N-30D 1 combinedpn30d-064.txt ANNUAL REPORT Dreyfus Premier State Municipal Bond Fund, Connecticut Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 17 Financial Highlights 20 Notes to Financial Statements 26 Report of Independent Auditors 27 Important Tax Information 28 Board Members Information 30 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Connecticut Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Connecticut Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, James Welch. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE James Welch, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Connecticut Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 6.16% for Class A shares, 5.61% for Class B shares and 5.36% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Connecticut Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 6.30% .(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. During much of the reporting period, the fund benefited from price appreciation as interest rates fell. However, market weakness late in the reporting period and the lingering effects of the September 11 terrorist attacks offset some of those earlier gains and caused the fund to underperform its Lipper category average. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Connecticut state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, we evaluate interest-rate trends and supply-and-demand factors in the municipal bond market. Based on that assessment, we select the individual tax-exempt bonds that we believe are most likely to potentially provide the highest returns with the least risk. We look at such criteria as the bond's yield, price, age, the creditworthiness of its issuer and any provisions for early redemption. The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) Second, we actively manage the portfolio's average duration -- a measure of sensitivity to changing interest rates -- in anticipation of temporary supply-and-demand changes. If we expect the supply of newly issued bonds to increase temporarily, we may reduce the portfolio's average duration to make cash available for the purchase of potentially higher yielding securities. Conversely, if we expect demand for municipal bonds to surge at a time when we anticipate little issuance, we may increase the portfolio's average duration to maintain current yields for as long as practical. What other factors influenced the fund's performance? When the reporting period began, the U.S. economy had already weakened considerably, with reduced capital spending and rising unemployment driving the downturn. These conditions were worsened by the September 11 terrorist attacks. In this environment, the Federal Reserve Board (the "Fed") aggressively reduced short-term interest rates, which fell to their lowest level in 40 years. As interest rates and bond yields declined, municipal bond prices generally rose. In addition, bond prices moved higher as demand for high quality investments surged from investors seeking an investment alternative to a declining stock market. During most of 2001, when interest rates were falling, we locked in existing yields for as long as practical by maintaining the fund's weighted average maturity at a point that was modestly longer than that of its peer group. In early 2002, however, when it became apparent that the Fed's aggressive interest-rate cuts were probably finished, we reduced the fund's weighted average maturity to protect against potential price declines. This change proved beneficial when the Fed suggested in March that an economic recovery was underway. Many investors interpreted these comments as a signal that the Fed's next move would be toward higher interest rates. While we do not anticipate rate hikes in the immediate future, these expectations were nonetheless factored into municipal bond prices, erasing a portion of the market's earlier gains. Unfortunately, the fund's otherwise strong performance was hurt by its holdings of tax-exempt airline bonds, which suffered in the aftermath of the September 11 attacks. While these bonds have since rebounded, they have not yet reached pre-attack price levels. In the meantime, they continue to pay competitive levels of tax-exempt income. What is the fund's current strategy? As was the case for many states, Connecticut's tax revenues declined when the U.S. economy weakened, causing us to intensify our focus on credit quality. We also have sought to diversify the fund's holdings further by spreading assets among bonds issued by local government entities where revenues are derived from property taxes, not income taxes. Nonetheless, because of conservative fiscal management and a strong residential tax base, we believe that Connecticut is poised to benefit more than many other states from a recovery of the U.S. economy. We have maintained the fund's relatively conservative positioning to protect against the possibility of a stronger economy and potentially higher interest rates later this year. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-CONNECTICUT RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Connecticut Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, CONNECTICUT SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN CONNECTICUT MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN CONNECTICUT MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception ------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 1.40% 4.74% 5.80% WITHOUT SALES CHARGE 6.16% 5.71% 6.29% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 1.61% 4.84% -- 5.48% ((+)(+)) WITHOUT REDEMPTION 1/15/93 5.61% 5.17% -- 5.48% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.36% 4.91% -- 5.11% WITHOUT REDEMPTION 8/15/95 5.36% 4.91% -- 5.11% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--96.0% Amount ($) Value ($) --------------------------------------------------------------------------------------------------------------------------------- CONNECTICUT--69.6% Connecticut: 5.25%, 3/1/2012 (Prerefunded 3/1/2007) 3,000,000 (a) 3,281,880 7.03%, 3/15/2012 5,000,000 (b,c) 5,493,200 5%, 3/15/2012 70,000 73,452 5.125%, 3/15/2013 (Prerefunded 3/15/2008) 25,000 (a) 27,225 5.25%, 3/1/2016 2,700,000 2,795,040 Airport Revenue (Bradley International Airport): 5.25%, 10/1/2013 (Insured; FGIC) 30,000 31,307 7.751%, 10/1/2013 2,750,000 (b,c) 2,989,635 5.25%, 10/1/2016 (Insured; FGIC) 20,000 20,426 7.751%, 10/1/2016 2,225,000 (b,c) 2,319,718 (Clean Water Fund) Revenue : 5.25%, 7/15/2012 15,000 16,076 7.599%, 7/15/2012 4,850,000 (b,c) 5,545,927 5.125%, 9/1/2014 3,050,000 3,204,635 Special Tax Obligation Revenue (Transportation Infrastructure): 5.50%, Series A, 11/1/2007 (Insured; FSA) 4,580,000 5,047,389 5.50%, Series B, 11/1/2007 (Insured; FSA) 5,000,000 5,510,250 7.125%, 6/1/2010 3,400,000 4,061,028 6.75%, 6/1/2011 (Prerefunded 6/1/2003) 8,500,000 (a) 8,937,580 Connecticut Development Authority, Revenue: First Mortgage Gross: (Health Care Project, Church Homes Inc.) 5.80%, 4/1/2021 3,000,000 2,718,600 (Health Care Project, Elim Park Baptist Home) 5.375%, 12/1/2018 2,300,000 2,143,301 PCR (Connecticut Light and Power): 5.85%, 9/1/2028 10,150,000 10,300,525 5.95%, 9/1/2028 1,945,000 1,973,844 Water Facilities (Bridgeport Hydraulic) 6.15%, 4/1/2035 (Insured; AMBAC) 2,750,000 2,909,253 Connecticut Health and Educational Facilities Authority, Revenue: (Danbury Hospital) 5.75%, 7/1/2029 (Insured; AMBAC) 3,000,000 3,146,670 (Fairfield University) 5%, 7/1/2029 (Insured; MBIA) 3,000,000 2,949,450 (Greenwich Academy) 5.75%, 3/1/2026 (Insured; FSA) 3,130,000 3,237,234 (Hartford University): 6.80%, 7/1/2022 (Prerefunded 7/1/2002) 8,500,000 (a) 8,740,295 5.625%, 7/1/2026 4,200,000 4,399,710 (Hospital for Special Care) 5.375%, 7/1/2017 4,430,000 4,226,353 (Loomis Chaffee School Project): 5.25%, 7/1/2021 900,000 919,503 5.50%, 7/1/2023 2,150,000 2,225,185 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- CONNECTICUT (CONTINUED) Connecticut Health and Educational Facilities Authority, Revenue (continued): 6%, 7/1/2025 (Insured; MBIA) (Prerefunded 7/1/2004) 1,000,000 (a) 1,090,200 5.25%, 7/1/2031 3,000,000 2,993,100 (Middlesex Hospital) 6.25%, 7/1/2022 (Insured; MBIA) (Prerefunded 7/1/2002) 1,500,000 (a) 1,541,685 (New Britian General Hospital) 6.125%, 7/1/2014 (Insured; AMBAC) 1,000,000 1,075,610 (New Britain Memorial Hospital) 7.75%, 7/1/2022 (Prerefunded 7/1/2002) 10,000,000 (a) 10,303,300 (Norwalk Hospital) 6.25%, 7/1/2022 (Insured; MBIA) (Prerefunded 7/1/2002) 3,860,000 (a) 3,967,269 (Quinnipiac College) 6%, 7/1/2013 (Prerefunded 7/1/2003) 4,100,000 (a) 4,364,368 (Sacred Heart University): 6.50%, 7/1/2016 (Prerefunded 7/1/2006) 1,465,000 (a) 1,684,428 6.125%, 7/1/2017 (Prerefunded 7/1/2007) 1,000,000 (a) 1,143,130 6.625%, 7/1/2026 (Prerefunded 7/1/2006) 2,720,000 (a) 3,140,594 (Trinity College) 5.875%, 7/1/2026 (Insured; MBIA) 2,500,000 2,630,275 (University of New Haven): 6.625%, 7/1/2016 2,050,000 2,135,587 6.70%, 7/1/2026 8,605,000 8,801,968 (William W. Backus Hospital) 5.75%, 7/1/2027 (Insured; AMBAC) 2,500,000 2,590,300 (Windham Community Memorial Hospital) 6%, 7/1/2020 1,000,000 1,019,410 (Yale, New Haven Hospital) 5.70%, 7/1/2025 (Insured; MBIA) 8,070,000 8,303,546 (Yale University) 5.125%, 7/1/2027 4,750,000 (d) 4,732,995 Connecticut Housing Finance Authority: 5.75%,11/15/2021 4,000,000 4,073,280 5.85%, 5/15/2031 7,370,000 7,500,007 (Housing Mortgage Finance Program): 6.125%, 5/15/2018 (Insured; MBIA) 1,290,000 1,349,559 6.75%, 11/15/2023 5,010,000 5,164,609 5.45%, 11/15/2029 5,805,000 5,776,962 6%, Subseries F-2, 11/15/2027 4,585,000 4,717,002 6%, Series G, 11/15/2027 4,000,000 4,115,160 5.85%, Subseries B-2, 11/15/2028 9,135,000 9,341,268 5.85%, Subseries C-2, 11/15/2028 8,660,000 8,834,066 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- CONNECTICUT (CONTINUED) Eastern Connecticut Resource Recovery Authority: Solid Waste Revenue 8.959%, 1/1/2014 4,000,000 (b,c) 3,596,320 (Wheelabrator Lisbon Project): 5.50%, 1/1/2014 50,000 47,477 5.50%, 1/1/2020 7,000,000 6,379,730 Greenwich Housing Authority, MFHR (Greenwich Close): 6.25%, 9/1/2017 2,840,000 2,812,111 6.35%, 9/1/2027 1,800,000 1,756,872 Hartford Parking System, Revenue 6.50%, 7/1/2025 1,000,000 1,031,160 Sprague, Environmental Improvement Revenue (International Paper Co. Project) 5.70%, 10/1/2021 1,350,000 1,295,622 Stamford 6.60%, 1/15/2010 2,750,000 3,235,017 University of Connecticut: 5.75%, 3/1/2015 (Insured; FGIC) 1,770,000 1,946,186 5.75%, 3/1/2016 (Insured; FGIC) 2,500,000 2,734,925 Special Obligation Student Fee Revenue: 6%, 11/15/2016 (Insured; FGIC) (Prerefunded 11/15/2010) 2,425,000 (a) 2,802,621 6%, 11/15/2017 (Insured; FGIC) (Prerefunded 11/15/2010) 2,000,000 (a) 2,311,440 5.25%, 11/15/2021 (Insured; FGIC) 1,755,000 1,792,311 5.75%, 11/15/2029 (Insured; FGIC) (Prerefunded 11/15/2010) 2,500,000 (a) 2,844,350 U. S. RELATED--26.4% Children's Trust Fund of Puerto Rico Tobacco Settlement Revenue, Asset Backed Bonds 6%, 7/1/2026 5,000,000 5,111,150 Commonwealth of Puerto Rico: 5.50%, 7/1/2012 (Insured; MBIA) 50,000 55,837 8.97%, 7/1/2012 2,000,000 (b,c) 2,466,920 8.97%, 7/1/2013 3,950,000 (b,c) 4,861,423 5.65%, 7/1/2015 (Insured; MBIA) 6,690,000 7,540,165 (Public Improvement): 5.50%, 7/1/2013 (Insured; MBIA) 100,000 111,537 5.25%, 7/1/2014 (Insured; MBIA) 3,925,000 4,281,037 5.25%, 7/1/2015 (Insured; MBIA) 1,000,000 1,087,350 6%, 7/1/2015 (Insured; MBIA) 2,000,000 2,323,680 6.80%, 7/1/2021 (Prerefunded 7/1/2002) 6,000,000 (a) 6,143,760 5.25%, 7/1/2027 (Insured; FSA) 4,500,000 4,567,725 Puerto Rico Aqueduct and Sewer Authority, Revenue 6.25%, 7/1/2013 (Insured; MBIA) 9,000,000 10,670,670 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- U. S. RELATED (CONTINUED) Puerto Rico Highway and Transportation Authority, Highway Revenue: 8.886%, 7/1/2010 3,200,000 (c) 3,373,952 5.50%, 7/1/2013 (Insured; MBIA) 10,000 11,192 8.10%, 7/1/2013 (Insured; MBIA) 2,290,000 (b,c) 2,835,730 5.50%, 7/1/2026 (Insured; FSA) 2,375,000 2,435,301 5.50%, 7/1/2036 5,000,000 5,116,900 Puerto Rico Industrial Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, Revenue (Teachers Retirement System) 5.50%, 7/1/2021 800,000 825,664 Puerto Rico Ports Authority, Special Facilities Revenue (American Airlines): 6.30%, 6/1/2023 3,700,000 3,106,520 6.25%, 6/1/2026 4,355,000 3,597,840 Puerto Rico Public Finance Corp. (Commonwealth Appropriation) 6%, 8/1/2026 12,450,000 13,712,181 University of Puerto Rico, University Revenue 5.50%, 6/1/2015 (Insured; MBIA) 5,000,000 5,229,100 Virgin Islands Public Finance Authority, Revenue, Gross Receipts Taxes Loan Note 6.375%, 10/1/2019 2,000,000 2,157,280 Virgin Islands Water and Power Authority, Refunding (Electric Systems) 5.30%, 7/1/2021 2,000,000 1,913,780 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $325,431,995) 339,757,205 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--3.6% ------------------------------------------------------------------------------------------------------------------------------------ Connecticut Health and Education Facilities Authority, Revenue,VRDN: (Quinnipiac University) 1.65% 9,000,000 (e) 9,000,000 (Yale University): 1.65% 1,000,000 (e) 1,000,000 1.75% 2,500,000 (e) 2,500,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $12,500,000) 12,500,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $337,931,995) 99.6% 352,257,205 CASH AND RECEIVABLES (NET) .4% 1,541,102 NET ASSETS 100.0% 353,798,307 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Summary of Abbreviations AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guarantee Insurance Company FSA Financial Security Assurance MBIA Municipal Bond Investors Assurance Insurance Corporation MFHR Multi-Family Housing Revenue PCR Pollution Control Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 58.1 AA Aa AA 6.0 A A A 10.9 BBB Baa BBB 15.7 BB BB BB 1.9 F1 MIG1/P1 SP1/A1 3.5 Not Rated (f) Not Rated (f) Not Rated( f) 3.9 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT APRIL 30, 2002, THESE SECURITIES AMOUNTED TO $30,108,873 OR 8.5% OF NET ASSETS. (C) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE PERIODICALLY. (D) PURCHASED ON A DELAYED DELIVERY BASIS. (E) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (F) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 337,931,995 352,257,205 Interest receivable 6,541,039 Receivable for investment securities sold 248,623 Receivable for shares of Beneficial Interest subscribed 231,899 Prepaid expenses 16,126 359,294,892 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 252,953 Cash overdraft due to Custodian 265,138 Payable for investment securities purchased 4,901,753 Payable for shares of Beneficial Interest redeemed 23,550 Accrued expenses 53,191 5,496,585 -------------------------------------------------------------------------------- NET ASSETS ($) 353,798,307 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 342,327,265 Accumulated net realized gain (loss) on investments (2,854,168) Accumulated net unrealized appreciation (depreciation) on investments 14,325,210 -------------------------------------------------------------------------------- NET ASSETS ($) 353,798,307 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 301,043,569 43,070,390 9,684,348 Shares Outstanding 25,389,661 3,635,696 818,220 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 11.86 11.85 11.84 SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 19,939,106 EXPENSES: Management fee--Note 3(a) 1,920,817 Shareholder servicing costs--Note 3(c) 1,064,653 Distribution fees--Note 3(b) 269,464 Professional fees 46,159 Custodian fees 38,202 Prospectus and shareholders' reports 22,042 Registration fees 22,029 Trustees' fees and expenses--Note 3(d) 9,711 Loan commitment fees--Note 2 4,979 Interest expense--Note 2 3,711 Miscellaneous 24,812 TOTAL EXPENSES 3,426,579 INVESTMENT INCOME--NET 16,512,527 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 192,109 Net unrealized appreciation (depreciation) on investments 3,583,735 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3,775,844 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 20,288,371 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ----------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 16,512,527 15,996,257 Net realized gain (loss) on investments 192,109 180,121 Net unrealized appreciation (depreciation) on investments 3,583,735 14,298,241 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 20,288,371 30,474,619 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (14,355,264) (14,048,821) Class B shares (1,793,678) (1,750,171) Class C shares (317,183) (197,265) TOTAL DIVIDENDS (16,466,125) (15,996,257) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 69,648,190 39,670,312 Class B shares 14,642,059 7,157,691 Class C shares 5,845,932 1,727,515 Dividends reinvested: Class A shares 7,648,884 7,585,805 Class B shares 1,109,603 1,050,886 Class C shares 215,197 120,317 Cost of shares redeemed: Class A shares (69,328,224) (45,020,495) Class B shares (11,945,701) (13,451,886) Class C shares (1,626,287) (1,197,083) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 16,209,653 (2,356,938) TOTAL INCREASE (DECREASE) IN NET ASSETS 20,031,899 12,121,424 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 333,766,408 321,644,984 END OF PERIOD 353,798,307 333,766,408 The Fund STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended April 30, --------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 5,858,193 3,419,069 Shares issued for dividends reinvested 642,795 655,628 Shares redeemed (5,823,751) (3,895,168) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 677,237 179,529 -------------------------------------------------------------------------------- CLASS B(A) Shares sold 1,230,762 616,874 Shares issued for dividends reinvested 93,309 90,948 Shares redeemed (1,000,322) (1,171,796) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 323,749 (463,974) -------------------------------------------------------------------------------- CLASS C Shares sold 489,299 148,705 Shares issued for dividends reinvested 18,125 10,416 Shares redeemed (137,722) (103,913) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 369,702 55,208 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 587,514 CLASS B SHARES REPRESENTING $7,039,342, WERE AUTOMATICALLY CONVERTED TO 587,024 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 725,715 CLASS B SHARES REPRESENTING $8,356,165 WERE AUTOMATICALLY CONVERTED TO 725,215 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, ---------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.72 11.21 12.26 12.23 11.81 Investment Operations: Investment income--net .57(b) .57 .58 .61 .62 Net realized and unrealized gain (loss) on investments .14 .51 (.96) .19 .47 Total from Investment Operations .71 1.08 (.38) .80 1.09 Distributions: Dividends from investment income--net (.57) (.57) (.58) (.61) (.62) Dividends from net realized gain on investments -- -- (.09) (.16) (.05) Total Distributions (.57) (.57) (.67) (.77) (.67) Net asset value, end of period 11.86 11.72 11.21 12.26 12.23 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.16 9.86 (3.06) 6.70 9.44 -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .90 .89 .90 .89 .90 Ratio of net investment income to average net assets 4.81 4.97 5.08 4.94 5.12 Portfolio Turnover Rate 15.96 21.71 35.12 21.95 33.31 -------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 301,044 289,723 274,962 317,923 310,343 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.80% TO 4.81%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ---------------------------------------------------------------------- CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.71 11.20 12.26 12.23 11.80 Investment Operations: Investment income--net .51(b) .51 .52 .55 .56 Net realized and unrealized gain (loss) on investments .14 .51 (.97) .19 .48 Total from Investment Operations .65 1.02 (.45) .74 1.04 Distributions: Dividends from investment income--net (.51) (.51) (.52) (.55) (.56) Dividends from net realized gain on investments -- -- (.09) (.16) (.05) Total Distributions (.51) (.51) (.61) (.71) (.61) Net asset value, end of period 11.85 11.71 11.20 12.26 12.23 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN (%)(C) 5.61 9.31 (3.66) 6.15 8.97 ------------------------------------------------------------------------------------------------------------------------------------ --- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.42 1.41 1.42 1.40 1.42 Ratio of net investment income to average net assets 4.28 4.45 4.55 4.42 4.59 Portfolio Turnover Rate 15.96 21.71 35.12 21.95 33.31 ----------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 43,070 38,794 42,283 58,416 59,315 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.27% TO 4.28%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ------------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.70 11.19 12.25 12.22 11.79 Investment Operations: Investment income--net .48(b) .49 .50 .52 .53 Net realized and unrealized gain (loss) on investments .14 .51 (.97) .19 .48 Total from Investment Operations .62 1.00 (.47) .71 1.01 Distributions: Dividends from investment income--net (.48) (.49) (.50) (.52) (.53) Dividends from net realized gain on investments -- -- (.09) (.16) (.05) Total Distributions (.48) (.49) (.59) (.68) (.58) Net asset value, end of period 11.84 11.70 11.19 12.25 12.22 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.36 9.05 (3.89) 5.88 8.68 -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.65 1.65 1.66 1.65 1.68 Ratio of net investment income to average net assets 4.03 4.20 4.31 4.15 4.29 Portfolio Turnover Rate 15.96 21.71 35.12 21.95 33.31 -------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 9,684 5,249 4,400 4,970 2,583 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.02% TO 4.03%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001, offers eleven series including the Connecticut Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premium and discount on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund receives net earnings credits based on available cash balances left on deposit. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. The Fund (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the Fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $1,775,029 and unrealized appreciation $13,826,446. In addition, the fund had $395,873 of capital losses realized after October 31, 2001 which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $1,775,029 of the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: tax exempt income $16,466,125 and $15,996,257, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $189,741, increased accumulated net realized gain (loss) on investments by $2,050 and increased paid-in capital by $187,691. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $150,133 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $210,223 and $59,241, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. 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 The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $748,240, $105,112 and $19,747, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $122,988 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $58,741,285 and $54,898,362, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $338,430,759; accordingly, accumulated net unrealized appreciation on investments was $13,826,446, consisting of $17,102,840 gross unrealized appreciation and $3,276,394 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $143,339 increase in accumulated undistributed investment income-net and a corresponding $143,339 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the period ended April 30, 2002 was to increase net investment income by $46,402, decrease net unrealized appreciation (depreciation) by $41,163, and decrease net realized gains (losses) by $5,239. The statement of changes in net assets and financial highlights for prior periods, have not been restated to reflect this change in presentation. The Fund REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Connecticut Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Connecticut Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Connecticut Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as "exempt-interest dividends" (not subject to regular Federal and, for individuals who are Connecticut residents, Connecticut personal income taxes). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund's taxable ordinary dividends (if any) and capital gain distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. The Fund BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983-present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962-present) * Instructor at the New York Psychoanalytic Institute (1981-present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987-2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997-Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984-December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER The Fund OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. NOTES For More Information Dreyfus Premier State Municipal Bond Fund, Connecticut Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 064AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Florida Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 19 Notes to Financial Statements 25 Report of Independent Auditors 26 Important Tax Information 27 Board Members Information 29 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Florida Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Florida Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you' ll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Douglas Gaylor. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE Douglas Gaylor, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Florida Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 6.48% for Class A shares, 5.94% for Class B shares and 5.68% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Florida Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 6.04%.(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. We attribute the fund's competitive relative performance to the success of our investment approach, in which we seek to buy out-of-favor securities at low prices and sell them at higher prices when they return to favor. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax without undue risk. To achieve this objective, we employ two primary strategies. First, for between one-half and three-quarters of the total fund, we look for bonds that can potentially offer attractive current income. We typically look for bonds that can provide consistently high current yields. We also try to ensure that we select bonds that are most likely to obtain attractive prices if and when we decide to sell them in the secondary market. Second, for the remainder of the fund, we try to look for bonds that we believe have the potential to offer attractive total returns. We typically look for bonds that are selling at a discount to face value because The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) they may be temporarily out of favor among investors. Our belief is that these bonds' prices will rise as they return to favor over time. What other factors influenced the fund's performance? When the reporting period began, the U.S. economy had already weakened considerably. Even before the September 11 terrorist attacks, capital spending by businesses had fallen, the stock market was declining and unemployment was rising. In this environment, the Federal Reserve Board attempted to stimulate renewed economic growth by aggressively reducing short-term interest rates to their lowest level in 40 years. As interest rates and bond yields fell, municipal bond prices generally rose. In addition, municipal bond prices moved higher in response to surging demand for high quality, tax-exempt securities from investors seeking a relatively stable alternative to a volatile stock market. Deep-discount bonds were among the greatest beneficiaries of the municipal bond market's rally. Because we had emphasized these securities when they were out of favor, the fund benefited during the reporting period when they returned to favor among investors. As the fund' s deep-discount bonds gradually reached prices that we considered fully valued, we sold them and reinvested the proceeds in income-oriented securities with relatively defensive characteristics. Typically, the fund's new purchases included bonds selling either at face value or at modest premiums to the prices they will command when redeemed early -- or called -- by their issuers. We believe that these bonds will hold more of their value if the economy improves, interest rates rise and the municipal bond market declines. In addition, we maintained the fund's average duration -- a measure of sensitivity to changing interest rates -- at a point that was consistently longer than that of its Lipper category average. This strategy enabled us to maintain existing yields for as long as practical while interest rates fell. Over time, however, as high yields became more difficult to obtain, the fund's average duration gradually moved closer to a neutral position. Although price movements of Florida municipal bonds generally tracked those of other states, Florida bonds generally commanded higher prices than bonds in most other states. That's primarily because of heavy demand for tax-exempt investment from Florida residents at a time when the supply of newly issued bonds remained relatively light. In addition, despite the U.S. recession and its adverse effects on Florida's state budget, we believe that the state's fiscal condition remains sound. What is the fund's current strategy? We have maintained the fund' s relatively defensive positioning, which is designed to produce competitive levels of tax-exempt income and preserve capital if and when the economy recovers and interest rates begin to rise. In addition, we have continued to focus primarily on income-oriented bonds with the potential for early redemption in five to seven years. Bonds with these characteristics often appeal to individual investors, helping to ensure a liquid market when we choose to sell them. Of course, we are prepared to change our strategy as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Florida Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, FLORIDA SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN FLORIDA MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN FLORIDA MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 1.65% 4.20% 5.36% WITHOUT SALES CHARGE 6.48% 5.16% 5.85% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 1.94% 4.30% -- 5.10% ((+)(+)) WITHOUT REDEMPTION 1/15/93 5.94% 4.63% -- 5.10% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.68% 4.35% -- 4.33% WITHOUT REDEMPTION 8/15/95 5.68% 4.35% -- 4.33% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--94.3% Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- FLORIDA--92.6% Brevard County, IDR (Nui Corp Project) 6.40%, 10/1/2024 (Insured; AMBAC) 1,000,000 1,085,000 Broward County Housing Finance Authority, MFHR: (Bridgewater Place Apartments) 5.40%, 10/1/2029 2,000,000 1,917,720 (Emerald Palms Apartments) 5.60%, 7/1/2021 2,000,000 2,012,640 (Pembroke Villas) 5.55%, 1/1/2023 1,000,000 995,050 Broward County School Board, COP 5%, 7/1/2021 (Insured; FSA) 1,250,000 1,238,512 Capital Projects Finance Authority, Revenue (Airports Project): 5.25%, 6/1/2014 (Insured; MBIA) 1,485,000 1,566,423 5%, 6/1/2020 (Insured; MBIA) 1,465,000 1,452,034 Collier County Water--Sewer District, Water Revenue 5.25%, 7/1/2013 (Insured; FGIC) 1,000,000 1,024,080 Dade County, Aviation Revenue 6.60%, 10/1/2022 (Insured; MBIA) 1,000,000 1,037,470 Dade County Housing Finance Authority, SFMR 6.70%, 4/1/2028 (Collateralized: FNMA, GNMA) 4,500,000 4,719,645 Escambia County Housing Finance Authority, SFMR (Multi-County Program) 5.50%, 10/1/2021 (Collateralized: FNMA, GNMA) 6,175,000 6,203,590 Florida (Jacksonville Transportation) 5%, 7/1/2012 3,000,000 3,118,320 Florida Board of Education: Capital Outlay (Public Education): 5%, 6/1/2011 1,200,000 1,252,020 5.30%, 6/1/2014 2,000,000 2,032,200 4.50%, 6/1/2019 (Insured; FSA) 5,615,000 5,254,910 4.50%, 6/1/2022 (Insured; FSA) 3,700,000 3,385,870 Lottery Revenue: 5.25%, 7/1/2017 (Insured; FGIC) 3,890,000 4,028,562 5%, 7/1/2020 (Insured; FGIC) 1,480,000 1,475,516 Florida Housing Finance Agency: (Brittany Rosemont Apartments) 7%, 2/1/2035 (Insured; AMBAC) 6,000,000 6,326,520 Single Family Mortgage: 6.65%, 1/1/2024 (Collateralized: FNMA, GNMA) 2,045,000 2,139,806 6.65%, 7/1/2026 (Insured; MBIA) 1,055,000 1,091,619 Florida Intergovernmental Finance Commission, Capital Revenue 5%, 2/1/2018 (Insured; AMBAC) 1,000,000 1,009,150 Florida Turnpike Authority, Turnpike Revenue 5%, 7/1/2013 (Insured; FGIC) 2,100,000 2,137,044 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) Hillsborough County Aviation Authority, Revenue (Delta Airlines) 6.80%, 1/1/2024 2,500,000 2,253,375 Jacksonville Electric Authority, Revenue: 5%, 10/1/2013 965,000 980,865 Lee County Housing Finance Authority SFMR: 6.30%, 3/1/2029 (Collateralized: FNMA, GNMA) 970,000 1,045,369 (Multi-County Program) 7.45%, 9/1/2027 (Collateralized: FNMA, GNMA) 620,000 686,582 Manatee County Housing Finance Authority, Mortgage Revenue 5.85%, 11/1/2033 (Collateralized; GNMA) 5,500,000 5,697,395 Miami-Dade County, Solid Waste System Revenue 5.50%, 10/1/2017 (Insured; FSA) 2,595,000 2,740,320 Miami-Dade County Housing Finance Authority, MFMR (Country Club Villa) 5.70%, 7/1/2021 (Insured; FSA) 400,000 408,220 (Miami Stadium Apartments) 5.40%, 8/1/2021 (Insured; FSA) 1,275,000 1,266,138 (Villa Esperanza Apartments Project) 5.35%, 10/1/2028 1,000,000 926,790 Orange County, Tourist Development Tax Revenue 4.75%, 10/1/2024 (Insured; AMBAC) 8,535,000 8,035,105 Orange County Housing Finance Authority: MFHR (Seminole Pointe) 5.75%, 12/1/2023 2,840,000 2,817,309 Osceola County Industrial Development Authority, Revenue (Community Provider Pooled Loan Program) 7.75%, 7/1/2017 5,235,000 5,341,165 Palm Bay, Utility Revenue Zero Coupon, 10/1/2020 1,845,000 672,613 Palm Beach County Housing Finance Authority Single Family Mortgage Purchase Revenue 6.55%, 4/1/2027 (Collateralized: FNMA, GNMA) 1,465,000 1,539,232 Pinellas County Housing Finance Authority, SFMR (Multi-County Program) 6.70%, 2/1/2028 (Collateralized: FNMA, GNMA) 4,040,000 4,209,074 Seminole County, Sales Tax Revenue 4.625%, 10/1/2022 (Insured; MBIA) 2,015,000 1,878,625 Seminole Water Control District 6.75%, 8/1/2022 2,000,000 2,028,680 South Broward Hospital District, HR 5.60%, 5/1/2027 4,000,000 4,011,400 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- FLORIDA (CONTINUED) Tampa: (Alleghany Health System Revenue St. Joseph) 6.50%, 12/1/2023 (Insured; MBIA, Prerefunded 12/1/2004) 1,000,000 (a) 1,119,050 Utility Tax Zero Coupon, 4/1/2017 (Insured; AMBAC) 2,110,000 987,417 Tampa Bay Water, Utility System Revenue: 4.75%, Series A, 10/1/2027 (Insured; FGIC) 5,875,000 5,465,101 4.75%, Series B, 10/1/2027 (Insured; FGIC) 3,500,000 3,255,805 Winter Springs, Water & Sewer Revenue 5%, 4/1/2020 (Insured; MBIA) 1,585,000 1,580,292 U.S. RELATED--1.7% Puerto Rico Public Finance Corporation, (Commonwealth Appropriation) 5.70%, 8/1/2025 2,000,000 2,073,941 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $116,215,539) 117,523,564 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--4.6% ------------------------------------------------------------------------------------------------------------------------------------ Jacksonville Electric Authority, Electric System Revenue, VRDN: 1.70% 1,000,000 (b) 1,000,000 1.70% 1,700,000 (b) 1,700,000 Martin County, PCR, VRDN (Florida Power & Light Co.) 1.75% 1,000,000 (b) 1,000,000 St. Lucie County, PCR, VRDN (Florida Power & Light Co.) 1.75% 2,000,000 (b) 2,000,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $5,700,000) 5,700,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $121,915,539) 98.9% 123,223,564 CASH AND RECEIVABLES (NET) 1.1% 1,412,643 NET ASSETS 100.0% 124,636,207 Summary of Abbreviations AMBAC American Municipal Bond Assurance Corporation COP Certificate of Participation FGIC Financial Guaranty Insurance Company FNMA Federal National Mortgage Association FSA Financial Security Assurance GNMA Government National Mortgage Association HR Hospital Revenue IDR Industrial Development Revenue MBIA Municipal Bond Investors Assurance Insurance Corporation MFHR Multi-Family Housing Revenue MFMR Multi-Family Mortgage Revenue PCR Pollution Control Revenue SFMR Single-Family Mortgage Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 72.1 AA Aa AA 6.0 A A A 9.5 BB Ba BB 1.8 F-1+, F-1 VMIG1,MIG1,P1 SP1,A1 4.6 Not Rated (c) Not Rated (c) Not Rated (c) 6.0 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. (D) AT APRIL 30, 2002, THE FUND HAD $44,002,699 OR 35.3% OF NET ASSETS INVESTED IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT UPON REVENUES GENERATED FROM HOUSING PROJECTS. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 121,915,539 123,223,564 Cash 132,489 Interest receivable 1,503,404 Receivable for shares of Beneficial Interest subscribed 13,872 Prepaid expenses 13,730 124,887,059 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 86,987 Payable for shares of Beneficial Interest redeemed 52,736 Accrued expenses 111,129 250,852 -------------------------------------------------------------------------------- NET ASSETS ($) 124,636,207 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 124,225,357 Accumulated net realized gain (loss) on investments (897,175) Accumulated net unrealized appreciation (depreciation) on investments 1,308,025 -------------------------------------------------------------------------------- NET ASSETS ($) 124,636,207 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 112,641,477 9,332,050 2,662,680 Shares Outstanding 8,081,394 669,714 191,033 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 13.94 13.93 13.94 SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 6,857,095 EXPENSES: Management fee--Note 3(a) 697,573 Shareholder servicing costs--Note 3(c) 408,794 Distribution fees--Note 3(b) 60,801 Professional fees 21,394 Registration fees 20,704 Custodian fees 17,150 Prospectus and shareholders' reports 16,227 Trustees' fees and expenses--Note 3(d) 3,519 Loan commitment fees--Note 2 1,848 Miscellaneous 11,725 TOTAL EXPENSES 1,259,735 Less--reduction in management fee due to undertaking--Note 3(a) (11,691) NET EXPENSES 1,248,044 INVESTMENT INCOME--NET 5,609,051 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 2,812,730 Net unrealized appreciation (depreciation) on investments (486,445) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,326,285 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 7,935,336 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ----------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 5,609,051 5,939,428 Net realized gain (loss) on investments 2,812,730 (3,728,359) Net unrealized appreciation (depreciation) on investments (486,445) 11,572,129 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,935,336 13,783,198 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (5,145,514) (5,459,047) Class B shares (375,252) (453,444) Class C shares (64,240) (26,937) Net realized gain on investments: Class A shares (25,444) (6,015) Class B shares (2,039) (520) Class C shares (527) (29) TOTAL DIVIDENDS (5,613,016) (5,945,992) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 8,626,780 13,511,862 Class B shares 3,388,048 2,654,143 Class C shares 1,937,801 1,300,928 Dividends reinvested: Class A shares 1,957,357 1,957,622 Class B shares 139,220 140,650 Class C shares 35,470 7,486 Cost of shares redeemed: Class A shares (17,195,195) (23,843,201) Class B shares (4,174,630) (8,011,131) Class C shares (330,241) (787,489) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (5,615,390) (13,069,130) TOTAL INCREASE (DECREASE) IN NET ASSETS (3,293,070) (5,231,924) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 127,929,277 133,161,201 END OF PERIOD 124,636,207 127,929,277 SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, --------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 619,038 1,011,938 Shares issued for dividends reinvested 140,202 146,357 Shares redeemed (1,234,354) (1,792,850) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (475,114) (634,555) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 243,336 196,147 Shares issued for dividends reinvested 9,975 10,532 Shares redeemed (299,149) (606,247) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (45,838) (399,568) -------------------------------------------------------------------------------- CLASS C Shares sold 138,700 96,804 Shares issued for dividends reinvested 2,547 556 Shares redeemed (23,546) (59,462) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 117,701 37,898 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 151,836 CLASS B SHARES REPRESENTING $2,128,022 WERE AUTOMATICALLY CONVERTED TO 151,758 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 434,225 CLASS B SHARES REPRESENTING $5,762,602 WERE AUTOMATICALLY CONVERTED TO 434,209 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, ------------------------------------------------------------------------ CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.69 12.88 14.03 14.17 14.06 Investment Operations: Investment income--net .62(b) .62 .65 .65 .66 Net realized and unrealized gain (loss) on investments .25 .81 (1.10) .05 .26 Total from Investment Operations .87 1.43 (.45) .70 .92 Distributions: Dividends from investment income--net (.62) (.62) (.65) (.65) (.66) Dividends from net realized gain on investments (.00)(c) (.00)(c) (.05) (.19) (.15) Total Distributions (.62) (.62) (.70) (.84) (.81) Net asset value, end of period 13.94 13.69 12.88 14.03 14.17 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 6.48 11.32 (3.19) 5.00 6.73 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .94 .92 .92 .92 .91 Ratio of net investment income to average net assets 4.47 4.65 4.92 4.53 4.67 Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .01 .18 .06 -- -- Portfolio Turnover Rate 52.76 8.55 29.04 88.48 91.18 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 112,641 117,133 118,352 149,185 167,793 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.45% TO 4.47%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ----------------------------------------------------------------------- CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.68 12.87 14.02 14.17 14.05 Investment Operations: Investment income--net .55(b) .55 .58 .57 .59 Net realized and unrealized gain (loss) on investments .25 .81 (1.10) .04 .27 Total from Investment Operations .80 1.36 (.52) .61 .86 Distributions: Dividends from investment income--net (.55) (.55) (.58) (.57) (.59) Dividends from net realized gain on investments (.00)(c) (.00)(c) (.05) (.19) (.15) Total Distributions (.55) (.55) (.63) (.76) (.74) Net asset value, end of period 13.93 13.68 12.87 14.02 14.17 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 5.94 10.78 (3.68) 4.40 6.26 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.44 1.42 1.43 1.42 1.41 Ratio of net investment income to average net assets 3.96 4.16 4.41 4.02 4.16 Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .01 .19 .06 -- -- Portfolio Turnover Rate 52.76 8.55 29.04 88.48 91.18 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 9,332 9,792 14,353 26,693 32,545 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01, AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 3.94% TO 3.96%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, -------------------------------------------------------------------------- S C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.69 12.88 14.03 14.17 14.05 Investment Operations: Investment income--net .51(b) .52 .54 .53 .55 Net realized and unrealized gain (loss) on investments .26 .81 (1.10) .05 .27 Total from Investment Operations .77 1.33 (.56) .58 .82 Distributions: Dividends from investment income--net (.52) (.52) (.54) (.53) (.55) Dividends from net realized gain on investments (.00)(c) (.00)(c) (.05) (.19) (.15) Total Distributions (.52) (.52) (.59) (.72) (.70) Net asset value, end of period 13.94 13.69 12.88 14.03 14.17 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 5.68 10.50 (3.97) 4.13 5.94 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.67 1.67 1.73 1.75 1.71 Ratio of net investment income to average net assets 3.69 3.83 4.11 3.69 3.69 Decrease reflected in above expense ratios due to undertaking by The Dreyfus Corporation .01 .21 .10 -- -- Portfolio Turnover Rate 52.76 8.55 29.04 88.48 91.18 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 2,663 1,004 456 394 366 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 3.66% TO 3.69%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001, currently offers eleven series, including the Florida Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C shares. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premiums and discounts on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $3,750 during the period ended April 30, 2002, based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the " Code" ). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $35,959, accumulated capital losses $915,628 and unrealized appreciation $1,315,831. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $190,594 of the carryover expires in fiscal 2009 and $725,034 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: ordinary income $28,010 and $938, long-term capital gain $0 and $5,626 and tax exempt income $5,585,006 and $5,939,428, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $103,234, increased accumulated net realized gain (loss) on investments by $40,934 and increased paid-in capital by $62,300. Net assets were not affected by this reclassification. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Manager has undertaken from May 1, 2001 through July 31, 2001, to reduce the management fee paid by the fund to the extent that the fund' s aggregate annual expenses, exclusive of Rule 12b-1 Distribution Plan fees, taxes, brokerage fees, interest on borrowings and extraordinary expenses, but including litigation expenses related to the fund's holdings of (a) Palm Beach County, Florida Solid Waste Industrial Development Revenue Bonds (Okleelanta Power Limited Partnership Project) Series 1993A; and (b) Palm Beach County, Florida Solid Waste Industrial Development Revenue Bonds (Osceola Power Limited Partnership Project) Series 1994A and 1994B, exceed an annual rate of .92 of 1% of the value of the fund's average daily net assets. The reduction in management fee, pursuant to the undertaking, amounted to $11,691 during the period ended April 30, 2002. The Distributor retained $39,078 during the period ended April 30, 2002 from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $47,655 and $13,146, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of the average daily net assets for the provision of certain services. 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30 2002, Class A, Class B and Class C shares were charged $288,869, $23,827 and $4,382, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $57,080 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $63,992,636 and $68,788,191, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $121,907,733; accordingly, accumulated unrealized appreciation on investments was $1,315,831, consisting of $2,076,225 gross unrealized appreciation and $760,394 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $79,189 increase in accumulated undistributed investment income-net and a corresponding $79,189 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the period ended April 30, 2002 was to increase net investment income by $24,045, increase net unrealized appreciation (depreciation) by $53,876 and decrease net realized gains (losses) by $77,921. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Florida Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Florida Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002, by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Florida Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 The Fund IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as " exempt-interest dividends' (not subject to regular Federal and, for individuals who are Florida residents, not subject to taxation by Florida). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund' s taxable ordinary dividends (if any) and capital gains distributions (if any) paid for the 2002 calendar year on form 1099-DIV which will be mailed by January 31, 2003. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981--present) * Chairman of the Board of Moody's Corporation (October 2000--Present) * Chairman of the Board and Chief Executive Officer (October 1999--September 2000) and Director (February 1993--September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983--present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 The Fund BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962--present) * Instructor at the New York Psychoanalytic Institute (1981--present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987--2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997--Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984--December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. The Fund For More Information Dreyfus Premier State Municipal Bond Fund, Florida Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 051AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Maryland Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 17 Financial Highlights 20 Notes to Financial Statements 26 Report of Independent Auditors 27 Important Tax Information 28 Board Members Information 30 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Maryland Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Maryland Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Douglas Gaylor. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE Douglas Gaylor, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Maryland Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 4.19% for Class A shares, 3.75% for Class B shares and 3.48% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Maryland Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 5.79%.(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. The fund's performance reflected changing economic conditions, including falling interest rates and a weakening economy during the first eight months of the reporting period. The fund's returns lagged those of its benchmark and Lipper category average primarily because of the recession-related default of one of the fund's tax-exempt corporate holdings. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Maryland state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, for between one-half and three-quarters of the total fund, we look for bonds that can potentially offer attractive current income. We typically look for bonds that can provide consistently high current yields. We also try to ensure that we select bonds that are most likely to obtain attractive prices if and when we decide to sell them in the secondary market. The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) Second, for the remainder of the fund, we try to look for bonds that we believe have the potential to offer attractive total returns. We typically look for bonds that are selling at a discount to face value because they may be temporarily out of favor among investors. Our belief is that these bonds' prices will rise as they return to favor over time. What other factors influenced the fund's performance? Even before the September 11 terrorist attacks, capital spending by businesses had fallen and unemployment was rising. In this weak economic environment, the Federal Reserve Board (the "Fed" ) aggressively reduced short-term interest rates, which reached their lowest level in 40 years. As interest rates and bond yields fell, municipal bond prices generally rose. In this environment, the deep-discount bonds that we had emphasized in 2000 and early 2001 returned to favor among investors and contributed strongly to the fund' s performance during the reporting period. When these bonds reached prices that we considered fully valued, we sold them and locked in profits. Typically, we used the proceeds to purchase bonds that we regarded as relatively out of favor in the prevailing environment, including income-oriented securities selling either at face value or at modest premiums to the prices they will command when redeemed early -- or called -- by their issuers. Such bonds provide competitive levels of income and are likely to hold more of their value than other types of bonds during market declines. The fund also benefited during the reporting period from its relatively long average duration, which helps determine the fund's sensitivity to changing interest rates. The fund's longer than average position enabled us to lock in existing yields while interest rates declined. However, the positive effects of our security selection and duration management strategies were partly overshadowed by the poor performance of bonds issued by a leading steel manufacturer with operations in Maryland. This company declared bankruptcy during the fourth quarter of 2001 after steel prices fell to unacceptably low levels, and it stopped paying interest on its bonds. The fund's returns during the reporting period reflected the full extent of the default. We have retained the defaulted bonds in the hope that they will gain value if and when this major corporation emerges from bankruptcy. Otherwise, we intend to sell them and use the resulting losses to offset other gains for tax purposes. What is the fund's current strategy? We have maintained the fund' s relatively defensive positioning, which is designed to produce competitive levels of tax-exempt income in today's low interest-rate environment, while potentially preserving capital if and when the economy recovers and interest rates begin to rise. Accordingly, we have continued to focus primarily on income-oriented bonds with maturities of 15 to 20 years and the potential for early redemption in five to seven years. Bonds with these characteristics have historically appealed to individual investors and should help to ensure a liquid market when we choose to sell them. As always, we are prepared to change our strategy as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-MARYLAND RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Maryland Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, MARYLAND SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN MARYLAND MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN MARYLAND MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception -------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) (0.48)% 3.52% 5.11% WITHOUT SALES CHARGE 4.19% 4.48% 5.60% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 (0.22)% 3.63% -- 4.91% ((+)(+)) WITHOUT REDEMPTION 1/15/93 3.75% 3.95% -- 4.91% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 2.49% 3.68% -- 4.25% WITHOUT REDEMPTION 8/15/95 3.48% 3.68% -- 4.25% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--95.4% Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- MARYLAND--91.5% Baltimore: Port Facilities Revenue (Consolidated Coal Sales) 6.50%, 12/1/2010 4,090,000 4,228,119 (Tindeco Wharf Project) 6.60%, 12/20/2024 (Collateralized; GNMA) 4,250,000 4,362,285 Baltimore City Housing Corp., MFHR 7.25%, 7/1/2023 (Collateralized; FNMA) 2,995,000 3,002,697 Baltimore County: Mortgage Revenue, Zero coupon, 9/1/2024 2,280,000 654,702 Nursing Facility Mortgage Revenue (Eastpoint Rehabilitation & Nursing Centers): 3%, 4/1/2015 1,000,000 484,800 3%, 4/1/2028 1,500,000 720,630 PCR (Bethlehem Steel Corp. Project): 7.50%, 6/1/2015 8,430,000 (a) 580,827 7.55%, 6/1/2017 1,945,000 (a) 134,010 Baltimore, Project Revenue (Water Projects) 5.00%, 7/1/2027 (Insured; FGIC) 2,000,000 (b) 1,964,180 Gaithersburg, Hospital Facilities Improvement Revenue (Shady Grove) 6.50%, 9/1/2012 (Insured; FSA) 10,000,000 11,824,200 Howard County: COP 8.15%, 2/15/2020 605,000 834,126 (Consolidated Public Improvement Project): 5.25%, 8/15/2019 1,800,000 1,854,756 5.25%, 8/15/2020 1,800,000 1,846,278 5.25%, 8/15/2021 1,765,000 1,804,871 (Metropolitan District Project) 5.25%, 8/15/2019 1,700,000 1,751,714 Maryland Community Development Administration, Department of Housing and Community Development: Housing Revenue: 5.95%, 7/1/2023 4,695,000 4,870,828 MFHR: 6.50%, 5/15/2013 2,000,000 2,071,440 6.85%, 5/15/2033 (Prerefunded 5/20/2002) 3,075,000 (c) 3,145,264 6.70%, 5/15/2036 (Insured; FHA) 7,710,000 8,042,455 Residential: 5.50%, 9/1/2014 1,000,000 1,028,180 5.30%, 9/1/2016 5,000,000 4,983,700 5.90%, 9/1/2019 2,000,000 2,040,100 5.85%, 9/1/2021 7,500,000 7,683,300 5.70%, 9/1/2022 6,000,000 6,098,940 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ MARYLAND (CONTINUED) Maryland Community Development Administration, Department of Housing and Community Development (continued): Single Family Program: 6.95%, 4/1/2011 850,000 856,018 4.95%, 4/1/2015 4,605,000 4,643,636 6.55%, 4/1/2026 5,940,000 6,178,372 6.75%, 4/1/2026 3,510,000 3,594,380 Maryland Economic Development Corp., Revenue (Health & Mental Hygiene Providers Facilities Acquisition Program): 8.375%, 3/1/2013 3,570,000 3,677,207 8.75%, 3/1/2017 3,880,000 3,882,677 Student Housing (University Village at Sheppard Pratt): 5.875%, 7/1/2021 1,750,000 1,779,943 6%, 7/1/2033 2,250,000 2,291,040 Maryland Health and Higher Educational Facilities Authority, Revenue: (Doctors Community Hospital) 5.50%, 7/1/2024 9,890,000 8,828,407 (Greater Baltimore Medical Center) 5.00%, 7/1/2025 4,000,000 3,848,400 (Helix Health Issue) 5%, 7/1/2027 (Insured; AMBAC) 5,780,000 5,734,627 (Institute College of Art): 5.50%, 6/1/2021 335,000 334,394 5.50%, 6/1/2032 2,500,000 2,447,675 (Johns Hopkins Hospital): 4.75%, 5/15/2033 5,000,000 4,551,550 4.50%, 5/15/2035 2,395,000 2,066,382 (Loyola College Issue) 5.375%, 10/1/2026 (Insured; MBIA) 1,710,000 1,740,541 (Medlantic Helix Issue) 4.75%, 8/15/2028 (Insured; FSA) 30,070,000 27,048,266 (Union Hospital of Cecil County) : 6.70%, 7/1/2009 2,320,000 2,542,395 (University of Maryland Medical System): 6.00%, 7/1/2022 2,000,000 2,065,120 6.00%, 7/1/2032 3,000,000 3,076,590 7%, 7/1/2022 (Insured; FGIC) 4,500,000 5,605,020 Maryland Industrial Development Financing Authority, EDR (Medical Waste Association) 8.75%, 11/15/2010 700,000 459,900 Maryland Local Government Insurance Trust, COP 7.125%, 8/1/2009 3,250,000 3,321,012 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ MARYLAND (CONTINUED) Montgomery County Housing Opportunities Commission: MFMR: 7.05%, 7/1/2032 2,485,000 2,538,328 7.375%, 7/1/2032 1,510,000 1,531,820 SFMR: 6.625%, 7/1/2026 1,000,000 1,032,240 Zero Coupon, 7/1/2027 20,835,000 5,069,572 Zero Coupon, 7/1/2028 54,555,000 12,265,601 Zero Coupon, 7/1/2032 7,215,000 1,259,883 Montgomery County, Special Obligation (West Germantown Development District): 5.375%, 7/1/2020 500,000 504,410 5.50%, 7/1/2027 3,075,000 3,093,727 Northeast Waste Disposal Authority, Solid Waste Revenue (Montgomery County Resource Recovery Project): 6%, 7/1/2008 2,690,000 2,938,368 6.20%, 7/1/2010 10,000,000 10,364,900 6.30%, 7/1/2016 14,205,000 14,672,487 Prince Georges County, Revenue (Dimensions Health Corp.) 5.30%, 7/1/2024 12,585,000 6,325,095 Prince Georges County Housing Authority: Mortgage Revenue: (New Keystone Apartment Project) 6.80%, 7/1/2025 (Insured: FHA & MBIA) 4,300,000 4,390,257 (Parkway Terrace Apartments) 5.90%, 1/20/2020 (Collateralized; GNMA) 2,195,000 2,279,617 (Riverview Terrace) 6.70%, 6/20/2020 (Collateralized; GNMA) 2,000,000 2,103,040 (Stevenson Apartments Project) 6.35%, 7/20/2020 (Collateralized; GNMA) 3,000,000 3,082,560 SFMR 6.60%, 12/1/2025 (Collateralized: FNMA & GNMA) 3,095,000 3,174,696 Washington Suburban Sanitary District (General Construction): 5.00%, 6/1/2015 5,000,000 5,194,550 5.00%, 6/1/2016 1,500,000 1,544,865 5.00%, 6/1/2017 1,500,000 1,532,730 U. S. RELATED--3.9% Commonwealth of Puerto Rico , Public Improvement: 4.50%, 7/1/2023 (Insured; AMBAC) 2,450,000 2,262,355 5.125%, 7/1/2030 (Insured; FSA) 5,500,000 5,491,475 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ U. S. RELATED (CONTINUED) Puerto Rico Electric Power Authority Revenue 5.125%, 7/1/2026 2,000,000 2,004,920 Puerto Rico Infrastructure Financing Authority Special Tax Revenue 5%, 7/1/2016 (Insured; AMBAC) 1,275,000 1,308,813 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $282,728,707) 272,552,263 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--3.8% ----------------------------------------------------------------------------------------------------------------------------------- Maryland Energy Financing Administration, SWDR, VRDN (Cimenteries Project) 1.75% (LOC; Deutsche Bank A.G.) (cost $11,000,000) 11,000,000 (d) 11,000,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $293,728,707) 99.2% 283,552,263 CASH AND RECEIVABLES (NET) .8% 2,143,973 NET ASSETS 100.0% 285,696,236 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Summary of Abbreviations AMBAC American Municipal Bond Assurance Corporation COP Certificate of Participation EDR Economic Development Revenue FGIC Financial Guaranty Insurance Company FHA Federal Housing Administration FNMA Federal National Mortgage Association FSA Financial Security Assurance GNMA Government National Mortgage Association LOC Letter of Credit MBIA Municipal Bond Investors Assurance Insurance Corporation MFHR Multi-Family Housing Revenue MFMR Multi-Family Mortgage Revenue PCR Pollution Control Revenue SFMR Single-Family Mortgage Revenue SWDR Solid Waste Disposal Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 36.8 AA Aa AA 31.5 A A A 19.0 BBB Baa BBB 5.3 F-1, F-1+ VMIG1, MIG1, P1 SP1,A1 3.9 Not Rated(e) Not Rated(e) Not Rated(e) 3.5 100.0 (A) NON-INCOME PRODUCING SECURITY; INTEREST PAYMENTS IN DEFAULT. (B) PURCHASED ON A DELAYED DELIVERY BASIS. (C) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POORS, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. (F) AT APRIL 30, 2002, THE FUND HAD $92,281,366 (32.3% OF NET ASSETS) AND $101,983,911 (35.7% OF NET ASSETS) INVESTED IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT UPON REVENUES GENERATED FROM HEALTH CARE AND HOUSING PROJECTS, RESPECTIVELY. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value ------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 293,728,707 283,552,263 Interest receivable 4,589,956 Receivable for shares of Beneficial Interest subscribed 208,909 Receivable for investment securities sold 44,800 Prepaid expenses 15,839 288,411,767 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 211,800 Cash overdraft due to Custodian 271,423 Payable for investment securities purchased 1,949,560 Payable for shares of Beneficial Interest redeemed 281,381 Accrued expenses 1,367 2,715,531 -------------------------------------------------------------------------------- NET ASSETS ($) 285,696,236 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 298,345,536 Accumulated net realized gain (loss) on investments (2,472,856) Accumulated net unrealized appreciation (depreciation) on investments (10,176,444) -------------------------------------------------------------------------------- NET ASSETS ($) 285,696,236 NET ASSET VALUE PER SHARE Class A Class B Class C --------------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 228,669,057 52,833,283 4,193,896 Shares Outstanding 19,340,598 4,467,574 354,470 --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 11.82 11.83 11.83 SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 16,876,377 EXPENSES: Management fee--Note 3(a) 1,586,576 Shareholder servicing costs--Note 3(c) 932,545 Distribution fees--Note 3(b) 286,133 Professional fees 43,239 Custodian fees 30,682 Registration fees 22,433 Prospectus and shareholders' reports 18,552 Trustees' fees and expenses--Note 3(d) 8,538 Loan commitment fees--Note 2 4,152 Miscellaneous 15,607 TOTAL EXPENSES 2,948,457 INVESTMENT INCOME--NET 13,927,920 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (2,543,818) Net unrealized appreciation (depreciation) on investments 100,196 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (2,443,622) NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 11,484,298 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ----------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 13,927,920 14,103,258 Net realized gain (loss) on investments (2,543,818) 819,361 Net unrealized appreciation (depreciation) on investments 100,196 3,607,811 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 11,484,298 18,530,430 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (11,468,607) (11,920,135) Class B shares (2,254,711) (2,060,024) Class C shares (162,072) (123,099) Net realized gain on investments: Class A shares (467,926) (3,793) Class B shares (101,220) (722) Class C shares (8,114) (44) TOTAL DIVIDENDS (14,462,650) (14,107,817) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 21,924,868 15,583,231 Class B shares 16,516,054 11,960,918 Class C shares 1,517,648 1,464,354 Dividends reinvested: Class A shares 7,206,056 7,148,581 Class B shares 1,169,322 1,118,330 Class C shares 104,625 70,282 Cost of shares redeemed: Class A shares (26,197,602) (27,525,182) Class B shares (11,393,958) (9,697,281) Class C shares (642,532) (527,492) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 10,204,481 (404,259) TOTAL INCREASE (DECREASE) IN NET ASSETS 7,226,129 4,018,354 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 278,470,107 274,451,753 END OF PERIOD 285,696,236 278,470,107 The Fund STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended April 30, --------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 1,824,089 1,300,857 Shares issued for dividends reinvested 601,386 597,968 Shares redeemed (2,196,093) (2,304,764) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 229,382 (405,939) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 1,372,432 998,608 Shares issued for dividends reinvested 97,576 93,541 Shares redeemed (947,376) (812,211) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 522,632 279,938 -------------------------------------------------------------------------------- CLASS C Shares sold 126,462 122,363 Shares issued for dividends reinvested 8,721 5,871 Shares redeemed (53,984) (44,161) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 81,199 84,073 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 445,075 CLASS B SHARES REPRESENTING $5,364,714 WERE AUTOMATICALLY CONVERTED TO 445,091 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 347,385 CLASS B SHARES REPRESENTING $4,152,891 WERE AUTOMATICALLY CONVERTED TO 347,504 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, ------------------------------------------------------------------------ CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.94 11.74 12.94 13.05 12.70 Investment Operations: Investment income--net .59(b) .62 .63 .65 .67 Net realized and unrealized gain (loss) on investments (.10) .20 (1.10) .09 .50 Total from Investment Operations .49 .82 (.47) .74 1.17 Distributions: Dividends from investment income--net (.59) (.62) (.63) (.65) (.67) Dividends from net realized gain on investments (.02) (.00)(c) (.10) (.20) (.15) Total Distributions (.61) (.62) (.73) (.85) (.82) Net asset value, end of period 11.82 11.94 11.74 12.94 13.05 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 4.19 7.14 (3.61) 5.76 9.40 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .92 .91 .91 .90 .90 Ratio of net investment income to average net assets 4.93 5.22 5.16 4.97 5.12 Portfolio Turnover Rate 35.83 14.74 28.37 29.30 18.12 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 228,669 228,111 229,184 264,255 262,560 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.92% TO 4.93%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ------------------------------------------------------------------------ CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.94 11.74 12.94 13.05 12.70 Investment Operations: Investment income--net .53(b) .56 .56 .58 .60 Net realized and unrealized gain (loss) on investments (.09) .20 (1.10) .09 .50 Total from Investment Operations .44 .76 (.54) .67 1.10 Distributions: Dividends from investment income--net (.53) (.56) (.56) (.58) (.60) Dividends from net realized gain on investments (.02) (.00)(c) (.10) (.20) (.15) Total Distributions (.55) (.56) (.66) (.78) (.75) Net asset value, end of period 11.83 11.94 11.74 12.94 13.05 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 3.75 6.60 (4.12) 5.20 8.83 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.43 1.42 1.43 1.42 1.42 Ratio of net investment income to average net assets 4.41 4.69 4.62 4.44 4.59 Portfolio Turnover Rate 35.83 14.74 28.37 29.30 18.12 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 52,833 47,095 43,044 59,806 50,141 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.39% TO 4.41%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, --------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.94 11.75 12.95 13.06 12.71 Investment Operations: Investment income--net .50(b) .53 .54 .55 .57 Net realized and unrealized gain (loss) on investments (.09) .19 (1.10) .09 .50 Total from Investment Operations .41 .72 (.56) .64 1.07 Distributions: Dividends from investment income--net (.50) (.53) (.54) (.55) (.57) Dividends from net realized gain on investments (.02) (.00)(c) (.10) (.20) (.15) Total Distributions (.52) (.53) (.64) (.75) (.72) Net asset value, end of period 11.83 11.94 11.75 12.95 13.06 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 3.48 6.23 (4.32) 4.93 8.55 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.67 1.67 1.65 1.66 1.67 Ratio of net investment income to average net assets 4.15 4.43 4.41 4.15 4.29 Portfolio Turnover Rate 35.83 14.74 28.37 29.30 18.12 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 4,194 3,264 2,223 3,235 1,618 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.13% TO 4.15%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company and operates as a series company that, effective May 17, 2001, offers eleven series including the Maryland Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premium and discount on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $34,512 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $68,600, accumulated capital losses $519,666 and unrealized depreciation $10,109,243. In addition, the fund had $2,021,790 of capital losses realized after October 31, 2001 which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $519,666 of the carryover expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001 were as follows: tax exempt income $13,885,390 and $14,103,258, ordinary income $31,692 and $4,559 and long-term capital gains $545,568 and $0, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $153,368, increased accumulated net realized gain (loss) on investments by $55,802 and increased paid-in capital by $97,566. Net assets were not affected by this reclassification, NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $126,193 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $256,709 and $29,424, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. 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 (a securities dealer, financial institu- The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) tion or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $583,009, $128,354 and $9,808, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $127,222 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $110,696,545 and $100,185,956, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $293,661,506; accordingly, accumulated net unrealized depreciation on investments was $10,109,243, consisting of $6,581,520 gross unrealized appreciation and $16,690,763 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premium on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $110,838 increase in accumulated undistributed investment income-net and a corresponding $110,838 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the year ended April 30, 2002 was to increase net investment income by $42,530, increase net unrealized appreciation (depreciation) by $43,636 and decrease net realized gains (losses) by $86,166. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. The Fund REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Maryland Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Maryland Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Maryland Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby makes the following designations regarding its fiscal year ended April 30, 2002: -- all the dividends paid from investment income-net are "exempt-interest dividends" (not subject to regular Federal income tax, and for individuals who are Maryland residents, Maryland personal income taxes), and -- the fund hereby designates $.0224 per share as a long-term capital gain distribution of the $.0237 per share paid on December 7, 2001. As required by Federal tax law rules, shareholders will receive notification of their portion of the fund' s taxable ordinary dividends (if any) and capital gains distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. The Fund BOARD MEMBERS INFORMATION (Unaudited) JOSEPH S. DIMARTINO (58) CHAIRMAN OF THE BOARD (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- CLIFFORD L. ALEXANDER (68) BOARD MEMBER (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981--present) * Chairman of the Board of Moody's Corporation (October 2000--Present) * Chairman of the Board and Chief Executive Officer (October 1999--September 2000) and Director (February 1993--September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 PEGGY C. DAVIS (58) BOARD MEMBER (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983--present) * 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 -------------- NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 ERNEST KAFKA (69) BOARD MEMBER (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962--present) * Instructor at the New York Psychoanalytic Institute (1981--present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987--2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- NATHAN LEVENTHAL (58) BOARD MEMBER (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997--Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984--December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER The Fund OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. NOTES For More Information Dreyfus Premier State Municipal Bond Fund, Maryland Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 052AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Massachusetts Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 11 Statement of Assets and Liabilities 12 Statement of Operations 13 Statement of Changes in Net Assets 15 Financial Highlights 18 Notes to Financial Statements 24 Report of Independent Auditors 25 Important Tax Information 26 Board Members Information 28 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Massachusetts Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Massachusetts Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, James Welch. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE James Welch, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Massachusetts Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 6.25% for Class A shares, 5.61% for Class B shares and 5.39% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Massachusetts Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 6.20% .(3) The fund' s benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. We attribute the fund' s performance during the reporting period to changing market conditions. Early in the reporting period, the fund and market benefited from falling interest rates in a slowing economy. However, market weakness late in the reporting period offset some of those earlier gains. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Massachusetts state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, we evaluate interest-rate trends and supply-and-demand factors in the municipal bond market. Based on that assessment, we select the individual tax-exempt bonds that we believe are most likely to potentially provide the highest returns with the least risk. We look at such criteria as the bond's yield, price, age, the creditworthiness of its issuer and any provisions for early redemption. The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) Second, we actively manage the fund's average duration -- a measure of sensitivity to changing interest rates -- in anticipation of temporary supply-and-demand changes. If we expect the supply of newly issued bonds to increase temporarily, we may reduce the fund's average duration to make cash available for the purchase of potentially higher yielding securities. Conversely, if we expect demand for municipal bonds to surge at a time when we anticipate little issuance, we may increase the fund's average duration to maintain current yields for as long as practical. What other factors influenced the fund's performance? When the reporting period began, the U.S. and Massachusetts economies had already slowed considerably, with the downturn driven by reduced capital spending, eroded corporate earnings and climbing unemployment. These weak economic conditions were further intensified by the September 11 terrorist attacks. In this environment, the Federal Reserve Board (the "Fed") attempted to stimulate renewed economic growth by aggressively reducing short-term interest rates, which fell to their lowest level in 40 years. As interest rates and bond yields declined, municipal bond prices generally rose, benefiting the fund's performance. During the first half of the reporting period, when the economy was slowing, we focused on income-oriented bonds with maturities in the 20- to 25-year range. By the second half of the reporting period, however, with interest rates already at historically low levels, we began to shift our focus to the lower end of that range in order to guard against the possibility of market declines. This change proved beneficial when the Fed suggested in early 2002 that an economic recovery was underway. Many investors interpreted these comments as a signal that the next move would be toward higher interest rates. While we do not anticipate rate hikes in the immediate future, these expectations were nonetheless factored into municipal bond prices, erasing a portion of the fund's earlier gains. In addition, the fund's performance was hurt during the reporting period by recession-related price declines in tax-exempt bonds issued to finance a waste-recovery facility in Massachusetts. In our opinion, these price declines were unwarranted. The affected bonds have since rebounded from their lows and continue to pay highly competitive levels of income. However, they have not yet reached pre-attack price levels. What is the fund's current strategy? As was the case for many states, Massachusetts received less tax revenue than it originally anticipated as the U.S. economy weakened. However, because of its strong residential tax base, we believe that Massachusetts should emerge from the recession in relatively good fiscal shape. Nonetheless, we have generally avoided the state' s general obligation debt, preferring instead to focus on bonds issued by localities where tax revenues are derived primarily from property taxes, not income taxes. We recently adopted a moderately defensive stance by reducing the fund's average duration to a point that, at times, is slightly shorter than that of its peer group average. Our security selection strategy has also been relatively defensive, focusing on highly rated, income-oriented bonds selling at modest premiums to their face values. These "cushion bonds" tend to be resistant to market declines in the event that inflationary pressures emerge or the supply of new securities outpaces investor demand. Of course, we are prepared to change our strategy and the fund's composition as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-MASSACHUSETTS RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Massachusetts Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, MASSACHUSETTS SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN MASSACHUSETTS MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN MASSACHUSETTS MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception -------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 1.51% 4.44% 5.55% WITHOUT SALES CHARGE 6.25% 5.41% 6.04% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 1.61% 4.52% -- 5.27% ((+)(+)) WITHOUT REDEMPTION 1/15/93 5.61% 4.85% -- 5.27% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.39% 4.57% -- 4.78% WITHOUT REDEMPTION 8/15/95 5.39% 4.57% -- 4.78% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--99.2% Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- MASSACHUSETTS--82.9% Boston Industrial Development Financing Authority Sewer Facility Revenue (Harbor Electric Energy Co. Project) 7.375%, 5/15/2015 2,500,000 2,534,450 Greater Lawrence Sanitation District 5.75%, 6/15/2014 (Insured; MBIA) 1,425,000 1,567,714 Massachusetts Bay Transportation Authority, General Transportation Systems 7%, 3/1/2021 1,000,000 1,230,530 Massachusetts Development Finance Agency, Revenue: (Belmont Hill School) 5.375%, 9/1/2023 2,000,000 2,004,900 (Boston University) 6%, 5/15/2059 2,325,000 2,422,511 (Landmark School) 5.25%, 6/1/2029 1,100,000 1,068,232 Massachusetts Education Loan Authority, Education Loan Revenue: 7.75%, 1/1/2008 (Insured; MBIA) 455,000 457,170 5.85%, 7/1/2014 (Insured; AMBAC) 1,010,000 1,065,318 Massachusetts Health and Educational Facilities Authority, Revenue: (Caritas Christi Obligation) 6.75%, 7/1/2016 1,500,000 1,585,440 (Community College Program) 5.25%, 10/1/2026 (Insured; AMBAC) 2,845,000 2,855,441 Healthcare Systems (Covenant Health) 6%, 7/1/2022 2,000,000 2,029,140 (Massachusetts Institute of Technology) 5.5%, 7/1/2022 2,000,000 2,129,940 (Partners Healthcare System) 5.75%, 7/1/2032 2,000,000 2,015,900 (Schepens Eye Research) 6.50%, 7/1/2028 2,145,000 2,237,986 (Tufts University): 5.50%, 8/15/2018 1,625,000 1,762,995 5.25%, 2/15/2030 1,680,000 1,686,317 (Wellesley College) 5.125%, 7/1/2039 2,500,000 2,437,000 Massachusetts Housing Finance Agency, Housing Development 5.40%, 6/1/2020 (Insured; MBIA) 1,200,000 1,194,732 Massachusetts Industrial Finance Agency, Revenue: Health Care Facility (Health Foundation, Inc. Project) 6.75%, 12/1/2027 1,000,000 918,290 Resource Recovery (Ogden Haverhill Project) 5.60%, 12/1/2019 1,000,000 788,900 (Water Treatment-American Hingham) 6.95%, 12/1/2035 3,000,000 3,095,370 Massachusetts Water Pollution Abatement Trust, Water Pollution Abatement Revenue (New Bedford Program) 4.75%, 2/1/2026 (Insured; FGIC) 1,250,000 1,158,425 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- MASSACHUSETTS (CONTINUED) Narragansett Regional School District 6.50%, 6/1/2016 (Insured; AMBAC) 1,205,000 1,381,822 New England Educational Loan Marketing Corporation Student Loan Revenue 6.90%, 11/1/2009 1,000,000 1,133,020 Plymouth County, COP (Correctional Facility) 5.125%, 10/1/2018 (Insured; AMBAC) 1,375,000 1,395,694 Route 3 North Transportation Improvement Association, LR: 5.75%, 6/15/2018 (Insured; MBIA) 2,000,000 2,139,660 5.375%, 6/15/2033 (Insured; MBIA) 1,000,000 1,008,450 Westfield 6.50%, 5/1/2017 (Insured; FGIC) 1,750,000 2,006,095 U.S. RELATED--16.3% Commonwealth of Puerto Rico 6%, 7/1/2014 (Prerefunded 7/1/2002) 1,000,000 (a) 1,022,530 Puerto Rico Highway and Transportation Authority, Highway Revenue: 8.786%, 7/1/2009 1,000,000 (b) 1,054,620 8.886%, 7/1/2010 1,000,000 (b) 1,054,360 Puerto Rico Public Buildings Authority, Guaranteed Government Facilities Revenue: 6.25%, 7/1/2015 (Insured; AMBAC) 1,100,000 1,290,223 5.75%, 7/1/2022 1,900,000 2,035,621 Virgin Islands Public Finance Authority, Revenue 7.25%, 10/1/2018 (Prerefunded 10/1/2002) 2,750,000 (a) 2,870,284 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $55,237,823) 56,639,080 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--3.9% ------------------------------------------------------------------------------------------------------------------------------------ MASSACHUSETTS; Massachusetts Health and Educational Facilities Authority, Revenue, VRDN (Capital Assets Program) 1.65% (Insured; MBIA) (cost $2,200,000) 2,200,000 (c) 2,200,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $57,437,823) 103.1% 58,839,080 LIABILITIES, LESS CASH AND RECEIVABLES (3.1%) (1,747,489) NET ASSETS 100.0% 57,091,591 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Summary of Abbreviations AMBAC American Municipal Bond Assurance Corporation COP Certificate of Participation FGIC Financial Guaranty Insurance Company LR Lease Revenue MBIA Municipal Bond Investors Assurance Insurance Corporation VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 40.3 AA Aa AA 19.6 A A A 21.9 BBB Baa BBB 12.9 F-1+, F-1 MIG1, VMIG1 & P1 SP1 & A1 3.7 Not Rated (d) Not Rated (d) Not Rated (d) 1.6 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE PERIODICALLY. (C) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (D) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. (E) AT APRIL 30, 2002, THE FUND HAD $19,022,844 (33.3% OF NET ASSETS) INVESTED IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT UPON REVENUES GENERATED FROM EDUCATION PROJECTS. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 57,437,823 58,839,080 Cash 71,762 Interest receivable 990,193 Receivable for shares of Beneficial Interest subscribed 101,887 Prepaid expenses 13,440 60,016,362 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 39,166 Payable for investment securities purchased 2,866,623 Accrued expenses 18,982 2,924,771 -------------------------------------------------------------------------------- NET ASSETS ($) 57,091,591 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 55,941,977 Accumulated net realized gain (loss) on investments (251,643) Accumulated net unrealized appreciation (depreciation) on investments 1,401,257 -------------------------------------------------------------------------------- NET ASSETS ($) 57,091,591 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 51,756,045 4,610,769 724,777 Shares Outstanding 4,580,938 408,281 64,092 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 11.30 11.29 11.31 SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 3,228,035 EXPENSES: Management fee--Note 3(a) 315,675 Shareholder servicing costs--Note 3(c) 183,416 Distribution fees--Note 3(b) 25,729 Registration fees 19,198 Prospectus and shareholders' reports 10,062 Professional fees 9,757 Custodian fees 7,857 Trustees' fees and expenses--Note 3(d) 1,734 Loan commitment fees--Note 2 739 Miscellaneous 7,921 TOTAL EXPENSES 582,088 INVESTMENT INCOME--NET 2,645,947 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 1,027,740 Net unrealized appreciation (depreciation) on investments (253,612) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 774,128 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,420,075 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ---------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 2,645,947 2,901,805 Net realized gain (loss) on investments 1,027,740 375,827 Net unrealized appreciation (depreciation) on investments (253,612) 2,014,909 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,420,075 5,292,541 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (2,437,931) (2,678,506) Class B shares (182,149) (214,937) Class C shares (18,338) (8,362) TOTAL DIVIDENDS (2,638,418) (2,901,805) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 4,221,628 4,881,079 Class B shares 1,269,321 671,135 Class C shares 410,839 227,612 Dividends reinvested: Class A shares 1,402,266 1,555,736 Class B shares 91,254 125,040 Class C shares 7,152 4,841 Cost of shares redeemed: Class A shares (6,124,881) (7,956,540) Class B shares (1,391,650) (1,074,757) Class C shares (72,305) (2,055) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (186,376) (1,567,909) TOTAL INCREASE (DECREASE) IN NET ASSETS 595,281 822,827 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 56,496,310 55,673,483 END OF PERIOD 57,091,591 56,496,310 The Fund STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended April 30, -------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 370,287 444,432 Shares issued for dividends reinvested 123,472 140,893 Shares redeemed (539,175) (719,509) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (45,416) (134,184) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 112,357 60,527 Shares issued for dividends reinvested 8,036 11,336 Shares redeemed (122,057) (96,997) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (1,664) (25,134) -------------------------------------------------------------------------------- CLASS C Shares sold 36,476 20,027 Shares issued for dividends reinvested 629 435 Shares redeemed (6,452) (192) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 30,653 20,270 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 68,194 CLASS B SHARES REPRESENTING $782,227, WERE AUTOMATICALLY CONVERTED TO 68,151 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 58,168 CLASS B SHARES REPRESENTING $647,751 WERE AUTOMATICALLY CONVERTED TO 58,135 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, -------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.14 10.69 11.68 11.75 11.40 Investment Operations: Investment income--net .53(b) .56 .57 .59 .61 Net realized and unrealized gain (loss) on investments .16 .45 (.98) .11 .40 Total from Investment Operations .69 1.01 (.41) .70 1.01 Distributions: Dividends from investment income--net (.53) (.56) (.57) (.59) (.61) Dividends from net realized gain on investments -- -- (.01) (.18) (.05) Total Distributions (.53) (.56) (.58) (.77) (.66) Net asset value, end of period 11.30 11.14 10.69 11.68 11.75 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.25 9.63 (3.42) 6.08 9.04 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .97 .96 .98 .93 .91 Ratio of net investment income to average net assets 4.66 5.09 5.22 4.97 5.23 Portfolio Turnover Rate 58.32 51.41 57.94 47.11 48.69 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 51,756 51,557 50,885 62,958 60,529 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.64% TO 4.66%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ------------------------------------------------------------------------ CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.14 10.68 11.67 11.75 11.40 Investment Operations: Investment income--net .46(b) .50 .52 .53 .55 Net realized and unrealized gain (loss) on investments .16 .46 (.98) .10 .40 Total from Investment Operations .62 .96 (.46) .63 .95 Distributions: Dividends from investment income--net (.47) (.50) (.52) (.53) (.55) Dividends from net realized gain on investments -- -- (.01) (.18) (.05) Total Distributions (.47) (.50) (.53) (.71) (.60) Net asset value, end of period 11.29 11.14 10.68 11.67 11.75 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.61 9.18 (3.93) 5.46 8.49 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.48 1.48 1.49 1.43 1.42 Ratio of net investment income to average net assets 4.13 4.57 4.70 4.46 4.71 Portfolio Turnover Rate 58.32 51.41 57.94 47.11 48.69 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 4,611 4,566 4,648 6,733 6,584 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.12% TO 4.13%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ------------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 11.15 10.70 11.69 11.76 11.41 Investment Operations: Investment income--net .42(b) .46 .49 .50 .52 Net realized and unrealized gain (loss) on investments .17 .45 (.98) .11 .40 Total from Investment Operations .59 .91 (.49) .61 .92 Distributions: Dividends from investment income--net (.43) (.46) (.49) (.50) (.52) Dividends from net realized gain on investments -- -- (.01) (.18) (.05) Total Distributions (.43) (.46) (.50) (.68) (.57) Net asset value, end of period 11.31 11.15 10.70 11.69 11.76 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.39 8.65 (4.16) 5.28 8.22 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.72 1.79 1.68 1.70 1.64 Ratio of net investment income to average net assets 3.81 4.18 4.51 4.06 4.51 Portfolio Turnover Rate 58.32 51.41 57.94 47.11 48.69 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 725 373 141 345 1 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 3.79% TO 3.81%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001, offers eleven series including the Massachusetts Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. , which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premium and discount on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $7,826 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $251,643 and unrealized appreciation $1,409,398. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $251,643 of the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: tax exempt income $2,638,418 and $2,901,805, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $22,575, decreased accumulated net realized gain (loss) on investments by $5,770 and increased paid-in capital by $28,345. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $20,673 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $22,103 and $3,626, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to share- The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) holder 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $131,228, $11,052 and $1,209, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $24,037 pursuant to the transfer agency agreement. (C) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $34,699,905 and $32,361,265, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $57,429,682; accordingly, accumulated net unrealized appreciation on investments was $1,409,398, consisting of $1,905,230 gross unrealized appreciation and $495,832 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $15,046 increase in accumulated undistributed investment income-net and a corresponding $15,046 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the period ended April 30, 2002 was to increase net investment income by $7,529, increase net unrealized appreciation (depreciation) by $6,906, and decrease net realized gains (losses) by $14,435. The statement of changes in net assets and financial highlights for prior periods, have not been restated to reflect this change in presentation. The Fund REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Massachusetts Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Massachusetts Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Massachusetts Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as "exempt-interest dividends" (not subject to regular Federal and, for individuals who are Massachusetts residents, Massachusetts personal income taxes). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund's taxable ordinary dividends (if any) and capital gain distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. The Fund BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981--present) * Chairman of the Board of Moody's Corporation (October 2000--Present) * Chairman of the Board and Chief Executive Officer (October 1999--September 2000) and Director (February 1993--September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983--present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962--present) * Instructor at the New York Psychoanalytic Institute (1981--present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987--2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997--Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984--December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER The Fund OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. For More Information Dreyfus Premier State Municipal Bond Fund, Massachusetts Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 063AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Michigan Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 19 Notes to Financial Statements 25 Report of Independent Auditors 26 Important Tax Information 27 Board Members Information 29 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Michigan Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Michigan Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you' ll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, W. Michael Petty. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE W. Michael Petty, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Michigan Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 6.72% for Class A shares, 6.11% for Class B shares and 5.93% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Michigan Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 6.32%.(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. The municipal bond market was marked by considerable volatility during the reporting period. During the reporting period's first half, prices generally rose as interest rates fell in a slowing economy. Later, prices fell when the U.S. economy began to recover. We are pleased with the fund's performance relative to its Lipper category average, which we attribute to the fund's relatively defensive positioning during the second half of the reporting period. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Michigan state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, we evaluate supply-and-demand factors in the bond market that are affected by the relatively few municipal bonds historically issued by Michigan. Based on that assessment, we select the individual Michigan tax-exempt bonds that we believe are most likely to provide the highest returns with the least risk. We look at such criteria as the bond's The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) yield, price, age, creditworthiness of its issuer, insurance and any provisions for early redemption. Under most circumstances, we look for high yielding bonds that have 10-year call protection and that are selling at a discount to face value. Second, while we do not attempt to predict changes in interest rates, we may tactically manage the fund's average duration -- a measure of sensitivity to changes in interest rates -- in anticipation of temporary supply-and-demand changes. If we expect the supply of newly issued bonds to increase, we may reduce the fund's average duration to make cash available for the purchase of higher yielding securities. Conversely, if we expect demand for municipal bonds to surge at a time when we anticipate little issuance, we may increase the fund's average duration to maintain current yields for as long as practical. At other times, we try to maintain a "neutral" average duration consistent with that of other Michigan municipal bond funds. What other factors influenced the fund's performance? Anemic corporate profits in early and mid-2001 led to dramatic reductions in capital spending, widespread layoffs and an economic slowdown. These conditions were intensified by the September 11 terrorist attacks. In response, the Federal Reserve Board (the "Fed") reduced short-term interest rates, which by year-end 2001 fell to their lowest levels in 40 years. During 2001, tax-exempt bond yields fell along with interest rates, and prices rose, boosting the fund's total returns. However, because we had expected the economy to begin to improve during the fall of 2001, the fund had already adopted a relatively defensive stance. Its performance was impacted when the September 11 attacks postponed any potential for recovery and the Fed cut interest rates further. The fund more than made up for any lost ground during the second half of the reporting period. Signs of economic recovery began to appear in early 2002, and the economy gained momentum through the first four months of the year. The Fed responded by keeping interest rates steady. However, because investors apparently expected interest rates to rise in the relatively near future, municipal bond prices generally fell. The fund' s defensive positioning -- which included a focus on income-oriented securities with protection from early redemption -- helped it avoid the brunt of those declines. What is the fund's current strategy? We have continued to maintain a relatively defensive stance, emphasizing income-oriented bonds in the 20- to 25-year range. As of April 30, 2002, the fund was less sensitive to changes in interest rates than the majority of its peers. In our view, this stance is prudent since bond issuance is likely to increase as states and municipalities borrow to finance their budget deficits, which could cause municipal bond yields to rise in Michigan and elsewhere. Although Michigan was affected by the weak U.S. economy, leading to a projected state budget deficit, we believe that the state remains fiscally sound. Nonetheless, we have recently favored bonds of local municipalities, where tax revenues are derived from property taxes, over Michigan's uninsured general obligation bonds, which are backed by income taxes. Of course, we are prepared to change our strategy and the fund's composition as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-MICHIGAN RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Michigan Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, MICHIGAN SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN MICHIGAN MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN MICHIGAN MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception --------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 1.91% 4.45% 5.91% WITHOUT SALES CHARGE 6.72% 5.42% 6.40% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 2.11% 4.55% -- 5.65% ((+)(+)) WITHOUT REDEMPTION 1/15/93 6.11% 4.89% -- 5.65% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.93% 4.62% -- 4.98% WITHOUT REDEMPTION 8/15/95 5.93% 4.62% -- 4.98% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--93.5% Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- Allegan Hospital Finance Authority, HR (Allegan General Hospital): 6.875%, 11/15/2017 4,460,000 4,453,488 7%, 11/15/2021 800,000 800,512 Anchor Bay School District, Building and Site 6%, 5/1/2023 (Insured; FGIC) (Prerefunded 5/1/2009) 1,500,000 (a) 1,699,755 Brighton Area School District: Zero Coupon, 5/1/2014 (Insured: AMBAC) 8,000,000 4,448,400 Zero Coupon, 5/1/2020 (Insured: AMBAC) 5,000,000 1,889,200 Capital Region Airport Authority, Airport Revenue 6.70%, 7/1/2021 (Insured; MBIA) (Prerefunded 7/1/2002) 2,500,000 (a) 2,570,475 Chippewa County Hospital Finance Authority, Revenue 5.625%, 11/1/2014 1,225,000 1,162,304 Clarkston Community School 5.75%, 5/1/2016 (Insured; FGIC) (Prerefunded 5/1/2005) 1,340,000 (a) 1,463,186 Detroit: (Unlimited Tax) 6.35%, 4/1/2014 2,590,000 2,719,267 Water Supply Systems Revenue: 11.17%, 7/1/2022 (Insured; FGIC) 1,500,000 (b) 1,576,785 Senior Lien 5.75%, 7/1/2028 (Insured; FGIC) 4,000,000 4,224,880 Dickinson County Healthcare System, HR: 5.50%, 11/1/2013 3,715,000 3,634,570 5.50%, 11/1/2013 (Insured; ACA) 2,000,000 2,058,900 5.70%, 11/1/2018 (Insured; ACA) 3,000,000 3,034,440 Fowlerville Community Schools School District 5.60%, 5/1/2016 (Insured; MBIA) (Prerefunded 5/1/2007) 2,995,000 (a) 3,297,525 Grand Rapids Housing Finance Authority, Multi-Family Revenue 7.625%, 9/1/2023 (Collateralized; FNMA) 1,000,000 1,052,600 Grand Valley State University, Revenue 5.25%, 12/1/2020 (Insured; FGIC) 3,000,000 3,038,130 Huron Valley School District Zero Coupon, 5/1/2018 (Insured; FGIC) 6,370,000 2,740,820 Kalamazoo Hospital Finance Authority, Hospital Facilities Revenue (Borgess Medical Center) 6.25%, 6/1/2014 (Insured; FGIC) 2,000,000 2,332,620 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- Kent County, Airport Facilities Revenue (Kent County International Airport): 5.90%, 1/1/2012 (Prerefunded 1/1/2005) 1,145,000 (a) 1,247,409 5.90%, 1/1/2013 (Prerefunded 1/1/2005) 1,095,000 (a) 1,192,937 6.10%, 1/1/2025 (Prerefunded 1/1/2005) 3,000,000 (a) 3,283,590 Lake Orion Community School District 5.80%, 5/1/2015 (Insured; AMBAC) 2,085,000 2,205,367 Leslie Public Schools (Ingham and Jackson Counties) Building and Site 6%, 5/1/2015 (Insured; AMBAC) (Prerefunded 5/1/2005) 1,000,000 (a) 1,099,070 Michigan Building Authority, Lease Revenue 7.87% 10/15/2017 5,000,000 (b,c) 5,458,250 Michigan Higher Education Student Loan Authority, Student Loan Revenue: 6.875%, 10/1/2007 (Insured; AMBAC) 2,250,000 2,274,503 6.125%, 9/1/2010 1,520,000 1,557,225 Michigan Hospital Finance Authority, HR: (Crittenton Hospital) 6.70%, 3/1/2007 2,250,000 2,323,417 (Detroit Medical Center) 8.125%, 8/15/2012 75,000 75,100 (Genesys Health Systems) 8.125%, 10/1/2021 (Prerefunded 10/1/2005) 5,000,000 (a) 5,933,250 (Trinity Healtheast) 6%, 12/1/2027 (Insured; AMBAC) 3,500,000 3,697,190 Michigan Housing Development Authority 6.75%, 12/1/2014 1,625,000 1,688,424 Michigan Housing Representatives, COP: Zero Coupon, 8/15/2022 (Insured; AMBAC) 7,325,000 2,389,708 Zero Coupon, 8/15/2023 (Insured; AMBAC) 2,615,000 802,308 Michigan Municipal Bond Authority, Revenue (State Revolving Fund): 6.50%, 10/1/2014 (Prerefunded 10/1/2004) 2,500,000 (a) 2,783,200 6.50%, 10/1/2017 (Prerefunded 10/1/2004) 3,500,000 (a) 3,896,480 Michigan Strategic Fund, Limited Obligation Revenue: (Ledyard Association Ltd. Partnership Project) 6.25%, 10/1/2011 (Insured; ITT Lyndon Property Insurance Co.) 3,075,000 3,323,614 (Northeastern Community Mental Health Foundation) 8.25%, 1/1/2009 990,000 1,000,939 SWDR (Genesee Power Station Project) 7.50%, 1/1/2021 3,000,000 2,902,650 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- Monroe County, PCR (Detroit Edison Project) 6.55%, 6/1/2024 (Insured; MBIA) 1,700,000 1,793,721 Monroe County Economic Development Corp, Ltd. Obligation Revenue (Detroit Edison Co. Project) 6.95%, 9/1/2022 (Insured; FGIC) 2,000,000 2,476,160 Northville, Special Assessment (Wayne County) 7.875%, 1/1/2006 1,015,000 1,019,862 Pontiac Tax Increment Finance Authority, Revenue 6.375%, 6/01/2031 3,170,000 3,073,664 Redford Unified School District 5.50%, 5/1/2015 (Insured; AMBAC) 1,260,000 1,375,340 Romulus Community Schools Zero Coupon, 5/1/2020 (Insured; FGIC) 1,385,000 522,394 Romulus Economic Development Corp, Ltd. Obligation EDR (Romulus Hir Ltd. Partnership Project) 7%, 11/1/2015 (Insured; ITT Lyndon Property Insurance Co.) 3,700,000 4,483,475 South Lyon Community Schools (School Building) 6.375%, 5/1/2018 (Prerefunded 5/1/2002) 1,500,000 (a) 1,530,195 Stockbridge Community Schools 5.50%, 5/1/2021 600,000 618,990 Sturgis Public School District, School Building and Site 5.625%, 5/1/2025 5,085,000 5,260,331 Wayne Charter County, Airport Revenue, Special Facilities (Northwest Airlines Inc.) 6.75%, 12/1/2015 5,150,000 4,743,820 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $117,576,275) 124,230,440 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--4.8% ----------------------------------------------------------------------------------------------------------------------------------- Michigan Strategic Fund, VRDN PCR (Consumer Power Project) 1.70% 4,300,000 (d) 4,300,000 University of Michigan Revenue, VRDN (Medical Service Plan) 1.70% (Insured; AMBAC) 2,065,000 (d) 2,065,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $6,365,000) 6,365,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $123,941,275) 98.3% 130,595,440 CASH AND RECEIVABLES (NET) 1.7% 2,315,103 NET ASSETS 100.0% 132,910,543 Summary of Abbreviations ACA American Capital Access AMBAC American Municipal Bond Assurance Corporation COP Certificate of Participation EDR Economic Development Revenue FGIC Financial Guaranty Insurance Company FNMA Federal National Mortgage Association HR Hospital Revenue MBIA Municipal Bond Investors Assurance Insurance Corporation PCR Pollution Control Revenue SWDR Solid Waste Disposal Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%). ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 57.2 AA Aa AA 5.5 A A A 9.7 BBB Baa BBB 6.1 F1 Mig1 SP1 4.9 Not Rated (e) Not Rated (e) Not Rated (e) 16.6 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE PERIODICALLY. (C) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THIS SECURITY MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT APRIL 30, 2002, THIS SECURITY AMOUNTED TO $5,458,250 OR 4.1% OF NET ASSETS. (D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 123,941,275 130,595,440 Cash 173,489 Interest receivable 2,147,199 Receivable for shares of Beneficial Interest subscribed 106,897 Prepaid expenses 15,339 133,038,364 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 93,798 Accrued expenses 34,023 127,821 -------------------------------------------------------------------------------- NET ASSETS ($) 132,910,543 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 126,957,147 Accumulated net realized gain (loss) on investments (700,769) Accumulated net unrealized appreciation (depreciation) on investments 6,654,165 -------------------------------------------------------------------------------- NET ASSETS ($) 132,910,543 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 117,731,500 10,200,899 4,978,144 Shares Outstanding 7,813,786 677,130 330,322 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 15.07 15.06 15.07 SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 7,755,805 EXPENSES: Management fee--Note 3(a) 736,096 Shareholder servicing costs--Note 3(c) 434,473 Distribution fees--Note 3(b) 80,360 Professional fees 20,178 Registration fees 19,693 Custodian fees 16,940 Prospectus and shareholders' reports 15,408 Trustees' fees and expenses--Note 3(d) 3,692 Loan commitment fees--Note 2 1,940 Miscellaneous 12,134 TOTAL EXPENSES 1,340,914 INVESTMENT INCOME--NET 6,414,891 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 1,364,759 Net unrealized appreciation (depreciation) on investments 826,696 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,191,455 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 8,606,346 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ----------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 6,414,891 6,888,926 Net realized gain (loss) on investments 1,364,759 198,901 Net unrealized appreciation (depreciation) on investments 826,696 4,473,442 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 8,606,346 11,561,269 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (5,793,346) (6,279,937) Class B shares (464,643) (554,980) Class C shares (144,058) (54,009) TOTAL DIVIDENDS (6,402,047) (6,888,926) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 5,995,109 5,259,177 Class B shares 1,554,414 1,460,748 Class C shares 3,725,592 592,867 Dividends reinvested: Class A shares 3,249,016 3,514,718 Class B shares 186,494 251,842 Class C shares 96,944 29,587 Cost of shares redeemed: Class A shares (13,380,288) (16,759,904) Class B shares (3,163,246) (3,817,614) Class C shares (320,035) (281,598) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (2,056,000) (9,750,177) TOTAL INCREASE (DECREASE) IN NET ASSETS 148,299 (5,077,834) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 132,762,244 137,840,078 END OF PERIOD 132,910,543 132,762,244 Year Ended April 30, -------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 396,919 358,420 Shares issued for dividends reinvested 215,384 238,396 Shares redeemed (886,738) (1,139,785) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (274,435) (542,969) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 102,783 98,990 Shares issued for dividends reinvested 12,363 17,107 Shares redeemed (208,952) (259,938) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (93,806) (143,841) -------------------------------------------------------------------------------- CLASS C Shares sold 245,414 39,866 Shares issued for dividends reinvested 6,437 2,001 Shares redeemed (21,390) (19,063) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 230,461 22,804 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 131,747 CLASS B SHARES REPRESENTING $2,002,876 WERE AUTOMATICALLY CONVERTED TO 131,686 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 126,102 CLASS B SHARES REPRESENTING $1,857,248 WERE AUTOMATICALLY CONVERTED TO 126,093 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, -------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.82 14.32 15.57 15.61 15.14 Investment Operations: Investment income--net .73(b) .75 .76 .78 .80 Net realized and unrealized gain (loss) on investments .25 .50 (1.16) .12 .48 Total from Investment Operations .98 1.25 (.40) .90 1.28 Distributions: Dividends from investment income--net (.73) (.75) (.76) (.78) (.80) Dividends from net realized gain on investments -- -- (.09) (.16) (.01) Total Distributions (.73) (.75) (.85) (.94) (.81) Net asset value, end of period 15.07 14.82 14.32 15.57 15.61 ----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.72 8.90 (2.56) 5.89 8.55 ----------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .94 .93 .94 .92 .92 Ratio of net investment income to average net assets 4.86 5.11 5.18 4.96 5.12 Portfolio Turnover Rate 38.11 29.62 29.55 36.17 41.46 ----------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 117,732 119,860 123,635 145,764 149,221 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.85% TO 4.86%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, --------------------------------------------------------------------------- CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.82 14.32 15.56 15.61 15.13 Investment Operations: Investment income--net .65(b) .68 .69 .70 .72 Net realized and unrealized gain (loss) on investments .24 .50 (1.15) .11 .49 Total from Investment Operations .89 1.18 (.46) .81 1.21 Distributions: Dividends from investment income--net (.65) (.68) (.69) (.70) (.72) Dividends from net realized gain on investments -- -- (.09) (.16) (.01) Total Distributions (.65) (.68) (.78) (.86) (.73) Net asset value, end of period 15.06 14.82 14.32 15.56 15.61 ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.11 8.35 (2.98) 5.29 8.08 ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.44 1.44 1.44 1.42 1.42 Ratio of net investment income to average net assets 4.34 4.60 4.66 4.44 4.61 Portfolio Turnover Rate 38.11 29.62 29.55 36.17 41.46 ------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 10,201 11,422 13,101 22,338 20,938 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.33% TO 4.34%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ------------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.82 14.33 15.57 15.61 15.14 Investment Operations: Investment income--net .62(b) .64 .65 .66 .67 Net realized and unrealized gain (loss) on investments .25 .49 (1.15) .12 .48 Total from Investment Operations .87 1.13 (.50) .78 1.15 Distributions: Dividends from investment income--net (.62) (.64) (.65) (.66) (.67) Dividends from net realized gain on investments -- -- (.09) (.16) (.01) Total Distributions (.62) (.64) (.74) (.82) (.68) Net asset value, end of period 15.07 14.82 14.33 15.57 15.61 ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.93 8.01 (3.22) 5.08 7.70 ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.68 1.69 1.69 1.67 1.69 Ratio of net investment income to average net assets 4.05 4.33 4.43 4.16 4.26 Portfolio Turnover Rate 38.11 29.62 29.55 36.17 41.46 ------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 4,978 1,480 1,104 1,877 640 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.04% TO 4.05%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001, offers eleven series including the Michigan Series (the " 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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A, which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premium and discount on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $640 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $700,769 and unrealized appreciation $6,660,858. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $700,769 of the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001 were as follows: tax exempt income $6,402,047 and $6,888,926, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) investment income-net by $31,713, decreased accumulated net realized gain (loss) on investments by $15,454 and increased paid-in capital by $47,167. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $23,701 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $53,601 and $26,759 respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $298,869, $26,800 and $8,920, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $65,412 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $49,486,001 and $55,754,869, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $123,934,582; accordingly, accumulated net unrealized appreciation on investments was $6,660,858, consisting of $7,469,443 gross unrealized appreciation and $808,585 gross unrealized depreciation. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premium on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $18,869 increase in accumulated undistributed investment income-net and a corresponding $18,869 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the year ended April 30, 2002 was to increase net investment income by $12,844, increase net unrealized appreciation (depreciation) by $12,177 and decrease net realized gains (losses) by $25,021. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Michigan Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Michigan Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Michigan Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 The Fund IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as "exempt-interest dividends" (not subject to regular Federal and, for individuals who are Michigan residents, Michigan personal income taxes). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund' s taxable ordinary dividends (if any) and capital gains distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981--present) * Chairman of the Board of Moody's Corporation (October 2000--Present) * Chairman of the Board and Chief Executive Officer (October 1999--September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983--present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 The Fund BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962--present) * Instructor at the New York Psychoanalytic Institute (1981--present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987--2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997--Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984--December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. The Fund For More Information Dreyfus Premier State Municipal Bond Fund, Michigan Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 053AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Minnesota Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 13 Statement of Assets and Liabilities 14 Statement of Operations 15 Statement of Changes in Net Assets 17 Financial Highlights 20 Notes to Financial Statements 26 Report of Independent Auditors 27 Important Tax Information 28 Board Members Information 30 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Minnesota Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Minnesota Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, W. Michael Petty. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE W. Michael Petty, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Minnesota Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 6.82% for Class A shares, 6.26% for Class B shares and 5.99% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Minnesota Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 5.96%.(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. Municipal bond prices were highly volatile during the reporting period as changing economic conditions affected the market. Nonetheless, prices and yields ended the reporting period close to where they began, and the fund's returns were derived mainly from income. We are pleased that the fund produced higher returns than its Lipper category average, which we attribute to its relatively defensive positioning, especially during the reporting period's second half. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Minnesota state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, we evaluate supply-and-demand factors in the bond market that are affected by the relatively few municipal bonds historically issued by Minnesota. Based on that assessment, we select the individual Minnesota tax-exempt bonds that we believe are most likely to provide the highest returns with the least risk. We look at such criteria as The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) the bond's yield, price, age, creditworthiness of its issuer, insurance and any provisions for early redemption. Under most circumstances, we look for high yielding bonds that have 10-year call protection and that are selling at a discount to face value. Second, while we do not attempt to predict changes in interest rates, we may tactically manage the fund' s average duration -- a measure of sensitivity to changes in interest rates -- in anticipation of temporary supply-and-demand changes. If we expect the supply of newly issued bonds to increase, we may reduce the fund' s average duration to make cash available for the purchase of higher yielding securities. Conversely, if we expect demand for municipal bonds to surge at a time when we anticipate little issuance, we may increase the fund's average duration to maintain current yields for as long as practical. At other times, we try to maintain a "neutral" average duration consistent with that of other Minnesota municipal bond funds. What other factors influenced the fund's performance? Anemic corporate profits in early and mid-2001 led to dramatic reductions in capital spending, widespread layoffs and an economic slowdown. These conditions were intensified by the September 11 terrorist attacks. In response, the Federal Reserve Board (the "Fed") reduced short-term interest rates, which by year-end 2001 fell to their lowest levels in 40 years. During 2001, tax-exempt bond yields fell along with interest rates, and prices rose, boosting the fund's total returns. However, because we had expected the economy to begin to improve during the fall of 2001, the fund had already adopted a relatively defensive stance. Its performance was impacted when the September 11 attacks postponed any potential for recovery and the Fed cut interest rates further. The fund more than made up for any lost ground during the second half of the reporting period. Signs of economic recovery began to appear in early 2002, and the economy gained momentum through the first four months of the year. The Fed responded by keeping interest rates steady. However, because investors apparently expected interest rates to rise in the relatively near future, municipal bond prices generally fell. The fund's defensive positioning -- which included a focus on income-oriented securities with protection from early redemption -- helped it avoid the brunt of those declines. What is the fund's current strategy? We have continued to maintain a relatively defensive stance, emphasizing income-oriented bonds in the 20- to 25-year range. Although Minnesota was affected along with the rest of the nation by the weak U.S. economy, it was one of the few to emerge with a balanced state budget. As a result, we expect the supply of newly issued Minnesota municipal bonds to remain limited, which should help support their prices. However, a rising supply of bonds from other states seeking to finance budget deficits may adversely affect the national tax-exempt bond market, of which Minnesota is a part. Of course, within constraints imposed by the limited supply of tax-exempt bonds from Minnesota issuers, we are prepared to change our strategy and the fund's composition as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-MINNESOTA RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Minnesota Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, MINNESOTA SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN MINNESOTA MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN MINNESOTA MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception ------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 2.00% 4.16% 5.39% WITHOUT SALES CHARGE 6.82% 5.12% 5.88% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 2.26% 4.23% -- 5.23% ((+)(+)) WITHOUT REDEMPTION 1/15/93 6.26% 4.56% -- 5.23% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.99% 4.26% -- 4.52% WITHOUT REDEMPTION 8/15/95 5.99% 4.26% -- 4.52% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--91.3% Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- Anoka County, SWDR (United Power Association Project) 6.95%, 12/1/2008 (Guaranteed; National Rural Utilities Cooperative Finance Corp.) 3,435,000 3,482,059 Bass Brook, PCR (Minnesota Power and Light Co.) 6%, 7/1/2022 1,500,000 1,517,910 Brooklyn Park 5.85%, 2/1/2016 (Insured; FSA) 1,425,000 1,490,080 Chaska, Electric Revenue 6%, 10/1/2020 3,000,000 3,123,420 Columbia Heights, MFHR (Crest View) 6.625%, 4/20/2043 (Collateralized; GNMA) 1,500,000 1,657,695 Dakota County Housing and Redevelopment Authority, South Saint Paul Revenue (Single Family-GNMA Program) 8.10%, 9/1/2012 25,000 25,036 Golden Valley, Revenue (Covenant Retirement Communities) 5.50%, 12/1/2029 2,000,000 1,905,920 Grand Rapids Housing and Redevelopment Authority, Revenue (Governmental Housing-Lakeshore Project) 5.30%, 10/1/2029 1,000,000 933,660 Harmony, MFHR (Zedakah Foundation Project) 5.95%, 9/1/2020 1,000,000 1,004,030 Hubbard County, SWDR (Potlatch Corp. Project) 7.375%, 8/1/2013 1,000,000 1,001,310 Inver Grove Heights Independent School District Number 199 5.75%, 2/1/2017 2,225,000 2,310,151 Mahtomedi Independent School District Number 832 Zero Coupon, 2/1/2017 (Insured; MBIA) 1,275,000 596,152 Minneapolis: Zero Coupon, 12/1/2014 1,825,000 992,326 Health Care Facilities Revenue (Shelter Care Foundation): 6%, 4/1/2010 750,000 735,180 6.50%, 4/1/2029 1,000,000 937,410 Home Ownership Program 7.10%, 6/1/2021 300,000 304,278 MFMR (Seward Towers Project) 7.375%, 12/20/2030 (Collateralized; GNMA) 2,350,000 2,377,660 Revenue (Blake School Project) 5.45%, 9/1/2021 2,000,000 2,023,920 Minneapolis and Saint Paul Metropolitan Airports Commission: Airport Revenue: 5.75%, 1/1/2017 (Insured; FGIC) 5,435,000 5,712,674 5.625%, 1/1/2018 (Insured; FGIC) 2,000,000 2,069,000 5.75%, 1/1/2032 (Insured; FGIC) 4,995,000 5,246,598 Special Facilities Revenue (Northwest Airlines) 7%, 4/1/2025 2,000,000 1,811,540 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- Minneapolis Community Development Agency, Ltd. Tax Supported Development Revenue 8%, 12/1/2009 300,000 300,684 Minneapolis Public Facilities Authority, Water Pollution Control Revenue 5.375%, 3/1/2019 3,000,000 3,091,380 Minneapolis-Saint Paul Housing and Redevelopment Authority, Health Care Systems Revenue (Group Health Plan Inc., Project) 6.75%, 12/1/2013 2,750,000 2,810,720 State of Minnesota: 6%, 10/1/2011 (Prerefunded 10/1/2004) 5,625,000 (a) 6,090,469 (Duluth Airport) 6.25%, 8/1/2014 2,500,000 2,649,050 Minnesota Agricultural and Economic Development Board, Revenue: (Evangelical Lutheran Project): 6%, 2/1/2022 1,130,000 1,124,700 6%, 2/1/2027 1,750,000 1,721,020 (Fairview Health Care Systems) 6.375%, 11/15/2029 2,000,000 2,082,560 Minnesota Higher Education Facilities Authority, College and University Revenue: (College at Saint Benedict) 5.35%, 3/1/2020 1,000,000 981,560 (University of Saint Thomas): 5.35%, 4/1/2017 1,000,000 1,016,930 5.40%, 4/1/2022 2,125,000 2,140,853 Minnesota Housing Finance Agency, Revenue: Rental Housing 6.10%, 8/1/2009 1,270,000 1,271,588 Single Family Mortgage: 5.80%, 1/1/2019 2,000,000 2,037,700 5.45%, 1/1/2022 (Insured; MBIA) 1,000,000 1,008,110 6.95%, 7/1/2026 1,530,000 1,576,053 Minnesota Retirement Systems, Building Revenue 6%, 6/1/2030 1,475,000 1,587,793 New Hope, Housing and Health Care Facilities Revenue (Masonic Home--North Ridge): 5.90%, 3/1/2019 1,000,000 945,870 5.875%, 3/1/2029 3,000,000 2,752,770 Northern Municipal Power Agency, Electric System Revenue 8.745%, 1/1/2016 (Insured; FSA ) 5,000,000 (b,c) 5,518,500 Northfield, HR 6%, 11/1/2031 2,000,000 1,948,760 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- City of Red Wing, Health Care Facilities Revenue (River Region Obligation Group) 6.50%, 9/1/2022 3,445,000 3,823,502 Rosemount Independent School District Number 196 Zero Coupon, 4/1/2014 (Insured; MBIA) 3,000,000 1,708,410 Saint Cloud Housing and Redevelopment Authority, Revenue (State University Foundation Project) 5.125%, 5/1/2018 1,500,000 1,520,040 Saint Paul Housing and Redevelopment Authority, Revenue: Hospital (HealthEast Project) 5.70%, 11/1/2015 (Insured; ACA) 2,000,000 2,058,340 Single Family Mortgage 6.90%, 12/1/2021 (Insured; FNMA) 1,220,000 1,239,239 Sartell, PCR (Champion International Corp. Project) 6.95%, 10/1/2012 5,000,000 5,109,350 Seaway Port Authority of Duluth, Industrial Development Dock and Wharf Revenues (Cargill Inc. Project) 6.80%, 5/1/2012 3,000,000 3,070,590 Shakopee Public Utilities Commission, Public Utilities Revenue 6%, 2/1/2028 (Insured; MBIA) 1,000,000 1,062,980 Southern Municipal Power Agency, Power Supply System Revenue: 5.75%, 1/1/2018 (Insured; MBIA) 2,000,000 2,058,280 Zero Coupon, 1/1/2025 (Insured; MBIA) 5,255,000 1,542,815 Zero Coupon, 1/1/2026 (Insured; MBIA) 15,530,000 4,299,636 Zero Coupon, 1/1/2027 (Insured; MBIA) 4,800,000 1,258,752 University of Minnesota, College and University Revenue 5.50%, 7/1/2021 5,925,000 6,336,491 Washington County Housing and Redevelopment Authority, Hospital Facility Revenue (Healtheast Project) 5.375%, 11/15/2018 (Insured; ACA) 3,150,000 3,109,176 Western Minnesota Municipal Power Agency, Electric Power and Light Revenue 5.50%, 1/1/2012 (Insured; AMBAC) 900,000 951,804 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $120,160,619) 123,064,484 Principal SHORT-TERM MUNICIPAL INVESTMENTS--7.0% Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- Arden Hills Housing and Health Care Facilities, Revenue, VRDN (Presbyterian Homes of Arden) 1.75% (LOC; U.S. Bank) 2,000,000 (d) 2,000,000 Beltrami County, Environmental Control Revenue, VRDN (Northwood Panelboard Co. Project) 1.75% (LOC; Toronto Dominion Bank) 500,000 (d) 500,000 Canby, IDR, VRDN (Keystone Building System Project) 1.85% (LOC; U.S. Bank) 1,000,000 (d) 1,000,000 Cohasset, Revenue, VRDN (Minnesota Power and Light Co.) 1.65% (LOC; ABN Amro Bank) 1,800,000 (d) 1,800,000 Mankato, Multi Family Revenue, VRDN (Highland Hills of Mankato) 1.75% (LOC; U.S. Bank and Trust) 1,000,000 (d) 1,000,000 Minneapolis, Revenue, VRDN (People Serving People Project) 1.75% (LOC; U.S. Bank) 500,000 (d) 500,000 Minneapolis-Saint Paul Housing and Redevelopment Authority, Health Care Systems Revenue, VRDN (Children's Health Care) 1.70% (SBPA; Wells Fargo Bank) 2,600,000 (d) 2,600,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $9,400,000) 9,400,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $129,560,619) 98.3% 132,464,484 CASH AND RECEIVABLES (NET) 1.7% 2,342,119 NET ASSETS 100.0% 134,806,603 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Summary of Abbreviations ACA American Capital Access AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guaranty Insurance Company FNMA Federal National Mortgage Association FSA Financial Security Assurance GNMA Government National Mortgage Association HR Hospital Revenue IDR Industrial Development Revenue LOC Letter of Credit MBIA Municipal Bond Investors Assurance Insurance Corporation MFHR Multi-Family Housing Revenue MFMR Multi-Family Mortgage Revenue PCR Pollution Control Revenue SBPA Standby Bond Purchase Agreement SWDR Solid Waste Disposal Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 37.0 AA Aa AA 11.4 A A A 23.1 BBB Baa BBB 11.8 F1 Mig1 SP1 6.3 Not Rated (e) Not Rated (e) Not Rated (e) 10.4 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE PERIODICALLY. (C) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THIS SECURITY MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT APRIL 30, 2002, THIS SECURITY AMOUNTED TO $5,518,500 OR 4.1% OF NET ASSETS. (D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 129,560,619 132,464,484 Cash 341,750 Interest receivable 1,858,203 Receivable for shares of Beneficial Interest subscribed 250,796 Prepaid expenses 13,439 134,928,672 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 95,369 Payable for shares of Beneficial Interest redeemed 153 Accrued expenses 26,547 122,069 -------------------------------------------------------------------------------- NET ASSETS ($) 134,806,603 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 132,015,203 Accumulated net realized gain (loss) on investments (112,465) Accumulated net unrealized appreciation (depreciation) on investments 2,903,865 -------------------------------------------------------------------------------- NET ASSETS ($) 134,806,603 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 117,881,272 13,714,410 3,210,921 Shares Outstanding 7,923,944 920,349 215,528 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 14.88 14.90 14.90 SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 7,562,842 EXPENSES: Management fee--Note 3(a) 738,236 Shareholder servicing costs--Note 3(c) 422,861 Distribution fees--Note 3(b) 81,032 Registration fees 19,998 Professional fees 19,509 Custodian fees 16,224 Prospectus and shareholders' reports 12,088 Trustees' fees and expenses--Note 3(d) 4,076 Loan commitment fees--Note 2 1,937 Miscellaneous 13,289 TOTAL EXPENSES 1,329,250 INVESTMENT INCOME--NET 6,233,592 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 585,933 Net unrealized appreciation (depreciation) on investments 1,919,825 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,505,758 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 8,739,350 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ----------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 6,233,592 6,675,999 Net realized gain (loss) on investments 585,933 (248,630) Net unrealized appreciation (depreciation) on investments 1,919,825 4,599,066 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 8,739,350 11,026,435 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (5,599,588) (5,974,560) Class B shares (563,470) (655,971) Class C shares (70,174) (45,468) TOTAL DIVIDENDS (6,233,232) (6,675,999) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 9,470,828 6,752,448 Class B shares 3,770,699 1,740,488 Class C shares 2,163,770 179,789 Dividends reinvested: Class A shares 3,394,793 3,623,176 Class B shares 315,972 386,271 Class C shares 27,862 19,758 Cost of shares redeemed: Class A shares (14,468,652) (13,204,346) Class B shares (5,074,847) (2,847,622) Class C shares (136,329) (168,770) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (535,904) (3,518,808) TOTAL INCREASE (DECREASE) IN NET ASSETS 1,970,214 831,628 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 132,836,389 132,004,761 END OF PERIOD 134,806,603 132,836,389 The Fund STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended April 30, -------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 633,854 463,838 Shares issued for dividends reinvested 227,809 249,350 Shares redeemed (972,911) (915,957) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (111,248) (202,769) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 252,009 118,624 Shares issued for dividends reinvested 21,162 26,546 Shares redeemed (338,910) (196,874) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (65,739) (51,704) -------------------------------------------------------------------------------- CLASS C Shares sold 144,896 12,313 Shares issued for dividends reinvested 1,867 1,358 Shares redeemed (9,176) (11,685) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 137,587 1,986 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 244,691 CLASS B SHARES REPRESENTING $3,671,473 WERE AUTOMATICALLY CONVERTED TO 245,090 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 85,091 CLASS B SHARES REPRESENTING $1,199,400 WERE AUTOMATICALLY CONVERTED TO 82,785 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except porfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, ----------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 14.60 14.11 15.30 15.30 15.03 Investment Operations: Investment income--net .70(b) .74 .75 .78 .82 Net realized and unrealized gain (loss) on investments .28 .49 (1.13) .04 .27 Total from Investment Operations .98 1.23 (.38) .82 1.09 Distributions: Dividends from investment income--net (.70) (.74) (.75) (.78) (.82) Dividends from net realized gain on investments -- -- (.06) (.04) -- Total Distributions (.70) (.74) (.81) (.82) (.82) Net asset value, end of period 14.88 14.60 14.11 15.30 15.30 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.82 8.90 (2.48) 5.41 7.36 -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ($): Ratio of expenses to average net assets .93 .92 .93 .91 .90 Ratio of net investment income to average net assets 4.71 5.13 5.20 5.05 5.32 Portfolio Turnover Rate 33.33 14.00 13.45 41.27 13.37 ------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 117,881 117,281 116,261 134,314 126,115 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS BY LESS THAN .01%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ------------------------------------------------------------------------------ CLASS B SHARES 2002(a) 2001 2000 1999 1998 --------------------------------------------------------------------------------------------------------------------------------- PER SHARE DATA ($): Net asset value, beginning of period 14.62 14.14 15.33 15.33 15.06 Investment Operations: Investment income--net .62(b) .67 .67 .70 .74 Net realized and unrealized gain (loss) on investments .28 .48 (1.13) .04 .27 Total from Investment Operations .90 1.15 (.46) .74 1.01 Distributions: Dividends from investment income--net (.62) (.67) (.67) (.70) (.74) Dividends from net realized gain on investments -- -- (.06) (.04) -- Total Distributions (.62) (.67) (.73) (.74) (.74) Net asset value, end of period 14.90 14.62 14.14 15.33 15.33 ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.26 8.27 (2.97) 4.86 6.79 ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.44 1.43 1.46 1.43 1.42 Ratio of net investment income to average net assets 4.18 4.62 4.64 4.52 4.79 Portfolio Turnover Rate 33.33 14.00 13.45 41.27 13.37 ------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 13,714 14,417 14,671 29,562 28,568 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS BY LESS THAN .01%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ----------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 14.62 14.13 15.33 15.33 15.06 Investment Operations: Investment income--net .56(b) .63 .63 .65 .69 Net realized and unrealized gain (loss) on investments .31 .49 (1.14) .04 .27 Total from Investment Operations .87 1.12 (.51) .69 .96 Distributions: Dividends from investment income--net (.59) (.63) (.63) (.65) (.69) Dividends from net realized gain on investments -- -- (.06) (.04) -- Total Distributions (.59) (.63) (.69) (.69) (.69) Net asset value, end of period 14.90 14.62 14.13 15.33 15.33 --------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.99 8.03 (3.30) 4.53 6.46 --------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.69 1.72 1.73 1.74 1.73 Ratio of net investment income to average net assets 3.85 4.32 4.38 4.16 4.40 Portfolio Turnover Rate 33.33 14.00 13.45 41.27 13.37 --------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 3,211 1,139 1,073 1,422 667 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS BY LESS THAN .01%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company and operates as a series company that, effective May 17, 2001, offers eleven series, including the Minnesota Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each Class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premiums and discounts on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $4,806 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $97,490 and unrealized appreciation $2,903,865. In addition, the fund had $14,975 of capital losses realized after October 31, 2001 which were deferred for tax purposes to the first day of the following fiscal year. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $97,490 of the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: tax exempt income $6,233,232 and $6,675,999, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $4,723, decreased accumulated net realized gain (loss) on investments by $11,242 and increased paid-in capital by $15,965. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $36,852 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $67,345 and $13,687, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of the average daily net assets for the provision of certain services. 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 The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $297,327, $33,673 and $4,562, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $56,901 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $43,084,593 and $51,822,312, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $129,560,619; accordingly, accumulated net unrealized appreciation on investments was $2,903,865, consisting of $3,604,342 gross unrealized appreciation and $700,477 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $4,363 increase in accumulated undistributed investment income-net and a corresponding $4,363 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the period ended April 30, 2002 was to increase net investment income by $359, increase net unrealized appreciation (depreciation) by $4,363 and decrease net realized gains (losses) by $4,722. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. The Fund REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Minnesota Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Minnesota Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Minnesota Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as " exempt-interest dividends" (not subject to regular Federal and, for individuals who are Minnesota residents, Minnesota personal income taxes). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund's taxable ordinary dividends (if any) and capital gain distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. The Fund BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981--present) * Chairman of the Board of Moody's Corporation (October 2000--Present) * Chairman of the Board and Chief Executive Officer (October 1999--September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983--present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962--present) * Instructor at the New York Psychoanalytic Institute (1981--present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987--2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997--Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984--December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER The Fund OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. NOTES For More Information Dreyfus Premier State Municipal Bond Fund, Minnesota Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 055AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, North Carolina Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 19 Notes to Financial Statements 25 Report of Independent Auditors 26 Important Tax Information 27 Board Members Information 29 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, North Carolina Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, North Carolina Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Scott Sprauer. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE Scott Sprauer, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, North Carolina Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 6.46% for Class A shares, 5.85% for Class B shares and 5.60% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper North Carolina Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 6.03% .(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. The fund's performance benefited from falling interest rates throughout much of the reporting period. However, market weakness later in the reporting period erased some of those earlier gains. The fund had competitive returns relative to its Lipper category average, which we attribute to our relatively defensive strategy, especially during the reporting period's second half. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and North Carolina state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, we evaluate supply-and-demand factors in the bond market that are affected by the relatively few municipal bonds historically issued by North Carolina. Based on that assessment, we select the individual North Carolina tax-exempt bonds that we believe are most likely to provide the highest returns with the least risk. We look at such criteria as the bond's yield, price, age, creditworthiness of its issuer, insur- The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) ance and any provisions for early redemption. Under most circumstances, we look for high yielding bonds that have 10-year call protection and that are selling at a premium to face value. Second, while we do not attempt to predict changes in interest rates, we may tactically manage the fund' s average duration -- a measure of sensitivity to changes in interest rates -- in anticipation of temporary supply-and-demand changes. If we expect the supply of newly issued bonds to increase, we may reduce the fund's average duration to make cash available for the purchase of higher yielding securities. Conversely, if we expect demand for municipal bonds to surge at a time when we anticipate little issuance, we may increase the fund's average duration to maintain current yields for as long as practical. What other factors influenced the fund's performance? With capital spending falling and unemployment rising, the U.S. economy had already weakened when the reporting period began. These conditions worsened after the September 11 terrorist attacks. In this environment, the Federal Reserve Board (the "Fed") attempted to stimulate economic growth by aggressively reducing short-term interest rates to their lowest level in 40 years. As the economy deteriorated, the municipal bond market rallied. That's because yields on newly issued bonds fell along with interest rates, making existing bonds more valuable. In addition, municipal bond prices moved higher as demand surged from investors seeking an investment alternative to a declining stock market. Bonds from North Carolina issuers remained in short supply, keeping yields low when compared to bonds from most other states. In this environment, we gradually reduced the fund's average duration by selling some of the fund' s more aggressive, long-term holdings, thereby limiting the fund' s interest-rate-related risks. However, because of the historically low interest-rate environment, it made little sense to replace more of the fund's higher yielding holdings with new securities offering lower yields. The fund also benefited from our focus on credit quality. The sale of certain tax-exempt corporate bonds last summer was particularly beneficial in the aftermath of the September 11 terrorist attacks, when bonds issued by airlines and other corporate entities were hard-hit. Greater attention to quality also helped during the second half of the reporting period as recession-related concerns affected other areas of the corporate market. What is the fund's current strategy? Although we do not manage the fund according to interest-rate trends, we have nonetheless positioned the fund defensively to protect against potential interest-rate increases later this year. The fund' s defensive stance also reflects our expectation that the supply of newly issued municipal bonds may increase throughout the United States as state and local governments struggle with widening budget deficits. Although we expect the supply of North Carolina bonds to remain low, the state is part of -- and often moves in tandem with -- the broader national market. Accordingly, we have continued to focus on income-oriented bonds with maturities in the 20-year range. Of course, within the constraints of the limited supply of North Carolina bonds, we are prepared to change our strategy as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-NORTH CAROLINA RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, North Carolina Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, NORTH CAROLINA SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN NORTH CAROLINA MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN NORTH CAROLINA MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception -------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 1.69% 4.46% 5.73% WITHOUT SALES CHARGE 6.46% 5.42% 6.21% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 1.85% 4.54% -- 5.35% ((+)(+)) WITHOUT REDEMPTION 1/15/93 5.85% 4.88% -- 5.35% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.60% 4.66% -- 5.15% WITHOUT REDEMPTION 8/15/95 5.60% 4.66% -- 5.15% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--96.9% Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- NORTH CAROLINA--75.6% Appalachian State University, Housing and Student Center System Revenue 5.60%, 7/15/2020 (Insured; FSA) 1,000,000 1,056,890 Buncombe County Metropolitan Sewage District, Sewage System Revenue 6.75%, 7/1/2022 (Prerefunded 7/1/2002) 500,000 (a) 514,370 Cabarrus County, COP, Installment Financing Contract 5.50%, 4/1/2014 2,000,000 2,155,740 Charlotte: 5%, 7/1/2022 2,110,000 (b) 2,105,886 5.60%, 6/1/2022 2,770,000 2,941,048 Airport Revenue 5.75%, 7/1/2029 (Insured; MBIA) 1,500,000 1,569,645 Storm Water Fee Revenue: 5.25%, 6/1/2020 (Prerefunded 6/1/2010) 1,000,000 (a) 1,024,890 6%, 6/1/2025 2,000,000 2,290,700 Water and Sewer System Revenue 5.25%, 6/1/2025 1,710,000 1,722,825 Henderson County, COP (Henderson County School Projects) 5%, 3/1/2015 (Insured; AMBAC) 1,630,000 1,680,139 New Hanover County: COP (New Hanover County Projects) 5.25%, 12/1/2018 (Insured; AMBAC) 1,640,000 1,690,938 Public Improvement 5.75%, 11/1/2017 1,700,000 1,861,279 New Hanover County Industrial Facilities and Pollution Control Financing Authority (Occidental Petroleum) 6.50%, 8/1/2014 1,000,000 1,017,060 North Carolina Eastern Municipal Power Agency, Power System Revenue: 5.70%, 1/1/2013 (Insured; MBIA) 2,690,000 2,873,404 6%, 1/1/2022 (Insured; ACA) 1,000,000 1,049,070 6.75%, 1/1/2026 (Insured; ACA) 3,000,000 3,250,590 North Carolina Capital Facilities Finance Agency, Revenue (Duke University Project) 5.125%, 10/1/2026 1,245,000 1,236,372 North Carolina Educational Assistance Authority, Guaranteed Student Loan Revenue 6.35%, 7/1/2016 4,375,000 4,590,206 North Carolina Housing Finance Agency, Single Family Revenue 6.50%, 9/1/2026 3,270,000 3,401,291 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- NORTH CAROLINA (CONTINUED) North Carolina Medical Care Commission, Health, Hospital and Nursing Home Revenue: (Depaul Community Facilities Project) 7.625%, 11/1/2029 2,115,000 2,151,378 (North Carolina Housing Foundation Inc.) 6.625%, 8/15/2030 (Insured; ACA) 3,250,000 3,516,825 (Northeast Medical Center Project): 5.50%, 11/1/2025 (Insured; AMBAC) 1,000,000 1,024,910 5.50%, 11/1/2030 (Insured; AMBAC) 2,000,000 2,037,780 (Southeast Regional Medical Center) 6.25%, 6/1/2029 2,000,000 2,092,200 (Wilson Memorial Hospital Project) Zero Coupon, 11/1/2016 (Insured; AMBAC) 3,055,000 1,440,799 North Carolina Municipal Power Agency Number 1, Catawba Electric Revenue 5.50%, 1/1/2015 (Insured; MBIA) 4,000,000 4,340,480 Pitt County, COP (School Facilities Project) 5.30%, 4/1/2021 (Insured; FSA) 550,000 558,586 Raleigh Durham Airport Authority, Airport Revenue 5.25%, 11/1/2019 (Insured; FGIC) 3,000,000 3,047,850 Rockingham, COP 5%, 4/1/2018 (Insured; AMBAC) 1,785,000 1,796,138 Shelby, Combined Enterprise System Revenue 5.625%, 5/1/2014 1,000,000 1,039,680 Thomasville Combined Enterprise System, Revenue 5.125%, 5/1/2027 (Insured; MBIA) 1,000,000 (b) 1,000,250 University of North Carolina, Multiple Utility Revenues Zero Coupon, 8/1/2018 1,250,000 531,637 U.S. RELATED--21.3% Guam Power Authority, Electric Power and Light Revenues 6.30%, 10/1/2022 (Prerefunded 10/1/2002) 2,000,000 (a) 2,079,660 Commonwealth of Puerto Rico 6.80%, 7/1/2021 (Prerefunded 7/1/2002) 600,000 (a) 614,376 Puerto Rico Housing Finance Corp., Home Mortgage Revenue 5.20%, 12/1/2033 3,000,000 2,965,440 Puerto Rico Public Finance Corp.: 5.375%, 8/1/2024 (Insured; MBIA) 4,000,000 4,129,160 6%, 8/1/2026 2,000,000 2,202,760 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- U.S. RELATED (CONTINUED) Virgin Islands Public Finance Authority, Revenues: Matching Fund Loan Notes 7.25%, 10/1/2018 (Prerefunded 10/1/2002) 4,000,000 (a) 4,174,960 Sub Lien Fund Loan Notes 5.875%, 10/1/2018 1,500,000 1,477,425 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $77,576,216) 80,254,637 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--2.4% ------------------------------------------------------------------------------------------------------------------------------------ University of North Carolina Hospital (Chapel Hill) Revenue, VRDN 1.75% (cost $2,000,000) 2,000,000 (c) 2,000,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $79,576,216) 99.3% 82,254,637 CASH AND RECEIVABLES (NET) .7% 573,486 NET ASSETS 100.0% 82,828,123 Summary of Abbreviations ACA American Capital Access AMBAC American Municipal Bond Assurance Corporation COP Certificate of Participation FGIC Financial Guaranty Insurance Company FSA Financial Security Assurance MBIA Municipal Bond Investors Assurance Insurance Corporation VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 55.2 AA Aa AA 15.2 A A A 21.6 BBB Baa BBB 1.2 F1 MIG1 SP1 2.4 Not Rated (d) Not Rated (d) Not Rated (d) 4.4 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) PURCHASED ON A DELAYED DELIVERY BASIS. (C) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (D) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 79,576,216 82,254,637 Cash 189,578 Receivable for investment securities sold 2,131,973 Interest receivable 1,404,129 Receivable for shares of Beneficial Interest subscribed 8,352 Prepaid expenses 14,874 86,003,543 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 62,677 Payable for investment securities purchased 3,099,024 Payable for shares of Beneficial Interest redeemed 950 Accrued expenses 12,769 3,175,420 -------------------------------------------------------------------------------- NET ASSETS ($) 82,828,123 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 82,028,810 Accumulated net realized gain (loss) on investments (1,879,108) Accumulated net unrealized appreciation (depreciation) on investments 2,678,421 -------------------------------------------------------------------------------- NET ASSETS ($) 82,828,123 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 61,807,328 19,597,971 1,422,824 Shares Outstanding 4,600,300 1,459,852 105,857 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 13.44 13.42 13.44 SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 4,449,097 EXPENSES: Management fee--Note 3(a) 445,795 Shareholder servicing costs--Note 3(c) 259,830 Distribution fees--Note 3(b) 105,565 Registration fees 18,992 Prospectus and shareholders' reports 12,524 Professional fees 12,074 Custodian fees 10,014 Trustees' fees and expenses--Note 3(d) 2,247 Loan commitment fees--Note 2 1,155 Miscellaneous 9,006 TOTAL EXPENSES 877,202 INVESTMENT INCOME--NET 3,571,895 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments (997,705) Net unrealized appreciation (depreciation) on investments 2,291,738 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,294,033 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 4,865,928 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ---------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 3,571,895 3,694,418 Net realized gain (loss) on investments (997,705) 122,880 Net unrealized appreciation (depreciation) on investments 2,291,738 2,271,070 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,865,928 6,088,368 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (2,747,300) (2,825,296) Class B shares (778,222) (842,453) Class C shares (45,743) (26,669) TOTAL DIVIDENDS (3,571,265) (3,694,418) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 7,621,941 6,200,661 Class B shares 3,875,030 3,663,902 Class C shares 701,874 192,192 Dividends reinvested: Class A shares 1,353,911 1,417,239 Class B shares 426,538 478,018 Class C shares 24,130 9,851 Cost of shares redeemed: Class A shares (5,154,953) (8,248,660) Class B shares (4,023,508) (5,597,771) Class C shares (74,754) (135,096) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 4,750,209 (2,019,664) TOTAL INCREASE (DECREASE) IN NET ASSETS 6,044,872 374,286 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 76,783,251 76,408,965 END OF PERIOD 82,828,123 76,783,251 SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, -------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A( A) Shares sold 567,296 469,421 Shares issued for dividends reinvested 100,649 107,714 Shares redeemed (383,948) (628,825) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 283,997 (51,690) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 288,164 275,821 Shares issued for dividends reinvested 31,737 36,395 Shares redeemed (298,690) (426,725) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 21,211 (114,509) -------------------------------------------------------------------------------- CLASS C Shares sold 52,399 14,447 Shares issued for dividends reinvested 1,792 749 Shares redeemed (5,563) (10,411) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 48,628 4,785 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 173,856 CLASS B SHARES REPRESENTING $2,352,835 WERE AUTOMATICALLY CONVERTED TO 173,723 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 295,337 CLASS B SHARES REPRESENTING $3,892,332 WERE AUTOMATICALLY CONVERTED TO 295,106 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, -------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.21 12.79 13.95 13.91 13.23 Investment Operations: Investment income--net .61(b) .66 .65 .66 .67 Net realized and unrealized gain (loss) on investments .23 .42 (1.12) .11 .68 Total from Investment Operations .84 1.08 (.47) .77 1.35 Distributions: Dividends from investment income--net (.61) (.66) (.65) (.66) (.67) Dividends from net realized gain on investments -- -- (.04) (.07) -- Total Distributions (.61) (.66) (.69) (.73) (.67) Net asset value, end of period 13.44 13.21 12.79 13.95 13.91 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.46 8.57 (3.38) 5.63 10.39 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .95 .95 .97 .94 .87 Ratio of net investment income to average net assets 4.54 5.01 4.97 4.68 4.89 Portfolio Turnover Rate 36.45 32.30 39.92 41.15 32.28 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ X 1,000) 61,807 57,033 55,883 47,794 41,592 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS BY LESS THAN .01%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ------------------------------------------------------------------------ CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.20 12.78 13.94 13.90 13.22 Investment Operations: Investment income--net .54(b) .59 .58 .59 .60 Net realized and unrealized gain (loss) on investments .22 .42 (1.12) .11 .68 Total from Investment Operations .76 1.01 (.54) .70 1.28 Distributions: Dividends from investment income--net (.54) (.59) (.58) (.59) (.60) Dividends from net realized gain on investments -- -- (.04) (.07) -- Total Distributions (.54) (.59) (.62) (.66) (.60) Net asset value, end of period 13.42 13.20 12.78 13.94 13.90 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.85 8.03 (3.88) 5.10 9.84 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.45 1.45 1.48 1.44 1.38 Ratio of net investment income to average net assets 4.04 4.50 4.42 4.16 4.39 Portfolio Turnover Rate 36.45 32.30 39.92 41.15 32.28 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ X 1,000) 19,598 18,994 19,854 39,535 45,296 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.03% TO 4.04%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ------------------------------------------------------------------------ CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 13.22 12.80 13.96 13.90 13.22 Investment Operations: Investment income--net .51(b) .56 .55 .56 .57 Net realized and unrealized gain (loss) on investments .22 .42 (1.12) .13 .68 Total from Investment Operations .73 .98 (.57) .69 1.25 Distributions: Dividends from investment income--net (.51) (.56) (.55) (.56) (.57) Dividends from net realized gain on investments -- -- (.04) (.07) -- Total Distributions (.51) (.56) (.59) (.63) (.57) Net asset value, end of period 13.44 13.22 12.80 13.96 13.90 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.60 7.78 (4.10) 5.02 9.58 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.68 1.68 1.72 1.63 1.62 Ratio of net investment income to average net assets 3.76 4.27 4.22 3.83 4.08 Portfolio Turnover Rate 36.45 32.30 39.92 41.15 32.28 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ X 1,000) 1,423 756 671 434 44 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS BY LESS THAN .01%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. B BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. C EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001 offers eleven series including the North Carolina Series (the "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 Dreyfus Corporation (the "Manager" ) serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (a) Portfolio valuation: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premiums and discounts on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $8,062 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. (c) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the " Code" ). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $1,879,108 and unrealized appreciation $2,678,421. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $306,110 of the carryover expires in fiscal 2008, $575,544 of the carryover expires in fiscal 2009 and $997,454 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: tax exempt income $3,571,265 and $3,694,418, respectively. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $2,878, decreased accumulated net realized gain (loss) on investments by $10,635 and increased paid-in capital by $13,513. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (a) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $20,633 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (b) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $96,446 and $9,119, respectively, pursuant to the Plan. (c) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $151,371, $48,223 and $3,040 respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $36,486 pursuant to the transfer agency agreement. (d) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $30,948,146 and $28,285,490, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $79,576,216; accordingly, accumulated net unrealized appreciation on investments was $2,678,421, consisting of $2,731,775 gross unrealized appreciation and $53,354 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $2,248 increase in accumulated undistributed investment income-net and a corresponding $2,248 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the period ended April 30, 2002 was to increase net investment income by $630, increase net unrealized appreciation (depreciation) by $2,248 and decrease net realized gain (loss) by $2,878. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, North Carolina Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, North Carolina Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, North Carolina Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 The Fund IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as "exempt-interest dividends" (not subject to regular Federal and, for individuals who are North Carolina residents, North Carolina personal income taxes). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund's taxable ordinary dividends (if any) and capital gain distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. BOARD MEMBERS INFORMATION (Unaudited) JOSEPH S. DIMARTINO (58) CHAIRMAN OF THE BOARD (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- CLIFFORD L. ALEXANDER (68) BOARD MEMBER (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- PEGGY C. DAVIS (58) BOARD MEMBER (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983-present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 The Fund BOARD MEMBERS INFORMATION (CONTINUED) ERNEST KAFKA (69) BOARD MEMBER (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962-present) * Instructor at the New York Psychoanalytic Institute (1981-present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987-2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- NATHAN LEVENTHAL (58) BOARD MEMBER (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997-Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984-December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. The Fund For More Information Dreyfus Premier State Municipal Bond Fund, North Carolina Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 065AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Ohio Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 15 Statement of Assets and Liabilities 16 Statement of Operations 17 Statement of Changes in Net Assets 19 Financial Highlights 22 Notes to Financial Statements 28 Report of Independent Auditors 29 Important Tax Information 30 Board Members Information 32 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Ohio Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Ohio Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you' ll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, W. Michael Petty. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE W. Michael Petty, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Ohio Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund produced a total return of 6.35% for Class A shares, 5.82% for Class B shares and 5.65% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Ohio Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 6.04%.(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. The municipal bond market was volatile during the reporting period, with prices rising strongly as interest rates declined and later falling sharply when the U.S. economy began to show signs of recovery. Nonetheless, long-term municipal bond prices and yields ended the year close to where they began. We are pleased with the fund' s performance relative to its Lipper category average, which we attribute to its relatively defensive positioning during the second half of the reporting period. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Ohio state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, we evaluate supply-and-demand factors in the bond market that are affected by the relatively few municipal bonds historically issued by Ohio. Based on that assessment, we select the individual Ohio tax-exempt bonds that we believe are most likely to provide the highest returns with the least risk. We look at such criteria as the bond's yield, price, age, creditwor- The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) thiness of its issuer, insurance and any provisions for early redemption. Under most circumstances, we look for high yielding bonds that have 10-year call protection and that are selling at a discount to face value. Second, while we do not attempt to predict changes in interest rates, we may tactically manage the fund' s average duration -- a measure of sensitivity to changes in interest rates -- in anticipation of temporary supply-and-demand changes. If we expect the supply of newly issued bonds to increase, we may reduce the fund' s average duration to make cash available for the purchase of higher yielding securities. Conversely, if we expect demand for municipal bonds to surge at a time when we anticipate little issuance, we may increase the fund' s average duration to maintain current yields for as long as practical. At other times, we try to maintain a "neutral" average duration consistent with that of other Ohio municipal bond funds. What other factors influenced the fund's performance? Anemic corporate profits in early and mid-2001 led to dramatic reductions in capital spending, widespread layoffs and an economic slowdown. These conditions were intensified by the September 11 terrorist attacks. In response, the Federal Reserve Board (the "Fed") reduced short-term interest rates, which by year-end 2001 fell to their lowest levels in 40 years. During 2001, tax-exempt bond yields fell along with interest rates, and prices rose, boosting the fund's total returns. However, because we had expected the economy to begin to improve during the fall of 2001, the fund had already adopted a relatively defensive stance. Its performance was impacted when the September 11 attacks postponed any potential for recovery and the Fed cut interest rates further. The fund more than made up for any lost ground during the second half of the reporting period. Signs of economic recovery began to appear in early 2002, and the economy gained momentum through the first four months of the year. The Fed responded by keeping interest rates steady. However, because investors apparently expected interest rates to rise in the relatively near future, municipal bond prices generally fell. The fund's defensive positioning -- which included a focus on income-oriented securities with protection from early redemption -- helped it avoid the brunt of those declines. What is the fund's current strategy? We have continued to maintain a relatively defensive stance, emphasizing income-oriented bonds in the 20- to 25-year range. As of April 30, 2002, the fund was less sensitive to changes in interest rates than the majority of its peers. In our view, this stance is prudent as bond issuance is likely to increase as states and municipalities borrow to finance their budget deficits, which could cause municipal bond yields to rise in Ohio and elsewhere. Although Ohio was affected by the weak U.S. economy, leading to a projected state budget deficit, we believe that the state remains fiscally sound. Nonetheless, we have recently favored bonds of local municipalities, where tax revenues are derived from property taxes, over Ohio' s uninsured general obligation bonds, which are backed by income taxes. Of course, we are prepared to change our strategy and the fund's composition as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-OHIO RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Ohio Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, OHIO SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN OHIO MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN OHIO MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 1.56% 4.32% 5.66% WITHOUT SALES CHARGE 6.35% 5.29% 6.15% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 1.82% 4.43% -- 5.39% ((+)(+)) WITHOUT REDEMPTION 1/15/93 5.82% 4.76% -- 5.39% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.65% 4.51% -- 4.87% WITHOUT REDEMPTION 8/15/95 5.65% 4.51% -- 4.87% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--95.4% Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- OHIO--94.2% Akron: 6%, 12/1/2012 1,380,000 1,584,737 5.50%, 12/1/2020 (Insured; MBIA) 1,460,000 1,518,940 Sewer Systems Revenue 5.875%, 12/1/2016 (Insured; MBIA) 1,200,000 1,275,108 Akron-Wilbeth Housing Development Corp., First Mortgage Revenue 7.90%, 8/1/2003 (Insured; FHA) 695,000 723,321 Cincinnati City School District, School Improvement 5.375%, 12/1/2018 (Insured; MBIA) 6,560,000 6,823,778 Clermont County, Hospital Facilities Revenue (Mercy Health Systems) 5.625%, 9/1/2016 (Insured; AMBAC) 4,250,000 4,500,707 City of Cleveland: Airport Special Revenue (Continental Airlines Inc. Project): 5.50%, 12/1/2008 5,000,000 4,553,900 5.70%, 12/1/2019 2,000,000 1,605,640 5.375%, 9/15/2027 5,000,000 3,657,250 Airport System Revenue 5%, 1/1/2031 (Insured; FSA) 1,000,000 965,240 COP: (Motor Vehicle, Motorized and Communication Equipment) 7.10%, 7/1/2002 135,000 135,987 (Stadium Project) 5.25%, 11/15/2022 (Insured; AMBAC) 1,210,000 1,222,342 Parking Facility Improvement Revenue 8%, 9/15/2012 (Prerefunded 9/15/2002) 5,000,000 (a) 5,216,850 Public Power System Revenue 5.125%, 11/15/2018 (Insured; MBIA) 9,650,000 9,757,115 Waterworks Revenue 5.50%, 1/1/2021 (Insured; MBIA) 8,000,000 8,556,800 Cleveland-Cuyahoga County Port Authority, Revenue: (Capital Improvements Project) 5.375%, 5/15/2019 5,000 4,567 (Port of Cleveland) 5.375%, 5/15/2018 2,450,000 2,311,624 Special Assessment/Tax Increment: 7%, 12/1/2018 2,345,000 2,307,597 7.35%, 12/1/2031 2,655,000 2,661,930 Cuyahoga County: HR: Improvement (MetroHealth Systems Project) 6.125%, 2/15/2024 4,845,000 4,965,156 Hospital Facilities Revenue (Canton Inc. Project) 7.50%, 1/1/2030 5,250,000 5,674,305 Mortgage Revenue (West Tech Apartments Project) 5.95%, 9/20/2042 (Guaranteed; GNMA) 5,295,000 5,360,076 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ OHIO (CONTINUED) Erie County, Hospital Facilities Revenue (Firelands Regional Medical Center) 5.625%, 8/15/2032 1,500,000 (b) 1,474,155 Eaton, IDR (Baxter International Inc. Project) 6.50%, 12/1/2012 1,500,000 1,566,615 Village of Evendale, IDR (Ashland Oil Inc. Project) 6.90%, 11/1/2010 2,000,000 2,038,400 Fairfield City School District, School Improvement Unlimited Tax: 7.20%, 12/1/2011 (Insured; FGIC) (Prerefunded 2/1/2005) 1,000,000 (a) 1,173,910 7.20%, 12/1/2012 (Insured; FGIC) (Prerefunded 2/1/2005) 1,250,000 (a) 1,467,387 6.10%, 12/1/2015 (Insured; FGIC) (Prerefunded 2/1/2005) 2,000,000 (a) 2,219,160 5.375%, 12/1/2019 (Insured; FGIC) 1,860,000 1,921,826 5.375%, 12/1/2020 (Insured; FGIC) 1,400,000 1,440,068 6%, 12/1/2020 (Insured; FGIC) (Prerefunded 2/1/2005) 2,000,000 (a) 2,212,400 Findlay 5.875%, 7/1/2017 2,000,000 2,125,940 Forest Hills Local School District 5.70%, 12/1/2016 (Insured; MBIA) 1,000,000 1,062,630 Franklin County: Health Care Facilities Revenue, Improvement (Friendship Village of Columbus) 5.375%, 8/15/2028 (Insured; ACA) 4,250,000 4,040,942 HR: (Children's Hospital Project) 6.60%, 5/1/2013 4,000,000 4,161,640 Holy Cross Health Systems Corp.: (Mount Carmel Health) 6.75%, 6/1/2019 (Insured; MBIA) (Prerefunded 6/1/2002) 2,500,000 (a) 2,561,075 Improvement 5.80%, 6/1/2016 2,000,000 2,093,540 Gallia County Local School District 7.375%, 12/1/2004 570,000 635,100 Greater Cleveland Gateway Economic Development Corp., Stadium Revenue 7.50%, 9/1/2005 (Prerefunded 12/1/2006) 3,275,000 (a) 3,353,862 Greater Cleveland Regional Transit Authority 5.65%, 12/1/2016 (Insured; FGIC) 5,445,000 6,073,516 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ------------------------------------------------------------------------------------------------------------------------------------ OHIO (CONTINUED) Hamilton County: Sales Tax Revenue Zero Coupon, 12/1/2027 (Insured; AMBAC) 18,440,000 4,449,019 Sewer System Revenue: 5.25%, 12/1/2019 (Insured; MBIA) 1,000,000 1,020,720 5.25%, 12/1/2020 (Insured; MBIA) 1,000,000 1,015,380 Hamilton County, Hospital Facilities Improvement Revenue (Deaconess Hospital) 7%, 1/1/2012 2,570,000 2,637,205 Highland Local School District, School Improvement: 5.75%, 12/1/2018 (Insured; FSA) 1,675,000 1,807,392 5.75%, 12/1/2020 (Insured; FSA) 2,020,000 2,158,774 Hilliard School District, School Improvement: Zero Coupon, 12/1/2013 (Insured; FGIC) 1,655,000 957,434 Zero Coupon, 12/1/2014 (Insured; FGIC) 1,655,000 900,999 Kirtland Local School District 7.50%, 12/1/2009 760,000 762,060 Knox County, IDR (Weyerhaeuser Co. Project) 9%, 10/1/2007 1,000,000 1,139,300 Lakota Local School District 6.125%, 12/1/2017 (Insured; AMBAC) (Prerefunded 12/1/2005) 1,075,000 (a) 1,193,712 Lebanon City School District 5.50%, 12/1/2021 (Insured; FSA) 4,050,000 4,204,103 Lowellville, Sanitary Sewer Systems Revenue (Browning-Ferris Industries Inc.) 7.25%, 6/1/2006 800,000 801,656 Marion County, Health Care Facilities Revenue, Improvement (United Church Homes Inc.) 6.375%, 11/15/2010 2,445,000 2,431,430 Milford Exempt Village School District, School Improvement 6%, 12/1/2020 (Insured; FSA) 1,910,000 2,085,128 Monroe Local School District, School Improvement 5%, 12/1/2029 (Insured; AMBAC) 1,500,000 1,453,035 Moraine, SWDR (General Motors Corp. Project): 6.75%, 7/1/2014 5,000,000 5,598,300 5.65%, 7/1/2024 3,800,000 3,924,108 Marysville Exempt Village School District 5.35%, 12/1/2025 (Insured; FSA) 2,010,000 2,039,869 Middleburg Heights 4.375%, 12/1/2018 1,745,000 1,612,764 North Royalton City School District 6.10%, 12/1/2019 (Insured; MBIA) 2,500,000 2,756,375 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- OHIO (CONTINUED) State of Ohio: Economic Development Revenue Ohio Enterprise Bond Fund (VSM Corp. Project) 7.375%, 12/1/2011 885,000 903,957 PCR (Standard Oil Co. Project) 6.75%, 12/1/2015 (Guaranteed; British Petroleum Co. p.l.c.) 2,700,000 3,278,745 Ohio Air Quality Development Authority, PCR (Cleveland Electric Illuminating Co. Project) 6.85%, 7/1/2023 5,250,000 5,388,443 Ohio Building Authority, State Facilities (Juvenile Correctional Projects) 6.60%, 10/1/2014 (Insured; AMBAC) (Prerefunded 10/1/2004) 1,660,000 (a) 1,852,344 Ohio Capital Corporation for Housing, Mortgage Revenue 5.55%, 8/1/2024 (Insured; FHA) 6,370,000 6,349,234 Ohio Housing Finance Agency, Residential Mortgage Revenue: 6.35%, 9/1/2031 (Guaranteed; GNMA) 4,845,000 5,071,988 6.05%, 9/1/2017 (Guaranteed; GNMA) 2,915,000 3,036,497 Ohio Turnpike Commission, Turnpike Revenue, Highway Improvements: 5.75%, 2/15/2024 (Prerefunded 2/15/2004) 6,100,000 (a) 6,567,321 5.50%, 2/15/2026 3,700,000 3,802,194 Ohio State University, General Receipts 5.125%, 12/1/2031 4,000,000 3,934,000 Ohio Water Development Authority, Fresh Water Revenue 5.90%, 12/1/2015 (Insured; AMBAC) (Prerefunded 6/1/2005) 4,650,000 (a) 5,151,968 Parma, Hospital Improvement Revenue (Parma Community General Hospital Association) 5.375%, 11/1/2029 4,000,000 3,765,120 Pickerington Local School District, School Facilities Construction and Improvement 5.25%, 12/1/2020 (Insured; FGIC) 6,000,000 6,101,400 Rickenbacker Port Authority, Capital Funding Revenue (Oasbo Expanded Asset Pooled) 5.375%, 1/1/2032 4,400,000 4,288,240 Shelby County, Hospital Facilities Revenue, Improvement (The Shelby County Memorial Hospital Association) 7.70%, 9/1/2018 (Prerefunded 9/1/2002) 2,500,000 (a) 2,598,850 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- OHIO (CONTINUED) Southwest Regional Water District, Water Revenue: 6%, 12/1/2015 (Insured; MBIA) 1,600,000 1,724,464 6%, 12/1/2020 (Insured; MBIA) 1,250,000 1,347,237 Strongsville, Library Improvement: 5%, 12/1/2015 (Insured; FGIC) 1,180,000 1,213,901 5.50%, 12/1/2020 (Insured; FGIC) 1,700,000 1,771,264 Student Loan Funding Corp., Student Loan Revenue 7.20%, 8/1/2003 235,000 235,566 Summit County 6.50%, 12/1/2016 (Insured; FGIC) (Prerefunded 12/1/2010) 2,000,000 (a) 2,305,880 Summit County Port Authority, Revenue (Civic Theatre Project) 5.50%, 12/1/2026 (Insured; AMBAC) 1,000,000 1,029,600 Toledo 5.625%, 12/1/2011 (Insured; AMBAC) 1,000,000 1,078,200 University of Cincinnati, University and College Revenue: 5.75%, 6/1/2018 2,165,000 2,343,115 5.75%, 6/1/2019 1,500,000 1,614,675 Warren, Waterworks Revenue 5.50%, 11/1/2015 (Insured; FGIC) 1,450,000 1,590,447 Youngstown: 5.375%, 12/1/2025 (Insured; AMBAC) 2,195,000 2,232,732 6%, 12/1/2031 (Insured; AMBAC) 2,370,000 2,560,406 U.S. RELATED--1.2% Virgin Islands Public Finance Authority, Revenue 6.375%, 10/1/2019 3,000,000 3,235,920 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $240,839,708) 248,327,607 Principal SHORT-TERM MUNICIPAL INVESTMENTS--3.1% Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- OHIO: Cuyuhoga County, HR, VRDN (Cleveland Clinic Foundation) 1.70% (SBPA; Bank of America) 1,000,000 (c) 1,000,000 Ohio Air Quality Development Authority, Revenue, VRDN: (Cincinnati Gas and Electric) 1.75% 1,000,000 (c) 1,000,000 (Toledo Edison Co.) 1.70% (LOC; Barclay's Bank) 4,000,000 (c) 4,000,000 Trumball County, Health Care Facility Revenue, VRDN (Shepherd of the Valley Lutheran) 1.70% (SBPA; Fleet Bank) 2,000,000 (c) 2,000,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $8,000,000) 8,000,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $248,839,708) 98.5% 256,327,607 CASH AND RECEIVABLES (NET) 1.5% 3,983,321 NET ASSETS 100% 260,310,928 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Summary of Abbreviations ACA American Capital Access AMBAC American Municipal Bond Assurance Corporation COP Certificate of Participation FGIC Financial Guaranty Insurance Company FHA Federal Housing Administration FSA Financial Security Assurance GNMA Government National Mortgage Association HR Hospital Revenue IDR Industrial Development Revenue LOC Letter of Credit MBIA Municipal Bond Investors Assurance Insurance Corporation PCR Pollution Control Revenue SBPA Standby Bond Purchase Agreement SWDR Solid Waste Disposal Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 54.6 AA Aa AA 12.7 A A A 13.1 BBB Baa BBB 8.9 BB Ba BB 4.1 F1 MIG1 SP1 3.1 Not Rated (d) Not Rated (d) Not Rated (d) 3.5 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) PURCHASED ON A DELAYED DELIVERY BASIS. (C) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (D) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 248,839,708 256,327,607 Interest receivable 4,695,288 Receivable for investment securities sold 1,047,542 Receivable for shares of Beneficial Interest subscribed 108,586 Prepaid expenses 15,010 262,194,033 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 191,615 Cash overdraft due to Custodian 65,488 Payable for investment securities purchased 1,471,292 Payable for shares of Beneficial Interest redeemed 91,837 Accrued expenses 62,873 1,883,105 -------------------------------------------------------------------------------- NET ASSETS ($) 260,310,928 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 253,754,042 Accumulated net realized gain (loss) on investments (931,013) Accumulated net unrealized appreciation (depreciation) on investments 7,487,899 -------------------------------------------------------------------------------- NET ASSETS ($) 260,310,928 NET ASSET VALUE PER SHARE Class A Class B Class C ----------------------------------------------------------------------------------------------------------------------------- Net Assets ($) 209,999,838 40,903,893 9,407,197 Shares Outstanding 16,829,902 3,277,131 752,847 ----------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE ($) 12.48 12.48 12.50 SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 14,084,058 EXPENSES: Management fee--Note 3(a) 1,394,838 Shareholder servicing costs--Note 3(c) 797,900 Distribution fees--Note 3(b) 258,680 Professional fees 34,495 Custodian fees 29,115 Registration fees 18,771 Prospectus and shareholders' reports 16,001 Trustees' fees and expenses--Note 3(d) 8,046 Loan commitment fees--Note 2 3,628 Miscellaneous 20,041 TOTAL EXPENSES 2,581,515 INVESTMENT INCOME--NET 11,502,543 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 1,920,612 Net unrealized appreciation (depreciation) on investments 1,784,198 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3,704,810 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 15,207,353 SEE NOTES TO FINANCIAL STATEMENTS. STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ----------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 11,502,543 11,844,348 Net realized gain (loss) on investments 1,920,612 (269,599) Net unrealized appreciation (depreciation) on investments 1,784,198 8,261,575 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 15,207,353 19,836,324 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (9,528,395) (9,946,284) Class B shares (1,652,799) (1,722,420) Class C shares (298,056) (175,644) TOTAL DIVIDENDS (11,479,250) (11,844,348) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 20,754,631 10,936,995 Class B shares 12,822,645 6,898,509 Class C shares 4,832,251 2,299,161 Dividends reinvested: Class A shares 6,126,198 6,347,474 Class B shares 1,033,878 1,125,148 Class C shares 177,684 105,131 Cost of shares redeemed: Class A shares (17,901,390) (27,908,361) Class B shares (12,338,808) (9,959,476) Class C shares (819,812) (455,091) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 14,687,277 (10,610,510) TOTAL INCREASE (DECREASE) IN NET ASSETS 18,415,380 (2,618,534) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 241,895,548 244,514,082 END OF PERIOD 260,310,928 241,895,548 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) Year Ended April 30, --------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 1,660,025 893,739 Shares issued for dividends reinvested 489,727 520,500 Shares redeemed (1,433,194) (2,303,354) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 716,558 (889,115) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 1,025,420 563,184 Shares issued for dividends reinvested 82,621 92,268 Shares redeemed (985,066) (820,892) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 122,975 (165,440) -------------------------------------------------------------------------------- CLASS C Shares sold 385,075 188,444 Shares issued for dividends reinvested 14,186 8,591 Shares redeemed (66,082) (37,619) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 333,179 159,416 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 480,509 CLASS B SHARES REPRESENTING $6,042,379 WERE AUTOMATICALLY CONVERTED TO 480,757 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 351,720 CLASS B SHARES REPRESENTING $4,303,838 WERE AUTOMATICALLY CONVERTED TO 351,872 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, ------------------------------------------------------------------------ CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.29 11.88 12.80 12.86 12.65 Investment Operations: Investment income--net .58(b) .61 .63 .65 .67 Net realized and unrealized gain (loss) on investments .19 .41 (.90) .08 .34 Total from Investment Operations .77 1.02 (.27) .73 1.01 Distributions: Dividends from investment income--net (.58) (.61) (.63) (.65) (.67) Dividends from net realized gain on investments -- -- (.02) (.14) (.13) Total Distributions (.58) (.61) (.65) (.79) (.80) Net asset value, end of period 12.48 12.29 11.88 12.80 12.86 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 6.35 8.75 (2.08) 5.72 8.09 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .92 .91 .91 .91 .90 Ratio of net investment income to average net assets 4.64 5.02 5.20 5.00 5.17 Portfolio Turnover Rate 32.20 27.53 26.70 40.36 24.73 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ X 1,000) 210,000 197,970 201,974 237,027 237,618 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.63% TO 4.64%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, --------------------------------------------------------------------- CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.29 11.88 12.81 12.87 12.65 Investment Operations: Investment income--net .51(b) .55 .57 .58 .60 Net realized and unrealized gain (loss) on investments .20 .41 (.91) .08 .35 Total from Investment Operations .71 .96 (.34) .66 .95 Distributions: Dividends from investment income--net (.52) (.55) (.57) (.58) (.60) Dividends from net realized gain on investments -- -- (.02) (.14) (.13) Total Distributions (.52) (.55) (.59) (.72) (.73) Net asset value, end of period 12.48 12.29 11.88 12.81 12.87 ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.82 8.21 (2.66) 5.17 7.62 ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.42 1.41 1.42 1.42 1.41 Ratio of net investment income to average net assets 4.13 4.51 4.68 4.47 4.65 Portfolio Turnover Rate 32.20 27.53 26.70 40.36 24.73 ----------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ X 1,000) 40,904 38,763 39,445 54,929 50,453 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.12% TO 4.13%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ---------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 12.30 11.89 12.82 12.88 12.66 Investment Operations: Investment income--net .48(b) .52 .54 .55 .57 Net realized and unrealized gain (loss) on investments .21 .41 (.91) .08 .35 Total from Investment Operations .69 .93 (.37) .63 .92 Distributions: Dividends from investment income--net (.49) (.52) (.54) (.55) (.57) Dividends from net realized gain on investments -- -- (.02) (.14) (.13) Total Distributions (.49) (.52) (.56) (.69) (.70) Net asset value, end of period 12.50 12.30 11.89 12.82 12.88 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 5.65 7.92 (2.90) 4.92 7.35 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.65 1.65 1.67 1.66 1.66 Ratio of net investment income to average net assets 3.86 4.21 4.41 4.20 4.38 Portfolio Turnover Rate 32.20 27.53 26.70 40.36 24.73 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ X 1,000) 9,407 5,163 3,095 1,793 579 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 3.85% TO 3.86%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001, offers eleven series including the Ohio Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premium and discount on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $14,927 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $931,013 and unrealized appreciation $7,492,348. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $931,013 of the carryover expires in fiscal 2009. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: tax exempt income $11,479,250 and $11,844,348, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $54,047, increased accumulated net realized gain (loss) on investments by $4,368 and increased paid-in capital by $49,679. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for temporary and emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $116,147 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $200,559 and $58,121, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $514,364, $100,280 and $19,373, respectively, pursuant to the Shareholder Services Plan. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $102,045 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings.These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $83,661,647 and $78,875,673, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $248,835,259; accordingly, accumulated net unrealized appreciation on investments was $7,492,348, consisting of $9,333,364 gross unrealized appreciation and $1,841,016 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $30,754 increase in accumulated undistributed investment income-net and a corresponding $30,754 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the period ended April 30, 2002 was to increase net investment income by $23,293, increase net unrealized appreciation (depreciation) by $26,306 and decrease net realized gains (losses) by $49,599. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. The Fund REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Ohio Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Ohio Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Ohio Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as "exempt-interest dividends" (not subject to regular Federal and, for individuals who are Ohio residents, Ohio personal income taxes). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund's taxable ordinary dividends (if any) and capital gain distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. The Fund BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983-present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962-present) * Instructor at the New York Psychoanalytic Institute (1981-present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987-2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997-Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984-December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER The Fund OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. For More Information Dreyfus Premier State Municipal Bond Fund, Ohio Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 057AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 14 Statement of Assets and Liabilities 15 Statement of Operations 16 Statement of Changes in Net Assets 18 Financial Highlights 21 Notes to Financial Statements 27 Report of Independent Auditors 28 Important Tax Information 29 Board Members Information 31 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Douglas Gaylor. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE Douglas Gaylor, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 5.18% for Class A shares, 4.72% for Class B shares and 4.48% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Pennsylvania Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 6.58% .(3) The fund' s benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. The fund s performance reflected changing economic conditions, including declining interest rates during the first eight months of the reporting period. The fund's returns lagged those of its benchmark and Lipper category average, primarily because of the poor performance among a few tax-exempt corporate bonds that the fund held which were hard-hit during the recession. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Pennsylvania state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, for between one-half and three-quarters of the total fund, we look for bonds that can potentially offer attractive current income. We typically look for bonds that can provide consistently high current yields. We also try to ensure that we select bonds that are most likely to obtain attractive prices if and when we decide to sell them in the secondary market. The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) Second, for the remainder of the fund, we try to look for bonds that we believe have the potential to offer attractive total returns. We typically look for bonds that are selling at a discount to face value because they may be temporarily out of favor among investors. Our belief is that these bonds' prices will rise as they return to favor over time. What other factors influenced the fund's performance? When the reporting period began, the U.S. economy had already weakened considerably. Even before the September 11 terrorist attacks, capital spending by businesses had fallen, the stock market was declining and unemployment was rising. In this environment, the Federal Reserve Board attempted to stimulate renewed economic growth by aggressively reducing short-term interest rates to their lowest level in 40 years. As the economy worsened, the municipal bond market rallied. That's primarily because yields on newly issued bonds fell along with interest rates, making existing bonds more valuable. In addition, municipal bond prices moved higher in response to surging demand from investors seeking a relatively stable alternative to a volatile stock market. Deep-discount bonds benefited greatly from the municipal bond market's rally. Because we had emphasized these securities in 2000 and early 2001 when they were out of favor, they contributed strongly to the fund's performance during the reporting period as they returned to favor among investors. When these bonds reached prices that we considered fully valued, we sold them and locked in profits. When reinvesting the proceeds, we generally favored relatively defensive, income-oriented securities selling either at face value or at modest premiums to the prices they will command when redeemed early -- or called -- by their issuers. We believe that such bonds will hold more of their value if interest rates rise and the municipal bond market declines. However, the positive effects of our security selection strategy were partly offset by problems with certain corporate holdings, which were issued by a leading Pennsylvania-based steel manufacturer. During the fourth quarter of 2001, this company declared bankruptcy after steel prices fell to unacceptably low levels, and it stopped paying interest on its bonds. The fund' s returns during the reporting period reflected the full extent of this default. However, we have kept these bonds in the portfolio in the hope that they will gain value if and when this major U.S. corporation emerges from bankruptcy. Otherwise, we intend to sell them and use the resulting losses to offset other gains for tax purposes. What is the fund's current strategy? We have maintained the fund's relatively defensive positioning, which is designed to produce competitive levels of tax-exempt income in today's low interest-rate environment, while potentially preserving capital if and when the economy recovers and interest rates rise. Accordingly, we have continued to focus primarily on income-oriented bonds with maturities of 15 to 20 years and the potential for early redemption in five to seven years. Bonds with these characteristics have historically appealed to individual investors, which may help to ensure a liquid market when we choose to sell them. As always, we are prepared to change our strategy as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, PENNSYLVANIA SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN PENNSYLVANIA MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN PENNSYLVANIA MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 0.42% 4.16% 5.68% WITHOUT SALES CHARGE 5.18% 5.12% 6.16% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 0.72% 4.25% -- 5.42% ((+)(+)) WITHOUT REDEMPTION 1/15/93 4.72% 4.57% -- 5.42% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 3.48% 4.31% -- 4.81% WITHOUT REDEMPTION 8/15/95 4.48% 4.31% -- 4.81% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--95.5% Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- PENNSYLVANIA--94.6% Allegheny County 5.25%, 11/1/2021 (Insured; FGIC) 1,795,000 1,820,058 Allegheny County Hospital Development Authority, Revenue (Hospital--South Hills Health) 5.125%, 5/1/2029 3,000,000 2,627,670 Allegheny County Industrial Development Authority, Medical Center Revenue (Presbyterian Medical Center of Oakmont Pennsylvania, Inc.) 6.75%, 2/1/2026 (Insured; FHA) 1,645,000 1,761,022 Allegheny County Residential Finance Authority, Health Care Facilities Revenue (GNMA Collateralized--Lemington Home for the Aged Project) 5.75%, 5/20/2037 1,000,000 1,010,970 Berks County Municipal Authority, Revenue (Phoebe--Devitt Homes Project) 5.50%, 5/15/2015 780,000 717,226 Bethlehem Area Vocational Technical School Authority, LR 5%, 9/1/2019 (Insured; MBIA) 895,000 895,215 Big Beaver Falls Area School District 5.25%, 3/15/2015 (Insured; MBIA) 2,000,000 2,045,060 Bradford County Industrial Development Authority, SWDR (International Paper Co. Projects) 6.60%, 3/1/2019 4,250,000 4,354,337 Bucks County Water and Sewer Authority, Revenue Collection Sewer Systems: 5.375%, 6/1/2017 (Insured; AMBAC) 1,340,000 1,399,107 5%, 6/1/2019 (Insured; AMBAC) 1,480,000 1,480,488 Butler County Industrial Development Authority, Health Care Facilities Revenue (Saint John Care Center) 5.80%, 4/20/2029 6,455,000 6,556,989 Cambria County Industrial Development Authority, PCR (Bethlehem Steel Corp. Project) 7.50%, 9/1/2015 4,250,000 (a) 292,825 Canon-McMillan School District, GO Zero Coupon, 12/1/2026 (Insured; FGIC) 2,000,000 504,060 Charleroi Area School Authority, School Revenue Zero Coupon, 10/1/2020 (Insured; FGIC) 2,000,000 736,200 Chester County Health and Education Facilities Authority, Health System Revenue (Jefferson Health System) 5.375%, 5/15/2027 2,000,000 1,930,620 Council Rock School District 5%, 11/15/2020 (Insured; MBIA) 1,400,000 1,395,772 Cumberland County Municipal Authority, College Revenue (Messiah College) 5.125%, 10/1/2015 (Insured; AMBAC) 1,000,000 1,016,580 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) Dauphin County General Authority, Revenue (Office and Parking, Riverfront Office) 6%, 1/1/2025 3,000,000 2,641,140 Erie Zero Coupon, 11/15/2020 (Insured; FSA) 1,610,000 585,122 Erie School District Zero Coupon, 9/1/2015 (Insured; FSA) 1,135,000 580,609 Gettysburg Municipal Authority, College Revenue (Gettysburg College) 4.75%, 8/15/2023 (Insured; AMBAC) 2,000,000 1,878,660 Girtys Run Joint Sewer Authority, Sewer Revenue 4.50%, 11/1/2020 (Insured; FSA) 4,580,000 4,204,486 Harbor Creek School District, GO: 5%, 8/1/2015 (Insured; FGIC) 1,185,000 1,219,483 5%, 8/1/2016 (Insured; FGIC) 2,375,000 2,421,669 Harrisburg Authority, Office and Parking Revenue 6%, 5/1/2019 (Prerefunded 5/1/2008) 2,000,000 (b) 2,250,740 Harrisburg Redevelopment Authority, Revenue: Zero Coupon, 5/1/2018 (Insured; FSA) 2,750,000 1,136,987 Zero Coupon, 11/1/2018 (Insured; FSA) 2,750,000 1,106,050 Zero Coupon, 11/1/2019 (Insured; FSA) 2,750,000 1,035,127 Zero Coupon, 5/1/2020 (Insured; FSA) 2,750,000 994,895 Zero Coupon, 11/1/2020 (Insured; FSA) 2,500,000 879,275 Health Care Facilities Authority of Sayre, Revenue (Guthrie Health Issue): 5.85%, 12/1/2020 3,000,000 3,039,750 5.75%, 12/1/2021 4,750,000 4,770,283 Lower Macungie Township 5.65%, 5/1/2020 (Prerefunded 5/1/2005) 900,000 (b) 972,432 Luzerne County Industrial Development Authority, Exempt Facilities Revenue (Pennsylvania Gas and Water Co. Project) 7.125%, 12/1/2022 4,000,000 4,121,120 McKeesport Area School District, GO Zero Coupon, 10/1/2021 (Insured; AMBAC) 3,455,000 1,193,288 Monroe County Hospital Authority, HR (Pocono Medical Center) 5.50%, 1/1/2022 1,455,000 1,461,926 Montgomery County Higher Educational and Health Authority, Revenue First Mortgage (Montgomery Income Project) 10.50%, 9/1/2020 2,795,000 2,841,900 Montgomery County Industrial Development Authority, RRR 7.50%, 1/1/2012 (LOC; Banque Paribas) 14,715,000 15,145,708 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) Montour School District (Notes): Zero Coupon, 1/1/2024 (Insured; FGIC) 1,155,000 343,878 Zero Coupon, 1/1/2025 (Insured; FGIC) 2,015,000 564,804 Norristown (Asset Guarantee) Zero Coupon, 12/15/2014 1,465,000 762,489 North Allegheny School District 5.05%, 11/1/2021 (Insured; FGIC) 1,455,000 1,454,098 Northampton County General Purpose Authority, County Agreement Revenue 5.125%, 10/1/2020 (Insured; FSA) 2,225,000 2,239,195 Northampton County Industrial Development Authority, PCR (Bethlehem Steel) 7.55%, 6/1/2017 5,700,000 (a) 392,730 Northern York County School District 5.25%, 11/15/2018 (Insured; FSA) 1,160,000 1,166,983 Pennsylvania: 5.375%, 5/1/2014 6,190,000 6,380,590 COP 5%, 7/1/2015 (Insured; AMBAC) 1,000,000 1,005,310 Pennsylvania Economic Development Financing Authority: RRR (Northampton Generating Project) 6.50%, 1/1/2013 6,500,000 6,582,550 Wastewater Treatment Revenue (Sun Co. Inc.--R and M Project) 7.60%, 12/1/2024 4,240,000 4,537,521 Pennsylvania Finance Authority, Guaranteed Revenue (Penn Hills Project): 5.45%, 12/1/2019 (Insured; FGIC) 2,615,000 2,694,914 Zero Coupon, 12/1/2022 (Insured; FGIC) 1,200,000 385,716 Zero Coupon, 12/1/2023 (Insured; FGIC) 3,790,000 1,145,641 Zero Coupon, 12/1/2024 (Insured; FGIC) 3,790,000 1,077,232 Zero Coupon, 12/1/2025 (Insured; FGIC) 3,790,000 1,015,114 Pennsylvania Higher Educational Facilities Authority, Revenue: (State Higher Education System): 5%, 6/15/2019 (Insured; AMBAC) 560,000 560,168 5%, 6/15/2020 (Insured; AMBAC) 1,915,000 1,904,736 (UPMC Health System) 6%, 1/15/2022 5,000,000 5,059,950 Pennsylvania Housing Finance Agency: 5%, 4/1/2016 2,000,000 2,012,620 Rental Housing 6.50%, 7/1/2023 2,750,000 2,816,880 Single Family Mortgage: 6.75%, 4/1/2016 3,000,000 3,076,830 6.875%, 10/1/2024 1,065,000 1,100,156 6.90%, 4/1/2025 3,335,000 3,440,586 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue (Philadelphia Funding Program): 5.25%, 6/15/2015 (Insured; FGIC) 1,000,000 1,038,750 5.50%, 6/15/2016 (Insured; FGIC) 2,750,000 2,831,977 4.75%, 6/15/2023 (Insured; FGIC) 11,700,000 10,965,006 Pennsylvania Public School Building Authority, Revenue (Marple Newtown School District Project) 5%, 3/1/2019 (Insured; MBIA) 3,680,000 3,673,523 Philadelphia, Gas Works Revenue 6.375%, 7/1/2026 (Insured; CMAC) 1,000,000 1,058,280 Philadelphia Authority for Industrial Development, LR 5.50%, 10/1/2015 (Insured; FSA) 2,870,000 3,080,572 Philadelphia Hospitals and Higher Education Facilities Authority, Revenue (Jefferson Health System) 5%, 5/15/2011 2,000,000 2,040,420 Philadelphia Redevelopment Authority, Revenue (Neighborhood Transformation) 5.50%, 4/15/2018 (Insured; FGIC) 3,600,000 (c) 3,772,872 Philadelphia School District 4.50%, 4/1/2023 (Insured; MBIA) 16,625,000 14,984,113 Philadelphia Water and Wastewater, Revenue 5.60%, 8/1/2018 (Insured; MBIA) 5,605,000 5,800,839 Pittsburgh 5.50%, 9/1/2013 (Insured; AMBAC) 2,580,000 2,720,404 Pittsburgh Urban Redevelopment Authority, Mortgage Revenue: 7.05%, 4/1/2023 1,785,000 1,807,848 (Sidney Square Project) 6.65%, 9/1/2028 3,350,000 3,526,378 Scranton School District (Notes): 5%, 4/1/2018 (Insured; MBIA) 1,390,000 1,398,396 5%, 4/1/2019 (Insured; MBIA) 2,710,000 2,710,840 South Side Area School District, GO 5.25%, 6/1/2015 (Insured; FGIC) 2,080,000 (c) 2,132,042 Southeast Delco School District Zero Coupon, 2/1/2023 (Insured; MBIA) 2,055,000 648,188 Southeastern Pennsylvania Transportation Authority, Special Revenue: 5.375%, 3/1/2017 (Insured; FGIC) 3,000,000 3,100,200 4.75%, 3/1/2024 (Insured; FGIC) 3,275,000 3,061,437 Unionville-Chadds Ford School District 5.20%, 6/1/2015 3,545,000 3,593,141 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- PENNSYLVANIA (CONTINUED) Upper Merion General Authority, LR 6%, 8/15/2016 1,000,000 1,018,350 Washington County Industrial Development Authority: PCR (West Pennsylvania Power Co. Mitchell) 6.05%, 4/1/2014 (Insured; AMBAC) 3,000,000 3,230,970 Revenue (Presbyterian Medical Center) 6.75%, 1/15/2023 (Insured; FHA) 3,000,000 3,083,160 Wilmington Area School District 5.50%, 9/1/2017 (Insured; FSA) (Prerefunded 3/1/2005) 3,550,000 (b) 3,807,233 U.S. RELATED--.9% Puerto Rico Public Finance Corp. (Commonwealth Appropriation) 5.70%, 8/1/2025 2,000,000 2,073,940 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $229,120,787) 223,904,419 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--5.8% ------------------------------------------------------------------------------------------------------------------------------------ PENNSYLVANIA; Geisinger Authority, Health Systems Revenue, VRDN (Geisinger Health System) 1.65% 500,000 (d) 500,000 Lehigh County General Purpose Authority, HR, VRDN (Saint Luke's Hospital of Bethlehem, Pennsylvania Project) 1.70% (LOC; First Union National Bank) 1,100,000 (d) 1,100,000 Pennsylvania Higher Educational Facilities Authority, Revenue, VRDN (Carnegie Mellon University) 1.70% 1,100,000 (d) 1,100,000 Philadelphia Hospitals and Higher Education Facilities Authority, HR, VRDN (Children's Hospital of Philadelphia Project) 1.70% 5,100,000 (d) 5,100,000 Schuylkill County Industrial Development Authority, RRR, VRDN (Northeastern Power Co.) 1.70% (LOC; Dexia CLF Finance Co.) 5,800,000 (d) 5,800,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $13,600,000) 13,600,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $242,720,787) 101.3% 237,504,419 LIABILITIES, LESS CASH AND RECEIVABLES (1.3%) (2,987,766) NET ASSETS 100.0% 234,516,653 Summary of Abbreviations AMBAC American Municipal Bond Assurance Corporation CMAC Capital Market Assurance Corporation COP Certificate of Participation FGIC Financial Guaranty Insurance Company FHA Federal Housing Administration FSA Financial Security Assurance GNMA Government National Mortgage Association GO General Obligation HR Hospital Revenue LOC Letter of Credit LR Lease Revenue MBIA Municipal Bond Investors Assurance Insurance Corporation PCR Pollution Control Revenue RRR Resources Recovery Revenue SWDR Solid Waste Disposal Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 56.4 AA Aa AA 19.4 A A A 9.1 BBB Baa BBB 6.5 F1 MIG1/P1 SP1/A1 5.7 Not Rated (e) Not Rated (e) Not Rated (e) 2.9 100.0 (A) NON-INCOME PRODUCING SECURITIES; INTEREST PAYMENTS IN DEFAULT. (B) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (C) PURCHASED ON A DELAYED DELIVERY BASIS. (D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 242,720,787 237,504,419 Interest receivable 3,314,631 Receivable for shares of Beneficial Interest subscribed 175,566 Prepaid expenses 14,392 241,009,008 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 172,722 Cash overdraft due to Custodian 301,045 Payable for investment securities purchased 5,873,145 Payable for shares of Beneficial Interest redeemed 112,206 Accrued expenses 33,237 6,492,355 -------------------------------------------------------------------------------- NET ASSETS ($) 234,516,653 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 239,306,018 Accumulated net realized gain (loss) on investments 427,003 Accumulated net unrealized appreciation (depreciation) on investments (5,216,368) -------------------------------------------------------------------------------- NET ASSETS ($) 234,516,653 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 190,173,126 40,775,457 3,568,070 Shares Outstanding 12,289,703 2,637,582 230,487 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 15.47 15.46 15.48 SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 13,221,079 EXPENSES: Management fee--Note 3(a) 1,316,964 Shareholder servicing costs--Note 3(c) 776,682 Distribution fees--Note 3(b) 235,734 Professional fees 33,543 Custodian fees 28,547 Prospectus and shareholders' reports 17,982 Registration fees 17,710 Trustees' fees and expenses--Note 3(d) 6,693 Loan commitment fees--Note 2 3,447 Miscellaneous 19,713 TOTAL EXPENSES 2,457,015 INVESTMENT INCOME--NET 10,764,064 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 1,449,859 Net unrealized appreciation (depreciation) on investments (379,207) NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,070,652 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 11,834,716 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ----------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 10,764,064 11,050,601 Net realized gain (loss) on investments 1,449,859 (416,605) Net unrealized appreciation (depreciation) on investments (379,207) 6,846,631 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 11,834,716 17,480,627 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (8,861,100) (9,383,302) Class B shares (1,719,719) (1,587,180) Class C shares (120,009) (80,119) Net realized gain on investments: Class A shares (72,078) (6,088) Class B shares (15,018) (1,059) Class C shares (1,247) (64) TOTAL DIVIDENDS (10,789,171) (11,057,812) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 14,845,603 19,370,172 Class B shares 11,261,724 12,623,431 Class C shares 1,456,961 1,104,938 Dividends reinvested: Class A shares 4,717,075 4,747,883 Class B shares 1,100,698 1,050,158 Class C shares 88,307 55,398 Cost of shares redeemed: Class A shares (18,712,018) (21,831,112) Class B shares (10,383,776) (15,001,169) Class C shares (324,501) (123,886) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 4,050,073 1,995,813 TOTAL INCREASE (DECREASE) IN NET ASSETS 5,095,618 8,418,628 -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 229,421,035 221,002,407 END OF PERIOD 234,516,653 229,421,035 Year Ended April 30, --------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 947,018 1,256,108 Shares issued for dividends reinvested 302,168 307,895 Shares redeemed (1,201,946) (1,421,029) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 47,240 142,974 -------------------------------------------------------------------------------- CLASS B(A) Shares sold 721,880 810,742 Shares issued for dividends reinvested 70,537 68,238 Shares redeemed (664,150) (980,459) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 128,267 (101,479) -------------------------------------------------------------------------------- CLASS C Shares sold 92,664 72,225 Shares issued for dividends reinvested 5,660 3,588 Shares redeemed (20,769) (8,128) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 77,555 67,685 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 378,299 CLASS B SHARES REPRESENTING $5,934,455 WERE AUTOMATICALLY CONVERTED TO 377,858 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 573,308 CLASS B SHARES REPRESENTING $8,811,256 WERE AUTOMATICALLY CONVERTED TO 572,837 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, -------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 15.40 14.94 16.56 16.68 16.23 Investment Operations: Investment income--net .72(b) .77 .79 .82 .85 Net realized and unrealized gain (loss) on investments .07 .46 (1.33) .16 .71 Total from Investment Operations .79 1.23 (.54) .98 1.56 Distributions: Dividends from investment income--net (.71) (.77) (.79) (.82) (.85) Dividends from net realized gain on investments (.01) (.00)(c) (.29) (.28) (.26) Total Distributions (.72) (.77) (1.08) (1.10) (1.11) Net asset value, end of period 15.47 15.40 14.94 16.56 16.68 --------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 5.18 8.37 (3.24) 5.97 9.83 --------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .93 .92 .94 .92 .92 Ratio of net investment income to average net assets 4.60 5.02 5.12 4.90 5.09 Portfolio Turnover Rate 36.46 23.01 34.29 48.14 34.82 --------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 190,173 188,473 180,760 195,728 196,055 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.57% TO 4.60%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ----------------------------------------------------------------------- CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 15.38 14.93 16.55 16.67 16.23 Investment Operations: Investment income--net .64(b) .69 .71 .74 .77 Net realized and unrealized gain (loss) on investments .08 .45 (1.33) .16 .70 Total from Investment Operations .72 1.14 (.62) .90 1.47 Distributions: Dividends from investment income--net (.63) (.69) (.71) (.74) (.77) Dividends from net realized gain on investments (.01) (.00)(c) (.29) (.28) (.26) Total Distributions (.64) (.69) (1.00) (1.02) (1.03) Net asset value, end of period 15.46 15.38 14.93 16.55 16.67 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 4.72 7.75 (3.75) 5.43 9.20 -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.43 1.43 1.46 1.43 1.43 Ratio of net investment income to average net assets 4.08 4.50 4.57 4.39 4.57 Portfolio Turnover Rate 36.46 23.01 34.29 48.14 34.82 -------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 40,775 38,593 38,968 68,869 74,855 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.05% TO 4.08%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ------------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 15.40 14.95 16.57 16.69 16.23 Investment Operations: Investment income--net .60(b) .66 .67 .69 .70 Net realized and unrealized gain (loss) on investments .09 .45 (1.33) .16 .72 Total from Investment Operations .69 1.11 (.66) .85 1.42 Distributions: Dividends from investment income--net (.60) (.66) (.67) (.69) (.70) Dividends from net realized gain on investments (.01) (.00)(c) (.29) (.28) (.26) Total Distributions (.61) (.66) (.96) (.97) (.96) Net asset value, end of period 15.48 15.40 14.95 16.57 16.69 ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 4.48 7.49 (3.98) 5.16 8.91 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.66 1.67 1.70 1.69 1.69 Ratio of net investment income to average net assets 3.83 4.23 4.35 4.07 3.98 Portfolio Turnover Rate 36.46 23.01 34.29 48.14 34.82 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 3,568 2,355 1,274 898 463 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 3.80% TO 3.83%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company and operates as a series company that, effective May 17, 2001, offers eleven series including the Pennsylvania Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund' s financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The Fund (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premium and discount on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $11,875 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $30,659, undistributed capital gains $396,344 and unrealized depreciation $5,060,844. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: ordinary income $49,595 and $7,211, long-term capital gain $38,748 and $0 and tax exempt income $10,700,828 and $11,050,601, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $224,194, increased accumulated net realized gain (loss) on investments by $22,719 and increased paid-in capital by $201,475. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for temporary and emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $102,781 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $212,060 and $23,674, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $484,699, $106,030, and $7,891, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $123,618 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $87,160,713 and $84,171,207, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $242,565,263; accordingly, accumulated net unrealized depreciation on investments was $5,060,844, consisting of $5,193,335 gross unrealized appreciation and $10,254,179 gross unrealized depreciation. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premium on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $160,958 increase in accumulated undistributed investment income-net and a corresponding $160,958 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the year ended April 30, 2002 was to increase net investment income by $63,236, increase net unrealized appreciation (depreciation) by $5,434 and decrease net realized gains (losses) by $68,670. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 The Fund IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby makes the following designations regarding its fiscal year ended April 30, 2002: -- all the dividends paid from investment income-net are "exempt-interest dividends" (not subject to regular Federal income tax, and for individuals who are Pennsylvania residents, Pennsylvania personal income taxes), and -- the fund hereby designates $.0025 per share as a long-term capital gain distribution of the $.0057 per share paid on December 7, 2001. As required by Federal tax law rules, shareholders will receive notification of their portion of the fund's taxable ordinary dividends (if any) and capital gain distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983-present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 The Fund BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962-present) * Instructor at the New York Psychoanalytic Institute (1981-present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987-2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997-Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984-December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. The Fund NOTES For More Information Dreyfus Premier State Municipal Bond Fund, Pennsylvania Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 058AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Texas Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 19 Notes to Financial Statements 25 Report of Independent Auditors 26 Important Tax Information 27 Board Members Information 29 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Texas Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Texas Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you' ll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Douglas Gaylor. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE Douglas Gaylor, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Texas Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 8.11% for Class A shares, 7.52% for Class B shares and 7.25% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Texas Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 5.82%.(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. We attribute the fund's strong relative performance during the reporting period to our ability to buy out-of-favor securities at low prices, which we held until they returned to favor and reached higher prices. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax without undue risk. To achieve this objective, we employ two primary strategies. First, for between one-half and three-quarters of the total fund, we look for bonds that can potentially offer attractive current income. We typically look for bonds that can provide consistently high current yields. We also try to ensure that we select bonds that are most likely to obtain attractive prices if and when we decide to sell them in the secondary market. Second, for the remainder of the fund, we try to look for bonds that we believe have the potential to offer attractive total returns. We typically look for bonds that are selling at a discount to face value because The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) they may be temporarily out of favor among investors. Our belief is that these bonds' prices will rise as they return to favor over time. What other factors influenced the fund's performance? With capital spending falling and unemployment rising, the U.S. economy had already weakened when the reporting period began. These conditions worsened after the September 11 terrorist attacks. The Federal Reserve Board (the "Fed") responded by aggressively reducing short-term interest rates, which fell to their lowest level in 40 years. As the economy deteriorated, the municipal bond market rallied. That's primarily because yields on newly issued bonds fell along with interest rates, making existing bonds more valuable. In addition, municipal bond prices moved higher as demand surged from investors seeking an investment alternative to a declining stock market. Deep-discount bonds performed particularly well during the market's rally. We had emphasized these securities when they were out of favor among investors, and the fund benefited during the reporting period as they returned to favor. After locking in profits by selling these bonds at attractive prices, we shifted our focus to income-oriented bonds selling at modest premiums to the prices they will command when redeemed early -- or called -- by their issuers. These relatively defensive bonds tend to hold more of their value when interest rates rise. In addition, we generally maintained the fund's average duration -- a measure of sensitivity to changing interest rates -- at a point that was longer than that of its Lipper category average. This strategy helped the fund's performance by maintaining existing yields for as long as practical while interest rates fell. On the other hand, the fund's performance was hurt by its holdings of tax-exempt airline bonds, which were hard-hit by the September 11 attacks. While prices have since rebounded from their lows, they have not yet reached pre-attack levels. These bonds comprised just a small percentage of the fund, however, and their impact on performance was correspondingly small. Although price movements of Texas municipal bonds generally tracked those of the national market, Texas bonds generally provided higher yields than bonds from most other states. That's primarily because Texas has no state income tax, which reduces demand for tax-exempt investments from its residents. What is the fund's current strategy? Although we do not manage the fund according to interest-rate trends, we have nonetheless positioned the fund defensively, using strategies designed to produce competitive levels of tax-exempt income and preserve capital if interest rates begin to rise. The fund's defensive stance also reflects our expectation that the supply of newly issued municipal bonds may increase throughout the United States as state and local governments struggle with disappointing tax revenues. Accordingly, although we have continued to focus on income-oriented bonds with maturities between 15 and 20 years, we have recently emphasized the shorter end of that range. Of course, we are prepared to change our strategy as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-TEXAS RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF FUND EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN UNDERTAKING IN EFFECT THAT MAY BE EXTENDED, TERMINATED OR MODIFIED AT ANY TIME. HAD THESE EXPENSES NOT BEEN ABSORBED, THE FUND'S RETURN WOULD HAVE BEEN LOWER. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT THE FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Texas Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, TEXAS SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN TEXAS MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN TEXAS MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception ---------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 3.26% 4.91% 6.40% WITHOUT SALES CHARGE 8.11% 5.88% 6.89% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 3.52% 5.03% -- 6.17% ((+)(+)) WITHOUT REDEMPTION 1/15/93 7.52% 5.35% -- 6.17% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 6.25% 5.08% -- 5.58% WITHOUT REDEMPTION 8/15/95 7.25% 5.08% -- 5.58% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--97.6% Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- Aledo Independent School District, Unlimited Tax School Building (Permanent School Fund Guaranteed) Zero Coupon, 2/15/2014 1,225,000 683,489 Austin, Utility System Revenue 5.125%, 11/15/2016 (Insured; FSA) 1,110,000 1,124,441 Austin Convention Enterprises Inc., Revenue (Convention Center Hotel) 6.60%, 1/1/2021 1,000,000 1,005,580 Austin Independent School District 5.75%, 8/1/2015 1,000,000 1,044,860 Brazos Higher Education Authority Inc., Student Loan Revenue 6.80%, 12/1/2004 700,000 754,418 Castleberry Independent School District 5.70%, 8/15/2021 830,000 852,609 Coastal Water Authority, Water Conveyance System Revenue 6.25%, 12/15/2017 (Insured; AMBAC) 2,170,000 2,172,582 Corpus Christi Utility System 5.25%, 7/15/2016 (Insured; FSA) 1,065,000 1,095,470 Denison Hospital Authority, HR (Texoma Medical Center Project) 6.125%, 8/15/2017 750,000 690,210 El Paso Housing Authority, Multi-Family Revenue (Section 8 Projects) 6.25%, 12/1/2009 2,510,000 2,570,968 Fort Worth, Water & Sewer Revenue 5.25%, 2/15/2016 875,000 893,533 Frisco Independent School District (School Building) 5.40%, 8/15/2023 1,155,000 1,158,326 Grape Creek-Pulliam Independent School District Public Facility Corp., School Facility LR 7.25%, 5/15/2021 (Prerefunded 5/15/2006) 2,200,000 (a) 2,570,744 Houston: Airport Systems Revenue (Continental) 7.375%, 7/1/2022 1,000,000 989,510 Certificate Obligation 5.625%, 3/1/2017 850,000 900,269 Water & Sewer Systems Revenue Zero Coupon, 12/1/2019 (Insured; FSA) 5,000,000 1,912,500 Houston Independent School District (Permanent School Fund Guaranteed) 4.75%, 2/15/2022 2,500,000 2,333,950 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- Irving Independent School District (Permanent School Fund Guaranteed) Zero Coupon, 2/15/2010 1,985,000 1,400,179 Jefferson County Certificate Obligation 6%, 8/1/2020 (Insured; FSA) (Prerefunded 8/1/2010) 500,000 (a) 569,855 Katy Independent School District 5.75%, 2/15/2020 405,000 424,294 Lakeway Municipal Utility District Zero Coupon, 9/1/2013 (Insured; FGIC) 1,850,000 1,068,671 Leon County, PCR (Nucor Corp. Project) 7.375%, 8/1/2009 750,000 768,075 Lower Colorado River Authority, Revenue, Junior Lein 4.50%, 1/1/2017 (Insured; FSA) 1,410,000 1,369,350 Lubbock Health Facilities Development Corporation, Revenue (Sears Plains) 5.50%, 1/20/2021 1,000,000 1,002,720 McKinney Independent School District 5.375%, 2/15/2019 1,000,000 1,022,260 North Central Health Facilities Development Corporation, Revenue 5.45%, 4/1/2019 (Insured; FSA) 2,000,000 2,018,600 San Antonio: 5%, 2/1/2016 500,000 504,065 Electric and Gas Revenue 5.50%, 2/1/2020 500,000 512,265 Water Revenue 5.60%, 5/15/2021 (Insured; MBIA) 1,500,000 1,536,900 Texas (Veterans Housing Assistance) 6.80%, 12/1/2023 2,145,000 2,258,213 Texas A & M University, Financing System Revenues 5.375%, 5/15/2014 920,000 946,855 Texas Department of Housing and Community Affairs, MFHR (Harbors and Plumtree) 6.35%, 7/1/2016 1,300,000 1,343,108 Texas National Research Laboratory Commission Financing Corp., LR (Superconducting Super Collider) 6.95%, 12/1/2012 700,000 831,362 Texas Public Finance Authority, Building Revenue (State Preservation Board Project): 4.50%, 2/1/2018 (Insured; AMBAC) 2,805,000 2,619,758 4.50%, 2/1/2019 (Insured; AMBAC) 2,165,000 1,995,589 Texas Water Development Board, Revenue, State Revolving Fund: 5.25%, 7/15/2017 1,500,000 1,520,490 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- Tomball Hospital Authority, Revenue 6%, 7/1/2013 5,000,000 5,052,550 Tyler Health Facility Development Corp., HR (East Texas Medical Center Regional Health): 6.625%, 11/1/2011 720,000 705,384 6.75%, 11/1/2025 1,000,000 925,990 University of Texas (Financing System) University Revenues 3.75%, 8/15/2018 5,000,000 4,202,250 Victoria, Utility System Revenue 4.75%, 12/1/2022 (Insured; MBIA) 1,105,000 1,023,473 Waxahachie Community Development Corp., Sales Tax Revenue: Zero Coupon, 8/1/2020 (Insured; MBIA) 1,430,000 503,617 Zero Coupon, 8/1/2023 (Insured; MBIA) 1,000,000 288,820 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $57,978,862) 59,168,152 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENT--.8% ----------------------------------------------------------------------------------------------------------------------------------- Harris County Industrial Development Corp., PCR, VRDN (EXXON Project) 1.75% (cost $500,000) 500,000 (b) 500,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $58,478,862) 98.4% 59,668,152 CASH AND RECEIVABLES (NET) 1.6% 966,239 NET ASSETS 100.0% 60,634,391 Summary of Abbreviations AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guaranty Insurance Company FSA Financial Security Assurance HR Hospital Revenue LR Lease Revenue MBIA Municipal Bond Investors Assurance Insurance Corporation MFHR Multi-Family Housing Revenue PCR Pollution Control Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 60.0 AA Aa AA 12.6 A A A 6.6 BBB Baa BBB 11.3 BB Ba BB 1.7 B B B 2.7 F1 MIG1/P1 SP1/A1 .8 Not Rated(c) Not Rated(c) Not Rated(c) 4.3 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 58,478,862 59,668,152 Cash 61,622 Interest receivable 948,075 Prepaid expenses 13,948 60,691,797 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 36,189 Accrued expenses 21,217 57,406 -------------------------------------------------------------------------------- NET ASSETS ($) 60,634,391 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 59,450,094 Accumulated net realized gain (loss) on investments (4,993) Accumulated net unrealized appreciation (depreciation) on investments 1,189,290 -------------------------------------------------------------------------------- NET ASSETS ($) 60,634,391 NET ASSET VALUE PER SHARE Class A Class B Class C -------------------------------------------------------------------------------------------------- --------------------------------- Net Assets ($) 53,008,695 6,993,716 631,980 Shares Outstanding 2,547,725 336,222 30,393 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 20.81 20.80 20.79 SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 3,267,532 EXPENSES: Management fee--Note 3(a) 333,392 Shareholder servicing costs--Note 3(c) 186,052 Distribution fees--Note 3(b) 37,207 Registration fees 18,724 Professional fees 10,903 Prospectus and shareholders' reports 10,493 Custodian fees 9,151 Trustees' fees and expenses--Note 3(d) 1,943 Loan commitment fees--Note 2 939 Miscellaneous 8,928 TOTAL EXPENSES 617,732 Less-reduction in management fee due to undertaking--Note 3(a) (64,345) NET EXPENSES 553,387 INVESTMENT INCOME--NET 2,714,145 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 162,118 Net unrealized appreciation (depreciation) on investments 1,781,778 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,943,896 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 4,658,041 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ---------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 2,714,145 2,871,137 Net realized gain (loss) on investments 162,118 252,182 Net unrealized appreciation (depreciation) on investments 1,781,778 2,580,295 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,658,041 5,703,614 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (2,406,432) (2,575,149) Class B shares (270,969) (284,092) Class C shares (16,674) (11,896) Net realized gain on investments: Class A shares (277,352) -- Class B shares (34,264) -- Class C shares (2,111) -- TOTAL DIVIDENDS (3,007,802) (2,871,137) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 2,587,354 3,029,305 Class B shares 1,211,855 668,499 Class C shares 302,500 102,208 Dividends reinvested: Class A shares 1,231,783 1,136,043 Class B shares 180,432 156,302 Class C shares 10,552 6,059 Cost of shares redeemed: Class A shares (4,975,690) (6,436,555) Class B shares (1,144,603) (2,049,039) Class C shares (57,698) (18,585) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (653,515) (3,405,763) TOTAL INCREASE (DECREASE) IN NET ASSETS 996,724 (573,286) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 59,637,667 60,210,953 END OF PERIOD 60,634,391 59,637,667 Year Ended April 30, -------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 124,064 154,473 Shares issued for dividends reinvested 59,392 56,619 Shares redeemed (239,794) (321,704) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (56,338) (110,612) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 58,315 32,710 Shares issued for dividends reinvested 8,703 7,804 Shares redeemed (54,779) (103,813) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 12,239 (63,299) -------------------------------------------------------------------------------- CLASS C Shares sold 14,645 5,006 Shares issued for dividends reinvested 509 301 Shares redeemed (2,804) (959) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 12,350 4,348 (A) DURING THE PERIOD ENDED APRIL 30, 2002, 30,709 CLASS B SHARES REPRESENTING $644,996 WERE AUTOMATICALLY CONVERTED TO 30,699 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 43,152 CLASS B SHARES REPRESENTING $853,361 WERE AUTOMATICALLY CONVERTED TO 43,153 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, -------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 20.24 19.33 21.37 21.68 20.99 Investment Operations: Investment income--net .94(b) .96 .98 1.00 1.08 Net realized and unrealized gain (loss) on investments .68 .91 (1.77) .21 .99 Total from Investment Operations 1.62 1.87 (.79) 1.21 2.07 Distributions: Dividends from investment income--net (.94) (.96) (.98) (1.00) (1.08) Dividends from net realized gain on investments (.11) -- (.27) (.52) (.30) Total Distributions (1.05) (.96) (1.25) (1.52) (1.38) Net asset value, end of period 20.81 20.24 19.33 21.37 21.68 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 8.11 9.83 (3.62) 5.66 10.03 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .85 .85 .85 .85 .72 Ratio of net investment income to average net assets 4.54 4.80 4.95 4.59 4.96 Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .10 .10 .14 .07 .18 Portfolio Turnover Rate 32.62 12.69 22.70 49.67 27.18 -------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 53,009 52,716 52,464 60,516 59,758 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.51% TO 4.54%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ------------------------------------------------------------------------- CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 20.24 19.32 21.37 21.68 20.98 Investment Operations: Investment income--net .83(b) .86 .88 .89 .97 Net realized and unrealized gain (loss) on investments .67 .92 (1.78) .21 1.00 Total from Investment Operations 1.50 1.78 (.90) 1.10 1.97 Distributions: Dividends from investment income--net (.83) (.86) (.88) (.89) (.97) Dividends from net realized gain on investments (.11) -- (.27) (.52) (.30) Total Distributions (.94) (.86) (1.15) (1.41) (1.27) Net asset value, end of period 20.80 20.24 19.32 21.37 21.68 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 7.52 9.35 (4.14) 5.13 9.53 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.35 1.35 1.35 1.35 1.23 Ratio of net investment income to average net assets 4.04 4.30 4.41 4.09 4.44 Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .11 .12 .16 .08 .18 Portfolio Turnover Rate 32.62 12.69 22.70 49.67 27.18 ---------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 6,994 6,557 7,483 17,031 20,454 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 4.00% TO 4.04%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, --------------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 20.23 19.31 21.36 21.67 20.97 Investment Operations: Investment income--net .77(b) .81 .84 .83 .91 Net realized and unrealized gain (loss) on investments .68 .92 (1.78) .21 1.00 Total from Investment Operations 1.45 1.73 (.94) 1.04 1.91 Distributions: Dividends from investment income--net (.78) (.81) (.84) (.83) (.91) Dividends from net realized gain on investments (.11) -- (.27) (.52) (.30) Total Distributions (.89) (.81) (1.11) (1.35) (1.21) Net asset value, end of period 20.79 20.23 19.31 21.36 21.67 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(C) 7.25 9.02 (4.33) 4.86 9.24 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.60 1.60 1.60 1.60 1.52 Ratio of net investment income to average net assets 3.76 4.01 4.15 3.79 4.10 Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation .13 .12 .15 .11 .15 Portfolio Turnover Rate 32.62 12.69 22.70 49.67 27.18 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 632 365 265 620 261 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM 3.72% TO 3.76%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001, offers eleven series including the Texas Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A, which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premium and discount on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $4,585 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the " Code" ). To the extent that net realized capital gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $4,574 and unrealized appreciation $1,226,381. In addition, the fund had $9,567 of capital losses realized after October 31, 2001 which were deferred for tax purposes to the first day of the following fiscal year. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, were as follows: ordinary income $10,479 and $0, long term capital gain $303,248 and $0 and tax exempt income $2,694,075 and $2,871,137, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated undistributed investment income-net by $46,321, increased accumulated net realized gain (loss) on investments by $5,798 and increased paid-in capital by $40,523. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility") to be utilized for The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Manager had undertaken from May 1, 2001 through April 30, 2002 to reduce the management fee paid by the fund, to the extent that, if the fund's aggregate expenses, excluding 12b-1 distribution fees, taxes, brokerage fees, commitment fees, interest on borrowings and extraordinary expenses, exceed an annual rate of .85 of 1% of the value of the fund' s average daily net assets. The reduction in management fee, pursuant to the undertaking, amounted to $64,345 during the period ended April 30, 2002. The Distributor retained $8,750 during the period ended April 30, 2002 from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $33,843 and $3,364, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of the average daily net assets for the provision of certain services. 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $133,499, $16,922 and $1,121, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $19,658 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $18,820,874 and $19,499,541, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $58,441,771; accordingly, accumulated net unrealized appreciation on investments was $1,226,381, consisting of $1,569,792 gross unrealized appreciation and $343,411 gross unrealized depreciation. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. The cumulative effect of this accounting change had no impact on total net assets of the fund, but resulted in a $26,251 increase in accumulated undistributed investment income-net and a corresponding $26,251 decrease in accumulated net unrealized appreciation (depreciation) , based on securities held by the fund on April 30, 2001. The effect of this change for the period ended April 30, 2002 was to increase net investment income by $20,069, decrease net unrealized appreciation (depreciation) by $10,840 and decrease net realized gains (losses) by $9,229. The statement of changes in net assets and financial highlights for prior periods have not been restated to reflect this change in presentation. REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Texas Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Texas Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Texas Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 The Fund IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby makes the following designations regarding its fiscal year ended April 30, 2002: -- all the dividends paid from investment income-net are "exempt-interest dividends" (not subject to regular Federal income tax, and for individuals who are Texas residents, not subject to taxation by Texas) , an -- the fund designates $.1042 per share as a long-term capital gain distribution of the $.1078 per share paid on December 7, 2001. As required by Federal tax law rules, shareholders will receive notification of their portion of the fund' s taxable ordinary dividends (if any) and capital gains distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-present) * Chairman of the Board of Moody's Corporation (October 2000--Present) * Chairman of the Board and Chief Executive Officer (October 1999--September 2000) and Director (February 1993--September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1990) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983-present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 The Fund BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED) Ernest Kafka (69) Board Member (1987) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962--present) * Instructor at the New York Psychoanalytic Institute (1981--present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987--2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1989) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997--Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984--December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. The Fund For More Information Dreyfus Premier State Municipal Bond Fund, Texas Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 061AR0402 ================================================================================ Dreyfus Premier State Municipal Bond Fund, Virginia Series ANNUAL REPORT April 30, 2002 The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value Contents THE FUND -------------------------------------------------- 2 Letter from the Chairman 3 Discussion of Fund Performance 6 Fund Performance 8 Statement of Investments 12 Statement of Assets and Liabilities 13 Statement of Operations 14 Statement of Changes in Net Assets 16 Financial Highlights 19 Notes to Financial Statements 24 Report of Independent Auditors 25 Important Tax Information 26 Board Members Information 28 Officers of the Fund FOR MORE INFORMATION --------------------------------------------------------------------------- Back Cover The Fund Dreyfus Premier State Municipal Bond Fund, Virginia Series LETTER FROM THE CHAIRMAN Dear Shareholder: We present this annual report for Dreyfus Premier State Municipal Bond Fund, Virginia Series, covering the 12-month period from May 1, 2001 through April 30, 2002. Inside, you'll find valuable information about how the fund was managed during the reporting period, including a discussion with the fund's portfolio manager, Scott Sprauer. Over the past year, we've seen economic conditions ranging from recession to steps toward recovery. Events during the reporting period included the September 11 terrorist attacks, the bankruptcies of major U.S. corporations, an energy crisis in California and the first calendar quarter of U.S. economic contraction in about 10 years. Municipal bonds generally benefited from some of these events and were hurt by others. Many investors who attempted to profit from the market's short-term gyrations found that the market moved faster than they could. Indeed, as many professionals can attest, the municipal bond market's direction becomes clearer only when viewed from a perspective measured in years, not weeks or months. Although you may become excited about the tax-exempt income opportunities or worried about the challenges presented under current market conditions, we encourage you to consider your long-term goals first. And, as always, we urge you to solicit the advice of a financial advisor who can help you navigate the right course to financial security for yourself and your family. For our part, and as we have for more than 50 years, we at The Dreyfus Corporation are ready to serve you with a full range of investment alternatives and experienced teams of portfolio managers. Thank you for your continued confidence and support. Sincerely, Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation May 15, 2002 DISCUSSION OF FUND PERFORMANCE Scott Sprauer, Portfolio Manager How did Dreyfus Premier State Municipal Bond Fund, Virginia Series, perform relative to its benchmark? For the 12-month period ended April 30, 2002, the fund achieved a total return of 5.86% for Class A shares, 5.26% for Class B shares and 5.01% for Class C shares.(1) In comparison, the Lehman Brothers Municipal Bond Index, the fund's benchmark, achieved a total return of 7.00% for the same period.(2) Additionally, the fund is reported in the Lipper Virginia Municipal Debt Funds category. Over the reporting period, the average total return for all funds reported in the category was 5.70%.(3) The fund's benchmark is a broad-based measure of overall municipal bond performance. There are no broad-based municipal bond market indices reflective of the performance of bonds issued by a single state. For this reason, we have also provided the fund's Lipper category average return for comparative purposes. We attribute the fund's performance to changing market conditions. Early in the reporting period, the fund benefited from falling interest rates in a slowing economy. While market weakness late in the reporting period offset some of those earlier gains, the fund still had competitive returns relative to its Lipper category average. What is the fund's investment approach? The fund seeks to maximize current income exempt from federal income tax and Virginia state income tax without undue risk. To achieve this objective, we employ two primary strategies. First, we evaluate interest-rate trends and supply-and-demand factors in the municipal bond market. Based on that assessment, we select the individual tax-exempt bonds that we believe are most likely to provide the highest returns with the least risk. We look at such criteria as the bond's yield, price, age, the creditworthiness of its issuer and any provisions for early redemption. Second, we actively manage the portfolio's average duration -- a measure of sensitivity to changing interest rates -- in anticipation of tem- The Fund DISCUSSION OF FUND PERFORMANCE (CONTINUED) porary supply-and-demand changes. If we expect the supply of newly issued bonds to increase temporarily, we may reduce the portfolio's average duration to make cash available for the purchase of higher yielding securities. Conversely, if we expect demand for municipal bonds to surge at a time when we anticipate little issuance, we may increase the portfolio's average duration to maintain current yields for as long as practical. What other factors influenced the fund's performance? When the reporting period began, the U.S. and Virginia economies had already slowed considerably, with the downturn driven by reduced capital spending, lower corporate earnings and climbing unemployment. Economic weakness was further intensified by the September 11 terrorist attacks. In this environment, the Federal Reserve Board (the "Fed") attempted to stimulate renewed economic growth by aggressively reducing short-term interest rates to their lowest level in 40 years. As interest rates and bond yields declined, municipal bond prices generally rose, benefiting the fund's performance. During the first half of the reporting period, when the economy was slowing, we focused on non-conventional, "off the run" bonds that we believed would provide opportunities for high income and total returns. To manage risks, we complemented these relatively aggressive holdings with high quality securities, including insured bonds that are not subject to potential early redemption by their issuers.(4) However, subsequent weakness among lower rated bonds hurt the fund' s performance during the reporting period. Tax-exempt bonds issued by airlines to finance airport terminal facilities were particularly hard-hit by the September 11 terrorist attacks. While these bonds have since rebounded strongly, they have not yet reached pre-attack price levels. The fund's other corporate holdings are typically from companies that dominate their industries, and we believe that they will reach higher prices as the economy recovers. The fund's average duration was longer than that of its Lipper category average for much of the reporting period. This benefited performance when interest rates fell. During the second half of the reporting period, we gradually reduced the fund's average duration by selling some of the fund' s more aggressive, long-term holdings. This change proved beneficial when the Fed suggested in early 2002 that an economic recovery was underway. Many investors interpreted these comments as a signal that the next move would be toward higher interest rates. While we do not anticipate rate hikes in the immediate future, these expectations were nonetheless factored into municipal bond prices, erasing a portion of the market and fund's earlier gains. What is the fund's current strategy? Although we do not manage the fund according to interest-rate trends, we intend to move the fund to a more defensive position to protect against potential interest-rate increases later this year. This stance also reflects our expectation that the supply of newly issued municipal bonds may increase throughout the United States as state and local governments struggle with widening budget deficits. Although we expect the supply of Virginia bonds to remain relatively low, the state is part of -- and generally moves in tandem with -- the broader national market. Of course, we are prepared to change our strategy as market conditions evolve. May 15, 2002 (1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID, AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE CASE OF CLASS A SHARES OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGES IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES FOR NON-VIRGINIA RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE. (2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED, UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET. INDEX RETURNS DO NOT REFLECT FEES AND EXPENSES ASSOCIATED WITH OPERATING A MUTUAL FUND. (3) SOURCE: LIPPER INC. -- CATEGORY AVERAGE RETURNS REFLECT THE FEES AND EXPENSES OF THE FUNDS COMPRISING THE AVERAGE. (4) PORTFOLIO INSURANCE EXTENDS TO THE REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST IN THE EVENT OF DEFAULT. IT DOES NOT EXTEND TO THE MARKET VALUE OF THE PORTFOLIO'S SECURITIES OR THE VALUE OF THE FUND'S SHARES. The Fund FUND PERFORMANCE Comparison of change in value of $10,000 investment in Dreyfus Premier State Municipal Bond Fund, Virginia Series Class A shares and the Lehman Brothers Municipal Bond Index ((+)) SOURCE: LIPPER INC. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN CLASS A SHARES OF DREYFUS PREMIER STATE MUNICIPAL BOND FUND, VIRGINIA SERIES ON 4/30/92 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS MUNICIPAL BOND INDEX (THE "INDEX") ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PERFORMANCE FOR CLASS B AND CLASS C SHARES WILL VARY FROM THE PERFORMANCE OF CLASS A SHARES SHOWN ABOVE DUE TO DIFFERENCES IN CHARGES AND EXPENSES. THE FUND INVESTS PRIMARILY IN VIRGINIA MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT THE MAXIMUM INITIAL SALES CHARGE ON CLASS A SHARES AND ALL OTHER APPLICABLE FEES AND EXPENSES. THE INDEX IS NOT LIMITED TO INVESTMENTS PRINCIPALLY IN VIRGINIA MUNICIPAL OBLIGATIONS AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, GEOGRAPHICALLY UNRESTRICTED TAX-EXEMPT BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET OVERALL. THESE FACTORS CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT. Average Annual Total Returns AS OF 4/30/02 Inception From Date 1 Year 5 Years 10 Years Inception -------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES WITH MAXIMUM SALES CHARGE (4.5%) 1.08% 4.47% 5.99% WITHOUT SALES CHARGE 5.86% 5.43% 6.48% CLASS B SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)) 1/15/93 1.26% 4.57% -- 5.57% ((+)(+)) WITHOUT REDEMPTION 1/15/93 5.26% 4.90% -- 5.57% ((+)(+)) CLASS C SHARES WITH APPLICABLE REDEMPTION CHARGE ((+)(+)(+)) 8/15/95 4.01% 4.64% -- 5.13% WITHOUT REDEMPTION 8/15/95 5.01% 4.64% -- 5.13% PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. ((+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 4%. AFTER SIX YEARS CLASS B SHARES CONVERT TO CLASS A SHARES. ((+)(+)) ASSUMES THE CONVERSION OF CLASS B SHARES TO CLASS A SHARES AT THE END OF THE SIXTH YEAR FOLLOWING THE DATE OF PURCHASE. ((+)(+)(+)) THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF THE DATE OF PURCHASE.
The Fund STATEMENT OF INVESTMENTS April 30, 2002 Principal LONG-TERM MUNICIPAL INVESTMENTS--96.7% Amount ($) Value ($) ---------------------------------------------------------------------------------------------------------------------------------- VIRGINIA--70.8% Alexandria 5.50%, 6/15/2017 2,625,000 2,802,581 Alexandria Redevelopment and Housing Authority, Multi-Family Housing Mortgage Revenue (Buckingham Village Apartments) 6.125%, 7/1/2021 3,000,000 3,062,190 Amelia County Industrial Development Authority, SWDR (Waste Management Project) 4.90%, 4/1/2027 2,500,000 2,500,250 Beford County Industrial Development Authority, IDR (Nekossa Packaging Corp. Project) 5.60%, 12/1/2025 1,200,000 1,045,176 Chesapeake, Public Improvement 5.50%, 12/1/2017 1,750,000 1,857,660 Chesapeake Bay Bridge and Tunnel Commission District, Revenue, General Resolution 5.50%, 7/1/2025 (Insured; MBIA) 3,500,000 3,715,880 Chesapeake Toll Road, Expressway Revenue 5.625%, 7/15/2019 1,250,000 1,266,913 Dulles Town Center Community Development Authority, Special Assessment Tax (Dulles Town Center Project) 6.25%, 3/1/2026 3,000,000 2,954,040 Fairfax County Park Authority, Park Facilities Revenue 6.625%, 7/15/2020 (Prerefunded 7/15/2003) 2,665,000 (a) 2,860,238 Fairfax County Redevelopment and Housing Authority, MFHR (Paul Spring Retirement Center) 6%, 12/15/2028 (Insured; FHA) 600,000 624,972 Fairfax County Water Authority, Water Revenue: 5.50%, 4/1/2018 1,655,000 1,751,404 5.50%, 4/1/2019 1,830,000 1,926,679 Hampton Redevelopment and Housing Authority, First Mortgage Revenue (Olde Hampton Hotel Associates Project) 6.50%, 7/1/2016 1,500,000 1,434,000 Industrial Development Authority of the County of Henrico, SWDR (Browning-Ferris Industries of South Atlantic, Inc. Project) 5.45%, 1/1/2014 3,500,000 3,044,055 Industrial Development Authority of the County of Prince William, Revenue: Hospital Facility (Potomac Hospital Corp. of Prince William) 6.85%, 10/1/2025 (Prerefunded 10/1/2005) 1,000,000 (a) 1,146,690 (Potomac Place) 6.25%, 12/20/2027 700,000 732,151 Residential Care Facility, First Mortgage (Westminster Lake Ridge) 6.625%, 1/1/2026 1,500,000 1,531,350 Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- VIRGINIA (CONTINUED) Industrial Development Authority of the Town of West Point, SWDR (Chesapeake Corp. Project) 6.375%, 3/1/2019 500,000 433,985 Isle Wight County Industrial Development Authority, Solid Waste Disposal Facilities Revenue (Union Camp Corp. Project) 6.10%, 5/1/2027 2,850,000 2,833,727 Prince William County Park Authority, Revenue 6.875%, 10/15/2016 (Prerefunded 10/15/2004) 3,000,000 (a) 3,364,230 Richmond Metropolitan Authority, Expressway Revenue 5.25%, 7/15/2017 (Insured; FGIC) 3,100,000 3,278,374 Roanoke Industrial Development Authority, HR (Carilion Health System) 5.50%, 7/1/2021 (Insured; MBIA) 2,500,000 2,573,400 Staunton Industrial Development Authority, Educational Facilities Revenue (Mary Baldwin College) 6.75%, 11/1/2021 2,000,000 2,072,180 University of Virginia, University Revenue 5.75%, 5/1/2021 1,200,000 1,251,540 Virginia Housing Development Authority: Commonwealth Mortgage: 5.80%, 1/1/2018 2,000,000 2,091,200 6.60%, 7/1/2020 1,075,000 1,095,629 5.50%, 1/1/2022 1,790,000 1,797,625 Multi-Family Housing 5.95%, 5/1/2016 2,000,000 2,093,540 Virginia Public Building Authority, Public Facilities Revenue 5.75%, 8/1/2018 2,500,000 2,689,150 Virginia Public School Authority 5%, 8/1/2019 2,055,000 (b) 2,065,480 Virginia Resource Authority, Clean Water Revenue (State Revolving Fund) 5.375%, 10/1/2022 3,035,000 3,117,552 U. S. RELATED--25.9% Children's Trust Fund of Puerto Rico, Tobacco Settlement Revenue, Asset Backed Bonds 6%, 7/1/2026 3,000,000 3,066,690 Commonwealth of Puerto Rico: 8.97%, 7/1/2012 2,950,000 (c,d) 3,638,707 (Public Improvement): 5.50%, 7/1/2012 (Insured; MBIA) 50,000 55,837 5.25%, 7/1/2015 (Insured; MBIA) 3,000,000 3,262,050 6%, 7/1/2026 (Prerefunded 7/1/2007) 1,500,000 (a) 1,727,370 Guam Economic Development Authority, Tobacco Settlement-Asset Backed Bond 5.50%, 5/15/2041 1,400,000 1,365,938 The Fund STATEMENT OF INVESTMENTS (CONTINUED) Principal LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($) ----------------------------------------------------------------------------------------------------------------------------------- U. S. RELATED (CONTINUED) Puerto Rico Highway and Transportation Authority, Highway Revenue: 5.50%, 7/1/2015 (Insured; MBIA) 20,000 22,286 8.10%, 7/1/2015 3,990,000 (c,d) 4,902,154 Puerto Rico Ports Authority, Special Facilities Revenue (American Airlines) 6.25%, 6/1/2026 3,000,000 2,478,420 Virgin Islands Public Finance Authority, Revenue Gross Receipts Taxes Loan Note 6.50%, 10/1/2024 3,000,000 3,236,730 TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $85,650,002) 88,770,023 ------------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL INVESTMENTS--4.0% ----------------------------------------------------------------------------------------------------------------------------------- Roanoke Industrial Development Authority, VRDN, HR: (Carilion Health System) 1.70% 1,600,000 (e) 1,600,000 (Roanoke Memorial Hospital): Series A, 1.70% 1,000,000 (e) 1,000,000 Series C, 1.70% 1,100,000 (e) 1,100,000 TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $3,700,000) 3,700,000 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (cost $89,350,002) 100.7% 92,470,023 LIABILITIES, LESS CASH AND RECEIVABLES (.7%) (669,760) NET ASSETS 100.0% 91,800,263 Summary of Abbreviations FGIC Financial Guaranty Insurance Company FHA Federal Housing Administration HR Hospital Revenue IDR Industrial Development Revenue MBIA Municipal Bond Investors Assurance Insurance Corporation MFHR Multi-Family Housing Revenue SWDR Solid Waste Disposal Revenue VRDN Variable Rate Demand Notes Summary of Combined Ratings (Unaudited) Fitch or Moody's or Standard & Poor's Value (%) ------------------------------------------------------------------------------------------------------------------------------------ AAA Aaa AAA 38.1 AA Aa AA 19.5 A A A 7.9 BBB Baa BBB 11.8 BB Ba BB 6.4 F1 MIG1/P1 SP1/A1 4.0 Not Rated (f) Not Rated (f) Not Rated (f) 12.3 100.0 (A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING DATE. (B) PURCHASED ON A DELAYED DELIVERY BASIS. (C) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE PERIODICALLY. (D) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT APRIL 30, 2002, THESE SECURITIES AMOUNTED TO $8,540,861 OR 9.3% OF NET ASSETS. (E) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE. (F) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S, HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST. SEE NOTES TO FINANCIAL STATEMENTS.
The Fund The Fund STATEMENT OF ASSETS AND LIABILITIES April 30, 2002 Cost Value -------------------------------------------------------------------------------- ASSETS ($): Investments in securities--See Statement of Investments 89,350,002 92,470,023 Cash 354,301 Interest receivable 1,499,680 Receivable for shares of Beneficial Interest subscribed 53,124 Prepaid expenses 14,949 94,392,077 -------------------------------------------------------------------------------- LIABILITIES ($): Due to The Dreyfus Corporation and affiliates 69,229 Payable for investment securities purchased 2,061,439 Payable for shares of Beneficial Interest redeemed 445,803 Accrued expenses 15,343 2,591,814 -------------------------------------------------------------------------------- NET ASSETS ($) 91,800,263 -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS ($): Paid-in capital 90,912,425 Accumulated net realized gain (loss) on investments (2,232,183) Accumulated net unrealized appreciation (depreciation) on investments 3,120,021 -------------------------------------------------------------------------------- NET ASSETS ($) 91,800,263 NET ASSET VALUE PER SHARE Class A Class B Class C ------------------------------------------------------------------------------------------------------------------------------------ Net Assets ($) 72,248,663 16,265,473 3,286,127 Shares Outstanding 4,332,529 975,619 197,198 ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ($) 16.68 16.67 16.66 SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS Year Ended April 30, 2002 -------------------------------------------------------------------------------- INVESTMENT INCOME ($): INTEREST INCOME 5,199,727 EXPENSES: Management fee--Note 3(a) 509,064 Shareholder servicing costs--Note 3(c) 293,664 Distribution fees--Note 3(b) 114,572 Registration fees 18,874 Professional fees 13,994 Custodian fees 12,963 Prospectus and shareholders' reports 9,874 Trustees' fees and expenses--Note 3(d) 2,653 Loan commitment fees--Note 2 1,331 Miscellaneous 9,522 TOTAL EXPENSES 986,511 INVESTMENT INCOME--NET 4,213,216 -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($): Net realized gain (loss) on investments 83,298 Net unrealized appreciation (depreciation) on investments 770,268 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 853,566 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 5,066,782 SEE NOTES TO FINANCIAL STATEMENTS. The Fund STATEMENT OF CHANGES IN NET ASSETS Year Ended April 30, ---------------------------------- 2002 2001 -------------------------------------------------------------------------------- OPERATIONS ($): Investment income--net 4,213,216 4,367,771 Net realized gain (loss) on investments 83,298 (260,907) Net unrealized appreciation (depreciation) on investments 770,268 4,027,306 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,066,782 8,134,170 -------------------------------------------------------------------------------- DIVIDENDS TO SHAREHOLDERS FROM ($): Investment income--net: Class A shares (3,327,409) (3,369,004) Class B shares (769,547) (883,605) Class C shares (116,260) (115,162) TOTAL DIVIDENDS (4,213,216) (4,367,771) -------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS ($): Net proceeds from shares sold: Class A shares 7,740,601 6,481,758 Class B shares 3,266,687 2,878,371 Class C shares 1,068,554 474,696 Dividends reinvested: Class A shares 1,642,386 1,649,479 Class B shares 400,931 460,099 Class C shares 46,973 32,989 Cost of shares redeemed: Class A shares (5,880,680) (9,835,036) Class B shares (6,672,683) (6,225,874) Class C shares (212,213) (1,308,061) INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 1,400,556 (5,391,579) TOTAL INCREASE (DECREASE) IN NET ASSETS 2,254,122 (1,625,180) -------------------------------------------------------------------------------- NET ASSETS ($): Beginning of Period 89,546,141 91,171,321 END OF PERIOD 91,800,263 89,546,141 Year Ended April 30, -------------------------------- 2002 2001 -------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: CLASS A(A) Shares sold 458,858 397,736 Shares issued for dividends reinvested 97,859 100,896 Shares redeemed (350,436) (605,532) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 206,281 (106,900) -------------------------------------------------------------------------------- CLASS B(A) Shares sold 194,782 176,128 Shares issued for dividends reinvested 23,886 28,168 Shares redeemed (395,896) (382,803) NET INCREASE (DECREASE) IN SHARES OUTSTANDING (177,228) (178,507) -------------------------------------------------------------------------------- CLASS C Shares sold 63,674 28,527 Shares issued for dividends reinvested 2,802 2,023 Shares redeemed (12,733) (79,640) NET INCREASE (DECREASE) IN SHARES OUTSTANDING 53,743 (49,090) (A) DURING THE PERIOD ENDED APRIL 30, 2002, 231,374 CLASS B SHARES REPRESENTING $3,924,097 WERE AUTOMATICALLY CONVERTED TO 231,349 CLASS A SHARES AND DURING THE PERIOD ENDED APRIL 30, 2001, 224,386 CLASS B SHARES REPRESENTING $3,661,364 WERE AUTOMATICALLY CONVERTED TO 224,410 CLASS A SHARES. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS The following tables describe the performance for each share class for the fiscal periods indicated. All information (except porfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund's financial statements. Year Ended April 30, -------------------------------------------------------------------------- CLASS A SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 16.51 15.84 17.31 17.37 16.61 Investment Operations: Investment income--net .79(b) .81 .83 .85 .88 Net realized and unrealized gain (loss) on investments .17 .67 (1.47) .17 .76 Total from Investment Operations .96 1.48 (.64) 1.02 1.64 Distributions: Dividends from investment income--net (.79) (.81) (.83) (.85) (.88) Dividends from net realized gain on investments -- -- (.00)(c) (.23) (.00)(c) Total Distributions (.79) (.81) (.83) (1.08) (.88) Net asset value, end of period 16.68 16.51 15.84 17.31 17.37 --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 5.86 9.54 (3.65) 5.98 10.05 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets .94 .93 .97 .92 .75 Ratio of net investment income to average net assets 4.68 4.99 5.12 4.83 5.10 Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- -- .14 Portfolio Turnover Rate 18.46 31.73 31.63 30.19 21.25 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 72,249 68,144 67,043 71,612 65,086 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THERE WAS NO EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. Year Ended April 30, ------------------------------------------------------------------------ CLASS B SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 16.51 15.83 17.31 17.37 16.60 Investment Operations: Investment income--net .70(b) .73 .75 .76 .79 Net realized and unrealized gain (loss) on investments .16 .68 (1.48) .17 .77 Total from Investment Operations .86 1.41 (.73) .93 1.56 Distributions: Dividends from investment income--net (.70) (.73) (.75) (.76) (.79) Dividends from net realized gain on investments -- -- (.00)(c) (.23) (.00)(c) Total Distributions (.70) (.73) (.75) (.99) (.79) Net asset value, end of period 16.67 16.51 15.83 17.31 17.37 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 5.26 9.05 (4.21) 5.44 9.56 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.45 1.44 1.48 1.43 1.26 Ratio of net investment income to average net assets 4.17 4.48 4.59 4.32 4.58 Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- -- .14 Portfolio Turnover Rate 18.46 31.73 31.63 30.19 21.25 --------------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 16,265 19,035 21,081 34,912 40,100 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THERE WAS NO EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS. The Fund FINANCIAL HIGHLIGHTS (CONTINUED) Year Ended April 30, ------------------------------------------------------------------------- CLASS C SHARES 2002(a) 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE DATA ($): Net asset value, beginning of period 16.50 15.83 17.30 17.36 16.60 Investment Operations: Investment income--net .66(b) .69 .71 .72 .75 Net realized and unrealized gain (loss) on investments .16 .67 (1.47) .17 .76 Total from Investment Operations .82 1.36 (.76) .89 1.51 Distributions: Dividends from investment income--net (.66) (.69) (.71) (.72) (.75) Dividends from net realized gain on investments -- -- (.00)(c) (.23) (.00)(c) Total Distributions (.66) (.69) (.71) (.95) (.75) Net asset value, end of period 16.66 16.50 15.83 17.30 17.36 -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (%)(D) 5.01 8.75 (4.37) 5.19 9.22 -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA (%): Ratio of expenses to average net assets 1.68 1.67 1.70 1.66 1.54 Ratio of net investment income to average net assets 3.92 4.27 4.37 4.06 4.24 Decrease reflected in above expense ratios due to undertakings by The Dreyfus Corporation -- -- -- -- .11 Portfolio Turnover Rate 18.46 31.73 31.63 30.19 21.25 -------------------------------------------------------------------------------------------------------------------------- Net Assets, end of period ($ x 1,000) 3,286 2,367 3,048 3,188 1,996 (A) AS REQUIRED, EFFECTIVE MAY 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON A DAILY BASIS. THERE WAS NO EFFECT OF THIS CHANGE FOR THE PERIOD ENDED APRIL 30, 2002. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS PRIOR TO MAY 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN PRESENTATION. (B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END. (C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE. (D) EXCLUSIVE OF SALES CHARGE. SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS NOTE 1--Significant Accounting Policies: Dreyfus Premier State Municipal Bond Fund (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified open-end management investment company, and operates as a series company that, effective May 17, 2001, offers eleven series including the Virginia Series (the "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 Dreyfus Corporation (the "Manager") serves as the fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A, which is a wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of the fund's shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in the following classes of shares: Class A, Class B and Class C. Class A shares are subject to a sales charge imposed at the time of purchase, Class B shares are subject to a contingent deferred sales charge ("CDSC") imposed on Class B share redemptions made within six years of purchase (five years for shareholders beneficially owning Class B shares on November 30, 1996) and Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class B shares automatically convert to Class A shares after six years. Other differences between the classes include the services offered to and the expenses borne by each Class and certain voting rights. The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series' operations; expenses which are applicable to all series are allocated among them on a pro rata basis. The fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States, which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) (A) PORTFOLIO VALUATION: Investments in securities (excluding options and financial futures on municipal and U.S. Treasury securities) are valued each business day by an independent pricing service ("Service") approved by the Board of Trustees. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal and U.S. Treasury securities are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for amortization of premiums and discounts on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Under the terms of the custody agreement, the fund received net earnings credits of $7,302 during the period ended April 30, 2002 based on available cash balances left on deposit. Income earned under this arrangement is included in interest income. The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund. (C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. (D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all Federal income and excise taxes. At April 30, 2002, the components of accumulated earnings on a tax basis were as follows: accumulated capital losses $2,215,933 and unrealized appreciation $3,103,771. The accumulated capital losses are available to be applied against future net securities profits, if any, realized subsequent to April 30, 2002. If not applied, $422,657 of the carryover expires in fiscal 2008, $1,642,274 expires in fiscal 2009 and $151,002 expires in fiscal 2010. The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2002 and April 30, 2001, was as follows: tax exempt income $4,213,216 and $4,367,771, respectively. During the period ended April 30, 2002, as a result of permanent book to tax differences, the fund decreased accumulated net realized gain (loss) on investments by $2,450 and increased paid-in capital by $2,450. Net assets were not affected by this reclassification. NOTE 2--Bank Line of Credit: The fund participates with other Dreyfus-managed funds in a $500 million redemption credit facility (the "Facility" ) to be utilized for The Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During period ended April 30, 2002, the fund did not borrow under the Facility. NOTE 3--Management Fee and Other Transactions With Affiliates: (A) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55 of 1% of the value of the fund's average daily net assets and is payable monthly. The Distributor retained $28,954 during the period ended April 30, 2002, from commissions earned on sales of the fund's shares. (B) Under the Distribution Plan (the "Plan") adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50 of 1% of the value of the average daily net assets of Class B shares and .75 of 1% of the value of the average daily net assets of Class C shares. During the period ended April 30, 2002, Class B and Class C shares were charged $92,325 and $22,247, respectively, pursuant to the Plan. (C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25 of 1% of the value of their average daily net assets for the provision of certain services. 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2002, Class A, Class B and Class C shares were charged $177,814, $46,162 and $7,416, respectively, pursuant to the Shareholder Services Plan. The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended April 30, 2002, the fund was charged $39,831 pursuant to the transfer agency agreement. (D) Each Board member also serves as a Board member of other funds within the Dreyfus complex (collectively, the "Fund Group"). Each Board member who is not an "affiliated person" as defined in the Act receives an annual fee of $50,000 and an attendance fee of $6,500 for each in person meeting and $500 for telephone meetings. These fees are allocated among the funds in the Fund Group. The Chairman of the Board receives an additional 25% of such compensation. Subject to the Trust's Emeritus Program Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer fee and per meeting fee paid at the time the Board member achieves emeritus status. NOTE 4--Securities Transactions: The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2002, amounted to $17,116,293 and $16,561,370, respectively. At April 30, 2002, the cost of investments for Federal income tax purposes was $89,366,252; accordingly, accumulated net unrealized appreciation on investments was $3,103,771, consisting of $4,545,842 gross unrealized appreciation and $1,442,071 gross unrealized depreciation. NOTE 5--Change in Accounting Principle: As required, effective May 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on a scientific basis for debt securities on a daily basis. Prior to May 1, 2001, the fund amortized premiums on debt securities on a scientific basis but recognized market discount upon disposition. There was no cumulative effect of this accounting change and there was no impact on total net assets of the fund for the period ended April 30, 2002. The Fund REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Trustees Dreyfus Premier State Municipal Bond Fund, Virginia Series We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Premier State Municipal Bond Fund, Virginia Series (one of the Funds comprising Dreyfus Premier State Municipal Bond Fund) as of April 30, 2002 and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Fund' s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2002 by correspondence with the custodian and others. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Premier State Municipal Bond Fund, Virginia Series at April 30, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated years, in conformity with accounting principles generally accepted in the United States. New York, New York June 6, 2002 IMPORTANT TAX INFORMATION (Unaudited) In accordance with Federal tax law, the fund hereby designates all the dividends paid from investment income-net during its fiscal year ended April 30, 2002 as "exempt-interest dividends" (not subject to regular Federal and, for individuals who are Virginia residents, Virginia personal income taxes). As required by Federal tax law rules, shareholders will receive notification of their portion of the fund's taxable ordinary dividends (if any) and capital gain distributions (if any) paid for the 2002 calendar year on Form 1099-DIV which will be mailed by January 31, 2003. The Fund BOARD MEMBERS INFORMATION (Unaudited) Joseph S. DiMartino (58) Chairman of the Board (1995) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Corporate Director and Trustee OTHER DIRECTORSHIPS AND AFFILIATIONS: * The Muscular Dystrophy Association, Director * Carlyle Industries, Inc., a button packager and distributor, Director * Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director * The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director * QuikCAT.com, a developer of high speed movement, routing, storage and encryption of data, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 190 -------------- Clifford L. Alexander (68) Board Member (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * President of Alexander & Associates, Inc., a management consulting firm (January 1981-present) * Chairman of the Board of Moody's Corporation (October 2000-Present) * Chairman of the Board and Chief Executive Officer (October 1999-September 2000) and Director (February 1993-September 1999) of The Dun and Bradstreet Corporation OTHER DIRECTORSHIPS AND AFFILIATIONS: * Wyeth (formerly, American Home Products Corporation), a global leader in pharmaceuticals, consumer healthcare products and animal health products, Director * IMS Health, a service provider of marketing information and information technology, Director * Mutual of America Life Insurance Company, Director NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 49 -------------- Peggy C. Davis (58) Board Member (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Shad Professor of Law, New York University School of Law (1983-present) * 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 NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 Ernest Kafka (69) Board Member (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Physician engaged in private practice specializing in psychoanalysis of adults and adolescents (1962-present) * Instructor at the New York Psychoanalytic Institute (1981-present) * Associate Clinical Professor of Psychiatry at Cornell Medical School (1987-2002) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- Nathan Leventhal (58) Board Member (1991) PRINCIPAL OCCUPATION DURING PAST 5 YEARS: * Chairman of the Avery-Fisher Artist Program (November 1997-Present) * President of Lincoln Center for the Performing Arts, Inc (March 1984-December 2000) NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 28 -------------- ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611. SAUL B. KLAMAN, EMERITUS BOARD MEMBER The Fund OFFICERS OF THE FUND (Unaudited) STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000. Chairman of the Board, Chief Executive Officer and Chief Operating Officer of the Manager, and an officer of 93 investment companies (comprised of 187 portfolios) managed by the Manager. Mr. Canter also is a Director or an Executive Committee Member of the other investment management subsidiaries of Mellon Financial Corporation, each of which is an affiliate of the Manager. He is 56 years old, and has been an employee of the Manager since May 1995. MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000. Executive Vice President, Secretary and General Counsel of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 56 years old, and has been an employee of the Manager since June 1977. STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000. Associate General Counsel and Assistant Secretary of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 52 years old, and has been an employee of the Manager since July 1980. MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 93 investment companies (comprised of 199 portfolios) managed by the Manager. He is 42 years old, and has been an employee of the Manager since October 1991. JANETTE E. FARRAGHER, ASSISTANT SECRETARY SINCE MARCH 2000. Associate General Counsel of the Manager, and an officer of 15 investment companies (comprised of 26 portfolios) managed by the Manager. She is 39 years old, and has been an employee of the Manager since February 1984. JAMES WINDELS, TREASURER SINCE NOVEMBER 2001. Director of Mutual Fund Treasury Accounting of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since April 1985. GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000. Senior Accounting Manager - Municipal Bond Funds of the Manager, and an officer of 29 investment companies (comprised of 59 portfolios) managed by the Manager. He is 43 years old, and has been an employee of the Manager since August 1981. KENNETH SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001. Mutual Funds Tax Director of the Manager, and an officer of 94 investment companies (comprised of 201 portfolios) managed by the Manager. He is 47 years old, and has been an employee of the Manager since June 1993. For More Information Dreyfus Premier State Municipal Bond Fund, Virginia Series 200 Park Avenue New York, NY 10166 Manager The Dreyfus Corporation 200 Park Avenue New York, NY 10166 Custodian The Bank of New York 15 Broad Street New York, NY 10286 Transfer Agent & Dividend Disbursing Agent Dreyfus Transfer, Inc. P.O. Box 9263 Boston, MA 02205-8501 Distributor Dreyfus Service Corporation 200 Park Avenue New York, NY 10166 To obtain information: BY TELEPHONE Call your financial representative or 1-800-554-4611 BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144 (c) 2002 Dreyfus Service Corporation 066AR0402