996.
2 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.
3 From December 4, 1995 (commencement of initial offering of Class C shares)
to July 31, 1996. The fiscal year ended was July 31, 1996.
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, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Connecticut Florida Georgia Maryland
Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share $12.23 $14.17 $13.63 $13.05
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) .58 .67 .64 .61
Offering price to public $12.81 $14.84 $14.27 $13.66
North
Massachusetts Michigan Minnesota New Jersey Carolina
Series Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share $11.75 $15.61 $15.30 $13.08 $13.91
Sales load for individual sales of shares
aggregating less than $50,000 - 4.5%
of offering price (approximately
4.7% of net asset value per share) .55 .73 .72 .62 .65
Offering price to public $12.30 $16.34 $16.02 $13.70 $14.56
Ohio Pennsylvania Texas Virginia
Series Series Series Series
Class A Shares:
NET ASSET VALUE, per share $12.86 $16.68 $21.68 $17.37
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) .60 .78 1.02 .82
Offering price to public $13.46 $17.46 $22.70 $18.19
</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 July 15, 1998. 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, 1998, 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 $288,425 $12,612
Florida 173,658 2,094
Georgia 89,437 342
Maryland 239,455 6,440
Massachusetts 31,057 9
Michigan 101,708 3,209
Minnesota 138,437 4,260
New Jersey 49,265 575
North Carolina 226,779 253
Ohio 240,979 6,397
Pennsylvania 368,004 987
Texas 94,015 1,466
Virginia 196,262 9,543
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 July 15, 1998. 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, 1998, 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 $787,479 $144,212 $4,204
Florida 465,676 86,829 698
Georgia 17,303 44,719 114
Maryland 666,933 119,727 2,147
Massachusetts 158,415 15,529 3
Michigan 388,639 50,854 1,070
Minnesota 321,060 69,218 1,420
New Jersey 12,278 24,633 191
North Carolina 105,607 113,389 85
Ohio 604,272 120,490 2,132
Pennsylvania 503,601 184,002 329
Texas 153,538 47,007 489
Virginia 159,744 98,131 3,181
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. The Fund provides
Redemption Checks ("Checks") to investors in Class A shares
automatically upon opening an account unless such investors
specifically refuse the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. Checks will be sent
only to the registered owner(s) of the account and only to the address
of record. The Check Redemption Privilege may be established for an
existing account by a separate signed Shareholder Services Form. The
Account Application or Shareholder Services Form must be manually
signed by the registered owner(s). Checks are drawn on the investor's
Fund account and 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 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.
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, Martin Luther King Jr. 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, 1998 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), 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 aggregate 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, override or modify 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 on straddle positions may be treated as short-term capital gains
or ordinary income.
The Taxpayer Relief Act of 1997 included constructive sale
provisions that generally will apply if the Fund either (1) holds an
appreciated financial position with respect to stock, certain debt
obligations, or partnership interests ("appreciated financial
position") and then enters into a short sale, futures, forward, or
offsetting notional principal contract (collectively, a "Contract")
respecting the same or substantially identical property or (2) holds an
appreciated financial position that is a Contract and then acquires
property that is the same as, or substantially identical to, the
underlying property. In each instance, with certain exceptions, the
Fund generally will be taxed as if the appreciated financial position
were sold at its fair market value on the date the Fund enters into the
financial position or acquires the property, respectively.
Transactions that are identified as hedging or straddle transactions
under other provisions of the Code can be subject to the constructive
sale provisions.
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, 1998, 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 4.18% -
Florida 3.87 -
Georgia 3.87 -
Maryland 4.30 -
Massachusetts 3.94 -
Michigan 3.92 -
Minnesota 3.92 -
New Jersey 4.17 -
North Carolina 4.13 -
Ohio 3.99 -
Pennsylvania 4.31 -
Texas 3.97 3.91%
Virginia 4.12 -
____________________________
(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 3.85% -
Florida 3.55 -
Georgia 3.59 -
Maryland 3.97 -
Massachusetts 3.61 -
Michigan 3.60 -
Minnesota 3.59 -
New Jersey 3.87 -
North Carolina 3.82 -
Ohio 3.66 -
Pennsylvania 4.00 -
Texas 3.67 3.61%
Virginia 3.81 -
____________________________
(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 C:
Connecticut 3.57% -
Florida 3.30 -
Georgia 3.12 -
Maryland 3.70 -
Massachusetts 3.45 -
Michigan 3.34 -
Minnesota 3.29 -
New Jersey 3.54 -
North Carolina 3.62 -
Ohio 3.43 -
Pennsylvania 3.71 -
Texas 3.38 3.33%
Virginia 3.55 -
____________________________
(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 1998 combined (except where noted) Federal and
applicable State tax rate specified below, the tax equivalent yield for the
30-day period ended April 30, 1998 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% 7.25% -
Florida(2) 39.60 6.41 -
Georgia 43.22 6.82 -
Maryland 42.59 7.49 -
Massachusetts 46.85 7.41 -
Michigan 42.26 6.79 -
Minnesota 44.73 7.09 -
New Jersey 43.45 7.37 -
North Carolina 44.28 7.41 -
Ohio 43.95 7.12 -
Pennsylvania 41.29 7.34 -
Texas(2) 39.60 6.57 6.47%
Virginia 43.07 7.24 -
___________________________
(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
1998.
Class B:
Tax Equivalent Net of Absorbed
Series Tax Rate Yield Expenses(1)
_______ ___________ ______________ __________________
Connecticut 42.32% 6.67% -
Florida(2) 39.60 5.88 -
Georgia 43.22 6.32 -
Maryland 42.59 6.92 -
Massachusetts 46.85 6.79 -
Michigan 42.26 6.23 -
Minnesota 44.73 6.50 -
New Jersey 43.45 6.84 -
North Carolina 44.28 6.86 -
Ohio 43.95 6.53 -
Pennsylvania 41.29 6.81 -
Texas(2) 39.60 6.08 5.98%
Virginia 43.07 6.69 -
___________________________
(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
1998.
Tax Equivalent Net of Absorbed
Series Tax Rate Yield Expenses(1)
________ ___________ ________________ __________________
Class C:
Connecticut 42.32% 6.19% -
Florida(2) 39.60 5.46 -
Georgia 43.22 5.49 -
Maryland 42.59 6.44 -
Massachusetts 46.85 6.49 -
Michigan 42.26 5.78 -
Minnesota 44.73 5.95 -
New Jersey 43.45 6.26 -
North Carolina 44.28 6.50 -
Ohio 43.95 6.12 -
Pennsylvania 41.29 6.32 -
Texas(2) 39.60 5.60 5.51%
Virginia 43.07 6.24 -
_________________________
(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
1998.
Tax equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax-exempt by 1 minus a
stated tax rate and adding the quotient to that portion, if any, of the
yield of the Series that is not tax-exempt.
The tax equivalent yield noted above represents the application of the
highest marginal personal tax rates currently in effect. For Federal
personal income tax purposes, a 39.60% tax rate has been used. The tax
equivalent figure, however, does not include the potential effect of any
local (including, but not limited to, county, district or city) taxes,
including applicable surcharges. In addition, there may be pending
legislation which could affect such stated tax rates or yields. Each
investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant
tax equivalent yield.
The average annual total return for the periods indicated for Class A
of each Series was as follows:
1-year period 5-year period 10-year period
Series ended April 30, 1998 ended April 30, 1998 ended April 30, 1998
Connecticut 4.49% 5.10% 7.54%
Florida 1.94 4.40 7.68
Georgia 2.94 4.78 6.06(1)
Maryland 4.46 5.28 7.75
Massachusetts 4.11 4.93 7.62
Michigan 3.69 5.52 8.09
Minnesota 2.51 4.78 7.60
New Jersey 4.51 5.56(2) -
North Carolina 5.45 5.17 7.26(3)
Ohio 3.20 5.04 7.94
Pennsylvania 4.91 5.60 8.28
Texas 5.08 6.21 8.73
Virginia 5.11 5.56 7.62(3)
____________________________
(1) For the 5.66 year period ended April 30, 1998.
(2) For the 4.00 year period ended April 30, 1998.
(3) For the 6.75 year period ended April 30, 1998.
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 5-year period 5.290-year period
Series ended April 30, 1998 ended April 30, 1998 ended April 30, 1998
Connecticut 4.97% 5.18% 5.96%
Florida 2.26 4.52 5.29
Georgia 3.24 4.90 5.94
Maryland 4.83 5.35 6.10
Massachusetts 4.49 5.03 5.78
Michigan 4.08 5.63 6.35
Minnesota 2.79 4.88 5.69
New Jersey 4.85 5.60(1) -
North Carolina 5.84 5.27 6.18
Ohio 3.62 5.14 5.93
Pennsylvania 5.20 5.69 6.46
Texas 5.53 6.32 7.12
Virginia 5.56 5.66 6.48
____________________________
(1) For the 4.00 year period ended April 30, 1998.
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 2.710-year period
Series ended April 30, 1998 ended April 30, 1998
Connecticut 7.68% 6.79%
Florida 4.94 4.89
Georgia 5.61 6.06
Maryland 7.55 6.90
Massachusetts 7.22 6.43
Michigan 6.70 6.65
Minnesota 5.46 5.72
New Jersey 7.55 4.30(1)
North Carolina 8.58 7.68
Ohio 6.35 6.45
Pennsylvania 7.91 7.25
Texas 8.24 7.85
Virginia 8.22 7.54
____________________________
(1) For the 2.41 year period ended April 30, 1998.
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, 1998
(except where indicated) for Class A of each Series was as follows:
Based on Maximum Based on Net Asset
Series Offering Price Value
Connecticut 116.44% 126.67%
Florida 141.22 152.67
Georgia(1) 39.52 46.10
Maryland 106.13 115.86
Massachusetts 105.22 114.86
Michigan 142.71 154.07
Minnesota 121.43 131.93
New Jersey(2) 24.08 29.93
North Carolina(3) 60.46 68.08
Ohio 77.94 86.27
Pennsylvania(4) 123.03 133.58
Texas 187.10 200.61
Virginia(3) 64.18 71.92
____________________________
(1) For the period from September 3, 1992 (commencement of operations)
through April 30, 1998.
(2) For the period from May 4, 1994 (commencement of operations) through
April 30, 1998.
(3) For the period from August 1, 1991 (commencement of operations) through
April 30, 1998.
(4) For the period from July 30, 1987 (commencement of operations) through
April 30, 1998.
The total return for the period January 15, 1993 to April 30, 1998
(except where indicated) for Class B of each Series was as follows:
Based on Net Asset Based on
Series Value Maximum CDSC
Connecticut 36.85% 35.85%
Florida 32.35 31.38
Georgia 36.72 35.72
Maryland 37.76 36.76
Massachusetts 35.59 34.59
Michigan 39.51 38.51
Minnesota 35.00 34.00
New Jersey(1) 27.28 24.28
North Carolina 38.32 37.32
Ohio 36.66 35.66
Pennsylvania 40.25 39.25
Texas 44.86 43.86
Virginia 40.36 39.36
___________________________________
(1) For the period May 4, 1994 (commencement of operations) to April 30,
1998.
The total return for the period August 15, 1995 to April 30, 1998
(except where indicated) for Class C of each Series was as follows:
Based on Net Asset
Series Value*
Connecticut 19.49%
Florida 13.80
Georgia 17.28
Maryland 19.80
Massachusetts 18.39
Michigan 19.07
Minnesota 16.26
New Jersey(1) 10.67
North Carolina 22.20
Ohio 18.46
Pennsylvania 20.87
Texas 22.72
Virginia 21.77
___________________________________
* No CDSC is charged Class C shares after one year of purchase.
(1) For the period December 4, 1995 (commencement of operations) to April
30, 1998.
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 Municipal
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 being 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.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Fund's Trust Agreement disclaims shareholder liability for acts
or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed
by the Fund or a Trustee. The Trust Agreement provides for indemnification
from the Fund's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet
its obligations, a possibility which management believes is remote. Upon
payment of any liability incurred by the Fund, the shareholder paying such
liability will be entitled to reimbursement from the general assets of the
Fund. The Fund intends to conduct its operations in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.
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 $24 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 ended April 30, 1998, the Fund paid
the Transfer Agent $993,804.
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian. The Bank of New York has no 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.
FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITOR
The Annual and Semi-Annual Reports to Shareholders of each Series are
separate documents and the financial statements, accompanying notes and,
with respect to the Annual Reports, reports of independent auditors
appearing therein are incorporated by reference into this Statement of
Additional Information. When requesting a copy of this Statement of
Additional Information, you will receive the report(s) for the Series in
which you are a shareholder.
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-47
Florida Series B-50
Georgia Series B-54
Maryland Series B-59
Massachusetts Series B-61
Michigan Series B-63
Minnesota Series B-67
New Jersey Series B-73
North Carolina Series B-75
Ohio Series B-80
Pennsylvania Series B-87
Texas Series B-94
Virginia Series B-100
Connecticut Series
Manufacturing has historically been of prime economic importance to
Connecticut. The State's manufacturing industry is diversified, with
transportation equipment (primarily aircraft engines, helicopters and
submarines) as the dominant industry, followed by non-electrical machinery,
fabricated metal products and electrical machinery. As a result of a rise
in employment in service-related industries and a decline in manufacturing
employment, however, manufacturing accounted for only 17.39% of total non-
agricultural employment in Connecticut in 1996. Defense-related business
represents a relatively high proportion of the manufacturing sector. On a
per capita basis, defense awards to Connecticut have traditionally been
among the highest in the nation, and reductions in defense spending have had
a substantial adverse impact on Connecticut's economy.
The average annual unemployment rate in Connecticut increased from a
low of 3.0% in 1988 to a high of 7.6% in 1992 and, after a number of
important changes in the method of calculation, was reported to be 5.8% in
1996. Average per capita personal income of Connecticut residents increased
in every year from 1987 to 1996, rising from $21,592 to $33,875. However,
pockets of significant unemployment and poverty exist in several Connecticut
cities and towns.
At the end of the 1990-1991 fiscal year, the General Fund had an
accumulated unappropriated deficit of $965,712,000. For the six fiscal
years ended June 30, 1997, the General Fund ran operating surpluses, based
on the State's budgetary method of accounting, of approximately
$110,200,000, $113,500,000, $19,700,000, $80,500,000, $250,000,000, and
$262,600,000, respectively. General Fund budgets for the biennium ending
June 30, 1999, were adopted in 1997. General Fund expenditures and revenues
are budgeted to be approximately $9,550,000,000 and $9,700,000,000 for the
1997-1998 and 1998-1999 fiscal years, respectively, an increase of more than
35% from the budgeted expenditures of approximately $7,008,000,000 for the
1991-1992 fiscal year.
During 1991 the State issued a total of $965,710,000 Economic Recovery
Notes. The notes were to be payable no later than June 30, 1996, but as
part of the budget adopted for the biennium ending June 30, 1997, payment of
the notes scheduled to be paid during the 1995-1996 fiscal year was
rescheduled to be made over the four fiscal years ending June 30, 1999. The
outstanding notes were $157,055,000 as of December 1, 1997.
The State's primary method for financing capital projects is through
the sale of general obligation bonds. These bonds are backed by the full
faith and credit of the State. As of December 1, 1997, the State had
authorized direct general obligation bond indebtedness totaling
$11,460,239,000, of which $10,159,950,000 had been approved for issuance by
the State Bond Commission and $9,181,272,000 had been issued. As of
December 1, 1997, State direct general obligation indebtedness outstanding
was $6,475,986,251.
In 1995, the State established the University of Connecticut as a
separate corporate entity to issue bonds and construct certain
infrastructure improvements. The University is authorized to issue bonds
totaling $962,000,000 to finance the improvements. The University's bonds
will be secured by a State debt service commitment, the aggregate amount of
which is limited to $382,000,000 for bonds issued in the four fiscal years
ending June 30, 1999, and $580,000,000 for bonds issued in the six fiscal
years ending June 30, 2005.
In addition, the State has limited or contingent liability on a
significant amount of other bonds. Such bonds have been issued by the
following quasi-public agencies: the Connecticut Housing Finance Authority,
the Connecticut Development Authority, the Connecticut Higher Education
Supplemental Loan Authority, the Connecticut Resources Recovery Authority
and the Connecticut Health and Educational Facilities Authority. Such bonds
have also been issued by the cities of Bridgeport and West Haven and the
Southeastern Connecticut Water Authority. As of December 1, 1997, the
amount of bonds outstanding on which the State has limited or contingent
liability totaled $4,000,900,000.
In 1984, the State established a program to plan, construct and improve
the State's transportation system (other than Bradley International
Airport). The total cost of the program through June 30, 2002, is currently
estimated to be $12.3 billion, to be met from federal, state, and local
funds. The State expects to finance most of its $5.1 billion share of such
cost by issuing $4.6 billion of special tax obligation ("STO") bonds. The
STO bonds are payable solely from specified motor fuel taxes, motor vehicle
receipts, and license, permit and fee revenues pledged therefor and credited
to the Special Transportation Fund, which was established to budget and
account for such revenues.
As of July 1, 1998, the General Assembly had authorized $4,489,200,000
of such STO bonds, of which $3,894,700,000 new money borrowings had been
issued. It is anticipated that additional STO bonds will be authorized
annually in amounts necessary to finance and to complete the infrastructure
program. Such additional bonds may have equal rank with the outstanding
bonds provided certain pledged revenue coverage requirements are met. The
State expects to continue to offer bonds for this program.
The State's general obligation bonds are rated AA- by Standard & Poors
and Aa3 by Moody's. On March 17, 1995, Fitch reduced its ratings of the
State's general obligation bonds from AA+ to AA.
The State, its officers and its employees are defendants in numerous
lawsuits. Although it is not possible to determine the outcome of these
lawsuits, the Attorney General has opined that an adverse decision in any of
the following cases might have a significant impact on the State's financial
position: (i) a class action by the Connecticut Criminal Defense Lawyers
Association claiming a campaign of illegal surveillance activity and seeking
damages and injunctive relief; (ii) an action on behalf of all persons with
traumatic brain injury who have been placed in certain State hospitals,
claiming that their constitutional rights are violated by placement in State
hospitals alleged not to provide adequate treatment and training, and
seeking placement in community residential settings with appropriate support
services; (iii) litigation involving claims by Indian tribes to a portion of
the State's land area; and (iv) an action by certain students and
municipalities claiming that the State's formula for financing public
education violates the State's Constitution and seeking a declaratory
judgment and injunctive relief.
As a result of litigation on behalf of black and Hispanic school
children in the City of Hartford seeking "integrated education" within the
Greater Hartford metropolitan area, on July 9, 1996, the State Supreme Court
directed the legislature to develop appropriate measures to remedy the
racial and ethnic segregation in the Hartford public schools. The fiscal
impact of this decision might be significant but is not determinable at this
time.
General obligation bonds issued by municipalities are payable primarily
from ad valorem taxes on property located in the municipality. A
municipality's property tax base is subject to many factors outside the
control of the municipality, including the decline in Connecticut's
manufacturing industry. Certain Connecticut municipalities have experienced
severe fiscal difficulties and have reported operating and accumulated
deficits. The most notable of these is the City of Bridgeport, which filed
a bankruptcy petition on June 7, 1991. The State opposed the petition. The
United States Bankruptcy Court for the District of Connecticut held that
Bridgeport has authority to file such a petition but that its petition
should be dismissed on the grounds that Bridgeport was not insolvent when
the petition was filed. State legislation enacted in 1993 prohibits
municipal bankruptcy filings without the prior written consent of the
Governor.
In addition to general obligation bonds backed by the full faith and
credit of the municipality, certain municipal authorities finance projects
by issuing bonds that are not considered to be debts of the municipality.
Such bonds may be repaid only from revenues of the financed project, the
revenues from which may be insufficient to service the related debt
obligations.
Regional economic difficulties, reductions in revenues and increases in
expenses could lead to further fiscal problems for the State and its
political subdivisions, authorities and agencies. Difficulties in payment of
debt service on borrowings could result in declines, possibly severe, in the
value of their outstanding obligations, increases in their future borrowing
costs, and impairment of their ability to pay debt service on their
obligations.
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 1996-1997 fiscal year, the State revenues allowed
under the amendment for the prior fiscal year shall equal the State revenues
collected for the 1995-1996 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 1995-96 and 1996-97 with General Revenue
plus Working Capital Funds unencumbered reserves of approximately $293.3
million and $440.5 million, respectively. Estimated fiscal year 1996-97
General Revenue plus Working Capital Funds available total $19.17 billion.
Total effective appropriations for the 1996-97 fiscal year are estimated at
$16.719 billion, resulting in estimated unencumbered reserves of $316.2
million at the end of the fiscal year.
In fiscal year 1996-97, the State derived approximately 60% 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 62%, 6.5% and 2.8%, 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 1996-97, expenditures from the General Revenue
Fund for education, health and welfare and public safety amounted to
approximately 28%, 34% and 8%, 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, 1997, receipts from this source were
$12.113 billion, an increase of 8% from fiscal year 1995-96.
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, 1997, were $1.438 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 $553.9 million in State fiscal year ended
June 30, 1997. 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 1996-97 a
total of $98.3 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, 1997, receipts from this
source were $1.358 billion, an increase of 25% from fiscal year 1995-96.
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 $864.2 million during fiscal year
1996-97, posting a 9% increase from the previous fiscal year. The General
Revenue Fund receives approximately 2% 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 1996-97, gross receipts utilities tax collections totalled
$585.4 million, an increase of 7% 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 1996-97 total intangible personal property tax collections
were $980.9 million, a 5% 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
$64.68 million during fiscal year 1996-97, up 42% 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 1996-97 produced ticket sales of $943.1 billion of which
education received approximately $805.39 million.
Georgia Series
Georgia's economy grew rapidly in the 1980s, resulting in a general
fund reserve. Although the State's economy incurred a slowdown in the early
1990's which effectively eliminated the general fund reserve, revenues once
again began to exceed appropriations in fiscal 1993. The State's revenue
shortfall reserve at the end of Fiscal 1997 was approximately $333 million,
and revenues are estimated to exceed expenditures for Fiscal 1998.
Georgia's unemployment rate was 4.4% for 1997 which is a decrease of
0.1% over the State's 1996 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 (94% of the U.S. average in 1997), 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 7% in fiscal
year 1997 from fiscal year 1996, and that these revenue sources generated
the following percentages of total Georgia State revenue in fiscal year
1997:
Sales Tax 33%
Income Tax 47%
Motor Fuels Tax 5%
Lottery 4%
Other Taxes 11%
TOTAL 100%
State expenditures are classified by major policy category for
budgetary purposes. In the fiscal year 1998 operating budget, Georgia
expenditures for educational development, human resources, protection of
persons and property, and transportation amounted to 56.4%, 22%, 6%, and 5%,
respectively, of total budgeted expenditures. Debt service for issued
obligations accounts for 3% of total budgeted expenditures for fiscal year
1998.
The aggregate general obligation debt and guaranteed revenue debt
authorized by the State General Assembly as of May 31, 1998 is $8.5 billion
and $200 million, respectively. The aggregate amount of general obligation
debt and guaranteed revenue debt actually outstanding, as of May 31, 1998,
is $4.7 billion. Of this outstanding debt, 29.9% is due and payable on or
before May 31, 2003 and 62.4% is due and payable on or before May 31, 2008.
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.
Abbott Laboratories v. Georgia Department of Administrative Services,
et al., Fulton Superior Court Civil Action No. E-65451. The plaintiff is
seeking unspecified damages against the Department of Administrative
Services ("DOAS") and the Department of Human Resources under breach of
contract and promissory estoppel theories. The case arises out of DOAS'
issuance of a notice of award to Abbott Laboratories, Ross Products Division
in connection with the WIC Infant Formula Rebate Program. The Director of
State Purchasing subsequently ordered cancellation of the notice of award
and rebid because of conflicting information that created a contradiction in
the bidding specifications. The damages sought are unspecified and
speculative. Discovery is ongoing in this matter. The State intends to
file a motion for summary judgment at the close of discovery.
Age International, Inc. v. State (two cases) Two suits for refund 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 (468 US 263)
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
trial court has granted the State's motives for summary judgment and the
claimants have requested that the trial court extend the time for filing a
notice of appeal from such decisions.
Cobb County, et al. v. Georgia, et al., Fulton Superior Court Civil
Action No. E-67414 (filed March 5, 1998) and DeKalb County, et al. v.
Georgia, et al., Fulton Superior Court Civil Action No. E-67520 (filed
March 13, 1998). In related cases, each County and certain of its officials
has sued the State of Georgia, the Department of Revenue, Zell Miller (in
his official capacity as Governor), T. Jerry Jackson (in his personal
capacity and in his official capacity as Revenue Commissioner), Claude L.
Vickers (in his personal capacity and in his official capacity as State
Auditor), and the Department of Audits (collectively "the State") in
connection with the State's collection and distribution of special local
option sales taxes to the counties. In Cobb, the County sought an
accounting, a writ of mandamus, injunctive relief and additional relief
based upon theories of unjust enrichment and bailment. Cobb's claims
related to the State's administration of state and local option sales taxes
from April 1, 1995 to the present. Cobb sought $19 million in relief. In
DeKalb, the County asserts similar grounds for relief with the addition of a
claim for declaratory relief. DeKalb's claims relate to the State's
administration of state and local option sales taxes from July 1, 1997 to
the present. DeKalb seeks unspecified monetary relief but estimates a
shortfall in distributions from the State of $15 million. The State filed
motions to dismiss in both cases and additionally, in Cobb, filed a
counterclaim against the County for $10.4 million. The trial court has
granted the State's motions to dismiss in both actions. DeKalb County has
appealed this ruling, claiming that certain of its claims were meritorious
and seeking to litigate those claims. The State believes that the period
for Cobb County to appeal has lapsed, although a motion by Cobb County
remains pending in the trial court. The State intends to contest all claims
against it vigorously. The State believes that the substance of Plaintiff's
claims in both cases is unsubstantiated.
George Jackson, et al. v. Georgia Lottery Corporation, Fulton Superior
Court Civil Action No. E-50303, filed August 26, 1996. Plaintiffs sought a
court order declaring that two games sponsored by the Georgia Lottery
Corporation, "Quick Cash" and "Cash Three", are unconstitutional and
enjoining the lottery from further offering of these games. Plaintiffs also
sought the return of all monies played on these games during a specified
period, approximately $1,703,462,781. On an interlocutory appeal, the
Georgia Court of Appeals ruled that the Lottery Corporation does not have
sovereign immunity but ruled for the Corporation on the merits. The
Plaintiffs petitioned for a writ of certiorari to the Supreme Court of
Georgia, and the Supreme Court denied the petition. The remittitur of the
Court of Appeals has been returned to the trial court.
Georgia Department of Administrative Services, et al. v. Abbensett, et
al., Gwinnett Superior Court Civil Action No. 96A-0395-16. This case arises
in the context of a declaratory judgment action brought by the State of
Georgia and counterclaims filed by the defendants. A young professional
woman and mother was killed in an automobile accident when her car collided
with another vehicle. The other vehicle was a state-owned vehicle driven by
an employee of a for-profit corporation, which had contracted Fulton County,
Georgia, to provide a transportation service. Fulton, County had a contract
with the Atlanta Regional Commission concerning the transportation service
program, and the Atlanta Regional Commission, in turn, had a contract with
the Georgia Department of Human Resources. In June, 1996, the Georgia
Department of Human Resources and the Georgia Department of Administrative
Services brought declaratory judgment actions against the decedent's estate
and others to assert the absence of any duty to insure the second driver.
In August, 1996, the estate and other parties filed counter-claims for
wrongful death. The State's self-insurance program and the State's vehicle
insurer have settled with the decedent's estate in a total amount of
$675,000; the State's share was $175,000. The State is currently engaged in
settlement negotiations as to all but one of the remaining claims, which are
not expected to exceed the $175,000 amount already paid out. As to the
other remaining claim of the for-profit corporation involved, the State
believes that it has good and adequate defenses and intends to defend
vigorously.
W.J. Luke, an individual, v. Georgia Department of Natural Resources,
et al., Fulton Superior Court Civil Action No. E-62384. This civil action
was filed in October, 1997, on behalf of W.J. Luke and all other
contributors to the Georgia Underground Storage Tank Trust Fund, established
under the Georgia Underground Storage Tank Act, O.C.G.A. 12-13-1, et seq.,
for refund of all monies collected under that Act, interest, and attorney's
fees. From the time of its inception in 1988 to the present, the Fund has
collected approximately $82 million. The State believes that it has
substantial defenses to assert and intends to defend the case vigorously.
The State was granted a motion to dismiss the action, on the grounds that no
justiciable controversy exists, and the Plaintiff has filed an appeal with
the Georgia Supreme Court. The State has filed a motion to transfer the
case to the Georgia Court of Appeals.
Year 2000 Compliance. Like other large organizations, the State and
its agencies are subject to the costs and risks associated with what has
come to be known as "Year 2000" compliance, which arises because many
computer programs accept only two-digit entries in date code fields used
for, among other things, calculation and report generation features.
Wherever the State and its agencies use information systems, the resulting
inability of such computer programs to distinguish between the years 1900
and 2000 presents a number of risks. Such risks include, for example,
disruption of the collection of revenues, disruption of the distribution of
State funds with respect to transfer payments, taxes, State payroll, and
transfers to local government, and disruption of other information
processing with respect to preparation of tax assessment notices and
calculation of prisoner release dates, as well as the inefficiencies and
delays caused by system-generated errors and potential litigation as a
result of any of such disruptions or delays. In addition, the State's
receipt of revenues from its various revenue sources, both in the public and
private sectors, could be adversely affected by Year 2000 compliance
problems experienced by such revenue sources.
Accordingly, the State has instituted a series of planning and
assessment activities aimed at Year 2000 compliance, which utilize the
services of an independent consultant. The State, with the assistance of
the independent consultant, has produced a status assessment and developed
estimated costs of implementing remediation and replacement strategies to
reduce and eliminate Year 2000 risks for the participating agencies. The
State's approach of funding Year 2000 compliance has been to include such
costs with those related to the State's ongoing goal of modernization and
standardization of existing information systems. The State's 1998
Supplemental Budget authorized the expenditure of approximately $152,000,000
to address Year 2000 compliance, approximately $120,000,000 of which has
already been allocated to state agencies for their Year 2000 compliance
efforts. The Department of Revenue has already received approximately
$51,000,000 of such funds. The State is in the process of estimating
additional funding requirements (including for nonparticipating State
agencies submitting their independently produced Year 2000 compliance and
system modernization funding requirements); however, actual costs may vary
from the estimates and may be significantly higher. Presently, the State
and its agencies are continuing these remediation and testing efforts in
order that all information systems used by the State will function properly
before, during and after Year 2000, subject, however, to the General
Assembly of the State appropriating the requested funds and the continued
ability of the State to employ and retain sufficient information technology
professionals to plan and implement remediation and replacement strategies.
No assurance can be given at this time, however, that these efforts will be
successful prior to the Year 2000.
As discussed above, the State has taken and is continuing to take
action to assess, plan and implement remediation and replacement strategies
to reduce and eliminate Year 2000 risk. All of the potential risks and costs
associated with the failure to remediate, however, cannot be accurately
identified and quantified at this time. In particular, the adverse impact
of the Year 2000 compliance problems on the revenues normally available to
the State, both from private and public sectors, cannot be accurately
quantified. No assurance can be given that the General Assembly will
appropriate adequate funds to assure compliance, that other possible
implementation delays or problems that may arise can be resolved on a timely
basis, or that the State will not be exposed to potential claims resulting
from Year 2000 noncompliance.
Maryland Series
Some of the significant financial considerations relating to the
investments of the Maryland Series are summarized below. Except with
respect to the various bond ratings described below, this information is
derived principally from the Official Statement with respect to State of
Maryland General Obligation Bonds dated July 8, 1998, and does not purport
to be a complete description.
The State's total expenditures for the fiscal years ending June 30,
1995, June 30, 1996 and June 30, 1997 were $13.528 billion, $14.169 billion,
and $14.787 billion, respectively. As of July 8, 1998, it was estimated
that total expenditures for fiscal year 1998 would be $15.851 billion. The
State's General Fund had unreserved surpluses on a budgetary basis of $13.1
million, $207.2 million and $317.2 million (estimated) in fiscal years 1996,
1997 and 1998, respectively. The State Constitution mandates a balanced
budget.
In April 1997, the General Assembly approved $15.438 billion 1998
fiscal year Budget. The Budget included $3.1 billion in aid to local
governments (reflecting a $206 million increase in funding over fiscal year
1997), and $0.3 million in General Fund deficiency appropriations for fiscal
year 1997. The Budget incorporated the first one-half year of a five-year
phase-in of a 10% reduction in personal income taxes estimated to result in
a reduction of revenues of $38.5 million in fiscal year 1998 (and estimated
to reduce revenues by $450 million when fully phased in). In addition,
legislation enacted by the 1997 General Assembly provided for a phased
reduction in the sales and use tax on certain categories of manufacturing
equipment. This legislation, scheduled to take effect in fiscal year 1999,
is expected to reduce revenues by $38.6 million when fully implemented in
fiscal year 2001. Upon enactment of the 1998 Budget, it was estimated that
the General Fund surplus on a budgetary basis at June 30, 1998, would be
approximately $27.9 million; as of July 8, 1998 it is estimated to be $317.2
million. In addition, the balance in the Revenue Stabilization Account of
the State Reserve Fund is estimated to be $617.16 million at June 30, 1998.
In April 1998, the General Assembly approved the $16.613 billion 1999
fiscal year Budget. The Budget includes $3.3 billion in aid to local
governments and retirement contributions on their behalf (reflecting a
$169.1 million increase over fiscal year 1998), and $75.5 million in General
Fund deficiency appropriations for fiscal year 1998, which includes a $25
million appropriation for computer modifications to address the "year 2000"
problem. The Budget incorporates the first full year of the five-year phase-
in for the 10% reduction in personal income taxes, which was accelerated by
legislation enacted by the 1998 General Assembly. The phase-in is estimated
to result in a reduction in revenues of approximately $300 million in fiscal
year 1999. Legislation was also enacted making the State's existing earned
income tax credit refundable, reducing revenues by an estimated $17.5
million in fiscal 1999. The estimated reduction in fiscal 1999 revenues
will be mitigated by a transfer of $185.2 million to the General Fund from
the Revenue Stabilization Account of the State Reserve Fund. Based on the
1999 Budget, it is estimated that the General Fund surplus on a budgetary
basis at June 30, 1999, will be approximately $14.5 million. In addition,
the balance in the Revenue Stabilization Account of the State Reserve Fund
is estimated to be $634.0 million at June 30, 1999 (after the $185.2 million
transfer to the General Fund).
The public indebtedness of Maryland and its instrumentalities is
divided into three basis 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 obligation
bonds for transportation purposes payable primarily from specific,
fixed-rate excise taxes and other revenue 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 May 1997, the State's general obligation bonds were rated "AAA"
by Moody's, 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 1998, these bonds were rated "AA2" 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 May 1997.
According to recent available ratings, general obligation bonds of
Montgomery County (abutting Washington, D.C.) are rated "AAA" by Moody's and
S&P. Prince George's County, also in the Washington, D.C. suburbs, issues
general obligation bonds rated "Aa3" 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 S&P.
The City of Baltimore's general obligation bonds are rated "A1" by Moody's
and 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
Allegany County and Garrett County, the bonds of which are rated "Baa2" and
"Baa3," respectively, by Moody's. The Washington Suburban Sanitary
district, a bi-county agency providing water and sewerage services in
Montgomery and Price George's Counties, issues general obligation bonds
rated "Aal" by Moody's and "AA" by S&P as of July 1998. Additionally, some
of the large municipal corporations in Maryland (such as the cities of
Rockville and Annapolis) have issued general obligation bonds.
Massachusetts Series
The economy of the Commonwealth of Massachusetts is experiencing
recovery following a slowdown that began in mid-1988. Massachusetts had
benefited from an annual job growth rate of approximately 2% since the early
1980's, but by 1989 employment started to decline. Between 1988 and 1992,
total employment in Massachusetts declined 10.7%. With the economic
recovery that began in 1993, however, employment levels have increased.
Since 1994, total employment levels have increased at yearly rates greater
than or equal to 2.0%. In 1995, 1996 and 1997, total employment increased
by 2.5%, 2.0% and 2.7%, respectively. Employment levels increased in all
sectors, including 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 (4.0% compared to 4.9% in 1997) and the employment
population ratio in Massachusetts in 1996 and 1997 was slightly above the
national average (66.4% compared to 63.2% for 1996 and 66.2% compared with
63.8% for 1997).
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 1998 with a
positive closing fund balance in its budgeted operating funds, and expects
to do so again at the close of fiscal 1998.
In recent years, health 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. However, the rate of increase has abated
in recent years, due to a number of savings and cost-cutting initiatives,
such as managed care and utilization review. During fiscal year 1994, 1995,
1996 and 1997, Medicaid expenditures were $3.313 billion, $3.398 billion,
$3.416 billion and $3.456 billion, respectively. The average annual growth
rate from fiscal 1993 to fiscal 1997 was 2.3%. It is estimated that in
fiscal 1998, Medicaid expenditures will be $3.62 billion, an increase of
4.7% from fiscal 1997. This amount includes $38.5 million in outpatient
medical services recently transferred to Medicaid in fiscal 1998.
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 rate of 7.6% from $751.5 million in fiscal 1992 to $1.005 billion in
fiscal 1996. The pension costs in 1997 were $1.069 billion and are
estimated to be $1.069 billion in fiscal 1998.
Payments for debt service on Massachusetts general obligation bonds and
notes have risen at an average annual rate of 10.27% from $649.8 million in
fiscal 1989 to $1.184 billion in fiscal 1996. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993, $1.15 billion
in fiscal 1994, $1.23 billion in fiscal 1995 and $1.18 billion in fiscal
1996. 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 April
1, 1998, the State had approximately $14.075 billion of long-term general
obligation debt outstanding and short-term direct obligations of the
Commonwealth totalled $451.5 million.
Certain independent authorities and agencies within the State are
statutorily authorized to use 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 voter approval at a general or
special election. Propositions 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 2/3 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 1998, approximately 20.6% 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
$3.246 billion in fiscal 1996 and $3.558 billion in fiscal 1997. Recent
increases are largely a result of comprehensive education reform legislation
enacted in 1993 that requires annual increase 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 $881 million for fiscal 1997 have been
fully funded. The fiscal 1998 budget has also fully funded the requirement
imposed by this legislation. 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 effects, 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 1997, approximately 78% of wage and salary employment was in the
State's non-manufacturing sectors. In 1997, total employment was 4,776,000
with manufacturing wage and salary employment totaling 967,200.
Manufacturing employment remains below the peak employment level of
1,179,600 attained in 1978. Employment in the durable goods manufacturing
industries was 724,400 and non-durable goods manufacturing employment was
242,800 in the State in 1997. The motor vehicle industry, which is still an
important component in the State's economy, employed 278,700 in 1997. The
State's average unemployment rate for calendar year 1996 was 4.9% and for
1997 was 4.2%.
The State's general obligation bonds are rated Aa1 by Moody's, AA+ by
S&P and AA+ by Fitch. In January, 1998, the State received an upgrade from
S&P from its prior rating of "AA." In March, 1998, the State received an
upgrade from Moody's from its prior rating of "Aa2." In April 1998, the
State received an upgrade from Fitch from its prior rating of "AA." 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
1990-91 through 1995-96.
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 was appropriated
to the State's local government payment fund in the fiscal year 1996-97.
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 1998 forecast is summarized below.
The State's economic forecast for calendar years 1998 and 1999 projects
healthy growth. Real GDP is projected to grow 3.1% in 1998 and 2.0% in
1999, on a calendar year basis. Car and light truck sales are expected to
total 14.9 million units in 1998 and 14.8 million units in 1999.
The forecast assumes moderate inflation, accompanied by steady interest
rates. Ninety-day T-Bill rates are expected to average 5.0% for 1998 and
5.0% for 1999. The United States' unemployment rate is projected to average
4.7% for 1998 and 5.1% for 1999.
The State's forecast for the Michigan economy reflects the above
national outlook. Total wage and salary employment is projected to grow
1.7% in 1998 and 0.8% in 1999. This growth reflects the ongoing
diversification of the Michigan economy. The unemployment rate is projected
to average 4.1% in 1998 and 4.4% in 1999, continuing the recent trend of
Michigan's unemployment rate being below the national average for six
consecutive years compared to the 27-year history of having higher
unemployment than the nation.
The Governor's Executive Budget for fiscal year 1997-98 was submitted
to the Legislature on February 6, 1997. The fiscal year 1997-98 general
fund general purpose Executive Budget recommendation totaled $8.247 billion.
The Governor has vetoed approximately $25.7 million of the appropriations
passed by the Legislature.
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 mileage levied for local and intermediate school
districts operating purposes, other than mileage 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, 1995 was $987.9 million, on September 30, 1996 was $614.5
million (net of a $529.1 million reserve for future education funding), and
on September 30, 1997 was $579.8 million (net of a $572.6 million reserve
for future education funding).
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, 1997, the
outstanding principal amount of all State general obligation bonds was $655
million. On November 13, 1997, 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, 1998. On April 28, 1998, the State
issued $160,000,000 in general obligation school loan bonds for school
purposes. On June 3, 1998, the State issued $90,000,000 in general
obligation environmental protection program bonds. In addition, the
Governor has proposed and the legislature has approved the issuance of
approximately $675 million in general obligation indebtedness for
environmental and other purposes. Issuance of such indebtedness would also
require approval of a majority of Michigan voters at the November 1998
elections.
As of December 31, 1997, approximately $7.3 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.
Year 2000 Compliance. On October 1, 1997, the State of Michigan
created the Year 2000 Project office to provide guidance, coordinate
oversight for applications software, manage Year 2000 funds, provide
monitoring support, quality assurance and other matters. The State's goal
is to have all critical applications operable by December 31, 1998 and all
other applications operable by September 30, 1999. The State is currently
on schedule to meet its objectives for Year 2000 compliance. The State
currently believes that it will continue to meet the objectives and time
frames set forth for the Year 2000 Project. There can, however, be no
assurance that such completion will be done in a timely manner.
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 June 1, 1998, the outstanding principal amount of all Minnesota
general obligation bonds was approximately $2.4 billion. The total amount
of general obligation bonds authorized but unissued as of June 1, 1998 was
approximately $940 million.
The Minnesota Constitution limits Minnesota general obligation debt to
(i) short-term debt for Minnesota operating purposes, (ii) short-term debt
for purposes 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
April, 1998, end of 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, 1997 and ends June 30,
1999. 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. Minnesota has not done any short-term
borrowing since January, 1985.
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% 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 $613 million.
For the fiscal year ended June 30, 1995, net revenues received were
$8.984 billion. Total expenditures and net transfers were $8.894 billion
for Fiscal Year 1995. For the fiscal year ended June 30, 1996, total net
revenues were $9.617 billion. Total expenditures and net transfers were
$9.301 billion. For the fiscal year ended June 30, 1997, total net revenues
were $10.538 billion. Total expenditures and net transfers were $10.229
billion.
As of May 1998 total revenues without taking into account any carry
over balance from the previous biennium for the current biennium, which
began on July 1, 1997 and ends on June 30, 1999, are estimated to be
approximately $10.365 billion for fiscal year 1998 and $10.613 billion for
fiscal year 1999. Revenue estimates for the next biennium will be available
in the middle part of June 1999.
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 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. For calendar years 1998 and 1999,
these permanent taxes have been temporarily lowered to 1.5 percent and zero,
respectively. The taxes will be returned to previous levels or revised
depending on the Fund's positive cash fund balance. The Commissioners of
Finance and Revenue will determine the necessary tax levels, to be effective
for calendar year 2000, in September, 1999.
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 May 1, 1998, there were approximately $100 million of certificates of
indebtedness enrolled in the program, all of which will mature within a
thirteen month period. The State has not had to make any debt service
payments on behalf of school districts under the program and does not expect
to make any payments in the future. The state expects that school districts
will issue certificates of indebtedness in 1999 and will enroll these
certificates in the program in about the same amount of principle as 1998.
School districts may issue certificates of indebtedness or capital
notes to purchase certain equipment. The certificates or notes which may be
issued by resolution of the Board, are payable from school district taxes
levied within statutory limits and must be payable in not more than five
years. As of May 1, 1998, there are approximately $13 million principal
amount of certificates and notes enrolled in the program.
School districts are authorized to issue general obligation bonds only
when authorized by school district electors or special law, and only after
levying a direct, irrevocable ad valorem tax on all taxable property in the
school district for the years and in amounts sufficient to produce sums not
less than 5% in excess of the principal of an interest on the bonds when
due. As of May 1, 1998, the total amount of principal on certificates and
capital notes issued for equipment and bonds, plus the interest on these
obligations, through the year 2026, is approximately $8 billion.
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 +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 1997 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, electronic equipment and instrument
and miscellaneous categories. 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 1997, approximately 30.3% of Minnesota's non-durable goods
employment was concentrated in food and kindred industries, and
approximately 16.8% in paper and allied industries. This compares to
approximately 22.3% and 8.9%, respectively, for comparable sectors in the
national economy. Both of these industries 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
1997. 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%, while business dissolutions
were on the decline.
Minnesota resident population grew from 4,085,000 in 1980 to 4,387,000
in 1990 or, at an average annual compound rate of .7%. In comparison, U.S.
population grew at an annual compound rate of .917% during this period.
Minnesota population is currently forecast by the U.S. Department of
Commerce to grow at an annual compound rate of .8% 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% as compared to 20.1%
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 1997, non-farm employment growth in Minnesota exceeded national
growth. Minnesota's non-farm employment grew 16.7% compared to 11.8%
nationwide.
Since 1980, Minnesota per capita personal income has been within six
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 1997, Minnesota per capita personal income was 104.7% of
its U.S. counterpart.
Another measure of the vitality of Minnesota's economy is its
unemployment rate. During 1996 and 1997, respectively, Minnesota's monthly
unemployment rate was generally less than the national unemployment rate,
averaging 3.3% in 1997, as compared to the national average of 4.9%.
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+. As of
June 30, 1997, S&P, Moody's and Fitch rate the State's long-term general
obligations AA+, Aa1 and AA+, respectively.
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
1996. For the six quarters following mid-1996, employment growth in New
Jersey has ranged between 1.5% and 2%.
The revised estimate as shown in the Governor's Fiscal Year 1999 Budget
forecasts Sales and Use Tax collections for Fiscal Year 1998 as $4.72
billion, a 6.9% rate of growth over Fiscal Year 1997 revenue. The Fiscal
Year 1999 estimate of $4.9 billion, is a 4.4% increase from the Fiscal Year
1998 estimate.
The revised estimate as shown in the Governor's Fiscal Year 1999 Budget
forecasts Gross Income Tax collections for Fiscal Year 1998 of $5.3 billion.
The estimate for fiscal year 1999 as shown in the Governor's Fiscal Year
1999 Budget of $5.9 billion, is a 9.7% increase from the Fiscal Year 1998
estimate. Included in the Fiscal Year 1999 forecast is an increase in the
property tax deduction to $10,000, or a $50 credit. This will reduce the
fiscal year 1999 collection by about $67 million compared to fiscal year
1998.
The revised estimate as shown in the Governor's Fiscal Year 1999 Budget
forecasts Corporation Business Tax collections for Fiscal Year 1998 of
$1.315 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 1999 forecast as shown in the
Governor's Fiscal 1999 Budget of $1.4 billion, represents a 8.8% increase
from the Fiscal Year 1998 estimate.
The revised estimate as shown in the Governor's Fiscal Year 1999 Budget
forecasts Other Miscellaneous Taxes Fees and Revenues collections for Fiscal
Year 1998 as $1.997 billion, a decrease from fiscal year 1997 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 $15,978 billion and $16.8 billion
for Fiscal 1997 and 1998, respectively. Of the $16.8 billion appropriated
in Fiscal Year 1998 from the General Fund, the Property Tax Relief Fund, the
Casino Control Fund, the Casino Revenue Fund and Gubernatorial Elections
Fund, $6.8 billion (40.5%) is appropriated for State aid to local
governments, $3.9 billion (23.2%) 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), $5.1 billion (30.3%) for Direct State services, $0.5 billion
(3.0%) for debt service on State general obligation bonds and $0.5 billion
(3.0%) 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 1998 and for Fiscal year 1999 reflect the amounts contained in
the Governor's Fiscal Year 1999 Budget.
The State has made appropriations for principal and interest payments
for general obligation bonds for fiscal years 1995 through 1998 in the
amounts of $103.6 million, $466.3 million, $447.0 million and $0.5 billion,
respectively. The Governor's Fiscal Year 1999 Budget for Fiscal Year 1999
includes an appropriation in the amount of $506.1 million for principal and
interest payments for general obligations bonds.
North Carolina Series
Economic Characteristics. The economic profile of North Carolina
consists of a combination of industry, agriculture, and tourism. Non-
agricultural wage and salary employment accounted for approximately
3,546,500 jobs in 1996, of which approximately 844,800 were in
manufacturing. According to the North Carolina Bureau of Labor Statistics,
in July 1997, the State ranked tenth in non-agricultural employment and
eighth in manufacturing employment. During the period from 1990 to 1996,
per capita income in the State grew from $16,673, to $22,205, an increase of
33.2%. The North Carolina Employment Security Commission estimated the
December 1997 seasonally adjusted unemployment rate to be 3.6%, as compared
with a national unemployment rate of 4.7%.
Agriculture is a basic element in North Carolina's economy. Gross
agricultural income in 1996 reached over 7.8 billion, placing the State
eighth in the nation in gross agricultural income. The poultry industry is
the leading source of agricultural income, accounting for 29% of gross
agricultural income. Pork production accounts for 22% of gross agricultural
income. The tobacco industry remains important to North Carolina providing
approximately 13% of gross agricultural income.
North Carolina's agricultural diversity and a continuing emphasis on
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 has
the third most diversified agricultural economy in the nation. In 1996,
there were approximately 58,000 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 $45 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 3,796,200 in 1996, an increase of 33%.
The Travel and Tourism Division of the North Carolina Department of
Commerce has estimated that approximately $9.8 billion was spent on tourism
in the State in 1995, an increase of approximately 8.1 percent over 1994,
two-thirds of which was derived from out-of-state travelers. The Travel and
Tourism Division estimates approximately 161,000 people were employed in
tourism-related jobs in the State. The effects of severe hurricanes in 1996
may have an adverse effect in certain areas of the State as to tourism
related activities.
Revenue Structure. North Carolina's three major operating funds, which
receive revenues and from which monies are expended, are the General Fund,
the Highway Fund and the Highway Trust Fund. The 1989 General Assembly
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
short-term 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, a highway use tax on long term
rentals and retail sales of motor vehicles 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 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.
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 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 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.
In November 1996, the voters of the State approved a Constitutional
amendment giving the Governor the power to veto budgetary and certain other
legislative matters.
Actual General Fund tax revenue totaled $10,670,500,000 in 1996-97, an
increase of 7.1% over 1995-96. This gross tax revenue includes revenues from
securities lending activity in the amount of $105,700,000. The individual
income tax personal exemption was increased from $2,000 to $2,250 for 1995
and further to $2,500 for 1996 and beyond. In addition, a $60 child tax
credit was enacted beginning with the 1995 tax year. The remaining portion
of the State intangibles tax was also repealed as of January 1, 1995.
The State sales and use tax rate on food consumed at home was reduced
from 4.0% to 3.0% beginning January 1, 1997. Effective July 1, 1998, the
rate decreases to 2.0%. The State corporate income tax rate will be reduced
from 7.5% to 7.25% in 1998, 7.0% in 1999, and 6.9% in 2000 and thereafter.
The State homestead exemption was increased, decreasing the ad valorem tax
base for counties. Most privilege license taxes were eliminated as of
January 1, 1997. The State tax will also be phased out over three years
beginning July 1, 1997.
The Highway Fund revenue collections totaled $1,647,800,000 in fiscal
year 1996-97, a 9.1% increase over 1995-96. Sources of revenues for the
Highway Fund include taxes on the sale of motor fuels as well as
registration and licensing fees for motor vehicles. This gross revenue
includes revenues from securities lending activity in the amount of $6
million.
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. The Highway Trust Fund
revenue collections totaled $792,600,000 in fiscal year 1996-97, a 7.5%
increase over 1995-96. This gross revenue includes revenues from securities
lending activity in the amount of $16,200,000.
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 therefor. 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 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 State filed a
motion to dismiss, which was denied at the trial court level. On Appeal, the
North Carolina Supreme Court upheld the present funding system against the
claim that it unlawfully discriminated against low wealth counties but
remanded the case for trial on the claim for relief based on the Court's
conclusion that the North Carolina Constitution guarantees every child the
opportunity to obtain a sound basic education. Five other North Carolina
counties intervened and now allege claims for relief on behalf of their
students' rights to sound basic education on the basis of the high
proportion of at risk students in the counties' systems. 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.
On May 31, 1995, the Superior Court issued an order ruling in favor of
the plaintiffs. Under the terms of the order, the Superior Court found that
the act of the General Assembly that repealed the tax exemption on State and
local government retirement benefits is null, void and unenforceable and
that retirement benefits which were vested before August 1989 are exempt
from taxation. On May 8, 1998 the North Carolina Supreme Court affirmed the
Superior Court order in favor of the plaintiffs, with minor modifications
which were also favorable to the plaintiffs. Following the North Carolina
Supreme Court decision and remand in Bailey, and because arguably federal
retirees must be treated the same as state retirees with respect to the
taxation of retirement income, Bailey and Patton (discussed in 5 below) were
settled for a total of $799 million. On June 11, 1998, class counsel for
the plaintiffs in Bailey and Patton and the Speaker of the North Carolina
Senate entered into a consent agreement settling the two cases for $799
million. The settlement is conditioned on legislation being enacted by the
North Carolina General Assembly appropriating the $799 million, and approval
by the trial court. A fairness hearing was held by the trial court on July
22, 1998. It is anticipated that by September 1, 1998 both the North
Carolina General Assembly and the trial court will take necessary actions to
implement the consent agreement resolving the Bailey and Patton cases.
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 Superior Court issued an order ruling in favor of
plaintiffs. The Order was affirmed by the North Carolina Supreme Court. A
determination of the actual amount of the State's liability and the payment
process is being determined by the parties. The plaintiffs have submitted
documentation to the court asserting that the cost in damages and higher
prospective benefit payments to the plaintiffs and class members would
amount to $407 million. These amounts would be payable from the funds of
the Retirement systems.
5. Patton case -- Federal Retirees. Federal retirees filed a class
action suit in Wake County Superior Court in 1995 seeking monetary relief
for taxes paid since 1989. This action was being held in abeyance pending
the outcome in Bailey. The federal retirees alleged, should the plaintiffs
in Bailey prevail, such a result, would re-establish the disparity of
treatment between state and federal pension income which was held
unconstitutional in Davis v. Michigan (1989). In Davis, the United States
Supreme Court ruled that a Michigan income tax statute which taxed federal
retirement benefits while exempting those paid by state and local
governments violated the constitutional doctrine of intergovernmental tax
immunity. At the time of the Davis decision, North Carolina law contained
similar exemptions in favor of state and local retirees. Those exemptions
were repealed prospectively, beginning with 1989 tax year.
On May 8, 1998, the North Carolina Supreme Court affirmed the Superior
Court order in favor of the plaintiffs in Bailey. See Bailey above for
discussion on settlement of the Bailey and Patton cases.
6. Smith Case. This class action is related to litigation in Fulton
Corporation v. Faulkner, a case filed by a single taxpayer and decided by
the United States Supreme Court in 1996 regarding the constitutionality of
certain taxes previously collected by the State on intangible personal
property. On July 7, 1995, while the Fulton case was pending before the
United States Supreme Court, the Smith class action was commenced on behalf
of all other taxpayers who had compiled with the requirements of the North
Carolina tax refund statute and would therefore be entitled to refunds if
Fulton prevailed on its refund claim. These original plaintiffs were later
designated Class A when a second group of plaintiffs were added. The new
class, denominated Class B, consisted of taxpayers who had paid the tax but
failed to comply with the tax refund statute. On February 21, 1996, the
United States Supreme Court held in Fulton that the State's intangibles tax
on shares of stock in non-North Carolina corporations (by then repealed)
violated the Commerce Clause of the United States Constitution because it
discriminated against stock issued by corporations that do all or part of
their business outside of North Carolina. It remanded the case to the North
Carolina Supreme Court to consider remedial issues, including whether the
offending provision in the statute (the taxable percentage deduction) was
severable.
On February 10, 1997, the Supreme Court of North Carolina in the Fulton
remand proceeding severed the taxable deduction provision and invited the
General Assembly to determine the appropriate remedy for the discriminatory
tax treatment of eligible taxpayers who paid the tax but did not benefit
from the deduction. While the General Assembly considered the remedial
issues raised by the Fulton remand, the Smith plaintiffs moved for judgment
on their refund claims. On June 11, 1997, the trial judge in Smith ordered
refunds to be made for tax years 1991-1994 to the Class A plaintiffs and
dismissed the Class B claims. Refunds to Class A taxpayers, totaling
approximately $120,000,000 have substantially been paid, with interest. The
Class B plaintiffs appealed, and their appeal is pending in the North
Carolina Court of Appeals. The North Carolina Attorney General's Office
believes that sound legal arguments support dismissal of the Class B and
that the trial judge's ruling will be upheld on appeal.
A second class action lawsuit was filed on January 16, 1998, by
intangibles taxpayers who paid intangibles tax on shares of stock for tax
years 1990-1994 and did not receive refunds because they failed to meet the
tax refund statute requirements. These are the same taxpayers as Class B
plaintiffs in Smith, but they claim refund entitlement under an alternative
theory. They claim refunds of approximately $131,750,000 for tax years 1991-
1994 and $80,000,000 for tax year 1990. The North Carolina Attorney
General's Office believes that sound legal arguments support dismissal of
this action.
Ohio Series
State Economy and Budget. The "non-manufacturing" sector employs
approximately 79% of all non-agricultural payroll workers in the State of
Ohio. 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 and related agricultural sectors combined
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) biennial 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 $1,084.4
million and $1,649.0 million ending fund and cash balances, respectively,
for the GRF for fiscal year ended June 30, 1998. In addition, as of the
same date, the Budget Stabilization Fund ("BSF") had a cash balance of
$862.7 million.
The GFR appropriations act for the biennium beginning July 1, 1997 was
passed on June 25, 1997 and promptly signed (after selective vetoes) by the
Governor. The act provides for total GRF biennial expenditures of over $36
billion, an increase over those for the 1996-97 fiscal biennium.
Legislation passed in the spring of 1998 increased the GRF Fiscal Year 1999
appropriation level for elementary and secondary education, with the
increase to be funded in part by mandated small (0.5-3%) percentage
reductions in State appropriations for various State agencies and
institutions; expressly exempt from those deductions are all appropriations
for debt service including lease rental payments. The June 30, 1998 GRF
ending fund balance guaranteed the availability of funds to support an
income tax reduction for Calendar Year 1998 and educational projects in the
state. In accordance with Ohio General Assembly direction, $701.4 million
was transferred to the Income Tax Reduction Fund to provide a tax cut in the
1998 income tax rates; transfers of $170 million and $30 million were made
to the Public School Building Assistance Fund and the School District
Solvency Fund, respectively. In addition, $44.2 million was transferred
from the GRF to the Budget Stabilization Fund.
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, 1998 was $6,317.1 million. 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 four months of the fiscal year ending
June 30, 1997, the highest being $565.7 million in December 1996. GRF cash
flow deficiencies have occurred in five months of the fiscal year ending
June 30, 1998, the highest being $742.1 million in December 1997.
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 of $750,000 and
(ii) repel invasion, suppress insurrection or defend the State in war.
From 1921 to July 1, 1998, the voters of Ohio, by fifteen
constitutional amendments, have authorized the incurrence of state debt to
which taxes or excises were pledged for payment, all of which related to
capital facilities financing, except for three funding veterans' bonuses.
The only such tax-supported debt still authorized to be incurred are
highway, local infrastructure, coal development and natural resource
obligation bonds.
A 1995 constitutional amendment extended the local Infrastructure Bond
program. The amendment authorizes not more than $1.2 billion to be
outstanding at any 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
July 1, 1998, $95 million of Coal Development Bonds were issued, of which
$28.3 million were outstanding.
A 1987 state constitutional amendment authorized the issuance of $1.2
billion of state full faith and credit obligations for general obligation
Infrastructure Bonds to finance local 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 to be issued over ten years. As of July 1, 1998,
approximately $1.2 billion of such obligations were issued, of which
approximately $945.5 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 million in state general obligation bonds to be outstanding for parks,
recreation and natural resource purposes (no more than $50 million to be
issued in any one fiscal year).
The Commissioners of the Sinking Fund, as of July 1, 1998, had
authorization to issue the following additional general obligation bonds:
$55 million coal development, $597.5 million highway capital improvements
and $80 million natural resources.
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.
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 July 1, 1998, the OPFC had issued
approximately $4.417 billion for higher education facilities, approximately
$2.093 billion of which were outstanding, approximately $1.078 billion for
mental health facilities, approximately $343.4 million of which were
outstanding and $194.9 million for parks and recreation facilities,
approximately $85.6 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 by 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. A 1996 issue of $168.74 ($163.19 million outstanding)
million of taxable bonds refunded the outstanding bonds and provided
additional funds for the program. The highest future fiscal year debt
service on those bonds, which are payable through 2022, is approximately
$16.2 million in 2008.
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 and, in some cases, by the
Treasurer.
The general capital appropriations act for the 1997-1998 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 $559 million for higher education
capital facilities projects (a substantial number of which are renovations
of equipment and improvements to existing facilities), $68.4 million for
mental health and retardation facilities projects, and $22.7 million for
parks and recreation facilities. It also authorizes the OBA to issue
obligations in the amounts of $197.4 million for local jails and prisons,
$37.8 million for Department of Youth Services facilities, $125.65 million
for Department of Administrative Services facilities, $80.7 million for Ohio
Arts Facilities Commission facilities, $75.8 million for Department of
Public Safety and $27.75 million for Ohio Department of Transportation
facilities. In addition, the Treasurer of State has been authorized to
issue bonds to finance approximately $538.6 million of capital improvements
for elementary and secondary public school facilities ($223.6 issued). As
of July 1, 1998, the Commissioners of the Sinking Fund had additional
General Assembly authorization to issue $55.0 million of additional Coal
Development Bonds, $597.5 million of highway obligation bonds, and $80
million of Natural Resources Bonds. Also as of July 1, 1998, the Treasurer
had additional General Assembly authorization to issue $120 million of
additional Infrastructure bonds.
Capital appropriations legislation provides for two new categories of
revenue-type financing. The Ohio Building Authority is authorized to issue
lease revenue obligations to assist in the financing of up to 15% of the
estimated cost of certain Ohio sports facilities. In addition, a revolving
fund is created to assist in financing local multimodal and intermodal
transportation facilities, initially funded with a deposit of $30 million of
GRF moneys.
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 Ohio Department of
Transportation appropriations bill for the 1998-1999 biennium, as now passed
by both Houses and signed by the Governor repeals the "full faith and
credit" and use of state revenue provisions.
The State and state agencies have issued revenue bonds that are payable
from net revenues of or relating to 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. The State
also is party to certain litigation questioning the constitutionality of the
State's system of school funding, which question recently was decided by the
Ohio Supreme Court. The Ohio Supreme Court concluded in a decision released
in March 1997 that major aspects of the system are unconstitutional. It
ordered the State to provide for and fund sufficiently a system complying
with the Ohio Constitution, staying its order for a year to permit time for
responsive corrective actions by the General Assembly. The Court has
indicated that property taxes may still play a role in, but "can no longer
be the primary means" of, school funding. The Court also confirmed that
contractual repayment provisions of certain debt obligations issued for
school funding will remain valid after the stay terminates.
In addition, there is litigation pending in federal district court and
in the Ohio Court of Claims which contests the Ohio Department of Human
Services' (ODHS) prior Medicaid financial eligibility rules for married
couples when one spouse is living in a nursing facility and the other
resides in the community. It is not possible at this time to state what
action or appeals plaintiffs will take or, should plaintiffs ultimately
prevail on any appeal, the period (beyond the current fiscal year) during
which necessary additional Medicaid expenditures would have to be made.
Plaintiffs have estimated total additional Medicaid expenditures at
$600,000,000 for the retroactive period and, based on current law, it is
estimated that the State's share of those additional expenditures would be
approximately $240,000,000. The Court of Claims has certified the action
there as a class action.
The State has identified and assessed "Year 2000 problems" in
connection with State agency computers and computer operations. OBM is
satisfied that those problems are being and will be timely addressed, and
the costs of corrections will be within moneys available and appropriate for
the purpose.
The outstanding state bonds issued by the OPFC currently are rated AA-
by both S&P and Fitch and Aa3 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 general obligation Highway Bonds.
The State's general obligation debt is rated as Aa1 by Moody's, and AA+ by
Fitch.
State Employees and Retirement Systems. The State has established five
public retirement systems to provide retirement, disability retirement and
survivor benefits. 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 the most recent year reported by the particular system, the unfunded
accrued liabilities of STRS and SERS were $7.168 billion and $1.076 billion,
respectively, and the unfunded accrued liabilities of PERS, HPRS and PFPDS
were $4.277 billion, $43.2 million and $1.253 billion, 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 eighteen 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 1997, the act has been applied to 11 cities and to 13 villages.
The situations in 9 cities and 9 villages have been resolved and their
commissions terminated. Only the cities of East Cleveland and Nelsonville
and 4 villages remain under the procedure. A new preliminary "fiscal watch"
status has recently been added, with two cities and one village currently in
this status.
The fiscal emergency legislation was recently amended to extend its
potential application to counties (88 in the State) and townships. This
extension is on an "if and as needed" basis, and not aimed at particular
existing fiscal problems of those subdivisions.
New legislation addresses larger school districts in financial straits.
It is similar to that for municipal "fiscal emergencies," but is
particularly tailored to certain school districts and their present and
potential fiscal problems. It has been applied to 6 districts, and 10
districts are currently on preliminary "fiscal watch" status.
Federal courts have ruled that the State shared joint liability with
the local school districts for segregation in public schools in Cincinnati,
Cleveland, Columbus, Dayton and Lorain. Subsequent trial court orders
directed that remedial costs be shared equally by the State and the
respective local districts. For that purpose approximately $75.8 million
was expended in the 1992-93 biennium and approximately $119 million in the
1994-95 biennium, $144.8 million in the 1996-97 biennium, and approximately
$50.4 million appropriated for the Fiscal Year ended June 30, 1998 and $50.4
million for the Year ending June 30, 1999. A recent settlement agreement in
one desegregation case is reducing annual state payments to one district.
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 of the Commonwealth's
economic structure, with nearly one-fourth of the Commonwealth's total land
area devoted to cropland, pasture and farm woodlands.
In 1997, the population of Pennsylvania was 12.02 million people,
ranking fifth in the nation. According to the U.S. Bureau of the Census,
Pennsylvania experienced a slight increase from the 1985 estimate of 11.85
million. Pennsylvania has a high proportion of persons 65 or older, and is
highly urbanized, with almost 80% of the 1990 census population residing in
the 15 Metropolitan Statistical Areas of the Commonwealth. The cities of
Philadelphia and Pittsburgh, the Commonwealth's largest metropolitan
statistical areas, together comprise approximately 50% of the Commonwealth's
total population.
The state's workforce is estimated at 5.9 million people, ranking as
the sixth largest labor pool in the nation. 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 7.1 percent in 1993. Seasonally
adjusted data for January 1998 show an unemployment rate of 4.6%, compared
to an unemployment rate of 4.7% for the United States as a whole.
Financial Accounting. Pennsylvania utilizes the fund method of
accounting and over 150 funds have been established for the purpose of
recording receipts and disbursements, of which the General Fund is the
largest. Most of the operating and administrative expenses are payable from
the General Fund. The Motor License Fund is a special revenue fund that
receives tax and fee revenues relating to motor fuels and vehicles (except
one-half cent per gallon of the liquid fuels tax which is deposited in the
Liquid Fuels Tax Fund for distribution to local municipalities) and all such
revenues are required to be used for highway purposes. Other special
revenue funds have been established to receive specified revenues
appropriated to specific departments, boards and/or commissions. Such funds
include the Game, Fish, Boat, Banking Department, Milk Marketing, State Farm
Products Show, State Racing and State Lottery Funds. The General Fund, all
special revenue funds, the Debt Service Funds and the Capital Project Funds
combine to form the Governmental Fund Types.
Enterprise funds are maintained for departments or programs operated
like private enterprises. The largest of the Enterprise funds is the State
Stores Fund, which is used for the receipts and disbursements of the
Commonwealth's liquor store system. Sale and distribution of all liquor
within Pennsylvania is a government enterprise.
Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary"). Since 1984, the Commonwealth has also prepared
financial statements in accordance with generally accepted accounting
principles ("GAAP"). The GAAP statements have been audited jointly by the
Auditor General of the Commonwealth and an independent public accounting
firm. The Budgetary information is adjusted at fiscal year end to reflect
appropriate accruals for financial reporting in conformity with GAAP. The
Commonwealth maintains a June 30th fiscal year end.
The Constitution of Pennsylvania provides that operating budget
appropriations may not exceed the actual and estimated revenues and
available surplus in the fiscal year for which funds are appropriated.
Annual budgets are enacted for the General Fund and for certain special
revenue funds which represent the majority of expenditures of the
Commonwealth.
Revenues and Expenditures. Pennsylvania's Governmental Fund Types
receive over 57% of their revenues from taxes levied by the Commonwealth.
Interest earnings, licenses and fees, lottery ticket sales, liquor store
profits, miscellaneous revenues, augmentations and federal government grants
supply the balance of the receipts to these funds. Revenues not required to
be deposited in another fund are deposited in the General Fund. The major
tax sources for the General Fund are the 6% sales and use tax (34.9% of
General Fund revenues in fiscal 1997), the 2.8% personal income tax (33.2%
of General Fund revenues in fiscal 1997) and the 9.99% corporate net income
tax (9.8% of General Fund revenues in fiscal 1997). 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 ($7.31
billion of fiscal 1997 expenditures, and $7.53 billion of the fiscal 1998
budget) and public health and human services ($13.4 billion of fiscal 1997
expenditures, and $13.8 billion of the fiscal 1998 budget).
Governmental Fund Types: Financial Condition/Results of Operations
(GAAP Basis). Financial conditions during fiscal years 1991 through 1995
were distinguished by slow economic growth and a rapid expansion of the
costs of certain governmental programs that together produced a significant
stress on the Commonwealth's budget. These problems were particularly
evident during fiscal years 1990 and 1991 when revenues were significantly
below projections, and expenditures, largely driven by demand for public
welfare services, rose above budgeted amounts. Actions taken during fiscal
1992 to bring the General Fund back into balance, including tax increases
and expenditure restraints, resulted in a $1.1 billion reduction to the
unreserved-undesignated fund deficit for combined Governmental Fund Types
and a return to a positive fund balance. The fund balance for the
governmental fund types, as restated, has increased during the 1993 through
1997 fiscal years. As of June 30, 1997, the fund balance totaled $1,364.9
million, including an unreserved-undesignated fund balance of $187.3
million.
General Fund: Financial Condition/Results of Operations.
Five Year Overview (GAAP Basis). For the five year period Fiscal Year
1993 through Fiscal Year 1997, total revenues and other sources rose at a
4.7% average annual rate while total expenditures and other uses grew by
4.1% annually. The majority of the increase in total revenues and other
sources during this period occurred during fiscal 1992 when a $2.7 billion
tax increase was enacted to address a fiscal 1991 budget deficit and to fund
increased expenditures for fiscal 1992. Also improved financial results and
structural cash flow modifications contributed to the lower borrowing.
Program areas having the largest increase in costs for the fiscal 1992
to fiscal 1996 period were for protection of persons and property, due to an
expansion of state prisons, and for public health and welfare, due to rising
caseloads, program utilization and increased prices. 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 that five year period.
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 led by a 24.2% increase in
intergovernmental revenues.
Fiscal 1996 Financial Results (Budgetary Basis). Commonwealth revenues
for the fiscal year were above estimate and exceeded fiscal year
expenditures and encumbrances. Prior to reserves for transfer to the Tax
Stabilization Reserve Fund, the fiscal 1996 closing unappropriated surplus
was $183.8 million, $65.5 million above estimate. Commonwealth revenues
(prior to tax refunds) for the fiscal year increased by $113.9 million over
the prior fiscal year to $16,338.5 million representing a growth rate of
0.7% . Tax rate reductions and other tax law changes substantially reduced
the amount and rate of revenue growth for the fiscal year. Sales and use
tax revenues were $5,682.4 million or 2.8% over fiscal 1995 collections.
Personal income tax receipts for fiscal 1996 totaled $5,374.3 million, or
5.7% over collections for fiscal 1995. Included in that increase was $67
million in net receipts from a tax amnesty program that was available for a
portion of the 1996 fiscal year. Some portion of the tax amnesty receipts
represent normal collections of delinquent taxes. The tax amnesty program
is not expected to be repeated.
Funds held in reserve at the end of fiscal 1995 for transfer to the Tax
Stabilization Reserve Fund totaled $111.0 million. The Tax Stabilization
Reserve Fund was anticipated to have an available balance of $182.8 million
at June 30, 1996, representing approximately 1.1% of general fund annual
commonwealth revenues.
Fiscal 1997 Financial Results (GAAP Basis). For fiscal 1997, assets
increased $563.4 million and liabilities declined $166.3 million to produce
a $729.7 million increase in fund balance at June 30, 1997. The fund
balance increase during fiscal 1997 has brought a restoration of an
undesignated-unreserved balance. The $187.3 million undesignated-unreserved
balance is the first recorded since fiscal 1994 and is the largest amount
since fiscal 1987. Total revenues and other sources rose 3.5% for fiscal
1997. An increase of 5.5% in tax revenue aided by an improving state
economy was partially offset by a $175.2 million decline in
intergovernmental revenues. Expenditures and other uses increased by 1.0%
for the fiscal year. General government program costs for fiscal 1997
declined by 14.3% from the fiscal year earlier. A reduction in estimated
expenditures for maintaining the Commonwealth's self-insured worker's
compensation program is largely responsible for the decline.
Fiscal 1997 Financial Results (Budgetary Basis). The unappropriated
balance of Commonwealth revenues increased during the 1997 fiscal year by
$432.9 million. Higher than estimated revenues and slightly lower
expenditures than budgeted caused the increase. The unappropriated balance
rose from an adjusted amount of $158.5 million at the beginning of fiscal
1997, to $591.4 million (prior to reserves for transfer to the Tax
Stabilization Reserve Fund) at the close of the fiscal year. Transfers to
the Tax Stabilization Reserve Fund for fiscal 1997 operations were $88.7
million representing the normal fifteen percent of the ending unappropriated
balance, plus an additional $100 million authorized by the General Assembly
when it enacted the fiscal 1998 budget.
Fiscal 1998 Budget (Budgetary Basis). The budget for fiscal 1998 was
enacted in May 1997. Commonwealth revenue for the fiscal year at that time
were estimated to be $17,435.4 million before reserves for tax refunds.
That estimate represented an increase over estimated fiscal 1997
Commonwealth revenues of 1.0%. Although actual fiscal 1997 revenues
exceeded the estimate, the adopted fiscal 1998 budget revenue estimate was
not changed and represents a 0.7% increase over actual fiscal 1997 revenues.
Fiscal 1998 estimates for Commonwealth revenues made at the time the budget
was enacted were based on an economic forecast for national economic growth
to slow through the remainder of calendar year 1997. A growth rate of just
above 1.0% was anticipated to be maintained for the last two quarters of the
fiscal year and result in a 1.2% growth rate in real gross domestic product
for the second calendar quarter of 1998 over the second quarter of 1997.
This anticipated rate of economic growth is a result of anticipated slowing
of gains in consumer spending, business investment and residential housing.
Inflation was projected to remain modest and the unemployment rate was
projected to reach 6.0% by the second calendar quarter of 1998.
The rate of anticipated growth of Commonwealth revenues was also
affected by the enactment of tax reductions and tax revenue dedications
effective for the 1998 fiscal year. Excluding these newly enacted changes,
revenues were projected to increase by 2.4% during fiscal 1998. Tax
reductions enacted for the 1998 fiscal year budget totaled an estimated
$170.0 million. The reserve for tax refunds for fiscal 1998 has been
increased by 21.3% to $655.0 million. A portion of the additional reserves
reflect tax refund liabilities that are expected to result in cash payments
in a subsequent fiscal year.
Proposed Fiscal 1999 Budget. In February 1998, the Governor presented
his proposed General Fund budget for fiscal 1999 to the General Assembly.
Revenue estimates in the proposed budget were developed using national
economic forecast with a projected real gross domestic product growth annual
rate below 2%. Total Commonwealth revenues before reductions for tax
refunds and proposed tax changes are estimated to be $18,191.0 million, 2.9%
above revised estimates for fiscal 1997. Proposed appropriations from those
revenues total $17,787.4 million, a 3.0% increase over currently estimated
appropriations for fiscal 1998. As proposed, the fiscal 1999 budget assumes
the draw down of the currently estimated $280.6 million unappropriated
surplus at June 30, 1998, however, no appropriation lapses are included in
this projection. The proposed fiscal 1999 budget includes five proposed tax
reductions.
Motor License Fund. The Constitution requires that all proceeds of
motor fuels taxes, vehicle registration fees, license taxes, operators'
license fees and other excise taxes imposed on products used in motor
transportation shall be used exclusively for construction, reconstruction,
maintenance and repair of and safety on highways and bridges and for the
payment of debt service on obligations incurred for such purposes. The
Motor License Fund is the fund through which most such revenues are
accounted for and expended. Portions of certain taxes whose receipts are
deposited into the Motor License Fund are legislatively restricted to a
specific transportation program. These receipts are accounted for in
restricted accounts in the Motor License Fund and are not included in the
budgetary basis presentations or discussion on the Motor License Fund. The
Motor License Fund budgetary basis includes only unrestricted revenue
available for annual appropriation for highway and bridge purposes.
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 $4,795.1 million at June 30, 1997, a
decrease of $261.0 million from June 30, 1996. Over the 10-year period
ended June 30, 1997, total outstanding general obligation debt increased at
an annual rate of 0.5%, but for the five years ended June 30, 1997, it has
decreased at the annual rate of 0.3%. All outstanding general obligation
bonds of the Commonwealth are rated AA- by Standard and Poor's Corporation,
Aa3 by Moody's Investors Service, and AA by Fitch Investors Service. The
ratings reflect only the views of the rating agencies.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature
within the fiscal year of issuance. The principal amount issued, when added
to that already outstanding, may not exceed in aggregate 20% of the revenues
estimated to accrue to the appropriate fund in the fiscal year. The
Commonwealth is not permitted to fund deficits between fiscal years with any
form of debt. All year-end deficit balances must be funded within the
succeeding fiscal year's budget. Pennsylvania issued a total of $550.0
million of tax anticipation notes for the account of the General Fund in
fiscal 1997, and $225.0 million in fiscal 1998 which matured on June 30,
1998, to be paid from fiscal 1998 General Fund receipts.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation
notes subject to the applicable statutory and constitutional limitations
generally imposed on bonds. The term of such borrowings may not exceed
three years. As of December 31, 1997, there were $46.4 million of bond
anticipation notes outstanding.
State-related Obligations. Certain state-created agencies have
statutory authorization to incur debt for which no legislation providing for
state appropriations to pay debt service thereon is required. The debt of
these agencies is supported by assets of, or revenues derived from, the
various projects financed and the debt of such agencies is not an obligation
of Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations. The following agencies had debt currently
outstanding as of December 31, 1997: Delaware River Joint Toll Bridge
Commission ($52.7 million), Delaware River Port Authority ($512.3 million),
Pennsylvania Economic Development Financing Authority ($1,080.5 million),
Pennsylvania Energy Development Authority ($72.8 million), Pennsylvania
Higher Education Assistance Agency ($1,583.8 million), Pennsylvania Higher
Educational Facilities Authority ($2,776.8 million), Pennsylvania Industrial
Development Authority ($402.1 million), Pennsylvania Infrastructure
Investment Authority ($196.4 million), Pennsylvania Turnpike Commission
($1,177.6 million), Philadelphia Regional Port Authority ($59.5 million),
and the State Public School Building Authority ($310.5 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 ($2,631.1 million of revenue bonds as of
December 31, 1997), 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
($1.19 million of the loan principal was outstanding as of December 31,
1997.)
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 in
1994 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 three-year court monitored settlement which expired in January 1998;
(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 state trial was
held in January 1997. There is no available estimate of potential
liability; and (f) Several banks have filed suit against the Commonwealth
contesting the constitutionality of a 1989 law imposing a bank shares tax on
banking institutions. After the Commonwealth Court ruled in favor of the
Commonwealth, finding no constitutional deficiencies, Fidelity Bank, the
Commonwealth, and certain intervenor banks filed Notices of Appeal to the
Pennsylvania Supreme Court on August 5, 1994. Pursuant to a Settlement
Agreement, dated as of April 21, 1995, the Commonwealth agreed to enter a
credit in favor of Fidelity in the amount of $4,100,000 in settlement of the
constitutional and non-constitutional issues including interest. Pursuant
to a separate Settlement Agreement, dated as of April 21, 1995, the
Commonwealth settled with the intervening banks, referred to as "New Banks."
As part of the settlement, the Commonwealth agreed neither to assesses nor
attempt to recoup any new bank tax credits which had been granted or taken
by any of the intervening banks. Although the described settlements have
quantified the Commonwealth's exposure to Fidelity and the intervening
banks, other banks have filed protective Petitions, and Royal Bank pursued
new constitutional challenges in the Commonwealth Court; however, the
Commonwealth Court has previously examined and confirmed the Act's
constitutionality; (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; and (h) In November 1995, the
Commonwealth and the Governor, along with the City of Philadelphia and its
Mayor, were joined as additional respondents in an enforcement action
commenced in Commonwealth Court in 1973 by the Pennsylvania Human Relations
Commission against the School District of Philadelphia pursuant to the
Pennsylvania Human Relations Act. The enforcement action was pursued to
remedy unintentional conditions of segregation in the public schools of
Philadelphia. The Commonwealth and the City were joined in the "remedial
phase" of the proceeding to determine their liability, if any, and to pay
additional costs necessary to remedy the unlawful conditions found to exist
in the Philadelphia public schools. After trial, Judge Smith issued an
Opinion and Order, granting in relevant part, judgment in favor of the
School District of Philadelphia and ASPIRA and against the Commonwealth and
Governor. The Commonwealth appealed and requested the Supreme Court to
enter judgments in favor of the Commonwealth and the Governor on all claims.
In February 1998, the Supreme Court heard oral argument on these issues.
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 May 20, 1997.
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 as of June 30, 1997, showed a surplus of
approximately $128.8 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
profitability 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
budget trimming and increasing taxes, and the improving Texas economy, the
State finished fiscal years 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996,
and 1997 with surpluses in the General Revenue Fund of $295 million, $768
million, $1.006 billion, $615.3 million, $1.633 billion, $2.239 billion,
$2.101 billion, $2.271 billion, and $2.685 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.
In the past decade, the Texas economy has seen a major shift from oil
and gas industry reliance to diversification into the technology and
computer industry. In 1981, the gas, oil and chemical industry accounted
for 26% of the State's total output of goods and services. Today, those
businesses account for only 10% of the State's economy. Fifteen years ago,
the Texas oil and gas industry was about six times as large as the State's
high technology industry. If present trends continue, employment in high
technology manufacturing will exceed that of oil and gas-related mining and
manufacturing shortly after the year 2000.
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 1995,
the unemployment rate had declined to just over 6.0% and by September 1996,
it had again declined to 5.7%. As of May 1998, the unemployment rate was
5.4%.
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 8.435 million in
1997. This was an increase of 198,000 non-farm jobs in a one-year time
span. Nonfarm employment is estimated to have reached 8.3 million in fiscal
1997, compared to the 8.1 million in the previous year. Service and trade
industries together account for over half the nonfarm employment (51%).
Construction and services have grown the most significantly, with rates of
growth of 4.4% and 3.5%, respectively.
On a national scale, Texas was third in job creation during fiscal
1997, maintaining its rank of 11th among the fifty states in terms of job
growth (in percentage terms). High-tech manufacturing continues to provide
diversification to the State's economy, along with notable increases in the
financial services and telecommunication sector. Texas' economy, as
measured by its gross State product, accounts for 7% of the total economy of
the United States, and the Comptroller of Public Accounts predicts Texas'
overall economy will continue to outpace national economic growth over the
long-term (through 2020) by an annual average of over three-fourths of a
percentage point.
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 State 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 the 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. In some cases, the authorized indebtedness may not be
issued without the approval of the Legislature, but in other cases, the
constitutional amendments are self-operating and the debt may be issued
without specific legislative action. The total amount of general obligation
bonds that have been authorized by the voters is in excess of $8.31 billion.
Bond income during the state's fiscal year ending August 31, 1996 stabilized
from a trend toward increased issuance of non-self supporting Texas bonds
whereby income from such bonds has declined from $656,915,000 for fiscal
year 1994 to $430,293,000 for fiscal year 1995, then increased slightly to
$451,857,000 in 1996 and again dropped to $449,023,000 in 1997. On August
31, 1997, Texas had $2.95 billion in bonds which were outstanding which must
be paid back from the state's general revenue fund. This is a slight decline
in the amount of such bonds outstanding at the end of fiscal years 1994-
1996, 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 by 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. Because of the
State's expansion in Medicaid spending and other Health and Human Services
programs requiring federal matching revenues, federal grants are the State's
single largest revenue source, accounting for approximately 28.4% of total
revenue during fiscal year 1997. Sales taxes are the State's second largest
source of revenues (and by far the largest source of tax revenue),
accounting for approximately 26.6% of the State's total revenues during
fiscal year 1997. Licenses, fees and permits, motor fuels taxes and net
lottery proceeds, accounted for approximately 9.1%, 5.6% and 4.35%,
respectively, of the State's total revenue in fiscal year 1997. 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 4.2% of total
revenues in fiscal 1997. 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, 1995, 1996 and 1997 amounted to approximately $23.622
billion, $26.190 billion, $29.647 billion, $33.795 billion, $36.707 billion,
$38.682 billion, $40.488 billion, and $42.649 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, $18.859 billion,
$19.762 billion, and $21.188 billion, respectively. The Texas legislature
maintained its normal expenditure patterns, allocating agencies of education
and health and human services 79% of 1998-99 general revenue and dedicated
general revenue funds. Texas public education agencies will receive an
increase of 7.9% and institutions of higher education will receive an
increase of 6.7% over 1996-97 dedicated general revenue and non-dedicated
general revenue funding levels. For health and human services, funding
levels from these funds have increased by 3.0% over the previous biennium.
Public safety and criminal justice is the third largest expenditure of
dedicated and non-dedicated general revenue and will consume 10.8% of these
funds in 1998-99. This amount is an increase of 7% over 1996-97 funding
levels.
The 75th State Legislature convened in January 1997 and before
adjourning passed a budget for the 1998-99 biennium. The 1998-99 budget
provides for appropriations totaling $53.1 billion from general revenue
related funds and $86.2 billion from all fund sources. The 1998-99 biennium
budget increases general revenue funding by 7.3%, which funding from all
funds increased by 6.8% over actual expenditures for the 1996-1997 biennium.
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 the 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 historically 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 in the early to mid-90s.
During the first half of this decade, weak market prices, declining
production from Texas fields, and the shifting of exploration activities
overseas translated into job losses in the Texas oil and gas industry.
Mining jobs bottomed out at 154,600 by late 1995, the lowest level since
1977. Since then, the oil and gas industry has taken advantage of firmer
prices to add employees in yet another of the endless cycles of this still
rambunctious industry. Mining added 14,000 jobs since the beginning of
1996, causing year-over-year job growth in mining to exceed the state's
average job growth for the first time since 1991. In a continuing saga of
economic cycles, oil prices began a steep slide again, causing the new round
of hiring to taper off during the last few months of 1997.
The status of the state's oil and gas industry is not represented well
by employment numbers alone. Drilling technology and success rates have
improved, thereby increasing the productivity per worker. Also, because
Texas is a headquarters center for exploration worldwide, the state often
benefits from exploration beyond its borders. As a result, the inflation-
adjusted gross product in the Texas mining industry is larger today than
during the 1981 energy boom, when oil and gas employment was nearly double
today's number.
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 closing among banks and
savings and loans. Texas bank failures peaked in 1989, reaching 134 or two-
thirds of all bank closing 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; two banks failed in 1996; and no banks failed in 1997.
The Texas banking industry has made substantial strides toward recovery
during the 1990's. Texas bank profits in 1993, 1994, 1995, 1996, and 1997
were $2.4 billion, $1.9 billion, $2.3 billion, $2.5 billion, and $2.65
billion, respectively. Total loans, total equity capital, and total assets
also rose in 1993, 1994 and 1995. Texas banks have reduced or curtailed
unnecessary expenses, have improved efficiency, have enjoyed reduced deposit
insurance premiums, and have taken advantage of healthy growth in the State
economy over the past few years.
The ratio of net income to net assets represented an annualized return
on assets of 1.3% in state chartered banks for the first half of 1997. Non-
performing loans increased by 5% in 1996, reaching $1.1 billion, and edged
up slightly in the first half of 1997. These loans have increased with
growing defaults on credit cards, but represent only 1% of total loans.
Many Texas banks and banking organizations have consolidated with a
continuing downward trend in the number of operating banks. Texas had 894
banks in May, 1997, 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 locations will rise.
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 1997. 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, benefiting from home
refinancing, increased their earnings by 59% in 1995, and by 37% in the
first nine months of 1997. 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 1996 total value of taxable property in Texas School Districts (the
most recent information available) amounted to approximately $693.1 billion
in 1996, according to records compiled by the Property Tax Division of the
Office of the Comptroller (derived from school districts in the State).
This represents a 4.9% increase in the tax base from the previous year, and
the fourth consecutive year total value rose. The $693 billion valuation
total included approximately $269.2 billion of single-family residences
(after allowing for exemptions), a 5.0% increase over the 1995 level. The
value of multi-family residential property values increased 6.9%, and the
value of commercial and industrial real estate increased a strong 5.8% to
$142.7 billion in the same period. However, commercial and industrial
personal property soared by 9.4% in the same year. The value of vacant
lots, taxable rural real estate, and utilities on January 1, 1996 were up
only modestly from 1995 levels. Only two real property categories posted
value declines from 1995 to 1996. The value of oil, gas and mineral
properties in Texas fell to $30.1 billion in 1996 from a 1995 level of $32.0
billion, and intangible personal property declined to $1.5 billion.
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.
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 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 of 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 were 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. Property tax reform, which would have resulted in a substantial
reduction in tax rates imposed by school districts, was one of the key
proposals to be put forward during the 1997 legislative session. While both
the House and Senate chambers of the legislature passed proposals that would
have reduced school property tax by differing (although significant)
amounts, there was such a wide variance between the proposals that no such
property tax reform measure was passed by the Texas legislature during the
1997 session.
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.
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 previous forecasts exceed expected
revenues in subsequent forecasts. 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,
state sales and use, corporate income, public service 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 annually 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 Committee provides its recommendations on the prudent use
of such obligations to the Governor and the General Assembly.
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) provides 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.
Section 9(d) provides 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, the Virginia College Building Authority 21st Century
Program, the Innovative Technology Authority and the Virginia Biotechnology
Park Authority have been 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 construction,
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, 40
incorporated cities, and 190 incorporated towns. Virginia is unique in that
cities and counties are independent, and their land areas do not overlap.
The largest expenditures 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 in 1994, the Virginia General Assembly passed
emergency legislation to provide payments in five annual installments to
federal retirees in settlement of their claims as a result of Davis. In
1995 and 1996, the General Assembly passed legislation allowing more
retirees to participate in the settlement. As of June 30, 1997, the
estimated total cost to Virginia for the settlement was approximately $316.2
million.
On September 15, 1995, the Supreme Court of Virginia rendered its
decision in Harper, reversing the judgment of the trial court, entering
final judgment in favor of the taxpayers, directing that the amounts
unlawfully collected be refunded with statutory interest. Virginia issued
refund checks on November 9, 1995, to federal government pensioners who
opted out of the settlement, and interest stopped accruing as of November 3,
1995. The cost of refunding all Virginia income taxes paid on federal
government pensions for taxable years 1985, 1986, 1987 and 1988 was
approximately $78.7 million, including interest earnings.
The total cost of refunding all Virginia income taxes paid on federal
pensions on account of the settlement (approximately $316.2 million) and the
judgment ($78.7 million) is approximately $394.9 million, of which $266.4
million ($187.6 million in respect of the settlement and the entire $78.7
million in respect of the judgment) has been paid, leaving $128.6 million
payable in respect of the settlement -- $62.6 million on March 31, 1998, and
(subject to appropriation) $66 million on March 31, 1999.
Most recently, Moody's has rated the long-term general obligation 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.
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 Connecticut Series,
Florida Series, Maryland Series, Massachusetts
Series, Michigan Series, Minnesota Series, Ohio Series,
Pennsylvania Series, and Texas Series for each of the ten
years ended April 30, 1998; 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 six years ended April 30, 1998; for the Georgia Series
for the period from September 3, 1992 (commencement of
operations) to April 30, 1993 and for the five years ended
April 30, 1998; for the New Jersey Series for the period from
May 4, 1994 (commencement of operations) to July 31, 1994,
for each of the two years ended July 31, 1996, for the nine
month period from August 1, 1996 to April 30, 1997, and for
the one year period ended April 30, 1998.
Included in Part B of the Registration Statement:
Statement of Investments-- April 30, 1998.*
Statement of Assets and Liabilities--April 30, 1998.*
Statement of Operations-- year ended April 30, 1998.*
Statement of Changes in Net Assets-- for each of the
years ended April 30, 1997 and 1998 for all series,
except the New Jersey Series; for the New Jersey Series,
for the year ended July 31, 1996, for the nine months
ended April 30, 1997, and for the year ended
April 30, 1998.*
Notes to Financial Statements*
Report of Ernst & Young LLP, Independent Auditors, dated
June 3, 1998.*
___________________________
* Incorporated by reference to Registrant's Annual Report on Form N-30D
for the fiscal year ended April 30, 1998 filed with the Commission.
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 No. 29 to the Registration Statement or Form N-1A,
filed on July 16, 1998.
(6)(a) Distribution Agreement is incorporated by reference to Exhibit
(6)(a) of Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A, filed on August 11, 1995.
(6)(b) Forms of Shareholder Services Plan Agreements are incorporated by
reference to Exhibit (6)(b) of Post-Effective Amendment No. 21 to
the Registration Statement on Form N-1A, filed on August 11, 1995.
(6)(c) Forms of Distribution Plan Agreements are incorporated
by reference to Exhibit (6)(c) of Post-Effective Amendment No. 21
to the Registration Statement on Form N-1A, filed on August 11,
1995.
(8)(a) Custody Agreement is incorporated by reference to
Exhibit (8)(a) of Post-Effective Amendment No. 28 to the
Registration Statement on Form N-1A, filed on June 16, 1997.
(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 No. 29 to the Registration Statement or Form
N-1A, filed on July 16, 1998.
(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 No. 29 to the Registration Statement or
Form N-1A, filed on July 16, 1998.
(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.
(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 3, 1998
______________ _____________________________
Shares of
beneficial interest,
par value $.001 per share Class A Class B Class C
Connecticut Series- 5,650 1,614 60
Florida Series- 3,701 692 15
Georgia Series- 169 353 5
Maryland Series- 5,877 1,701 39
Massachusetts Series- 1,382 163 1
Michigan Series- 3,746 563 23
Number of Record
Title of Class Holders as of August 3, 1998
______________ _____________________________
Shares of
beneficial interest,
par value of $.001 per share Class A Class B Class C
Minnesota Series- 2,638 892 42
New Jersey 142 254 6
North Carolina Series- 923 1,162 4
Ohio Series- 5,093 1,382 19
Pennsylvania Series- 5,172 2,421 12
Texas Series- 937 397 5
Virginia Series- 1,427 975 13
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
Item 27. Indemnification (Continued)
_______ ___________________________
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
_________________ ________________
W. KEITH SMITH Senior Vice Chairman:
Chairman of the Mellon Bank, N.A.*;
Board President and Director:
The Bridgewater Land Co., Inc.**;
Mellon Preferred Capital Corporation**;
TBC Securities Co., Inc.**;
Wellington-Medford II Properties, Inc.**;
Chairman, President and Chief Executive Officer:
Shearson Summit Euromanagement, Inc.*;
Shearson Summit EuroPartners, Inc.*;
Shearson Summit Management, Inc.*;
Shearson Summit Partners, Inc.*;
Shearson Venture Capital, Inc.*;
Chairman and Chief Executive Officer:
The Boston Company, Inc.**;
Boston Safe Deposit and Trust Company**;
Boston Group Holdings, Inc.**;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
The Boston Company Asset Management, Inc.**;
Mellon Europe Limited
London, England;
Mellon Global Investing Corp.*;
Mellon Accounting Services, Inc.*;
MGIC-UK Ltd.;
Mellon Capital Management Corporation***;
Chairman:
Mellon Financial Company*;
Buck Consultants, Inc.
1 Pennsylvania Plaza, 29th Floor
New York, New York 10019;
Director and Vice Chairman:
Mellon Financial Services Corporation*;
Mellon Bank Corporation*;
Trustee:
Laurel Capital Advisors, LLP*;
Mellon Equity Associates, LLP*;
Mellon Bond Associates, LLP*;
Past Director:
Access Capital Strategies Corp.
124 Mount Auburn Street
Suite 200 North
Cambridge, MA 02138
W. KEITH SMITH Past Trustee:
Chairman of the Board Franklin Portfolio Associates Trust
(continued) 2 International Place, 22nd Floor
Boston, MA 02110
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034
BURTON C. BORGELT Director:
Director Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880;
Mellon Bank Corporation*;
Mellon Bank, N.A.*
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation*;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Alleghany Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067;
Past Chairman, President and Chief Executive Officer:
Mellon Bank, N.A.*
STEPHEN E. CANTER Chairman and President:
Vice Chairman, Dreyfus Investment Advisors, Inc.****
Chief Investment Officer,Director:
and a Director The Dreyfus Trust Company+
CHRISTOPHER M. CONDRON President and Chief Operating Officer:
President, Chief Mellon Bank, N.A.*;
Executive Officer, President and Director:
Chief Operating Boston Safe Advisors, Inc.**;
Officer and a Vice-Chairman and Director:
Director Mellon Bank Corporation*;
The Boston Company, Inc.**;
Director:
Certus Asset Advisors Corporation++;
Mellon Capital Management Corporation***;
Boston Safe Deposit and Trust Company**;
Past President and Director:
The Boston Company Financial Services, Inc.**;
Past President:
The Boston Company Financial Strategies, Inc.**;
CHRISTOPHER M. CONDRON Boston Safe Deposit and Trust Company**;
President, Chief Past Director:
Executive Officer, Mellon Preferred Capital Corporation**;
Chief Operating Access Capital Strategies Corp.
Officer and a Director 124 Mount Auburn Street
(continued) Suite 200 North
Cambridge, MA 02138;
Past Chairman, President, and Chief Executive Officer:
The Boston Company Asset Management, Inc.**;
Past Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Past Trustee:
Franklin Portfolio Associates Trust
2 International Place, 22nd Floor
Boston, MA. 02710;
Mellon Bond Associates, LLP*;
Mellon Equity Associates, LLP*;
LAWRENCE S. KASH Executive Vice President:
Vice Chairman-Distribution Mellon Bank, N.A.*;
and a Director Chairman, President and Director:
The Dreyfus Consumer Credit Corporation****;
Trustee, President and Chief Executive Officer:
Laurel Capital Advisors, LLP*;
Director:
Dreyfus Investment Advisors, Inc.****;
Seven Six Seven Agency, Inc.****;
President and Director:
Dreyfus Service Corporation+;
Dreyfus Precious Metals, Inc.+;
Dreyfus Service Organization, Inc.****;
The Boston Company, Inc.**;
Boston Group Holdings, Inc.**;
Chairman and Chief Executive Officer:
Dreyfus Brokerage Services, Inc.
401 North Maple Avenue
Beverly Hills, CA 90210;
Chairman, President and Chief Executive Officer:
The Dreyfus Trust Company+;
The Boston Company Advisors, Inc.
Wilmington, DE.
J. DAVID OFFICER Director:
Vice Chairman Dreyfus Financial Services Corporation*****;
and a Director Dreyfus Investment Services Corporation*****;
Mellon Trust of Florida
2875 Northeast 191st Street
North Miami Beach, Florida 33180;
Mellon Preferred Capital Corporation**;
Boston Group Holdings, Inc.**;
Mellon Trust of New York
1301 Avenue of the Americas - 41st Floor
New York, New York 10019;
J. DAVID OFFICER Mellon Trust of California
Vice Chairman 400 South Hope Street
and a Director Los Angeles, California 90071-2806;
(continued) Dreyfus Insurance Agency of Massachusetts, Inc.
53 State Street
Boston, Massachusetts 02109;
Executive Vice President:
Dreyfus Service Corporation****;
Mellon Bank, N.A.*;
Vice Chairman and Director:
The Boston Company, Inc.**;
President and Director:
RECO, Inc.**;
The Boston Company Financial Services, Inc.**;
Boston Safe Deposit and Trust Company**;
RICHARD F. SYRON Chairman of the Board and Chief Executive Officer:
Director American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance Company
John Hancock Place, Box 111
Boston, Massachusetts 02117;
Thermo Electron Corporation
81 Wyman Street, Box 9046
Waltham, Massachusetts 02254-9046;
American Business Conference
1730 K Street, NW, Suite 120
Washington, D.C. 20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Ave.
Chestnut Hill, Massachusetts 02167-3934
RONALD P. O'HANLEY III Director:
Vice Chairman The Boston Company Asset Management, LLC**;
TBCAM Holding, Inc.**;
Franklin Portfolio Holdings, Inc.
Two International Place - 22nd Floor
Boston, Massachusetts 02110;
Mellon Capital Management Corporation***;
Certus Asset Advisors Corporation++;
Mellon-France Corporation***;
Chairman and Director:
Boston Safe Advisors, Inc.**;
Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Chairman and Trustee:
Mellon Bond Associates, LLP*;
Mellon Equity Associates, LLP*;
Trustee:
Laurel Capital Advisors, LLP*;
RONALD P. O'HANLEY III Chairman, President and Chief Executive Officer:
Vice Chairman Mellon Global Investing Corp.*;
(continued) Partner:
McKinsey & Company, Inc.
Boston, Massachusetts
WILLIAM T. SANDALLS, JR. Chairman and Director:
Senior Vice President and Dreyfus Transfer, Inc.
Chief Financial Officer One American Express Plaza
Providence, Rhode Island 02903;
President and Director:
Dreyfus-Lincoln, Inc.
4500 New Linden Hill Rd.
Wilmington, DE 19808;
Executive Vice President and Chief Financial Officer:
Dreyfus Service Corporation****;
Executive Vice President, Treasurer and Director:
Dreyfus Service Organization, Inc.****;
Director and Treasurer:
Dreyfus Investment Advisors, Inc.****;
Seven Six Seven Agency, Inc.****;
Dreyfus Precious Metals, Inc.+;
Director, Vice President and Treasurer:
The Dreyfus Consumer Credit Corporation****;
The TruePenny Corporation****
Director, Treasurer and Chief Financial Officer:
The Dreyfus Trust Company+;
Past Director and President:
Lion Management, Inc.****;
Dreyfus Partnership Management, Inc.****;
Past Director and Executive Vice President:
Dreyfus Service Organization, Inc.****;
Past Director and Treasurer:
Dreyfus Personal Management, Inc.****
MARK N. JACOBS Director:
Vice President, Dreyfus Service Organization, Inc.****;
General Counsel The Dreyfus Trust Company+;
and Secretary Dreyfus Investment Advisors, Inc.****;
Director and Secretary:
The TruePenny Corporation****;
Past Director, Vice President and Secretary:
Lion Management, Inc.****
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation*
Services
JAMES BITETTO Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation****;
Dreyfus Investment Advisers, Inc.****;
Dreyfus Service Organization, Inc.****
STEVEN F. NEWMAN Vice President, Secretary and Director:
Assistant Secretary Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
Secretary:
Dreyfus Service Organization, Inc.****
______________________________________
* The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
** The address of the business so indicated is One Mellon Bank Place,
Boston, Massachusetts, 02108.
*** The address of the business so indicated is 595 Market Street, Suite
3000, San Francisco CA 94105.
**** The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
*****The address of the business so indicated is Union Trust Building, 501
Grant Street, Pittsburgh, PA 15259.
+ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York, 11556-0144.
++ The address of the business so indicated is One Bush Street, Suite
450, San Francisco, CA. 94104.
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 Funds
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 Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) The Dreyfus/Laurel Tax-Free Municipal Funds
40) Dreyfus LifeTime Portfolios, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus MidCap Index Fund
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Premier California Municipal Bond Fund
66) Dreyfus Premier Equity Funds, Inc.
67) Dreyfus Premier International Funds, Inc.
68) Dreyfus Premier GNMA Fund
69) Dreyfus Premier Worldwide Growth Fund, Inc.
70) Dreyfus Premier Insured Municipal Bond Fund
71) Dreyfus Premier Municipal Bond Fund
72) Dreyfus Premier New York Municipal Bond Fund
73) Dreyfus Premier State Municipal Bond Fund
74) Dreyfus Premier Value Fund
75) Dreyfus Short-Intermediate Government Fund
76) Dreyfus Short-Intermediate Municipal Bond Fund
77) The Dreyfus Socially Responsible Growth Fund, Inc.
78) Dreyfus Stock Index Fund, Inc.
79) Dreyfus Tax Exempt Cash Management
80) The Dreyfus Third Century Fund, Inc.
81) Dreyfus Treasury Cash Management
82) Dreyfus Treasury Prime Cash Management
83) Dreyfus Variable Investment Fund
84) Dreyfus Worldwide Dollar Money Market Fund, Inc.
85) General California Municipal Bond Fund, Inc.
86) General California Municipal Money Market Fund
87) General Government Securities Money Market Fund, Inc.
88) General Money Market Fund, Inc.
89) General Municipal Bond Fund, Inc.
90) General Municipal Money Market Fund, Inc.
91) General New York Municipal Bond Fund, Inc.
92) General New York Municipal Money Market 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+ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is 60 State Street, 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. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
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 certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and 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 28th day of August, 1998.
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, 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 8/28/98
______________________________ Officer)
Marie E. Connolly
/s/Joseph F. Tower, III* Assistant Treasurer (Principal 8/28/98
______________________________ Accounting and Financial Officer)
Joseph F. Tower, III
/s/Clifford L. Alexander, Jr.* Director 8/28/98
______________________________
Clifford L. Alexander, Jr.
/s/Peggy C. Davis* Director 8/28/98
______________________________
Peggy C. Davis
/s/Joseph S. DiMartino* Chairman of the Board of 8/28/98
______________________________ Directors
Joseph S. DiMartino
/s/Ernst Kafka* Director 8/28/98
______________________________
Ernest Kafka
/s/Saul B. Klaman* Director 8/28/98
______________________________
Saul B. Klaman
/s/Nathan Leventhal* Director 8/28/98
______________________________
Nathan Leventhal
*BY: __________________________
Stephanie Pierce,
Attorney-in-Fact
INDEX OF EXHIBITS
__________________
ITEM PAGE
____ ____
(b) Exhibits:
(11) Consent of Independent Auditors
(17) Financial Data Schedules
(18) (a) Powers of Attorney of the Trustees and Officers
(b) Certificate of Assistant Secretary
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our reports
dated June 3, 1998, which is incorporated by reference, in this Registration
Statement (Form N-1A 33-10238) of Dreyfus Premier State Municipal Bond Fund.
ERNST & YOUNG LLP
New York, New York
August 26, 1998
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<ACCUM-APPREC-OR-DEPREC> 575
<NET-ASSETS> 118
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 851
<OTHER-INCOME> 0
<EXPENSES-NET> 202
<NET-INVESTMENT-INCOME> 649
<REALIZED-GAINS-CURRENT> 173
<APPREC-INCREASE-CURRENT> 452
<NET-CHANGE-FROM-OPS> 1274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> (1)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1587
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 34
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 82
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 206
<AVERAGE-NET-ASSETS> 77
<PER-SHARE-NAV-BEGIN> 12.64
<PER-SHARE-NII> .500
<PER-SHARE-GAIN-APPREC> .560
<PER-SHARE-DIVIDEND> (.500)
<PER-SHARE-DISTRIBUTIONS> (.110)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.09
<EXPENSE-RATIO> .019
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806176
<NAME> DREYFUS PREMIER STATE MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 035
<NAME> NORTH CAROLINA SERIES-CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 82094
<INVESTMENTS-AT-VALUE> 86549
<RECEIVABLES> 1306
<ASSETS-OTHER> 189
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 88044
<PAYABLE-FOR-SECURITIES> 961
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 151
<TOTAL-LIABILITIES> 1112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82752
<SHARES-COMMON-STOCK> 3
<SHARES-COMMON-PRIOR> 1
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (275)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4455
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<INTEREST-INCOME> 5053
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<EXPENSES-NET> 995
<NET-INVESTMENT-INCOME> 4059
<REALIZED-GAINS-CURRENT> 965
<APPREC-INCREASE-CURRENT> 3411
<NET-CHANGE-FROM-OPS> 8435
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<DISTRIBUTIONS-OF-INCOME> (1)
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<NUMBER-OF-SHARES-SOLD> 7
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<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1241)
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<GROSS-ADVISORY-FEES> 482
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 995
<AVERAGE-NET-ASSETS> 34
<PER-SHARE-NAV-BEGIN> 13.22
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .68
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.90
<EXPENSE-RATIO> .016
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806176
<NAME> DREYFUS PREMIER STATE MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 036
<NAME> OHIO SERIES-CLASS C
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
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<INVESTMENTS-AT-VALUE> 284835
<RECEIVABLES> 5551
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<TOTAL-ASSETS> 290405
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<OTHER-ITEMS-LIABILITIES> 1756
<TOTAL-LIABILITIES> 1756
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 270932
<SHARES-COMMON-STOCK> 45
<SHARES-COMMON-PRIOR> 55
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1220
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16497
<NET-ASSETS> 578
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17643
<OTHER-INCOME> 0
<EXPENSES-NET> 2865
<NET-INVESTMENT-INCOME> 14778
<REALIZED-GAINS-CURRENT> 2236
<APPREC-INCREASE-CURRENT> 5572
<NET-CHANGE-FROM-OPS> 22586
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (37)
<DISTRIBUTIONS-OF-GAINS> (9)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31
<NUMBER-OF-SHARES-REDEEMED> (44)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 637
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1823
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1599
<INTEREST-EXPENSE> 3
<GROSS-EXPENSE> 2865
<AVERAGE-NET-ASSETS> 853
<PER-SHARE-NAV-BEGIN> 12.66
<PER-SHARE-NII> .570
<PER-SHARE-GAIN-APPREC> .350
<PER-SHARE-DIVIDEND> (.570)
<PER-SHARE-DISTRIBUTIONS> (.130)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.88
<EXPENSE-RATIO> .017
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806176
<NAME> DREYFUS PREMIER STATE MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 037
<NAME> PENNSYLVANIA SERIES-CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 254447
<INVESTMENTS-AT-VALUE> 268077
<RECEIVABLES> 5427
<ASSETS-OTHER> 157
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 273661
<PAYABLE-FOR-SECURITIES> 1894
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 394
<TOTAL-LIABILITIES> 2288
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 255833
<SHARES-COMMON-STOCK> 28
<SHARES-COMMON-PRIOR> 2
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1910
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13630
<NET-ASSETS> 463
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16524
<OTHER-INCOME> 0
<EXPENSES-NET> 2901
<NET-INVESTMENT-INCOME> 13623
<REALIZED-GAINS-CURRENT> 4306
<APPREC-INCREASE-CURRENT> 7423
<NET-CHANGE-FROM-OPS> 25352
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1559)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1899
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1514
<INTEREST-EXPENSE> 3
<GROSS-EXPENSE> 2901
<AVERAGE-NET-ASSETS> 132
<PER-SHARE-NAV-BEGIN> 16.23
<PER-SHARE-NII> .700
<PER-SHARE-GAIN-APPREC> .720
<PER-SHARE-DIVIDEND> (.700)
<PER-SHARE-DISTRIBUTIONS> (.260)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.69
<EXPENSE-RATIO> .017
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806176
<NAME> DREYFUS PREMIER STATE MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 038
<NAME> TEXAS SERIES-CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 76846
<INVESTMENTS-AT-VALUE> 81125
<RECEIVABLES> 1362
<ASSETS-OTHER> 447
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 82934
<PAYABLE-FOR-SECURITIES> 2387
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74
<TOTAL-LIABILITIES> 2461
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75361
<SHARES-COMMON-STOCK> 12
<SHARES-COMMON-PRIOR> 6
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 833
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4279
<NET-ASSETS> 261
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4567
<OTHER-INCOME> 0
<EXPENSES-NET> 673
<NET-INVESTMENT-INCOME> 3895
<REALIZED-GAINS-CURRENT> 1306
<APPREC-INCREASE-CURRENT> 2405
<NET-CHANGE-FROM-OPS> 7606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8)
<DISTRIBUTIONS-OF-GAINS> (3)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2098
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 638
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 442
<INTEREST-EXPENSE> 1
<GROSS-EXPENSE> 819
<AVERAGE-NET-ASSETS> 195
<PER-SHARE-NAV-BEGIN> 20.97
<PER-SHARE-NII> .910
<PER-SHARE-GAIN-APPREC> 1.000
<PER-SHARE-DIVIDEND> (.910)
<PER-SHARE-DISTRIBUTIONS> (.300)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.67
<EXPENSE-RATIO> .015
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806176
<NAME> DREYFUS PREMIER STATE MUNICIPAL BOND FUND
<SERIES>
<NUMBER> 039
<NAME> VIRIGNIA SERIES-CLASS C
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 102961
<INVESTMENTS-AT-VALUE> 108637
<RECEIVABLES> 1739
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110388
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3207
<TOTAL-LIABILITIES> 3207
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101416
<SHARES-COMMON-STOCK> 115
<SHARES-COMMON-PRIOR> 41
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 89
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5676
<NET-ASSETS> 1996
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6106
<OTHER-INCOME> 0
<EXPENSES-NET> 997
<NET-INVESTMENT-INCOME> 5109
<REALIZED-GAINS-CURRENT> 717
<APPREC-INCREASE-CURRENT> 3847
<NET-CHANGE-FROM-OPS> 9673
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (54)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 74
<NUMBER-OF-SHARES-REDEEMED> (1)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 9621
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (609)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 574
<INTEREST-EXPENSE> 1
<GROSS-EXPENSE> 1144
<AVERAGE-NET-ASSETS> 1272
<PER-SHARE-NAV-BEGIN> 16.60
<PER-SHARE-NII> .750
<PER-SHARE-GAIN-APPREC> .760
<PER-SHARE-DIVIDEND> (.750)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.36
<EXPENSE-RATIO> .015
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Item 18.(a).
Other Exhibits (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret W. Chambers,
Marie E. Connolly, Christopher J. Kelley, Kathleen K. Morrisey, Michael S.
Petrucelli, Stephanie Pierce and Elba Vasquez, and each of them, with full
power to act without the other, his or here true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or
her, 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. June 15, 1998
- -------------------------------
Clifford L. Alexander, Jr.
/s/Peggy C. Davis June 15, 1998
- -------------------------------
Peggy C. Davis
/s/Joseph S. DiMartino June 15, 1998
- -------------------------------
Joseph S. DiMartino
/s/Ernst Kafka June 15, 1998
- -------------------------------
Ernst Kafka
/s/Saul B. Klaman June 15, 1998
- -------------------------------
Saul B. Klaman
/s/Nathan Leventhal June 15, 1998
- -------------------------------
Nathan Leventhal
ITEM 18.(b)
OTHER EXHIBIT (b)
DREYFUS PREMIER STATE MUNICIPAL BOND FUND
Certificate of Assistant Secretary
The undersigned, Stephanie Pierce , Vice President, Assistant Treasurer
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 Margaret W. Chambers,
Marie E. Connolly, Christopher J. Kelley, Kathleen K. Morrisey, Michael S.
Petrucelli, Stephanie Pierce and Elba Vasquez 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 Margaret W. Chambers, Marie E.
Connolly, Christopher J. Kelley, Kathleen K. Morrisey,
Michael S. Petrucelli, Stephanie Pierce and Elba Vasquez
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 attorney-in-fact hereby is authorized
and approved; and that such attorneys-in-fact, and each
of them, shall have full 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 August 28, 1998.
-----------------------
Stephanie Pierce
Vice President, Assistant Treasurer
and Assistant Secretary
