<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>combinedpn30d-064.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--96.0% Amount ($) Value ($)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $30,108,873 OR 8.5% OF NET ASSETS.
(C) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(D) PURCHASED ON A DELAYED DELIVERY BASIS.
(E) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(F) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $8,356,165
WERE AUTOMATICALLY CONVERTED TO 725,215 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated.All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
----------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
<TABLE>
April 30, 2002
Principal
LONG-TERM MUNICIPAL INVESTMENTS--94.3% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $44,002,699 OR 35.3% OF NET ASSETS INVESTED
IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT UPON
REVENUES GENERATED FROM HOUSING PROJECTS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $5,762,602 WERE
AUTOMATICALLY CONVERTED TO 434,209 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--95.4% Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MARYLAND--91.5%
Baltimore:
Port Facilities Revenue (Consolidated Coal Sales)
6.50%, 12/1/2010 4,090,000 4,228,119
(Tindeco Wharf Project)
6.60%, 12/20/2024 (Collateralized; GNMA) 4,250,000 4,362,285
Baltimore City Housing Corp., MFHR
7.25%, 7/1/2023 (Collateralized; FNMA) 2,995,000 3,002,697
Baltimore County:
Mortgage Revenue, Zero coupon, 9/1/2024 2,280,000 654,702
Nursing Facility Mortgage Revenue
(Eastpoint Rehabilitation & Nursing Centers):
3%, 4/1/2015 1,000,000 484,800
3%, 4/1/2028 1,500,000 720,630
PCR (Bethlehem Steel Corp. Project):
7.50%, 6/1/2015 8,430,000 (a) 580,827
7.55%, 6/1/2017 1,945,000 (a) 134,010
Baltimore, Project Revenue (Water Projects)
5.00%, 7/1/2027 (Insured; FGIC) 2,000,000 (b) 1,964,180
Gaithersburg, Hospital Facilities Improvement Revenue
(Shady Grove)
6.50%, 9/1/2012 (Insured; FSA) 10,000,000 11,824,200
Howard County:
COP 8.15%, 2/15/2020 605,000 834,126
(Consolidated Public Improvement Project):
5.25%, 8/15/2019 1,800,000 1,854,756
5.25%, 8/15/2020 1,800,000 1,846,278
5.25%, 8/15/2021 1,765,000 1,804,871
(Metropolitan District Project)
5.25%, 8/15/2019 1,700,000 1,751,714
Maryland Community Development Administration,
Department of Housing and Community Development:
Housing Revenue:
5.95%, 7/1/2023 4,695,000 4,870,828
MFHR:
6.50%, 5/15/2013 2,000,000 2,071,440
6.85%, 5/15/2033 (Prerefunded 5/20/2002) 3,075,000 (c) 3,145,264
6.70%, 5/15/2036 (Insured; FHA) 7,710,000 8,042,455
Residential:
5.50%, 9/1/2014 1,000,000 1,028,180
5.30%, 9/1/2016 5,000,000 4,983,700
5.90%, 9/1/2019 2,000,000 2,040,100
5.85%, 9/1/2021 7,500,000 7,683,300
5.70%, 9/1/2022 6,000,000 6,098,940
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount($) 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
$101,983,911 (35.7% OF NET ASSETS) INVESTED IN SECURITIES WHOSE PAYMENT OF
PRINCIPAL AND INTEREST IS DEPENDENT UPON REVENUES GENERATED FROM HEALTH
CARE AND HOUSING PROJECTS, RESPECTIVELY.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
-------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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
$4,152,891 WERE AUTOMATICALLY CONVERTED TO 347,504 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--99.2% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
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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 $19,022,844 (33.3% OF NET ASSETS) INVESTED
IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT UPON
REVENUES GENERATED FROM EDUCATION PROJECTS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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
$647,751 WERE AUTOMATICALLY CONVERTED TO 58,135 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
--------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--93.5% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allegan Hospital Finance Authority, HR
(Allegan General Hospital):
6.875%, 11/15/2017 4,460,000 4,453,488
7%, 11/15/2021 800,000 800,512
Anchor Bay School District, Building and Site 6%, 5/1/2023
(Insured; FGIC) (Prerefunded 5/1/2009) 1,500,000 (a) 1,699,755
Brighton Area School District:
Zero Coupon, 5/1/2014 (Insured: AMBAC) 8,000,000 4,448,400
Zero Coupon, 5/1/2020 (Insured: AMBAC) 5,000,000 1,889,200
Capital Region Airport Authority, Airport Revenue
6.70%, 7/1/2021
(Insured; MBIA) (Prerefunded 7/1/2002) 2,500,000 (a) 2,570,475
Chippewa County Hospital Finance Authority, Revenue
5.625%, 11/1/2014 1,225,000 1,162,304
Clarkston Community School
5.75%, 5/1/2016 (Insured; FGIC) (Prerefunded 5/1/2005) 1,340,000 (a) 1,463,186
Detroit:
(Unlimited Tax) 6.35%, 4/1/2014 2,590,000 2,719,267
Water Supply Systems Revenue:
11.17%, 7/1/2022 (Insured; FGIC) 1,500,000 (b) 1,576,785
Senior Lien 5.75%, 7/1/2028 (Insured; FGIC) 4,000,000 4,224,880
Dickinson County Healthcare System, HR:
5.50%, 11/1/2013 3,715,000 3,634,570
5.50%, 11/1/2013 (Insured; ACA) 2,000,000 2,058,900
5.70%, 11/1/2018 (Insured; ACA) 3,000,000 3,034,440
Fowlerville Community Schools School District
5.60%, 5/1/2016
(Insured; MBIA) (Prerefunded 5/1/2007) 2,995,000 (a) 3,297,525
Grand Rapids Housing Finance Authority,
Multi-Family Revenue
7.625%, 9/1/2023 (Collateralized; FNMA) 1,000,000 1,052,600
Grand Valley State University, Revenue
5.25%, 12/1/2020 (Insured; FGIC) 3,000,000 3,038,130
Huron Valley School District
Zero Coupon, 5/1/2018 (Insured; FGIC) 6,370,000 2,740,820
Kalamazoo Hospital Finance Authority,
Hospital Facilities Revenue (Borgess Medical Center)
6.25%, 6/1/2014 (Insured; FGIC) 2,000,000 2,332,620
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) 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 $5,458,250 OR 4.1% OF NET ASSETS.
(D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $1,857,248 WERE
AUTOMATICALLY CONVERTED TO 126,093 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
--------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--91.3% Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $5,518,500 OR 4.1% OF NET ASSETS.
(D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $1,199,400 WERE
AUTOMATICALLY CONVERTED TO 82,785 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except porfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
-----------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--96.9% Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NORTH CAROLINA--75.6%
Appalachian State University, Housing and Student
Center System Revenue
5.60%, 7/15/2020 (Insured; FSA) 1,000,000 1,056,890
Buncombe County Metropolitan Sewage District,
Sewage System Revenue
6.75%, 7/1/2022 (Prerefunded 7/1/2002) 500,000 (a) 514,370
Cabarrus County, COP, Installment Financing Contract
5.50%, 4/1/2014 2,000,000 2,155,740
Charlotte:
5%, 7/1/2022 2,110,000 (b) 2,105,886
5.60%, 6/1/2022 2,770,000 2,941,048
Airport Revenue 5.75%, 7/1/2029 (Insured; MBIA) 1,500,000 1,569,645
Storm Water Fee Revenue:
5.25%, 6/1/2020 (Prerefunded 6/1/2010) 1,000,000 (a) 1,024,890
6%, 6/1/2025 2,000,000 2,290,700
Water and Sewer System Revenue 5.25%, 6/1/2025 1,710,000 1,722,825
Henderson County, COP (Henderson County School
Projects) 5%, 3/1/2015 (Insured; AMBAC) 1,630,000 1,680,139
New Hanover County:
COP (New Hanover County Projects)
5.25%, 12/1/2018 (Insured; AMBAC) 1,640,000 1,690,938
Public Improvement 5.75%, 11/1/2017 1,700,000 1,861,279
New Hanover County Industrial Facilities
and Pollution Control Financing Authority
(Occidental Petroleum)
6.50%, 8/1/2014 1,000,000 1,017,060
North Carolina Eastern Municipal Power Agency,
Power System Revenue:
5.70%, 1/1/2013 (Insured; MBIA) 2,690,000 2,873,404
6%, 1/1/2022 (Insured; ACA) 1,000,000 1,049,070
6.75%, 1/1/2026 (Insured; ACA) 3,000,000 3,250,590
North Carolina Capital Facilities Finance Agency,
Revenue (Duke University Project)
5.125%, 10/1/2026 1,245,000 1,236,372
North Carolina Educational Assistance Authority,
Guaranteed Student Loan Revenue
6.35%, 7/1/2016 4,375,000 4,590,206
North Carolina Housing Finance Agency,
Single Family Revenue 6.50%, 9/1/2026 3,270,000 3,401,291
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) 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 $79,576,216) 99.3% 82,254,637
CASH AND RECEIVABLES (NET) .7% 573,486
NET ASSETS 100.0% 82,828,123
Summary of Abbreviations
ACA American Capital Access
AMBAC American Municipal Bond
Assurance Corporation
COP Certificate of Participation
FGIC Financial Guaranty
Insurance Company
FSA Financial Security Assurance
MBIA Municipal Bond Investors Assurance
Insurance Corporation
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 55.2
AA Aa AA 15.2
A A A 21.6
BBB Baa BBB 1.2
F1 MIG1 SP1 2.4
Not Rated (d) Not Rated (d) Not Rated (d) 4.4
100.0
(A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(B) PURCHASED ON A DELAYED DELIVERY BASIS.
(C) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(D) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $3,892,332 WERE
AUTOMATICALLY CONVERTED TO 295,106 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
--------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--95.4% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OHIO--94.2%
Akron:
6%, 12/1/2012 1,380,000 1,584,737
5.50%, 12/1/2020 (Insured; MBIA) 1,460,000 1,518,940
Sewer Systems Revenue
5.875%, 12/1/2016 (Insured; MBIA) 1,200,000 1,275,108
Akron-Wilbeth Housing Development Corp., First Mortgage
Revenue 7.90%, 8/1/2003 (Insured; FHA) 695,000 723,321
Cincinnati City School District, School Improvement
5.375%, 12/1/2018 (Insured; MBIA) 6,560,000 6,823,778
Clermont County, Hospital Facilities Revenue
(Mercy Health Systems)
5.625%, 9/1/2016 (Insured; AMBAC) 4,250,000 4,500,707
City of Cleveland:
Airport Special Revenue (Continental Airlines Inc. Project):
5.50%, 12/1/2008 5,000,000 4,553,900
5.70%, 12/1/2019 2,000,000 1,605,640
5.375%, 9/15/2027 5,000,000 3,657,250
Airport System Revenue 5%, 1/1/2031 (Insured; FSA) 1,000,000 965,240
COP:
(Motor Vehicle, Motorized and Communication
Equipment) 7.10%, 7/1/2002 135,000 135,987
(Stadium Project)
5.25%, 11/15/2022 (Insured; AMBAC) 1,210,000 1,222,342
Parking Facility Improvement Revenue
8%, 9/15/2012 (Prerefunded 9/15/2002) 5,000,000 (a) 5,216,850
Public Power System Revenue
5.125%, 11/15/2018 (Insured; MBIA) 9,650,000 9,757,115
Waterworks Revenue 5.50%, 1/1/2021 (Insured; MBIA) 8,000,000 8,556,800
Cleveland-Cuyahoga County Port Authority, Revenue:
(Capital Improvements Project) 5.375%, 5/15/2019 5,000 4,567
(Port of Cleveland) 5.375%, 5/15/2018 2,450,000 2,311,624
Special Assessment/Tax Increment:
7%, 12/1/2018 2,345,000 2,307,597
7.35%, 12/1/2031 2,655,000 2,661,930
Cuyahoga County:
HR:
Improvement (MetroHealth Systems Project)
6.125%, 2/15/2024 4,845,000 4,965,156
Hospital Facilities Revenue (Canton Inc. Project)
7.50%, 1/1/2030 5,250,000 5,674,305
Mortgage Revenue (West Tech Apartments Project)
5.95%, 9/20/2042 (Guaranteed; GNMA) 5,295,000 5,360,076
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) 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 $248,839,708) 98.5% 256,327,607
CASH AND RECEIVABLES (NET) 1.5% 3,983,321
NET ASSETS 100% 260,310,928
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Summary of Abbreviations
ACA American Capital Access
AMBAC American Municipal Bond
Assurance Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance
Company
FHA Federal Housing Administration
FSA Financial Security Assurance
GNMA Government National
Mortgage Association
HR Hospital Revenue
IDR Industrial Development Revenue
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
Insurance Corporation
PCR Pollution Control Revenue
SBPA Standby Bond Purchase Agreement
SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 54.6
AA Aa AA 12.7
A A A 13.1
BBB Baa BBB 8.9
BB Ba BB 4.1
F1 MIG1 SP1 3.1
Not Rated (d) Not Rated (d) Not Rated (d) 3.5
100.0
(A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(B) PURCHASED ON A DELAYED DELIVERY BASIS.
(C) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(D) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $4,303,838 WERE
AUTOMATICALLY CONVERTED TO 351,872 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--95.5% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $242,720,787) 101.3% 237,504,419
LIABILITIES, LESS CASH AND RECEIVABLES (1.3%) (2,987,766)
NET ASSETS 100.0% 234,516,653
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
CMAC Capital Market Assurance
Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance
Company
FHA Federal Housing Administration
FSA Financial Security Assurance
GNMA Government National
Mortgage Association
GO General Obligation
HR Hospital Revenue
LOC Letter of Credit
LR Lease Revenue
MBIA Municipal Bond Investors
Assurance Insurance
Corporation
PCR Pollution Control Revenue
RRR Resources Recovery Revenue
SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 56.4
AA Aa AA 19.4
A A A 9.1
BBB Baa BBB 6.5
F1 MIG1/P1 SP1/A1 5.7
Not Rated (e) Not Rated (e) Not Rated (e) 2.9
100.0
(A) NON-INCOME PRODUCING SECURITIES; INTEREST PAYMENTS IN DEFAULT.
(B) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(C) PURCHASED ON A DELAYED DELIVERY BASIS.
(D) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $8,811,256 WERE
AUTOMATICALLY CONVERTED TO 572,837 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
--------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--97.6% Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aledo Independent School District, Unlimited Tax
School Building (Permanent School Fund Guaranteed)
Zero Coupon, 2/15/2014 1,225,000 683,489
Austin, Utility System Revenue
5.125%, 11/15/2016 (Insured; FSA) 1,110,000 1,124,441
Austin Convention Enterprises Inc., Revenue
(Convention Center Hotel) 6.60%, 1/1/2021 1,000,000 1,005,580
Austin Independent School District
5.75%, 8/1/2015 1,000,000 1,044,860
Brazos Higher Education Authority Inc., Student Loan Revenue
6.80%, 12/1/2004 700,000 754,418
Castleberry Independent School District
5.70%, 8/15/2021 830,000 852,609
Coastal Water Authority, Water Conveyance System Revenue
6.25%, 12/15/2017 (Insured; AMBAC) 2,170,000 2,172,582
Corpus Christi Utility System
5.25%, 7/15/2016 (Insured; FSA) 1,065,000 1,095,470
Denison Hospital Authority, HR
(Texoma Medical Center Project) 6.125%, 8/15/2017 750,000 690,210
El Paso Housing Authority, Multi-Family Revenue
(Section 8 Projects) 6.25%, 12/1/2009 2,510,000 2,570,968
Fort Worth, Water & Sewer Revenue
5.25%, 2/15/2016 875,000 893,533
Frisco Independent School District (School Building)
5.40%, 8/15/2023 1,155,000 1,158,326
Grape Creek-Pulliam Independent School District
Public Facility Corp., School Facility LR
7.25%, 5/15/2021 (Prerefunded 5/15/2006) 2,200,000 (a) 2,570,744
Houston:
Airport Systems Revenue (Continental)
7.375%, 7/1/2022 1,000,000 989,510
Certificate Obligation 5.625%, 3/1/2017 850,000 900,269
Water & Sewer Systems Revenue
Zero Coupon, 12/1/2019
(Insured; FSA) 5,000,000 1,912,500
Houston Independent School District
(Permanent School Fund Guaranteed)
4.75%, 2/15/2022 2,500,000 2,333,950
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) 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 $58,478,862) 98.4% 59,668,152
CASH AND RECEIVABLES (NET) 1.6% 966,239
NET ASSETS 100.0% 60,634,391
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
FGIC Financial Guaranty Insurance
Company
FSA Financial Security Assurance
HR Hospital Revenue
LR Lease Revenue
MBIA Municipal Bond Investors
Assurance Insurance
Corporation
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 60.0
AA Aa AA 12.6
A A A 6.6
BBB Baa BBB 11.3
BB Ba BB 1.7
B B B 2.7
F1 MIG1/P1 SP1/A1 .8
Not Rated(c) Not Rated(c) Not Rated(c) 4.3
100.0
(A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(B) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
-------------------------------------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <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.
</TABLE>
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 $853,361 WERE
AUTOMATICALLY CONVERTED TO 43,153 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except portfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
--------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
<TABLE>
Inception From
Date 1 Year 5 Years 10 Years Inception
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
The Fund
STATEMENT OF INVESTMENTS
April 30, 2002
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--96.7% Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $8,540,861 OR 9.3% OF NET ASSETS.
(E) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(F) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
The Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2002
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
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
<TABLE>
Class A Class B Class C
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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.
</TABLE>
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 $3,661,364 WERE
AUTOMATICALLY CONVERTED TO 224,410 CLASS A SHARES.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. All information (except porfolio turnover rate)
reflects financial results for a single fund share. Total return shows how much
your investment in the fund would have increased (or decreased) during each
period, assuming you had reinvested all dividends and distributions. These
figures have been derived from the fund's financial statements.
<TABLE>
Year Ended April 30,
--------------------------------------------------------------------------
CLASS A SHARES 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
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.
</TABLE>
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
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